Asian stocks fell, heading for a third week of losses, while metals dropped and the South Korean won weakened as Europe’s debt crisis spread and concern mounted that bad loans in China increased.

The MSCI Asia Pacific Index fell 1.5 percent as of 12:17 p.m. in Tokyo, reaching the lowest level in almost six weeks. Standard & Poor’s 500 Index futures were little changed after the U.S. equity benchmark sank 1.7 percent yesterday. Copper lost 0.5 percent and nickel and zinc fell more than 1 percent. The won declined 0.6 percent to 1,136.70 per dollar. Oil, which slid below $100 a barrel yesterday, sank 0.1 percent to $98.71.

“The fear is that Europe is deep in recession,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “That will make the debt situation worse.”

Investors drove up the funding costs of France and Spain as the countries sold 11.6 billion euros ($15.6 billion) of debt yesterday. The China Banking Regulatory Commission told lenders last week that loans to property developers are likely to sour as sales slow, said a person with knowledge of the matter who declined to be identified because the instructions were private.

Growth in Southeast Asian economies may have peaked last quarter as the European debt crisis and Thai floods hurt the outlook for exports. Malaysia’s gross domestic product increased 4.8 percent in the three months through September from a year earlier, after a 4 percent expansion the previous quarter, based on the median of 25 estimates from a Bloomberg News survey taken before a central bank’s report today.
Nikkei, Kospi

S&P 500 futures rose less than 0.1 percent to 1,215.20. The U.S. stock gauge has lost 3.8 percent in the past four days and closed yesterday at the lowest level in a month.

About five stocks fell for each that rose on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average lost 1.3 percent, South Korea’s Kospi tumbled 2.1 percent and Hong Kong’s Hang Seng Index retreated 1.8 percent.

China Vanke Co., the nation’s biggest listed property developer, sank 4.5 percent in Shenzhen, southern China. Evergrande Real Estate Group Ltd. (3333) and Agile Property Holdings Ltd. fell more than 2 percent in Hong Kong. China’s banking regulator said banks should cut “high-risk” loans to developers, the person with knowledge of the instructions said.

China’s home prices fell in 33 of 70 cities monitored by the government in October, the statistics bureau reported today. That’s the worst performance since the government expanded property curbs and scrapped the reporting of its national average housing data this year.
Greek Bailout

Debt in the property industry is “certainly something Chinese authorities need to focus on, but the information I have tells me that it’s an issue that government will be able to control and they have enough ability to withstand the size of defaults,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion.

The euro was within 0.2 percent of a five-week low versus the yen as discussions progressed between Greece’s government and banks on terms of a voluntary debt swap that is part of the country’s international bailout. The 17-nation currency traded at $1.3465 from $1.3458 yesterday in New York and has declined 2.1 percent this week.

German Chancellor Angela Merkel rejected yesterday French calls to deploy the European Central Bank as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. Merkel listed using the ECB as lender of last resort alongside joint euro-area bonds and a “snappy debt cut” as proposals that won’t work.
Most Bearish

Copper dropped 0.5 percent to $7,492.50 a metric ton, having fallen as much as 2.1 percent today. The metal is set for a 1.8 percent decline this week, the third weekly drop. Zinc weakened 1.2 percent to $1,903.25 a ton and nickel slipped 1.9 percent to $17,801.

Copper traders and analysts are the most bearish in almost two months because of mounting concern that Europe’s debt crisis will curb demand in the region that accounts for about 19 percent of global consumption. Eleven of 23 surveyed by Bloomberg expect the metal to decline, the second consecutive week that their outlook worsened and the highest proportion since Sept. 23.

The cost of protecting corporate and sovereign bonds from default in the Asia-Pacific region rose, according to traders of credit-default swaps. The Markit iTraxx Japan index increased 6 basis points to 192, Deutsche Bank AG prices show. That would be its highest close since Oct. 26, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. (Bloomberg)

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HONG KONG: Asian shares began Monday on a high after France and Germany said they had agreed a plan to support Europe's banks, while US jobs data also provided some lift.

However, dealers remained cautious after Wall Street finished last week with a loss and Fitch downgraded the debt ratings of Italy and Spain.

Hong Kong gained 0.66 per cent in the first few minutes, Sydney gained 1.20 per cent, Seoul was 1.10 per cent higher and Shanghai, which was closed last week for the Golden Week holiday, was 0.16 per cent up.

Tokyo and Taipei were closed for public holidays.

French President Nicolas Sarkozy and German Chancellor Angela Merkel put on a united front Sunday and vowed after talks in Berlin a response to Europe's debt crisis within weeks.

Without announcing concrete details, Sarkozy said there would be "lasting, global and quick responses before the end of the month", amid rampant fears of a crippling credit crunch.

The announcement comes a few weeks ahead of a G20 summit in Cannes, and Sarkozy said Europe must "arrive at the (meeting) united and with the problems resolved".

It also came amid concerns that France and Germany, the two main powerhouses of the eurozone, were at odds over the best way to recapitalise the region's banks.

Germany, the effective eurozone paymaster, wants banks that are under pressure to turn to investors for funds before appealing for national or European cash.

It wants the EU's 440-billion-euro ($589-billion) European Financial Stability Facility (EFSF) bailout fund to intervene only as a last resort.

But France, fearful of losing its top-notch AAA credit rating, would rather dip into European funds than its own coffers.

However, Sarkozy said Sunday that "agreement is complete".

"An economy is not prosperous without stable and reliable banks," he told reporters after the talks.

Merkel also said the two sides had "decided on doing what is necessary to recapitalise (the) banks in order to assure the granting of credit to the economy".

Also on Sunday, Belgium and Luxembourg said they had reached a deal to dismantle troubled bank Dexia, the first victim of the eurozone crisis.

Belgium's finance minister said Brussels had, in accordance with French wishes, agreed to guarantee 60 per cent of the so-called "bad bank" assets, compared with 36.5 per cent for France and 3.5 per cent for Luxembourg.

The news from Europe added to the upbeat data from the United States, which showed the economy created a better-than-expected net nonfarm 103,000 jobs in September.

The Labour Department also revised upward the two previous months' job creation numbers, indicating that employment in the faltering economy had more momentum than previously believed.

The July payrolls totalled 127,000, not the 85,000 initially estimated, while August was revised from zero to 57,000.

However, Wellington-based ANZ bank strategists said in a note: "Some optimists are hailing an end to the risk of recession for the US, but given this data is volatile and prone to large revisions, we'll not make any significant judgements from one outturn."

But putting downward pressure on markets was Fitch's decision Friday to cut it ratings on Italy and Spain, citing the increasing pressure on them as the eurozone crisis makes it harder for them to raise cash.

"The downgrade reflects the intensification of the eurozone crisis that constitutes a significant financial and economic shock which has weakened Italy's sovereign risk profile," Fitch said.

The single currency was at $1.3454 against the dollar, from $1.3375 late Friday in New York, and at 103.25 yen, from 103.10 yen.

The dollar was at 76.70 yen, from 76.73.

Crude oil prices were up in Asia Monday with New York's main contract, light sweet crude for delivery in November, adding 93 cents to $83.91 a barrel.

Brent North Sea crude for November delivery gained 53 cents to $106.41.

By 0210 GMT (10.10am Singapore time) gold was at $1,652.10 an ounce, up from $1,653.97 at 1045 GMT (6.45pm Singapore time) on Friday.(channelnewsasia.com)

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