Barefoot Investor: Asia Stocks Fall, Bond Risk Climbs on Outlook

Asian stocks fell, South Korea’s won weakened and the cost of insuring bonds against default rose as data added to evidence that regional economies are slowing as Europe’s debt crisis curbs exports. The Australian dollar slid after the central bank cut rates for the first time in 31 months.

The MSCI Asia Pacific Index slipped 1.2 percent at 12:33 p.m. in Tokyo. Standard & Poor’s 500 Index futures lost 0.7 percent. The euro weakened 0.1 percent to $1.3839 and the yen was little changed, after a 3.1 percent slump yesterday. The won fell 0.4 percent and Australia’s dollar dropped 0.5 percent. The Markit iTraxx Australia index of debt-default risk was set for the biggest gain in four weeks. Oil retreated for a third day.

China’s manufacturing, South Korean exports and Taiwan’s economy are all expanding at the slowest pace since 2009, based on data released since late yesterday. Greek Prime Minister George Papandreou pledged to hold a referendum on the European Union’s latest bailout plan for the nation, days before Group of 20 leaders gather Nov. 3-4 for a summit in Cannes, France, to discuss the debt crisis.

“Markets are taking a second look and they see a lot of gaps” in Europe’s debt accord, Hans Goetti, chief investment officer for Asia at Finaport Investment Intelligence, said in a Bloomberg Television interview from Singapore. “The fundamentals point in the direction of a recession in the U.S. and Europe and in recessionary times, you do have earnings downgrades. The market has some downside going into 2012.”

Two shares declined for every one that gained on MSCI’s Asia Pacific Index. Japan’s Nikkei 225 Stock Average decreased 1 percent, Australia’s S&P/ASX 200 Index declined 1.1 percent and Hong Kong’s Hang Seng Index lost 1.6 percent.
Panasonic, Harvey Norman

Among the 379 companies that have released quarterly results on the MSCI regional index, 201 have missed analysts’ profit estimates, compared with 118 that beat forecasts, data compiled by Bloomberg show.

Panasonic Corp. sank 4.3 percent after the maker of Viera televisions forecast its biggest annual loss in 10 years. Harvey Norman Holdings Ltd. (HVN) dropped 5.1 percent in Sydney after Australia’s largest electronics retailer estimated pretax profit before slumped 19 percent in the last quarter.

Futures signal the S&P 500 may extend yesterday’s 2.5 percent retreat. The gauge still rallied 11 percent in October, the biggest monthly increase since December 1991. Data today may show the Institute for Supply Management’s factory index rose to 52 this month from 51.6 in September, according to the median forecast of 85 economists surveyed by Bloomberg News.

Treasury 10-year yields climbed three basis points to 2.14 percent, after sliding 28 basis points in the previous two days.
Europe’s Economy

The euro extended yesterday’s 2.1 percent loss against the dollar amid speculation a report tomorrow will confirm the region’s manufacturing shrank for a third month. That may add pressure on the European Central Bank to consider cutting interest rates as early as its next policy meeting on Nov. 3.

Greece’s Papandreou also told lawmakers he’ll seek a vote of confidence in parliament. The referendum on the EU accord, which called for a 50 percent writedown on Greek debt as well as an expansion of the region’s bailout fund, will likely be held after details are wound up, Papandreou said.

“Investors are looking at the details of the European deal and they’re not satisfied,” Russ Koesterich, the San Francisco- based global chief investment strategist for the IShares unit of BlackRock Inc., said in a Bloomberg Television interview. “The problem is the same one we’ve been facing since April 2010: The deal tends to piecemeal, it tends to be complex and it doesn’t provide the finality that investors have been looking for.”

Won, Taiwan Dollar

The won and the Taiwan dollar retreated from six-week highs. South Korea said its exports increased 9.3 percent in October from a year earlier following an 18.8 percent gain in September. The Taiwan dollar depreciated 0.4 percent to NT$30.035 after the statistics bureau said yesterday gross domestic product grew 3.37 percent in the three months through September, the smallest increase in two years.

The China Federation of Logistics and Purchasing said its Purchasing Managers’ Index fell to 50.4 in October from 51.2 the previous month. China is Asia’s biggest economy and the No. 1 export destination for South Korea and Taiwan.

The yen declined as much as 1.1 percent to 78.99 per dollar before trading at 78.15. Japanese Finance Minister Jun Azumi said in Tokyo he will “continue to intervene until I am satisfied,” after yen sales yesterday that Credit Suisse Group AG analysts estimated may have exceeded $50 billion.

The Australian dollar weakened to $1.0502. The central bank lowered interest rates by a quarter of a percentage point to 4.5 percent and said inflation is now likely to be close to target.
Bond Risk, Oil

The cost of protecting Asia-Pacific corporate and sovereign bonds from default rose, with the Markit iTraxx Australia index increasing 13 basis points to 173 basis points, according to Westpac Banking Corp. The gauge is set for its biggest increase since Oct. 4, according to data provider CMA, after rising 10 basis points yesterday by New York close of trading.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan jumped 10 basis points to 189.5 basis points, BNP Paribas SA prices show, while the Markit iTraxx Japan index rose eight basis points to 169.5, according to Deutsche Securities Inc.

Crude for December delivery slid 0.7 percent to $92.53 a barrel on the New York Mercantile Exchange. The contract extended its decline after the PMI report from China, the world’s second-biggest oil user. Futures rose 18 percent in October, the biggest increase since May 2009.

Copper in London dropped as much as 1.4 percent to $7,880 a metric ton, falling for the second day, as base metals declined on concern the deepening European debt crisis will damp demand for raw materials. Zinc slumped 2.4 percent to $1,951.25 a ton.

Copper futures on the London Metal Exchange had open interest, or contracts outstanding, of 502,214 as of Oct. 24, the highest level since Dec. 16, 2008, exchange data on Bloomberg showed. The contract gained almost 14 percent last month, the most since December last year. (Bloomberg)


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