By Shani Raja April 29 (Bloomberg) -- Asian commodity stocks fell as concern Europe’s deficit crisis is widening overshadowed rising earnings in China. Rio Tinto Group, the world’s No. 3 mining company, sank 2.5 percent in Sydney on concern any slowdown in growth will hurt metals demand. Australia & New Zealand Banking Group Ltd. fell 2.6 percent as its chief executive officer said Europe’s debt problems may worsen. China Life Insurance Co. rose 1.2 percent and China Merchants Bank Co. gained 2.6 percent in Shanghai after their first-quarter profit rose at least 40 percent. The MSCI Asia Pacific excluding Japan Index lost 0.1 percent to 423.68 as of 2:34 p.m. in Hong Kong. Japanese markets are closed today for a national holiday. Standard & Poor’s yesterday cut Spain’s credit rating to AA from AA+, which followed downgrades the previous day on Greece and Portugal. The MSCI gauge sank 1.5 percent yesterday, paring a 12-month rally to 61 percent. “Concern surrounding European sovereign debt is limiting gains,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “Investors are grappling with the sustainability of improved earnings and the impact on long-term stock valuations.” China’s Shanghai Composite Index lost 0.2 percent, while Hong Kong’s Hang Seng Index was little changed. South Korea’s Kospi index sank 0.3 percent. Australia’s S&P/ASX 200 Index fell 0.8 percent. New Zealand’s NZX 50 Index rose 0.1 percent. Central bank Governor Alan Bollard said he may raise the benchmark interest rate from a record low as early as June as improving global demand buoys exports and underpins an economic recovery. Fed Pledge Futures on the U.S. Standard & Poor’s 500 Index rose 0.1 percent. The index advanced 0.7 percent yesterday, rebounding from the biggest drop since February, as profits at Dow Chemical Co. and Owens Corning Inc. beat analyst forecasts. Banks led the S&P 500’s advance after the Federal Reserve said it will keep its benchmark interest rate near zero for an extended period, even as the labor market begins to improve. The gauge fell as much as 0.2 percent after S&P downgraded Spain. ANZ Banking fell 2.6 percent to A$24.20. Rival National Australia Bank Ltd. slipped 1.4 percent to A$28.01, while Westpac Banking Corp. retreated 0.5 percent to A$27. “I am still quite worried about the global economy,” ANZ Chief Executive Officer Michael Smith told reporters in Sydney today. “Europe is a mess. The uncertainty has continued and that’s probably going to get worse. The contagion issue is now very real.” Esprit, LG Electronics Separately, the lender said fiscal first-half profit jumped 36 percent as lending income grew and charges for bad loans fell in an improving domestic economy, and Smith confirmed ANZ is considering buying a 51 percent stake in Korea Exchange Bank. In Hong Kong, Esprit Holdings Ltd., which makes 85 percent of its revenue in Europe, lost 2.4 percent to HK$56.30, while in Seoul, LG Electronics Inc., with about 16 percent of its sales in the region, slid 2.8 percent to 124,000 won. Rio Tinto decreased 2.5 percent to A$72.59. BHP Billiton Ltd., the world’s largest mining company, declined 1.4 percent to A$40.50. Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, sank 0.9 percent to A$45.35. In Seoul, Posco dropped 0.6 percent to 515,000 won. Among other materials companies that fell today, Inner Mongolia Yitai Coal Co., a coal producer, slumped 4.3 percent to 5.45 yuan. Material Stocks “The underlying strength in economic data and company earnings continues to surprise on the upside,” said Ben Potter, an analyst at IG Markets Ltd. in Melbourne. “It’s just these sovereign debt concerns in Europe and the fear of contagion that are distracting markets at the moment.” Raw-material producers and telecommunications companies posted the biggest declines among the 10 industry groups in MSCI’s Asian ex-Japan gauge. China Telecom Corp., the country’s biggest fixed-line carrier, fell 2.5 percent to HK$3.56 in Hong Kong after reporting lower first-quarter profit. China Unicom (Hong Kong) Ltd., the country’s second-biggest provider of mobile-phone services, lost 1.5 percent to HK$9.51. The MSCI Asia Pacific Index, which includes Japan, has climbed 9.1 percent from its low this year on Feb. 8 as better- than-estimated economic and earnings reports around the world offset concerns Greece will default on its debt. The gauge slumped 2 percent yesterday following S&P’s downgrades on Greece and Portugal. Stocks in that index are priced at an average at 15.9 times estimated profit, compared with 14.9 times for the S&P 500 Index, according to data compiled by Bloomberg. Chinese Earnings China Life, the nation’s biggest insurer, gained 1.2 percent to 26.40 yuan. First-quarter profit climbed 67 percent to 10.2 billion yuan ($1.5 billion) as higher bond yields bolstered investment returns and premiums expanded. China Merchants Bank climbed 2.6 percent to 14.18 yuan. The nation’s fifth-largest lender by market value said first-quarter net income rose 40 percent to 5.91 billion yuan, rebounding from its first annual profit decline in at least six years. “Given the strong first-quarter earnings growth, the potential downside on the broader market will be very limited,” said Li Jun, a strategist at Central China Securities Holding Co. in Shanghai. To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net

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