By James Poole and Shani Raja May 20 (Bloomberg) -- Asia stocks dropped to an eight-month low after slower-than-estimated growth in Japan caused Tokyo shares to slide for a second day. The euro fell after climbing yesterday from its weakest in four years and commodities rallied. The MSCI Asia Pacific Index lost 1.8 percent to 112.69 at 3:20 p.m. in Tokyo and the Nikkei 225 Stock Average shed 1.5 percent to 10,030.31. Futures on the Standard & Poor’s Index dropped 0.3 percent, extending a 0.5 percent decline in the U.S. benchmark yesterday, while those on the Euro Stoxx 50 gained 0.2 percent. The euro lost 0.5 percent versus the dollar and copper rose 2 percent. While Japan’s economy grew at the fastest pace in three quarters, the 4.9 percent expansion was below the 5.5 percent median forecast of 21 economists in a Bloomberg survey. Finance Minister Naoto Kan warned the economy was in a deflationary state. The MSCI World Index of 23 developed nations’ stocks fell 0.2 percent after Germany’s decision to ban naked short-selling on sovereign debt and some financial stocks. “Doubts over Europe’s ability to keep its own house in order remain, along with concerns about the robustness of global growth,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “It’s difficult for investors to swim against the tide.” More than four shares dropped for each one that gained on the MSCI Asia Pacific Index, which headed for its lowest close since Sept. 3. The index fell on all but two days this month. Dubai’s benchmark stock index gained 0.7 percent. Nintendo, Toyota The gross domestic product report in Japan showed more than half of the growth came from trade, while consumer spending expanded 0.3 percent in the first quarter, slowing from the previous period’s 0.7 percent gain. Nintendo Co., which gets 34 percent of its revenue in Europe, dropped 3.2 percent in Osaka. Toyota Motor Corp. slumped 2.6 percent as the Tokyo Shimbun newspaper reported the company will recall its Passo subcompacts in Japan to fix engine problems. BHP Billiton Ltd., the world’s largest mining company, was little changed in Sydney as commodities advanced. Crude oil for June delivery climbed 0.2 percent to $70 a barrel, the second day of gains. Copper for delivery in three months rebounded to $6,634 per metric ton after slumping 2.8 percent yesterday. Singapore’s economy expanded at a faster pace than initially estimated last quarter. GDP grew an annualized 38.6 percent from the previous three months, more than the median estimate for a 33.4 percent increase in a Bloomberg News survey of eight economists. The Straits Times Index fell 1.2 percent. German Talks The euro fell to $1.2350 and by 1.2 percent to 112.45 against the yen on concern the pace of Europe’s economic recovery will slow as governments take measures to cut spending to stem the debt crisis. German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble host talks on financial regulation today in Berlin. The euro slid to a four-year low yesterday after Germany banned naked short-selling on sovereign debt and some financial stocks. Euro area policy makers last week unveiled an unprecedented loan package worth nearly $1 trillion and a program of bond purchases to forestall defaults of the region’s most indebted countries, including Greece, Spain and Portugal. The Conference Board’s index of U.S. leading indicators probably rose 0.2 percent in April, the smallest gain since March 2009, according to a Bloomberg News survey. Other reports today will show jobless claims were little changed last week and manufacturing in the Philadelphia region grew this month, separate Bloomberg surveys show. Bond Risk The cost of insuring Asia-Pacific bonds against default increased, reversing an earlier drop, as Asian stocks and the euro fell on concern Europe’s debt crisis will spread. The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan increased 1 basis point to 142 basis points as of 9:55 a.m. in Singapore, after dropping 7 basis points, according to Royal Bank of Scotland Group Plc. The Shanghai Composite Index fell 0.8 percent. Industrial & Commercial Bank of China Ltd., the biggest lender, and Poly Real Estate Group Co., the second-largest developer, earlier climbed as much as 1.8 percent after the China Securities Journal said a slowing economy means China can delay raising interest rates. “The market is betting that China may not need to tighten so aggressively given that Europe’s problems may ironically act as a brake on growth and prevent overheating,” said Xiao Bo, a Beijing-based strategist at Huarong Securities Co. “We may see a short-term rebound as the market adjusts.” Yuan Forwards The 12-month non-deliverable yuan forwards weakened 0.3 percent to 6.7332 per dollar as of 2:04 p.m. in Hong Kong after Chinese officials said the nation won’t yield to calls to end the 22-month peg, damping speculation next week’s U.S.-China trade talks would spur an appreciation. That’s 1.4 percent stronger than the spot rate of 6.8277, according to data compiled by Bloomberg. South Korea’s won weakened 0.7 percent to 1,173.55 after the currency’s slide beyond its 200-day moving average increased concern more losses were likely. The currency reached 1,176.43, the weakest level since Feb. 5. To contact the reporters for this story: James Poole in Singapore jpoole4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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