By James Poole and Candice Zachariahs June 7 (Bloomberg) -- Asia stocks dropped the most in 15 months and the euro weakened to a four-year low after U.S. employment rose less than economists estimated and Hungarian leaders raised concerns about a potential default. Bonds rose. The MSCI Asia Pacific Index slid 3.2 percent to 109.79 at 3:15 p.m. in Tokyo. Standard & Poor’s 500 Index futures decreased 0.6 percent and those for the Euro Stoxx 50 lost 1.5 percent. The euro fell 0.6 percent against the dollar and oil plunged 1.9 percent to $70.12 a barrel, while the U.S. 10-year note yield declined three basis points to 3.17 percent. Investor sentiment deteriorated in Asia after the U.S. government reported that private-sector employers added 41,000 jobs in May, down from 218,000 in April and below the 180,000 median forecast of 35 economists in a Bloomberg News survey. The euro continued to depreciate. Hungary’s government said June 5 that there’s no danger of default, a day after a spokesman for Prime Minister Viktor Orban said it’s not “an exaggeration at all” to speculate that the country may be unable to pay its debt. “The euro is the clearest sell out of all this,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “The market is groaning under the weight of excessive debt levels and there’s a lot of concern over the state of European banks. Hungary is just another straw being piled onto the camel’s back.” Stocks Plunge Only 41 of 983 stocks in the MSCI Asia index rose. The benchmark has slumped about 15 percent from its high this year on April 15 on growing concern over the European debt crisis and Chinese measures to curb property prices. The Nikkei 225 Stock Average sank 3.7 percent and Australia’s S&P/ASX 200 Index dropped 3 percent. The Kospi index lost 1.7 percent in Seoul and Taiwan’s Taiex index lost 2.5 percent. The S&P 500 dived 3.4 percent to a four-month low on Friday. Canon Inc., a camera maker that gets 78 percent of its revenue outside Japan, slid 5.3 percent. KB Financial Group Inc. slumped 3.1 percent in Seoul, leading declines among financial companies. Melbourne-based BHP Billiton Ltd., the world’s largest mining company, declined 3.8 percent. Hon Hai Precision Industry Co., the world’s largest contract electronics manufacturer, declined 5.6 percent, the most in more than four months, after the company announced the base wage for workers at a China factory will double following a spate of employee suicides. The euro dropped 1.1 percent to 108.80, its weakest level since November 2001 versus the yen and touched a four-year low against the dollar. The yen gained against all 16 of its most- traded counterparts. Asian Currencies “Markets have to price for lower growth than what they had previously,” said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia. “The yen will probably maintain a bias toward strength.” Asian currencies fell, with the Malaysian ringgit set for its biggest decline in 12 years and the won sliding the most in two weeks, according to data compiled by Bloomberg. The ringgit dropped 1.8 percent to 3.3330, the most since June 1998. The won weakened 2.5 percent to 1,231.20 per dollar. “Disappointing U.S. non-farm payrolls and concerns about European debt refinancing are keeping the pressure on risk appetite and Asian currencies,” said Mirza Baig, a Singapore- based currency analyst at Deutsche Bank AG. Treasuries advanced for a second day, sending yields toward a one-year low. Traders cut bets for the Federal Reserve to raise interest rates this year, and economists reduced their yield forecasts. “Fear has taken over,” said Roger Bridges, who oversees $9.9 billion as head of debt at Tyndall Investment Management Ltd. in Sydney. “People are flying to the U.S.” Bond Risk Asian bond risk gauges jumped the most in almost two weeks after Hungarian officials roiled global markets by comparing the nation’s finances to Greece. The Markit iTraxx Asia credit swap index of 50 investment- grade borrowers outside Japan rose 12 basis points to 148.5 points in Singapore, according to Deutsche Bank AG. That’s the most since May 25, prices from CMA DataVision in New York show. Japan’s and Australia’s benchmarks also climbed. “European sovereign fears were very much in focus again,” National Australia Bank Ltd. analysts led by Michael Bush wrote in a note to clients. Hungary’s government “later downplayed the comments as exaggerated, but the damage had been done.” Crude oil for July delivery has dropped 6.1 percent since closing at $74.61 a barrel on June 3, the biggest two-day decline since May 6. Copper, which entered a bear market last week, extended its decline to the lowest price in more than seven months on concern demand may weaken from the U.S., China and Europe. Aluminum, lead, zinc and nickel and tin also dropped. Three-month delivery copper slumped as much as 3.2 percent to $6,076.25 a metric ton in London and traded at $6,104.75 a ton. To contact the reporters for this story: Candice Zachariahs in Sdney at Czachariash2@bloomberg.net; James Poole at jpoole4@bloomberg.net

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