BLBG: Asia Stocks Fall to Two-Week Low, Yen Gains on Recovery Outlook
By Linus Chua and Saeromi Shin
Aug. 11 (Bloomberg) -- Asian stocks dropped to a two-week low, the yen strengthened, and Treasuries and German bunds climbed as the Federal Reserve said it needs to boost the U.S. economy because growth will be “more modest” than anticipated.
The MSCI Asia Pacific Index slid 1.6 percent to 119.07 at 4 p.m. in Tokyo. The Nikkei 225 Stock Average shed 2.7 percent as Japan’s machinery orders rose less than economists’ estimates. The Stoxx Europe 600 descended 0.3 percent to 259.05. The yen advanced against all 16 major counterparts. Standard & Poor’s 500 index futures decreased 1 percent.
The Federal Reserve made its first attempt to bolster the economy in more than a year, saying it will maintain holdings of securities to stop money from draining out of the financial system. Japanese machinery orders increased less than forecast in June, a sign companies may be holding off on spending, and China’s industrial output grew the least in 11 months in July.
“Investors’ concern now has shifted to economic growth,” Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages $27 billion. “I don’t think the double-dip scenario is likely but we may be in a corrective mood in the short term.”
The Nikkei dropped to three-week low. Australia’s S&P/ASX 200 Index declined 1.9 percent. South Korea’s Kospi index retreated 1.3 percent.
Canon Inc., which gets more than 80 percent of its sales abroad, lost 3.3 percent after the dollar weakened against the yen. Honda Motor Co., receiving almost 85 percent of its revenue outside Japan, dived 3.3 percent. Commonwealth Bank of Australia, the country’s biggest bank, slumped 3 percent after saying business slowed and a measure of profitability fell.
China Data
China Vanke Co. rose 4.4 percent, leading gains among property developers on optimism the government may ease its crackdown on real-estate speculation and credit curbs as the latest economic data point to slowing growth. Production rose 13.4 percent from a year earlier, the statistics bureau said.
The yen advanced to a two-week high against the euro, and the dollar rose, as signs of a slowing global recovery boosted demand for safer assets. U.S. and Japanese government debt advanced. The yen strengthened to as much as 111.38 per euro, the highest since July 22, from 112.58 in New York yesterday. The dollar gained to $1.3049 per euro from $1.3177. The yen was at 85.36 per dollar from 85.44.
“There are worries that U.S. growth is slowing further and this may adversely affect other economies in the near future,” said Yoh Nihei, a Tokyo-based trading group manager at Tokai Tokyo Securities Co. “Risk aversion is prevailing, with the bias for the yen to be bought.”
Treasuries Gain
The yield on the benchmark 10-year Treasury note fell two basis points to 2.75 percent in Tokyo, according to BGCantor Market Data. Yields on similar-dated Japanese debt fell two basis points to 1.01 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. German 10-year bunds rose, sending the yield to as low as 2.476 percent, the lowest since Bloomberg began compiling the data in 1989. The yield fell four basis points to 2.50 percent.
South Korea’s won dropped the most in three weeks after the government reported the highest unemployment since April, damping speculation the central bank will tomorrow add to last month’s interest-rate increase. The currency also declined on concern exports will be hurt as demand cools in the U.S. The won dropped 1.2 percent to 1,182.50 per dollar after sliding 0.7 percent yesterday, according to data compiled by Bloomberg.
The cost of protecting Asia-Pacific bonds from non-payment rose to the highest level in at least one week, according to traders of credit-default swaps. The Markit iTraxx Australia index rose 2.5 basis points to 116.5 basis points, the most since July 26, according to Nomura Holdings Inc. and CMA prices.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 2 basis points to 119 basis points, according to Credit Agricole CIB and CMA prices, while the Markit iTraxx Japan index increased by 2 basis points to 112 basis points, according to Morgan Stanley and CMA.
To contact the reporter on this story: Linus Chua at lchua@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net
