BS: Asian Stocks, Copper Decline as Yen Gains on China Speculation
Nov. 19 (Bloomberg) -- Asian stocks fell, heading toward a second weekly loss, while copper and oil slipped as speculation China will raise interest rates overshadowed optimism Ireland may accept a bailout. The yen and dollar rose against the euro.
The MSCI Asia Pacific Index lost 0.1 percent to 131.51 as of 3:11 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index slid 0.2 percent after the gauge yesterday jumped 1.5 percent. Copper sank as much as 1.3 percent and crude oil was set for its biggest weekly decline since August. The yen and the dollar gained against euro for the first time in three days.
The Shanghai Composite Index has dropped 5.6 percent this week, leading the selloff in global markets. China may be poised to raise borrowing costs as efforts to attack inflation with subsidies, sales of food reserves and the threat of price controls are likely to prove insufficient, according to analysts surveyed by Bloomberg News. Higher rates in China may undermine the global recovery, even as data from the U.S. yesterday show that the world’s largest economy is accelerating.
“Concern about what policy measures China introduces to stem inflationary concerns is likely to weigh on the markets for some time,” said Tim Schroeders, who helps manage $1 billion in Melbourne at Pengana Capital Ltd.
Losses today took the MSCI Asian index’s 5-day decline to 0.5 percent, following a 2 percent drop last week. The Shanghai Composite fell 1.6 percent, on course for its lowest level since Oct. 11. Hong Kong’s Hang Seng Index fell 1.5 percent, led by a 3.4 percent retreat in Cheung Kong (Holdings) Ltd., as Hong Kong’s government prepared to announce new measures to cool the property market, a person familiar with the situation said.
Imminent Rate Move
Jiangxi Copper Co. retreated 2.6 percent in Shanghai while PetroChina Co. lost 2.8 percent. Copper fell to as low as $8,320 a metric ton in London, halting a two-day, 3.4 percent rebound. Nickel dropped 1 percent to $21,620 a ton. Crude lost 0.4 percent to $81.54 a barrel, heading for a 4 percent weekly slump.
Analysts at nine banks surveyed this week by Bloomberg News predict the People’s Bank of China will add to last month’s rate rise, the first since 2007, by the end of December. Concern that rising consumer prices, which surged the most in two years in October, will undermine the economy spurred Premier Wen Jiabao to hold a cabinet meeting on the issue this week.
Money Markets
Speculation of an interest-rate increase boosted China’s benchmark money-market rate to the highest level in six weeks. The seven-day repurchase rate, which measures lending costs between banks, rose seven basis points to 2.06 percent, the highest level since Oct. 8, according to a daily fixing published at 11 a.m. in Shanghai by the Interbank Funding Center.
“Every Friday there is always a chance that China is going to do something,” Qu Hongbin, co-head of Asian economic research at HSBC Holdings Inc. in Hong Kong, told Bloomberg Television, indicating a PBOC announcement can’t be ruled out for today. At the same time, given this month’s increase in banks’ reserve requirement ratios and the steps taken this week, a boost to borrowing costs is more likely next month, he said.
The yen strengthened versus 15 of its 16 major counterparts and traded at 113.60 per euro from 113.95 in New York yesterday. It earlier touched 114.13, the lowest level since Nov. 8. Japan’s currency was at 83.37 per dollar from 83.52 yesterday, when it reached 83.79, the weakest since Oct. 5. The dollar advanced to $1.3626 per euro from $1.3643.
Irish Talks
Europe’s currency yesterday gained 0.8 percent against the greenback after Ireland’s Finance Minister Brian Lenihan said the government is prepared to ask for a bank rescue package after talks conclude with the European Union and International Monetary Fund, which sent teams to Dublin yesterday. Patrick Honohan, governor of the central bank, said he expects his nation will seek a package worth “tens of billions” of euros to help rescue lenders battered by Ireland’s property slump.
Data today may show German producer prices gained 4.1 percent in October from a year ago after rising 3.9 percent in September, according to a Bloomberg News survey of economists. The nation’s consumer confidence may advance to 5 in December from 4.9 this month, another survey showed before GfK AG, a market research company, releases the data on Nov. 23.
In the U.S., a Commerce Department report due on Nov. 23 may show that gross domestic product grew at a 2.4 percent annual rate in the third quarter, compared with the 2 percent increase initially reported.
U.S. Growth Accelerates
Data released yesterday showed manufacturing in the Philadelphia region expanded in November to the highest level this year, while a separate report from the Conference Board showed an index of leading indicators rose for a fourth month.
Treasury 10-year yields have risen seven basis points, or 0.07 percentage point, to 2.860 percent this week. Gains were capped by four basis point drop today after Federal Reserve Chairman Ben S. Bernanke said unemployment and disinflation are a threat to the U.S. recovery.
Bernanke took his defense of the U.S. central bank’s monetary stimulus abroad, saying it will aid the world economy, and implicitly criticized China for keeping its currency weak. The Fed released the text of Bernanke’s speech in Washington ahead of the address scheduled for 11:15 a.m. Frankfurt time at a European Central Bank conference on monetary policy.
--With assistance from Susan Li in Hong Kong, Rocky Swift and Yoshiaki Nohara in Tokyo, and Katrina Nicholas, Christian Schmollinger, Lilian Karunungan and Ron Harui in Singapore. Editors: James Poole, Shiyin Chen
To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net.
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
