Asian stocks and oil fell for a second day after U.S. job growth stalled last month and amid concern Europe’s sovereign-debt crisis will worsen. The Dollar Index headed for its longest winning streak in eight months.
The MSCI Asia Pacific Index sank 2.3 percent as of 1:30 p.m. in Tokyo, set for the biggest drop since Aug. 19. Standard & Poor’s 500 Index futures slid 0.5 percent, after the gauge’s 2.5 percent drop on Sept. 2 in the U.S., where markets are closed today for a holiday. Crude retreated 0.7 percent in New York. The dollar climbed 0.3 percent to $1.4165 against the euro. The Markit iTraxx Asia index that tracks default risk for 50 investment-grade borrowers added nine basis points.
Taiwan Semiconductor Manufacturing Co. paced losses in Asia after the chipmaker said its customers’ confidence in the global economic recovery is weakening. A report on Sept. 2 showed payrolls were unchanged last month, and data tomorrow may that show the U.S. service industries grew at the slowest pace in more than a year. An election loss for German Chancellor Angela Merkel’s party in her home state fueled concern opposition is growing to bailouts for debt-saddled European nations.
The recent data confirmed “that the U.S. economy had slowed down in the last quarter and with all the political uncertainty, really hit a wall in August,” Sean Fenton, who helps manage about $1 billion at Tribeca Investment Partners in Sydney, said in a Bloomberg Television interview. “And given the uncertainty in Europe, the real question now is: does that soft patch extend further, and how serious has been the impact on businesses and consumers?”
Almost six shares decreased for every one that climbed on MSCI’s Asia Pacific Index, which was headed for the lowest close since Aug. 26. Japan’s Nikkei 225 Stock Average fell 1.8 percent, South Korea’s Kospi Index slumped 3.4 percent, while Australia’s S&P/ASX 200 Index retreated 2.2 percent. Investors should be “underweight” in global equities, UBS AG said.
Komatsu, TSMC
Komatsu Ltd. sank 4.5 percent in Tokyo after Citigroup Inc. cut its rating on the world’s second-largest maker of construction and mining equipment. Taiwan Semiconductor lost 1.3 percent after Chairman and Chief Executive Officer Morris Chang said the weakening global economy will impact the chip market.
Cnooc Ltd. (883), China’s largest offshore energy explorer, dropped 7.7 percent after oil leaks at a field operated by partner ConocoPhillips forced the company to cut its output estimate. Hutchison Whampoa Ltd., which owns ports in Germany and Spain, sank 1.7 percent. Shares of the two companies also trade today without the right to a dividend payment. Commodity suppliers and shipping companies declined after a Chinese services-industry index fell to a record low of 50.6 in August, fueling concern growth in the world’s fastest-growing major economy is slowing.
‘Scary’ Jobs Report
The S&P 500 slumped 2.5 percent on Sept. 2, dragging the gauge to a 0.2 percent weekly loss, after the Labor Department reported the weakest payrolls reading since September 2010. The median economist forecast was for growth of 68,000. Treasury 10- year notes surged after the report, sending yields 14 basis points lower to 1.99 percent. There will be no trading of Treasuries for the Labor Day holiday today.
“It was a scary report,” said Dan North, chief U.S. economist at Euler Hermes ACI in Owings Mills, Maryland in an interview on Bloomberg Television. “When you get to negative job growth, which we’re very close to now, it means you’re already in a recession.”
President Barack Obama is set to address Congress Sept. 8 to outline plans for boosting hiring and economic growth as Republicans criticize him for his policies, including rules and regulations on business.
The Institute for Supply Management’s non-manufacturing index fell to 51 last month, the lowest since January 2010, from 52.7 in July, according to the median of 59 forecasts in a Bloomberg News survey ahead of the Sept. 6 release. A reading of 50 is the dividing line between expansion and contraction.
Dollar, Euro
The Dollar Index rose 0.2 percent, set for its first five- day winning streak since Jan. 7. The U.S. currency climbed to the highest since Aug. 11 versus the euro. Europe’s shared currency weakened 0.3 percent to 108.75 yen.
The Social Democrats, Germany’s main opposition party, took 36.1 percent to win yesterday’s election in Mecklenburg-Western Pomerania, while Merkel’s Christian Democratic Union had 23.3 percent, ZDF television projections showed. The result means Merkel’s national coalition has been defeated or lost votes in all six German state elections so far this year as voters resist her bid to prevent a euro-region breakup by putting more taxpayer money on the line for bailouts.
European sovereign-debt risk rose to a record on Sept. 2, while the yield on two-year Greek notes climbed the same day to a euro-era high of 47.14 percent amid bickering over Greece’s bailout. The world economy is entering a “new danger zone” amid Europe’s debt difficulties, World Bank President Robert Zoellick said in Beijing on Sept. 3.
‘Risk-Off Scenario’
“The U.S. economy is sluggish, the European debt concern is not going away in a hurry, so market sentiment is not going to improve for a very long time,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland, New Zealand. “This week is certainly a risk-off scenario.”
Britons’ confidence in the outlook for employment weakened “sharply” in August as the number of job vacancies declined, Lloyds Bank Corporate Markets said today. The pound weakened 0.3 percent to $1.6177, adding to the 0.9 percent retreat last week, its biggest weekly loss since June. FTSE 100 Index futures dropped 1.3 percent.
The won depreciated 0.5 percent to 1,068.35 per dollar. Malaysia’s ringgit weakened 0.3 percent to 2.9750 against the U.S. currency. Data today may show inflation accelerated in Indonesia and Taiwan, while a separate report this week may indicate consumer prices climbed at a slower pace in China, according to Bloomberg News surveys.
Default Risk
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan increased to 160.5 basis points, Royal Bank of Scotland Group Plc prices show. The risk benchmark is headed for its highest close since Aug. 26, after dropping 8.6 basis points last week, according to data provider CMA, which is owned by CME Group Inc. and compiles credit-default swap prices quoted by dealers in the privately negotiated market.
Oil for October delivery fell as much as 0.9 percent to $85.68 a barrel in electronic trading on the New York Mercantile Exchange before trading at $85.81. The contract dropped 2.8 percent to $86.45 on Sept. 2. There will be no Nymex floor trading today.
Crude also fell as Exxon Mobil Corp. and Royal Dutch Shell Plc returned workers to some oil and natural gas platforms after Tropical Storm Lee moved out of the Gulf of Mexico. The storm shut 60 percent of Gulf oil production and 44 percent of natural gas output, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
