BLBG:Euro Declines for Fifth Day as Asia Stocks, Oil Fall on European Debt Risk
The euro declined for a fifth day against the yen, while Asian stocks and oil retreated as investors watched for signs of progress in efforts to tame Europe’s sovereign-debt crisis.
Europe’s shared currency weakened 0.4 percent to 104.85 yen at 1:33 p.m. in Tokyo. The MSCI Asia Pacific Index dropped 1.8 percent, set for its lowest close since August 2010, and Standard & Poor’s 500 Index futures sank 1.1 percent. Treasuries advanced for the first time this week before U.S. reports today on retail sales and producer prices. Oil dropped 1.5 percent in New York.
Chinese Premier Wen Jiabao today called on developed nations to cut their debt and create jobs rather than relying on his nation to bail out the world economy. Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy today amid increasing speculation that Greece will default. Spain is scheduled to sell debt tomorrow, after demand dropped during an auction by Italy yesterday.
“We’ve seen stocks bounce around a lot, with all eyes still on Europe,” said Matt Riordan, who helps manage close to $6.6 billion in Sydney at Paradice Investment Management Pty. “The key from here is how governments manage the downside, in terms of how they restructure Greek debt and shore up their banks. The risk beyond this is to what extent this spreads into some of the larger countries.”
Debt Auctions
The euro traded at $1.3629 from $1.3678 in New York yesterday. The 17-nation currency sank to 103.90 yen on Sept. 12, the lowest since June 2001. Spain is scheduled to auction securities maturing in 2019 and 2020 tomorrow, after Italy sold 3.9 billion euros ($5.3 billion) of five-year notes yesterday at an average yield of 5.6 percent, up from 4.93 percent at the previous auction. Demand dropped to 1.28 times the amount on offer, from 1.93 times.
The S&P 500 rose 0.9 percent yesterday, following a 0.9 percent gain in the Stoxx Europe 600 Index as French banks rebounded. BNP Paribas (BNP) SA gained 7.2 percent after a two-day 19 percent slump after the lender said it is able to finance its dollar needs at normal levels “directly and through foreign- exchange swaps.”
“If Greece does default in some shape, way or form, then the banks that hold that debt are going to be under a lot of pressure,” Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, said in a Bloomberg Television interview. “Markets are going to continue to struggle.”
Stocks Slide
About four shares slid for each one that gained on MSCI’s Asia Pacific Index. The gauge has erased all the gains since Federal Reserve Chairman Ben S. Bernanke suggested the U.S. central bank will take steps to stimulate growth. Japan’s Nikkei 225 Stock Average declined 1 percent, Australia’s S&P/ASX 200 Index lost 1 percent, and the Kospi Index slumped 2.7 percent in South Korea, where markets traded for the first time this week after a holiday.
Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, sank 3.6 percent after Apple Inc. won backing from a German court for a ban on sales of Samsung’s Galaxy 10.1 tablet computer in the country. Commonwealth Bank of Australia (CBA) dropped 1.6 percent, pacing losses among bank stocks.
The Asian Development Bank reduced its 2011 growth forecast for Asia excluding Japan to 7.5 percent from an April estimate of 7.8 percent. It raised the region’s inflation estimate to 5.8 percent from 5.3 percent. Indonesia’s rupiah plunged 1.7 percent to 8,863 per dollar, the most since February 2009. Taiwan’s dollar fell 0.5 percent to NT$29.626, an eighth day of losses.
U.S. Economy
Data today may show U.S. retail sales rose 0.2 percent, following a 0.5 percent increase in July, according to the median forecast in a Bloomberg News survey of economists. The Labor Department’s producer price index was probably unchanged in August, a separate survey shows. Yields on 10-year Treasuries fell two basis points to 1.97 percent.
Americans’ pessimism about the economy has deepened and confidence in both political parties has fallen with only 20 percent saying the country is on the right course even as they remain divided over solutions. Just 9 percent of people say they are confident the economy won’t slide back into recession, in a Bloomberg National Poll.
The cost of protecting Asia-Pacific corporate and sovereign bonds from default dropped, with the Markit iTraxx Australia index falling 6 basis points to 188 basis points as of 11:10 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. That’s down from a two-year high on Sept. 12, according to data provider CMA.
Oil for October delivery dropped 1.5 percent to $88.84 a barrel on the New York Mercantile Exchange. Futures are retreating after climbing to a six-week high yesterday.
Copper for three-month delivery fell 1 percent to $8,686 a metric ton on the London Metal Exchange. December-delivery wheat slid 0.3 percent to $7 a bushel, extending six-day drop. Corn fell 0.4 percent to $7.20 a bushel, extending yesterday’s 3 percent drop.
To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
