Asian stocks dropped from a three- month high and the euro weakened before Europe’s leaders meet to discuss the debt crisis and Italy sells bonds. Chinese shares sank in the first day of trading after the Lunar New Year holiday.
The MSCI Asia Pacific Index (MXAP) slumped 0.8 percent as of 4:05 p.m. in Tokyo, paring its gain for the month to 7.2 percent. The Euro Stoxx 50 Index futures lost 0.8 percent and contracts on the Standard & Poor’s 500 Index retreated 0.6 percent. The euro slid 0.5 percent, snapping a five-day advance against the dollar. Australia’s dollar fell 1 percent, weakening against all of its 16 major peers. Treasury five-year yields extended declines to a record low of 0.7331 percent. Copper tumbled 1.6 percent and zinc, nickel and aluminum fell.
European Union leaders gather in Brussels today for their first summit of 2012 to put the finishing touches on a German- led deficit-control treaty and endorse a 500 billion-euro ($661 billion) rescue fund to be set up this year. Greece and its private creditors said Jan. 28 they expect to complete a deal in coming days after bondholders signaled they would accept a bigger cut in their debt holdings.
“Even with a resolution, the bottom line is that there’s going to be tough medicine having to be swallowed by Europe,” said Gavin Stacey, chief interest-rate strategist at Barclays Capital in Sydney. “There is a greater risk of a pullback in euro strength.”
Bond Sales
The euro weakened after climbing 2.2 percent against the dollar last week. Italy sells debt maturing in 2016, 2017, 2021 and 2022 today, after the country was downgraded by Fitch Ratings last week. The common currency lost 0.5 percent to 100.86 yen.
New Zealand’s currency fell 0.7 percent to 81.87 U.S. cents, ending a six-day advance, which was the longest since March. Central bank Governor Alan Bollard won’t seek another five years when his current term ends Sept. 25, the Reserve Bank of New Zealand said in an e-mailed statement today.
Taiwan’s Taiex Index surged 2.4 percent and the country’s currency rose to a three-month high, rallying 0.8 percent to NT$29.764 against its U.S. counterpart, following last week’s holiday. Catcher Technology Co. (2474), which makes casings for the iPhone, surged 6.9 percent after Apple Inc. posted record earnings last week.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 2.1 percent. Japan’s Nikkei 225 Stock Average slumped 0.5 percent and South Korea’s Kospi Index retreated 1.2 percent.
Volatility
“There will still be volatility,” said Pauline Dan, who helps oversee $480 million as chief investment officer at Samsung Asset Management in Hong Kong. “I don’t think we’ve seen the worst of the European situation.”
Mitsubishi Electric Corp. (6503), a Japanese maker of satellites and factory-automation equipment, plunged 15 percent. The government barred the company from bidding on state contracts because it overcharged for defense and aerospace projects.
Bharat Heavy Electricals Ltd. sank 9 percent, set for the biggest drop since November 2008. India’s biggest power- equipment maker reported quarterly profit that missed analysts’ estimates and at least five brokerages downgraded the stock.
Ten-year Treasury yields fell three basis points to 1.86 percent. The U.S. economy grew 2.8 percent last quarter, compared with the 3 percent predicted in a Bloomberg survey of economists, according to government data released on Jan. 27. Federal Reserve Chairman Ben S. Bernanke said last week that he is considering additional debt purchases to spur the economy.
Copper for delivery in three months dropped 1.6 percent to $8,385 a metric ton on the London Metal Exchange. Nickel, zinc and aluminum lost at least 1.3 percent.
Crude oil for March delivery fell 0.8 percent to $98.80 a barrel on the New York Mercantile Exchange. Rubber lost as much as 2 percent to 310 yen a kilogram on the Tokyo Commodity Exchange.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
