BLBG:Asian Stocks, Oil Drop As Spain Rescue Euphoria Fades
Asian stocks fell, after climbing the most in four months yesterday, and oil dropped to its lowest since October amid doubt Spain’s 100 billion euro ($125 billion) bailout will halt the debt crisis. The yen reversed gains.
The MSCI Asia Pacific Index fell 0.8 percent as of 1:45 p.m. in Tokyo, while futures on the Standard and Poor’s 500 Index gained 0.4 percent. Oil futures slumped as much as 2 percent, copper slid 0.7 percent and rubber fell 1.2 percent. The yen weakened against most its major peers after the International Monetary Fund said it was overvalued.
Italy’s plan to auction at least 9.5 billion euros of debt this week amid surging bond yields, along with an election on June 17 that may determine Greece’s future in the euro, damped investor optimism after Spain asked for European aid to shore up its banks. In China, new loans exceeded economist estimates in May, signaling support for investment projects that will help counter a slowdown in Asia’s biggest economy.
“It used to be after one of these bailouts you’d get a month’s worth of good reaction, now $100 billion buys you 24 hours,” said Andrew Pease, Sydney-based chief investment strategist at Russell Investment Group, which manages about $150 billion. “The bond market is now demanding more integration and the focus is coming back to growth. Nobody is looking to go back into risk-on positions until they see how Greece plays out.”
The MSCI Asia-Pacific Index (MXAP) has fallen 13 percent from a peak this year on Feb. 29 as Europe’s debt crisis intensified, the U.S. recovery showed signs of losing steam and China’s economy slowed. Almost three stocks fell on the regional benchmark for each that gained today.
Toyota, BHP
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong dropped 0.7 percent even after China’s local-currency lending rose last month to a record for May. The loans totaled 793.2 billion yuan ($125 billion), the central bank said late yesterday, beating the 700 billion yuan median forecast in a Bloomberg survey.
Toyota Motor Corp., Asia’s biggest automaker, declined 1.5 percent in Tokyo. The stock fell as much as 2.3 percent before paring the day’s loss as Japan’s currency weakened. BHP Billiton Ltd., the world’s biggest mining company, fell 0.8 percent in Sydney as raw-materials prices slid.
The S&P GSCI gauge of 24 commodities fell 0.5 percent, approaching its lowest level since 2010. The drop was led by declines in prices for nickel, natural gas and copper.
OPEC Quota
Oil declined for a fourth day after Saudi Arabian Oil Minister Ali al-Naimi said the Organization of Petroleum Exporting Countries may need a higher output quota and the U.S. exempted more countries from sanctions for buying Iranian crude. Oil for July delivery sank as low as $81.07 a barrel before trading 0.6 percent lower on the day at $82.18. The cost of oil has dropped 17 percent this year and yesterday’s close of $82.70 was the lowest since Oct. 6.
The yen reversed earlier gains after the IMF said it was overvalued. Japan’s currency has strengthened about 12 percent against the euro since this year’s low on March 21. Asset purchases by the Bank of Japan, which meets on June 15 to review monetary policy, could be substantially expanded, the Washington-based lender said today. The yen fell 0.3 percent to 99.45 per euro, after strengthening as much as 0.4 percent.
The Australian and New Zealand dollars rallied from an earlier drop amid speculation recent losses were excessive. The so-called Aussie rose 0.4 percent to 99.07 U.S. cents and the kiwi strengthened 0.4 percent to 77.21 U.S. cents.
The cost of insuring Asian bonds against default rose, according to traders of credit default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed seven basis points to 196 basis points, Royal Bank of Scotland Group Plc prices show. That brings gains to 63.5 basis points from a low this year of 132.5 basis points reached on March 19, according to CMA.
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
