BLBG:Asia Stocks Rally On Japan Confidence; Oil Declines
Asian stocks headed for their longest winning streak since March and credit risk fell as manufacturing indicators in Japan and China beat forecasts and European leaders agreed on measures to ease the debt crisis. The euro weakened and oil declined after rallying last week.
The MSCI Asia Pacific (MXAP) Index added 0.4 percent in its fourth day of gains as of 1:37 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent. The euro dropped against most of its major peers after gaining 1.8 percent against the dollar June 29. Oil in New York sank 1.4 percent to $83.81 a barrel after surging the most in three years. Corn in Chicago rose to the highest since September. The Markit iTraxx indexes tracking credit-default swaps for Asia ex-Japan, Japan and Australia all fell.
Japan’s Tankan index of large manufacturers’ sentiment and China’s Purchasing Managers’ Index exceeded economist estimates, while a reading today may show factory activity in the euro zone contracted for an 11th month. Equities rallied the most this year on June 29 as European leaders reduced aid requirements for Spain and Italy. Stocks rose the most in June since 1999 and more in the first-half than the dollar, bonds and commodities.
“We have been adding risk,” Hugh Young, who helps manage $70 billion in Asian equities at Aberdeen Asset Management Asia Ltd. in Singapore, said. “Nobody’s overly optimistic about economic growth but they are realistic. We are bumping along the bottom and this is quite healthy given where we’ve been.”
Less Pessimistic
Japan’s Nikkei 225 (NKY) Stock Average rose 0.3 percent and the Topix Index was up 0.2 percent. The nation’s quarterly Tankan index was minus 1 in June from minus 4 in March, the central bank said today. Economists surveyed by Bloomberg News expected a reading of minus 4, and a negative number means pessimists outnumber optimists.
South Korea’s Kospi index increased 0.2 percent after data yesterday showed exports growth in June snapped three months of declines. Australia’s S&P/ASX 200 Index rose 1 percent. China’s Shanghai Composite Index rose 0.1 percent after falling earlier, with more than three stocks gaining for every one that fell. The Hong Kong market is closed today for a holiday.
China’s PMI fell to 50.2 in June from 50.4 in May, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing reported yesterday. That compares with the 49.9 median estimate in survey of 24 economists. A final PMI reading for June by HSBC Holdings Plc and Markit Economics today was better than a preliminary level published last month.
Galaxy Blocked
BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 1.2 percent in Australia after commodity prices rallied last week. Samsung Electronics Co. (005930), the world’s top handset maker, fell as much as 2.4 percent in Seoul, the biggest decline in a week, after Apple Inc. won a court ruling blocking sales of the Galaxy Nexus smartphone in the U.S. The stock had the biggest negative impact on the MSCI Asia Pacific index.
Before the June 29 rally, more than $4.9 trillion had been erased from global equities in the second quarter amid concern a worsening debt crisis will stifle the global recovery.
Seven of the 10 major sectors tracked by the MSCI Asia Pacific Index rose, led by stocks of oil and gas, basic materials and financial companies. The MSCI All-Country World Index was unchanged.
“Asia is the one that has quite sustainable growth compared to the U.S. and Europe,” Tan Lip Kwang, who helps manage 2.74 billion ringgit ($865 million) at K&N Kenanga Holdings Bhd., said from Kuala Lumpur. “That’s one of the reasons people want to put their money into Asia.”
Stock, Bonds
The MSCI All-Country World Index of shares in 45 nations climbed 6 percent over the first six months, led by the U.S., where $1.1 trillion was added to share values. The gain is about 1.1 times the increase in global bonds and 1.8 times more than the dollar after adjusting for daily swings, data compiled by Bloomberg show. Before the adjustment, fixed income climbed 2.8 percent, the U.S. currency added 1.7 percent and the S&P GSCI Total Return index of commodities sank 7.2 percent.
The euro fell 0.3 percent to $1.2625 and 100.70 yen before data today forecast to show manufacturing contracted and the currency bloc’s jobless rate climbed to a record, boosting prospects the European Central Bank will cut interest rates.
The ECB, which has kept borrowing costs at a record low of 1 percent since December, will probably lower the benchmark rate by 0.25 percentage point on July 5, a Bloomberg survey of economists shows. The 17-nation currency posted the biggest jump in more than a year versus the yen on June 29 after euro leaders eased terms on loans to Spanish banks and relaxed conditions on potential help for Italy.
Euro Puts
Derivatives traders see at least a year of pain for the euro even after the currency’s rally late last week. One-year options show that the premium for puts, which grant the right to sell the euro versus the dollar, over calls, which confer the right to buy, is the most relative to three-month contracts since Bloomberg began tracking the data in 2003.
“On a long-term basis what you need to make the euro a survivable currency is fiscal-policy union in Europe, and you are a long way from that,” Jeff Applegate, the chief investment officer at Morgan Stanley Smith Barney, which manages over $1.7 trillion, said in a June 29 interview. “The value of the euro will go lower.”
Mexican Peso
Mexico’s peso advanced as presidential candidate Enrique Pena Nieto said official electoral data indicates that he will win the vote. He spoke in a televised statement in Mexico City. The peso rose 0.7 percent to 13.2625 per dollar, after gaining 3.8 percent last week, the best weekly performance since December
Corn and soybeans climbed amid concern hot, dry weather will erode prospects for crops in the U.S. Corn for December delivery gained as much as 4.6 percent to $6.64 a bushel on the Chicago Board of Trade, the highest for that contract since Sept. 12. Soybeans for November delivery rose 1 percent.
The S&P GSCI gauge of 24 commodities fell 0.6 percent after gaining the most since April 2009 on June 29. Copper in London declined 0.6 percent, and zinc fell 1.1 percent. Rubber futures in Tokyo jumped the most in seven months.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 5 basis points to 168 as of 8:38 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The index is set for its lowest close since May 4, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market
To contact Bloomberg News staff for this story: Chua Baizhen in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
