BLBG:Asian Stocks, Oil Drop On Signs Europe Slump Is Worsening
Asian stocks retreated from an eight- week high, Australia’s dollar weakened and crude oil dropped before the European Central Bank meets to review interest rates and Spain sells debt.
The MSCI Asia Pacific Index slid 0.4 percent as of 2:33 p.m. in Tokyo, while futures on the Standard & Poor’s 500 Index declined 0.3 percent. The so-called Aussie fell against 15 of 16 major peers and oil lost 1 percent in New York, where markets were closed yesterday for a holiday. Treasuries gained before jobs data today and tomorrow. The Philippine peso rose toward a four-year high after a Standard & Poor’s upgrade.
A deteriorating outlook for the global economy is fueling speculation central banks will step up efforts to revive growth. The ECB will probably reduce its benchmark interest rate to a record-low 0.75 percent at a policy meeting today, while the Bank of England will step up bond purchases that boost the supply of pounds, according to Bloomberg surveys of economists. The Bank of Japan will use monetary policy to ensure financial stability, Governor Masaaki Shirakawa said.
“We need to see that economic growth globally, particularly in Europe and the U.S., is improving,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. “Until then, markets will remain under pressure.”
Spanish Auction
The ECB will lower its benchmark rate by at least a quarter of a percentage point today, according to 52 of 63 forecasts in a Bloomberg survey. The Bank of England will raise its target for bond purchases by 50 billion pounds ($78 billion) to 375 billion pounds, according to the median estimate in a separate survey. Factory orders in Germany, Europe’s biggest economy, probably dropped 6 percent in May from a year earlier, a Bloomberg survey of economists showed before a report today.
The euro was little changed at $1.2526 following a 0.6 percent slide yesterday. Spain is scheduled to auction three-, four- and 10-year bonds today. The nation’s benchmark 10-year securities yielded 6.41 percent yesterday, compared with a euro- lifetime high of 7.29 percent reached June 18.
Investors are “skeptical” Europe will address its debt crisis in a timely fashion, said Tim Schroeders, a portfolio manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “I would still be cautious.”
U.S. Jobs
Nine out of 10 industry groups in the MSCI Asia Pacific Index declined as investors favored safer bets than equities. The Hang Seng Index fell 0.3 percent, the Shanghai Composite (SHCOMP) slid 1.4 percent and the Nikkei 225 Stock Average retreated 0.3 percent.
U.S. Treasuries advanced, pushing the 10-year yield down four basis points, or 0.04 percentage point, to 1.59 percent. The yield on Singapore’s 3.125 percent bonds due September 2022 fell six basis points to 1.45 percent, the lowest level since the security was issued in August 2007.
ADP Employer Services, which compiles a private report on payrolls, will say today that U.S. jobs growth slowed to 100,000 in June from 133,000 in May, a Bloomberg survey showed. Government data on nonfarm payrolls tomorrow are forecast to show an increase of 90,000 workers for June after a 69,000 gain in May, according to the median estimate in a separate survey.
The Aussie weakened 0.2 percent to $1.0259 as commodities prices declined. Crude oil traded at $86.82 a barrel in New York, down from $87.66 on July 3. Copper declined 0.3 percent from yesterday to $7,700.75 a ton in London.
“Price moves tonight will be primarily driven by the size of an interest rate cut by the European Central Bank and the magnitude of expected stimulus from the Bank of England,” analysts led by Mark Pervan at Australia & New Zealand Banking Group Ltd. wrote in a report today.
Philippine Upgrade
The Philippine peso strengthened 0.3 percent to 41.69 per dollar in Manila, near a four-year high of 41.60 reached yesterday. The nation’s long-term foreign-currency debt rating was increased one level to BB+ from BB, S&P said in a statement yesterday. The country’s benchmark 10-year bonds rose for a fifth day, pushing their yield down six basis points to 5.20 percent, the lowest level since April.
The cost of insuring corporate and sovereign bonds from non-payment in the Asia-Pacific region increased, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced two basis points to 164.5 in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark, which has ranged between 210 and 132.5 this year, is set to rise for the first time in eight days, according to data provider CMA.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
