BLBG:Euro Drops With Metals on Debt Crisis Concern as Aussie Weakens
The euro weakened and metals declined on renewed concern about Europe’s debt crisis. Asian stocks fell from an 18-month high and Australia’s dollar retreated.
The euro lost 0.3 percent to $1.347 at 7:26 a.m. in London, after falling yesterday by the most in a month. Euro Stoxx 50 Index futures were little changed. Contracts on the Standard & Poor’s 500 Index rose 0.1 percent after the gauge sank 1.2 percent yesterday. The MSCI Asia Pacific Index (MXAP) slumped 1 percent. Zinc fell 1.1 percent, the most in three weeks. The Australian dollar slipped 0.2 percent versus the greenback after the central bank signaled it’s prepared to cut interest rates.
Data today may show retail sales in the euro area declined in December, while the National Institute of Economic and Social Research said the U.K. economy faces risks of prolonged stagnation. A “perfect storm” may be forming in the world economy as signs of a recovery spur capital flows to emerging markets and some advanced nations that may lead to asset bubbles, Banco de Mexico Governor Agustin Carstens said. The European Central Bank meets on Feb. 7, while euro-area leaders gather for a summit the same day.
“It’s a return of worries about Europe,” said Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd., which has about $126 billion under management. “The market got very stretched and was due for a pullback, it was just a question of what the trigger would be. We could still see some further weakness this month.”
UBS Loss
The Stoxx Europe 600 Index dropped the most since Oct. 23 yesterday while Spanish 10-year bond yields rose to a seven-week high as the nation’s Prime Minister Mariano Rajoy faced corruption allegations. UBS AG, Switzerland’s biggest bank, may be active after posting a smaller-than-expected quarterly loss. Munich Re, the world’s biggest reinsurance company, may move after its earnings that beat estimates.
Seven stocks fell for every two that rose in the MSCI Asia Pacific. The gauge gained 12 percent from a two-month low on Nov. 14 through yesterday on optimism a new Japanese government would add stimulus to fight deflation and amid signs of growth in China’s economy. Japan’s Nikkei 225 Stock Average and South Korea’s Kospi Index retreated at least 0.8 percent.
HTC (2498) Corp. and Hitachi Ltd. (6501) led Asian technology shares lower. HTC sank 6.8 percent, the most since Nov. 13, after the smartphone maker said first-quarter revenue will be NT$50 billion ($1.7 billion) to NT$60 billion, below the NT$64.8 billion average of 19 analyst estimates compiled by Bloomberg. Hitachi lost 6.4 percent, the most since March 2011, after lowering its operating profit estimate by 13 percent.
Asset Bubbles
The S&P 500 Index, which reached a five-year high last week, declined yesterday by the most since Nov. 14. The U.S. gauge rallied 5 percent last month as lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The Dow Jones Industrial Average (INDU) climbed above the 14,000-level last week for the first time since 2007, and is 2 percent away from its all-time high.
“Risk appetite among investors has returned and the search for yield is in full force,” Mexico’s Carstens said in a speech in Singapore today. “The mood swing has been so strong that some fears have been expressed about financial markets being too optimistic, causing mispricing in some asset classes. Concern of asset-price bubbles fed by credit booms are starting to appear in some economies.”
The yield on Japanese 10-year government bonds fell one basis point to 0.79 percent. It climbed to 0.805 percent yesterday, the most since Jan. 15.
Euro Weakens
The euro weakened 0.4 percent to 124.34 yen, extending yesterday’s drop, which was the biggest since June. The ECB, which has held its main refinancing rate at 0.75 percent since July, will make no change at its next policy decision, according to the median forecast of economists surveyed by Bloomberg News.
The Australian dollar dropped to $1.0415, erasing a 0.2 percent advance, after the nation’s central bank kept its benchmark interest rate unchanged at 3 percent. The inflation outlook “would afford scope to ease policy further, should that be necessary to support demand,” the Reserve Bank of Australia said in a statement today.
Zinc futures in London, which touched a one-year high yesterday, declined to $2,161.50 a metric ton, the first drop in three days. Nickel and copper fell at least 0.4 percent. Palladium for immediate delivery snapped a two-day gain, dropping 0.8 percent to $752 an ounce.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
