Asian stocks dropped the most in two weeks while the yen rose amid signs U.S. economic growth is slowing as the nation struggled to resolve an impasse on raising its debt ceiling. The New Zealand dollar rose toward a record.
The MSCI Asia Pacific Index decreased 1.1 percent at 3:02 p.m. in Tokyo, set for the largest loss since July 12 and Euro Stoxx 50 Index futures sank 1.2 percent. Standard & Poor’s 500 Index futures added 0.2 percent after a three-day drop in the U.S. stock gauge. The yen gained toward a four-month high versus the dollar and the so-called kiwi jumped as much as 0.4 percent to 87.36 U.S. cents. Gold traded within 1 percent of a record.
House Speaker John Boehner revised his plan to raise the U.S. debt ceiling as he gained support among fellow Republicans for a proposal that Senate Democrats said won’t pass their chamber. The Federal Reserve said yesterday the U.S. economy expanded at a slower pace in more parts of the country since the beginning of June. Data today is likely to show home sales dropped that month and figures due tomorrow are forecast to show growth last quarter was at the slowest pace in a year.
“It’s a slowdown,” Brian Jacobsen, the chief portfolio strategist at San Francisco-based Wells Fargo Funds Management, said in a Bloomberg Television interview. “Unfortunately, we are at a point where, depending upon on what comes out of Washington, that could determine whether or not this does become a double dip.”
About five shares retreated for every one that climbed on MSCI’s Asia Pacific Index. Japan’s Nikkei 225 Stock Average slumped 1.5 percent, South Korea’s Kospi Index dropped 0.9 percent and Australia’s S&P/ASX 200 Index declined 1.5 percent.
Tech Earnings
Advantest Corp. sank 6.9 percent in Tokyo after the world’s biggest maker of memory-chip testers said profit fell 56 percent last quarter. AU Optronics Corp. (2409) slid 5.9 percent after Taiwan’s second-largest maker of liquid-crystal displays posted quarterly losses that were more than twice what analysts had estimated.
The Stoxx Europe 600 Index retreated 1.1 percent yesterday, while the S&P 500 tumbled 2 percent, its steepest drop since June 1. The U.S. benchmark has declined for three straight days even though 78 percent of S&P 500 companies that reported earnings so far posted higher-than-estimated results. Exxon Mobil Corp., the world’s most valuable company, will be among companies releasing their earnings today.
Growth slowed in eight of the Fed’s 12 regions, compared with four in the last survey, the central bank said in its Beige Book survey released yesterday. A Commerce Department report also showed durable goods orders fell 2.1 percent, defying economists’ median forecast for an increase of 0.3 percent.
Home Sales, GDP
Economic figures today may show pending home sales shrank 2 percent in June after an 8.2 percent increase the previous month, while data tomorrow will show gross domestic product grew at a 1.8 percent annual pace last quarter, slowing from the 1.9 percent gain the previous three months, economists surveyed by Bloomberg said.
Republican leaders were moving ahead with plans to vote on Boehner’s measure tomorrow, less than one week before a potential U.S. default on Aug. 2. The Congressional Budget Office said the new plan would cut $915 billion in spending over a decade, still short of the $2.2 trillion Senate plan.
Yields on 10-year Treasuries rose two basis points to 2.97 percent, following a three-basis-point drop yesterday. Credit default swaps on the U.S. climbed four basis points yesterday to 62, according to data provider CMA. While the swaps are the most-expensive since Feb. 8, 2010, they are cheaper than swaps on 53 of 58 countries tracked by CMA.
Bond Risk
The cost of protecting Asia-Pacific corporate and sovereign bonds from default also rose, with the Markit iTraxx Australia climbing three basis points to 119 basis points, according to Credit Agricole CIB prices. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan added 2.5 basis points to 118, Credit Agricole prices show, while the Markit iTraxx Japan index increased one basis point to 121, Deutsche Bank AG prices show.
The yen traded at 77.77 per dollar from 77.98 in New York yesterday, when it advanced to 77.58, the strongest since it hit a postwar record on March 17. Japan’s currency was at 111.74 per euro from 112.04 after climbing 0.9 percent yesterday. The yen may strengthen to as high as 75 per dollar, former top Finance Ministry official Eisuke Sakakibara said yesterday.
The greenback fetched $1.4367 per euro from $1.4369. It reached $1.4536 against the 17-nation currency yesterday, the weakest level since July 5, before rebounding after S&P said Greece will partially default on its debt once European officials push through a second bailout for the nation. The rating company also cut Greece to CC, two steps above default.
European Concerns
“Greece is definitely still an issue,” said Moh Siong Sim, a currency strategist at Bank of Singapore Ltd. “Europe is still a concern because the resolution they came to was somewhat unclear.”
The New Zealand dollar climbed after the Reserve Bank said it would likely remove the 50-basis-point “insurance” cut made after a February earthquake. The won slipped 0.2 percent to 1,051.50 per dollar, halting a two-day rally.
Oil for September delivery slid as much as 0.9 percent to $96.51 a barrel on the New York Mercantile Exchange before trading at $97.23. U.S. crude stockpiles climbed 2.3 million barrels to 354 million last week, a Department of Energy report showed. A 2 million-barrel drop was forecast in a Bloomberg News survey. Gasoline, diesel and heating oil inventories also rose.
Immediate-delivery bullion traded at $1,615.35 an ounce as investors sought a haven. Spot gold has rallied 7.6 percent this month as the U.S. default deadline has approached, touching an all-time high of $1,628.05 an ounce yesterday. Holdings in exchange-traded products rose for a third day to a record 2,131.378 metric tons yesterday, data compiled by Bloomberg show.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Patrick Chu at pchu@bloomberg.net
