BLBG:Asian Stocks, European Futures Drop as Euro Retreats
Asian stocks tumbled the most since November, European equity futures fell and the euro slid to a three-month low after French Socialist Francois Hollande was elected President. Treasuries and the yen advanced, while commodities declined.
The MSCI Asia Pacific Index (MXAP) sank 2.5 percent as of 3:01 p.m. in Tokyo. Euro Stoxx 50 Index futures retreated 2.4 percent and Standard & Poor’s 500 Index futures fell 1.1 percent. The euro lost 0.8 percent to $1.2986, while the yen rose against all of its major peers. Ten-year Treasury yields declined five basis points to 1.83 percent, while bond risk in Asia increased. The S&P GSCI Index of commodities dropped to the lowest level in four months and oil slumped as much as 3.2 percent in New York.
Hollande, the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity, while Greek voters flocked to anti-bailout parties. Hollande’s platform calls for policies German Chancellor Angela Merkel opposes, including increased spending and a delayed deficit-reduction effort. Indonesia’s economy grew 6.3 percent in the first quarter as domestic consumption helped counter a global slowdown, government data showed.
“There’s been a lot of concern about what’s going on in the U.S., China, and recession in Europe and now we have more concern about Europe,” Vasu Menon, the vice president for wealth management at Singapore-based Oversea-Chinese Banking Corp., said in a Bloomberg Television interview. The company oversees about $223 billion. “That’s going to hurt the markets.”
Europe’s Debt Crisis
Austerity measures aimed at stemming Europe’s turmoil have driven economies from the Netherlands to Spain back into recession, emboldening politicians campaigning for growth. The elections took place as 386 billion euros ($501 billion) of emergency loan packages for Greece, Ireland and Portugal and a focus on deficit reduction failed to stem Europe’s sovereign debt crisis.
The euro slid 0.9 percent to 103.58 yen, extending a 1.8 percent drop last week. The dollar was at 79.77 yen and the Australian dollar depreciated for a sixth day, falling 0.4 percent to $1.0142.
“There are major concerns about the euro,” said Marito Ueda, the senior managing director in Tokyo at FX Prime Corp., a currency margin company. “What’s common to both Greek and French voting is that people aren’t feeling good about austerity measures, which are the crux to a resolution of Europe’s debt problems.”
Euro, Yen
The euro has declined 1 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar has lost 1.1 percent and the yen has weakened 5.1 percent, the indexes show.
About 13 stocks fell for each that rose in the MSCI Asia Pacific Index. The gauge is still up 6.3 percent for 2012. The MSCI Emerging Markets Index lost 1.5 percent, extending the longest string of weekly declines since 2008. Hong Kong’s Hang Seng Index fell 2.7 percent and South Korea’s Kospi index sank 1.6 percent.
The Nikkei 225 Stock Average tumbled 2.8 percent, heading for the biggest drop since November, after Japanese markets were shut for a two-day holiday last week. The index has fallen 11 percent since March 27, poised to enter a so-called correction.
Sony, KT Corp.
Sony Corp. shares retreated 4.4 percent to the lowest level in 25 years in Tokyo amid concern that a weaker euro may reduce the value of European sales for Japan’s exporters. KT Corp. (030200), South Korea’s largest phone and Internet company, climbed 5.9 percent in Seoul after reporting first-quarter profit that beat analyst estimates.
The difference between the 10-year swap rate and the yield on similar-maturity U.S. debt widened to as much as 14.6 basis points, the most since Jan. 18. Japan’s 10-year yield slid two basis points to 0.865 percent, the least since October 2010. Australia’s rate touched a record low of 3.41 percent.
The cost of insuring Asia-Pacific bonds from default rose. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 7 basis points to 171 basis points, according to Credit Agricole SA. The gauge is set for its highest close since Feb. 2, according to data provider CMA.
The S&P GSCI Index of commodities fell as much as 1.3 percent to 645.29, the lowest level since Dec. 30. Copper for July delivery on the Comex declined 1 percent to $3.6825 a pound. The London Metal Exchange is closed for a public holiday.
Gauges of equity volatility jumped as stocks tumbled. The HSI Volatility Index (VHSI), a measure of options prices on the Hang Seng Index, gained 14 percent to 21.88 for the biggest advance in six months. The Nikkei Stock Average Volatility Index surged 14 percent to 22.68.
“There are still many hurdles in Europe,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “There are no easy answers and the electorate is rejecting austerity. People will take a renewed focus on Europe and that focus is not positive.”
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
