Asian stocks fell, with the benchmark MSCI Asia Pacific Index snapping four days of gains, and U.S. futures declined after central bankers in Japan and Australia said the outlook for U.S. growth is deteriorating. Japanese government bonds rose and the euro weakened.
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| The euro dropped 0.5 percent to $1.2818 at 12:20 p.m. in Tokyo from $1.2876 in New York yesterday, the biggest decline since Aug. 30. Photographer: Hannelore Foerster/Bloomberg |
The MSCI index dropped 0.1 percent to 121.70 at 4:20 p.m. in Tokyo. Standard & Poor’s 500 index futures decreased 0.4 percent after U.S. markets were closed yesterday. The Stoxx Europe 600 slid 0.2 percent to 260.47. The euro dropped 1 percent to 107.32 yen. Yields on the 10-year Japanese government bond fell 4.5 basis points to 1.140 percent.
Japan’s central bank kept interest rates unchanged at 0.1 percent, citing concerns over the U.S. economic outlook and “instability” in foreign exchange and stock markets, while Reserve Bank of Australia Governor Glenn Stevens kept the main rate at 4.5 percent “with the global outlook remaining somewhat uncertain.” Europe’s largest banks hold more than 134 billion euros in Greek, Portuguese and Spanish government bonds, according to a Bloomberg News survey.
“Markets may be taking a breather after four straight days of gains,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages $85 billion. “We haven’t seen convincing signs that the yen will substantially weaken, and that’s bad news for the Japanese economy and share market.”
Japan’s Nikkei 225 Stock Average declined 0.8 percent, led by automakers, on concern the yen’s strength against the euro will hurt the value of European sales. Nissan Motor Co. lost 1.8 percent, while Honda Motor Co. slipped 1.4 percent. Nintendo, the world’s largest maker of video-game consoles, declined 1 percent.
Asian Steelmakers
U.S. President Barack Obama proposed spending $50 billion on transportation projects to spur the world’s biggest economy before JPMorgan Chase & Co. said that it sees “further upside” for China steelmakers. Maanshan Iron & Steel Co. jumped 7.8 percent in Shanghai. Posco, the world’s third-biggest steelmaker, jumped 4.7 percent in Seoul, set for its biggest gain since June 21, Hyundai Steel Co. climbed 5.1 percent and Dongkuk Steel Mill Co. added 2.7 percent.
Benchmark hot-rolled coil steel prices in China, the metal’s biggest consumer, rose 3.5 percent yesterday as steelmakers in Hebei province shut mills after the local government limited electricity to reach power efficiency targets. In the U.S., Obama’s proposals call for an “infrastructure bank” and seek money to rebuild 150,000 miles (241,400 kilometers) of roads, construct and maintain 4,000 miles of rail and overhaul 150 miles of runways.
Euro Weakens
The euro weakened amid renewed concern sovereign-debt risk will hinder the fiscal health of European banks, denting prospects for the region’s economic recovery. The dollar traded at 83.89 yen from 84.21 yen.
Greece still faces “substantial” default risk as insolvency prevents the nation from repaying its debt when its bailout program expires in three years, Pacific Investment Management Co. fund manager Andrew Bosomworth said yesterday.
The yen was among the biggest gainers among the major currencies today as sovereign debt concern boosted demand for so-called refuge currencies.
The Bank of Japan kept borrowing costs and the size of its liquidity injections unchanged. Governor Masaaki Shirakawa and his board left the bank-loan facility at 30 trillion yen ($356 billion) after boosting it by 10 trillion yen at an Aug. 30 emergency meeting, the central bank said. Policy makers held the benchmark overnight rate at 0.1 percent.
Reserve Bank of Australia Governor Glenn Stevens kept the overnight cash rate target at 4.5 percent for a fourth month, the central bank said, as concern that the global recovery may falter trumped evidence of accelerating expansion at home.
“The domestic economy by itself demands higher interest rates,” Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today’s decision. “What’s stopping the RBA is the global economic uncertainty.”
The Australian dollar extended declines after Prime Minister Julia Gillard won the backing of key independent lawmakers, allowing her Labor Party to retain government and pursue a tax on mining companies. The Australian currency slid to 91.28 U.S. cents in Sydney, from 91.76 yesterday in New York.
South Korea’s won fell for the first time in five days, dropping 0.5 percent to 1,176.70 per dollar, on speculation the central bank intervened to curb appreciation that may hurt exports. The won retreated from its strongest level in four weeks after policy makers were suspected of buying dollars in the foreign-exchange market yesterday, said Ha Joon Woo, a currency dealer at Daegu Bank in Seoul.
Commodities Drop
Copper dropped for the first time in five days as London Metal Exchange contracts for three-month delivery fell 1 percent to $7,630 a metric ton.
Oil slid for a second day in New York, declining 1.3 percent to $73.65 a barrel on speculation that fuel demand will decline as the U.S. summer peak consumption season ends. Yesterday’s Labor Day holiday marks the end of the peak driving season. Refiners often idle units for maintenance in September and October as gasoline demand drops and before heating-oil use increases. U.S. crude inventories last week rose to the highest point since June, the Energy Department said.
The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan rose 3.5 basis points to 116 basis points in Singapore, Royal Bank of Scotland Group Plc prices show. The risk benchmark is headed for its biggest increase since Aug. 31 and its highest close since Sept. 4, according to CMA in New York.