Euro, Japanese Stocks Fall on Europe Budget Deficit Concern
By Darren Boey and Anna Kitanaka
Feb. 8 (Bloomberg) -- The euro fell for a fourth day and Japanese stocks dropped as investors sought less risky investments after European finance ministers failed to announce detailed plans to tackle budget deficits in the region.
The euro weakened as much as 0.4 percent against the dollar, approaching an eight-month low, and traded at $1.3640 as of 12:14 p.m. in Tokyo. Japan’s Topix index lost 0.2 percent to 889.78, with nine stocks declining for every six that rose. Copper jumped 2.4 percent on the London Metal Exchange.
U.S. stocks rebounded on Feb. 5 on speculation the European Union may propose a solution for Greece’s budget deficit, the largest in the region. French Finance Minister Christine Lagarde said at the conclusion of a Group of Seven finance ministers meeting in Canada that European nations “have confirmed the substance and significance” of Greece’s plan to reduce its shortfall without outside assistance.
“The market is still pretty nervous,” said Chris Hall, who helps manage $3.3 billion at Argo Investments Ltd. in Adelaide, Australia. “Greece is still just one part of a bigger concern about the growing size of budget deficits.”
Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 0.3 percent on Feb. 5, rallying from a 1.8 percent slump on optimism that support measures for Greece would be announced. European Central Bank President Jean-Claude Trichet said the ECB is “confident” Greece will cut its deficit below the limit of 3 percent of gross domestic product in 2012 from 12.7 percent.
Panasonic, Yamaha
The MSCI Asia Pacific Index lost 0.2 percent to 114.50. Japan’s Nikkei 225 Stock Average fell 0.5 percent. Australia’s S&P/ASX 200 Index rose 0.4 percent after the government said it’s withdrawing guarantees on large deposits and wholesale funding as credit markets recover from the financial crisis.
Panasonic Corp., the world’s largest maker of plasma televisions, dropped 4.6 percent to 1,328 yen in Tokyo after the company reported a net loss for the nine months ended Dec. 31. Yamaha Motor Co. retreated 4.9 percent to 1,192 yen after the motorcycle maker widened its 2009 loss forecast.
Chunghwa Picture Tubes Ltd. slid by the 7 percent daily limit for a second day in Taipei after reporting its sixth quarterly loss. The stock fell to NT$3.34. Korea Gas Corp., the world’s biggest buyer of liquefied natural gas, sank 2.4 percent to 52,000 won on lower-than-estimated earnings.
“Investors are concerned about who will rescue Greece and how it’ll be rescued,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages $13 billion in Tokyo. “The reaction in the stock market seems excessive, but the euro’s fall against the yen inevitably has an effect.”
Euro, Dollar
The euro fell to as low as $1.3622, from $1.3678 in New York on Feb. 5, on speculation mounting budget deficits in some European nations will keep policy makers from raising interest rates. It reached $1.3586 on Feb. 5, the lowest since May 20. The dollar strengthened versus 13 of the 16 major currencies as losses in most Asian stocks boosted demand for safer investments.
The dollar gained 0.2 percent to 86.64 cents per Australian dollar, 0.3 percent to 68.78 cents to the New Zealand currency and 0.3 percent to 1,172.6 per Korean won.
“The market is still not believing the story,” said Oh Suktae, an economist at SC First Bank Korea Ltd. in Seoul. “What they want is some big bailout program from the European countries.”
The cost of protecting Asia-Pacific corporate and sovereign bonds from default declined, after a surge on Feb. 5, according to traders of credit-default swaps.
Risk Aversion
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 2.5 basis points to 126.5 basis points, according to Citigroup Inc. The Markit iTraxx Australia index fell 3.5 basis points to 105.5 basis points, Citigroup Inc. prices show. The Markit iTraxx Japan index declined 3 basis points to 154.5 basis points, according to ICAP Plc.
“As sovereign risks spread in the euro-zone, risk aversion will continue,” said Susumu Kato, chief economist for Japan in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “Investors are wondering how financial issues in those small nations may affect bigger ones.”
Treasuries declined for the first time in three days as the U.S. prepared to sell a record-equaling $81 billion of notes and bonds in three auctions starting tomorrow. The 10-year note yield rose two basis points to 3.59 percent, according to BG Cantor Market Data.
The Treasury will sell $2.43 trillion in notes and bonds this year, the most ever and a 16 percent increase from the $2.1 trillion sold in 2009, according to the average forecasts of 10 primary dealers.
U.S. Economy
Commodity prices advanced amid speculation economic reports this week will bolster confidence in the global recovery and metals demand. U.S. reports on wholesale inventories, consumer confidence and the country’s trade balance are due in the next two days, according to data compiled by Bloomberg.
Three-month delivery copper in London jumped as much as 3 percent to $6,468.25 a metric ton, the biggest intraday gain since Jan. 11, before trading at $6,430. Zinc jumped as much as 5.8 percent to $2,053 a ton, the most since Jan. 6, before trading at $2,040 a ton.
Crude oil gained 0.7 percent to $71.65 a barrel in after- hours, electronic trading on the New York Mercantile Exchange. A report tomorrow in the U.S., the world’s largest oil consumer, will probably show wholesale inventories rose for a third month in December, according to economists surveyed by Bloomberg News.
“Everyone is going to be watching every piece of economic data like a hawk looking for signs of self-sustaining economic recovery,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo.
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