BL: Asian Stocks Drop, Yen Rises on Greece, Concern Fed May Withdraw Stimulus
By Patrick Chu and Masaki Kondo
Feb. 18 (Bloomberg) -- Asian stocks dropped and the yen strengthened on speculation the Federal Reserve is moving closer to pulling economic stimulus measures and concerns about the European Union’s financial rescue of Greece resurfaced.
The MSCI Asia Pacific Index lost 0.4 percent to 117.73 as of 2:25 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index declined 0.2 percent. The yen strengthened 0.6 percent to 123.42 versus the euro, set for the sharpest gain since Feb. 4 on a closing basis. The Japanese currency advanced to 90.93 to the dollar from 91.25 in New York yesterday.
Minutes of the Fed’s Jan. 26-27 meeting posted yesterday showed some policy makers pushed to start selling assets in the “near future” as a way to shrink the central bank’s balance sheet. The yen climbed against all 16 of its most-traded counterparts after a political ally of German Chancellor Angela Merkel said that “not a single euro” should go to Greece, rekindling sovereign credit concerns and demand for Japan’s currency as a refuge.
“People have a strong appetite for bargain hunting and can’t see bright prospects for higher share prices,” said Yoshihiro Ito, senior strategist at Okasan Asset Management Co., which oversees $8.2 billion. “Continued improvement in the global economy is supporting the market, though uncertainties won’t be easily cleared.”
The Asia stock benchmark’s drop today followed a 1.6 percent increase yesterday, which was the most since Nov. 30. Japan’s Topix index lost 0.1 percent and Singapore’s Straits Times Index dropped 0.4 percent.
Stocks Reversal
“After yesterday’s surge, profit taking will weigh on the market,” said Mitsushige Akino, who oversees about $450 million at Tokyo-based Ichiyoshi Investment Management Co.
The S&P 500 advanced 0.4 percent yesterday as better-than- estimated earnings, industrial production and housing data bolstered confidence in the economic recovery.
Qantas Airways Ltd., Australia’s biggest airline, plunged 8.1 percent to A$2.73. The company will scrap first-class cabins on most routes after a slump in demand for the most expensive seats led to a 72 percent drop in first-half profit. The company’s earnings missed analyst estimates.
Sims Metal Management Ltd., the world’s biggest recycler of scrap metal, sank 7.7 percent to A$19.79 after reporting a 39 percent decline in first-half sales.
Santos Ltd., Australia’s third-largest oil and gas producer, declined 1 percent to A$13.47. The company said 2009 net income tumbled 74 percent as the price it received for oil fell.
German Resistance
The leader of Chancellor Merkel’s Bavarian political allies said Germany must resist supporting Greece with taxpayer funds because granting aid would invite other nations to seek bailouts.
“We are the stable-currency party,” Horst Seehofer, who heads the Christian Social Union, one of three parties in Merkel’s coalition, told a rally in the southern city of Passau yesterday. “That’s why we’re helping Greece politically, but not a single euro must go there.”
The euro has fallen about 10 percent against the dollar from a one-year high of $1.5144 in November on concern sovereign debt problems will hamper the region’s recovery. The dollar advanced to $1.3570 per euro in Tokyo from $1.3607 in New York yesterday.
Futures on the CME Group exchange show a 47 percent chance the Fed will raise its target rate for overnight bank lending by at least a quarter-percentage point by its September meeting, up from 46 percent odds on Feb. 16.
South Korea’s won weakened 0.7 percent to 1,149.70 per dollar on signs European Union leaders are failing to persuade bond investors that Greece can fix its budget woes, boosting the attractiveness of the greenback. The yield on Greece two-year notes has remained above 5 percent, more than four percentage points higher than those of Germany. The Malaysian ringgit fell 0.4 percent to 3.3995 per dollar.
Oil Falls
Crude oil dropped for the first time in three days as the dollar climbed against the euro and an industry report showed an increase in distillate supplies in the U.S., the world’s biggest energy consumer.
Oil retreated from a four-week high, dropping 0.7 percent to $76.83 a barrel, after the American Petroleum Institute reported that supplies of distillate fuel, a category that includes heating oil and diesel, rose 1.28 million barrels last week.
“The global economy is still realistically weak,” said Peter McGuire, managing director at CWA Global Markets Pty in Sydney. “I don’t see a lot of issues in terms of supply constraints out there and demand is relatively weak.”
Gold for immediate delivery fell 0.4 percent to $1,102.15 an ounce after the International Monetary Fund said it would begin selling some of its reserves on the open market, raising concern that supply will increase.
Metals Drop
Copper on the London Metal Exchange slid 0.4 percent to $7,099.75 a metric ton and nickel declined 1.3 percent to $19,875 a ton.
The cost of protecting Australian and Japanese corporate bonds from default dropped to a two-week low, according to traders of credit-default swaps. The Markit iTraxx Australia index fell 2 basis points to 97.5 basis points in Hong Kong, the lowest since Feb. 4, according to Citigroup Inc. and CMA DataVision. The Markit iTraxx Japan index declined 1 basis point to 146, according to Morgan Stanley. That’s also the lowest since Feb. 4, CMA prices show.
To contact the reporters on this story: Patrick Chu in Tokyo at pachu@bloomberg.netMasaki Kondo in Tokyo at mkondo3@bloomberg.net.
Last Updated: February 18, 2010 00:24 EST
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