Asian Stocks Rise From 10-Month Low as Copper Gains; Euro Falls
By Darren Boey
May 26 (Bloomberg) -- Asian stocks rallied from a 10-month low, led by commodity producers, as speculation of rising demand in China outweighed European debt concerns that dragged the euro lower. The won stabilized as South Korea’s government pledged to intervene in markets amid tensions with the North.
The MSCI Asia Pacific Index climbed 0.6 percent to 109.46 at 4 p.m. in Tokyo. The measure’s gauge of raw-material makers surged 1.6 percent as copper gained 1.2 percent and oil advanced 1.1 percent. The Stoxx Europe 600 increased 1.3 percent to 235.02. Standard & Poor’s 500 Index futures rose 0.2 percent. The euro fell to $1.229 from $1.2345 in New York. The won was little changed after falling yesterday by the most in a year.
Investor sentiment improved after Rio Tinto Group, the world’s third-biggest mining company, said it expects commodity demand in China, the engine of the global recovery, to increase in the next 15 years. Concerns the European debt crisis and Chinese property curbs will hurt growth have dragged the MSCI World Index down by 15 percent from its high this year in April.
“We’ve got bad news just about every place you can look but on the other hand, we’ve got rising earnings and better economic conditions in most of the world,” Donald Gimbel, senior managing director at Carret Asset Management LLC, told Bloomberg Television. “Now is probably an opportune time to pick up some of the bargains that have been created over the past two or three weeks.”
Two stocks advanced for each one that fell on the MSCI Asia Pacific Index, which rose from its lowest close since July 2009. Hong Kong’s Hang Seng Index gained 1 percent and Australia’s S&P/ASX 200 Index climbed 1 percent. Japan’s Nikkei 225 Stock Average increased 0.7 percent. Korea’s Kospi jumped 1.4 percent.
Biggest Advance
The MSCI index’s gauge of material producers posted the biggest advance of 10 industry groups on speculation earnings will benefit from rising prices. BHP Billiton, the world’s largest mining company, climbed 2.7 percent to A$37.26, while Rio Tinto increased 3.7 percent to A$63.95.
Copper advanced to $6,811 a metric ton on the London Metal Exchange, increasing for the fourth time in five days, while crude oil reached $69.50 a barrel in New York. Oil prices also rose after an American Petroleum Institute report showed that U.S. gasoline stockpiles declined.
“China’s demand for iron ore, copper, coal and aluminum is expected to grow over the next 15 years, after which time we expect to see increasing demand from India,” Jan du Plessis, chairman of London-based Rio, said today at its annual meeting in Melbourne.
Baltic Dry
Shipping stocks gained after the Baltic Dry Index, a measure of shipping costs for commodities, jumped 6.2 percent, the biggest gain since March 4, to its highest level in six months. STX Pan Ocean Co., South Korea’s biggest bulk carrier, surged 8.5 percent to 11,500 won. Korea Line Corp., the second- largest, jumped 5.4 percent to 50,000 won.
Defense-related shares in South Korea extended advances on speculation demand for their products will increase. Speco Co., a military installation parts developer, advanced 11.2 percent, taking a four-day surge to 47 percent.
The won was little changed at 1,252.28 per dollar. Vice Finance Minister Yim Jong Yong said today that “authorities will supply sufficient foreign currency liquidity if needed.”
The currency yesterday plunged 3 percent after a report by a defector group based in Seoul said North Korea’s military was ordered to prepare for combat on May 20, when South Korea said its communist neighbor was responsible for the March sinking of a warship.
Euro Declines
North Korea said it will sever ties with the South and expel its workers from a joint industrial zone as “punishment” for accusing it of the torpedo attack, which killed 46 sailors.
Speculation of central bank intervention also lifted Malaysia’s ringgit from near a two-month low. The ringgit rose 0.7 percent to 3.3413 per dollar, according to data compiled by Bloomberg.
“The recent slide has been triggered by a lot of tension in Europe and Korea,” said Calbert Loh, head of treasury at Bangkok Bank Bhd. in Kuala Lumpur. “The ringgit is oversold and there’s talk that Asian central banks are going to ensure orderly market movements.”
The euro dropped against 15 of its 16 major counterparts as concern Europe’s debt crisis will slow economic growth damped demand for the region’s assets. Reports due later today may show German consumer confidence and French consumer spending declined, according to economists surveyed by Bloomberg.
Structural Problem
The euro dropped to 110.93 yen from 111.39 yen. It sank to 108.84 yen yesterday, the least since November 2001, and touched $1.2178, the lowest since May 19. Australia’s dollar lost 0.4 percent to 82.49 U.S. cents.
“Rebuilding finances will take a long time,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “This is a structural problem, which may spread to other nations in the region. The euro is set to go down.”
European leaders face “the difficult challenge of trying to restore sustainability to an unsustainable system,” U.S. Treasury Secretary Timothy F. Geithner told a group of mid- career Chinese government officials in Beijing yesterday. He said the European Union launched its common currency with a budgeting framework that put restraints on borrowing without tools needed to deal with country-specific imbalances.
The cost of insuring Asian bonds from default fell from a 10-month high reached yesterday, according to traders of credit- default swaps. The Markit iTraxx Asia index of 50 investment- grade borrowers outside Japan dropped 12 basis points to 160.5 basis points, according to Royal Bank of Scotland Group Plc.
To contact the reporter for this story: Darren Boey in Hong Kong at dboey@bloomberg.net.
Last Updated: May 26, 2010 03:01 EDT
