By Chen Shiyin and Toshiro Hasegawa
Dec. 12 (Bloomberg) -- Asian stocks, U.S. and European stock-index futures and the dollar tumbled after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.
The MSCI Asia Pacific Index lost 3.4 percent to 85.13 as of 4:38 p.m. in Tokyo after senators voted down a bill to provide $14 billion of emergency funds for General Motors Corp. and Chrysler LLC. Honda Motor Co. and Nissan Motor Co. plunged more than 11 percent. The dollar fell to a 13-year low against the yen, while the cost of protecting Asian bonds against default advanced. Metals and crude oil prices slumped.
“Investors have been betrayed again by U.S. politicians,” said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. “Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship. This could have a substantial effect on unemployment.”
Standard & Poor’s 500 Index futures sank 4.3 percent. The measure dropped 2.9 percent yesterday, as General Motors shares plunged 10 percent, extending an 83 percent annual decline. Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 4.7 percent.
“It’s over with,” Majority Leader Harry Reid said on the Senate floor in Washington. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”
Japan’s Nikkei 225 Stock Average retreated 5.6 percent to 8,235.87. The CSI 300 Index sank 3.8 percent in China, after a government official said growth will slow more sharply next quarter. China Mobile Ltd. fell 7.1 percent in Hong Kong.
Annual Decline
South Korea’s Kospi Index lost 4.4 percent, led by KB Financial Group Inc., after the Bank of Korea said the economy will expand at the slowest pace in 11 years in 2009.
The MSCI World Index has dropped 46 percent this year, on course for its worst annual retreat on record, as writedowns and credit losses neared $1 trillion amid the worsening financial crisis. Spending plans by governments from the U.S. to Australia spurred a 15 percent rally on the index since it reached a five- year low on Nov. 20.
Honda, Japan’s second-largest automaker, tumbled 12 percent to 1,921 yen, the largest drop since Oct. 31. Nissan, the third biggest, plunged 11 percent to 308 yen. Hyundai Motor Co., South Korea’s No. 1 automaker, dropped 9.3 percent to 42,000 won.
“A potential failure in U.S. automakers will have immediate reverberations throughout the U.S. economy, which will affect demand for Asian products and add to recessionary pressures,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which has $81 billion.
Suppliers Drop
Denso Corp., the world’s largest listed auto-parts maker, plunged 12 percent to 1,430 yen. Aisin Seiki Co., Japan’s largest maker of car transmissions, sank 13 percent to 1,116 yen.
The dollar sank to 89.89 yen, the lowest since August 1995. The Markit iTraxx Japan index of credit-default swaps rose 19 basis points to 340 at 3:35 p.m. in Tokyo, according to prices from BNP Paribas SA. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan gained 12.5 basis points to 385, ICAP Plc prices show.
Platinum, used to make catalytic converters for car and truck exhaust systems, fell as much as 3.4 percent in Asia, dropping below the price of gold for the first time since 1996. Gold slid as much as 1.3 percent. Crude oil dropped as much as 5.9 percent, eroding yesterday’s 10 percent rally.
The yield on the 10-year note fell 11 basis points, or 0.11 percentage point, to 2.50 percent as of 2:05 p.m. in Tokyo, according to BGCantor Market Data. The price of the 3.75 percent security due in November 2018 rose 1 point, or $10 per $1,000 face amount, to 110 30/32. The yield reached 2.489 percent, the lowest level since 1954, Federal Reserve data showed.
‘Flight to Quality’
“Treasuries are clearly showing signs of flight to quality as people generally expected the bailout to succeed,” said Kevin Yang, who helps oversee about $1 billion of U.S. bonds in Taipei at Shinkong Life Insurance Co. “Yields will go lower in the very short-term as stocks test new lows.”
A sign that U.S. unemployment is rising also weighed on Asian equities. The number of Americans filing first-time claims for unemployment benefits surged to the highest level since November 1982, a report showed.
James Hardie, which gets more than three-quarters of its sales from the U.S., fell 10 percent to A$3.75. Canon Inc., the world’s biggest digital-camera maker, declined 5.8 percent to 2,590 yen. Li & Fung Ltd., a supplier of toys and clothing to retailers, plunged 11 percent to HK$15.10 in Hong Kong.
“If you lose your job, you don’t spend. If you see others lose their jobs, you don’t spend either,” said Daphne Roth, the Singapore-based head of equity research at ABN Amro Private Bank, which manages about $27 billion of Asian assets.
Slowing Growth
China Mobile, the world’s No. 1 phone company by value, lost 7.1 percent to HK$76.50. China Shipping Development Co., the nation’s largest oil carrier, sank 16 percent to HK$7.37, the biggest loss on MSCI’s Asian index.
China’s growth will slow more sharply in the first quarter of 2009 before stabilizing and then recovering, Liu He, vice minister of the Central Leading Group on Financial and Economic Affairs said in Beijing today. Retail sales rose 20.8 percent in November, the slowest pace in nine months, the National Bureau of Statistics also said today.
Wuliangye Yibin Co., China’s biggest spirits maker, fell 4.7 percent to 14.97 yuan. Concern that China’s economic growth will slow spurred the government to pledge on Nov. 4 to implement a 4- trillion yuan ($584 billion) economic stimulus package and the benchmark lending rate was cut by the most in 11 years.
South Korea yesterday slashed interest rates to a record low. The nation’s central bank said today growth will slow to 2 percent next year from an estimated 3.7 percent this year. KB Financial plunged 15 percent to 31,250 won.
To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.
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