Asian Stocks Fall on Renewed Recession Concern; Honda Slumps

By Jonathan Burgos and Shani Raja

March 12 (Bloomberg) -- Asian stocks dropped for the first time in three days, led by finance companies and automakers, as the Japanese government confirmed the country’s economy shrank at the fastest pace since 1974.

Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, slumped 4.4 percent as the economy contracted 12.1 percent in the fourth quarter. Woolworths Ltd., Australia’s biggest retailer, fell 2.3 percent after the nation’s jobless rate jumped to a four-year high. Honda Motor Co., which makes half of its sales in North America, sank 7 percent as the yen rose against the dollar.

“The global economy is weakening in such a highly synchronized way that everybody is affected,” said Stephen Halmarick, Sydney-based Head of Investment Markets Research Colonial First State Global Management, which manages about $84 billion. “I’d still be cautious on the Asian economies.”

The MSCI Asia Pacific Index fell 1 percent to 72.72 as of 1:07 p.m. in Tokyo, snapping a two-day, 4.1 percent advance. The gauge has slumped 19 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits at companies from Honda to BHP Billiton Ltd., the world’s largest mining company.

Japan’s Nikkei 225 Stock Average fell 1.6 percent to 7,257.16. South Korea’s Kospi index lost 1.5 percent after the central bank unexpectedly left interest rates unchanged. All markets in Asia declined except Taiwan.

Economic Contraction

Toyota Motor Corp., the world’s No. 1 carmaker, lost 3.4 percent in Tokyo after saying it was concerned suppliers may run short of cash. Nippon Telegraph and Telephone Corp., Japan’s largest fixed-line phone company, slumped 4.4 percent after an analyst downgrade. Inpex Corp., the country’s largest oil explorer, retreated 4.5 percent after oil prices tumbled.

Futures on the Standard & Poor’s 500 Index fell 0.8 percent The gauge added 0.2 percent in New York yesterday as JPMorgan Chase & Co. joined Citigroup Inc. in saying it was profitable in January and February.

“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”

Gross domestic product in Japan shrank an annualized 12.1 percent in the three months ended Dec. 31, government figures today showed, as exports, output and business spending collapsed. The figure was less than the 12.7 percent reported last month. Australia’s jobless rate rose to 5.2 percent in February from 4.8 percent in January, the country’s statistics bureau said.

Rate Cut

Mitsubishi UFJ slumped 4.4 percent to 393 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, fell 2.8 percent to 171 yen. Woolworths dropped 2.3 percent to A$24.92 in Sydney. Westpac Banking Corp., Australia’s largest bank by market value, lost 1.7 percent to A$16.59.

New Zealand’s central bank today reduced its benchmark interest rate to a record low to help steer the economy out of its worst recession in 30 years. The Bank of Korea, meanwhile, unexpectedly left its interest rate as policy makers struggled between the need to stimulate the economy and prevent a further slide in the won, the worst performing Asian currency against the dollar this year.

Governments have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. U.S. Treasury Secretary Timothy Geithner yesterday urged the Group of 20 nations to take “forceful” actions to end the financial crisis.

Yen Strengthens

Honda Motor slumped 7 percent to 2,055 yen after the yen rose 2.2 percent to 96.26 to the dollar, its biggest gain since March 6. Sony Corp., which gets a quarter of sales from the U.S., declined 2.6 percent to 1,755 yen.

A stronger yen lowers the value of Japanese exporters’ overseas sales when converted back into the local currency.

Toyota sank 3.4 percent to 2,810 yen in Tokyo. Jim Lentz, president of the company’s U.S. sales unit, told the U.S. government’s auto task force yesterday it has “real concerns” suppliers may run short of cash and any failures could disrupt production.

Nippon Telegraph slid 4.4 percent to 3,480 yen. Mizuho Securities downgraded the stock to “buy” from “strong buy.”

Inpex Corp., Japan’s largest oil explorer, dropped 4.5 percent to 655,000 yen in Tokyo after crude-oil prices slumped. Woodside Petroleum Ltd., Australia’s second-largest oil producer, slipped 3.2 percent to A$35.80 in Sydney.

Crude oil for April delivery plunged 7.4 percent yesterday to $42.33 in New York as U.S. inventories climbed and fuel consumption retreated to a two-month low.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.