Asian Stocks Fall the Most in Two Months on Goldman Sachs Probe

By Kana Nishizawa and Shani Raja

April 19 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index down by the most in two months, on concern a U.S. suit against Goldman Sachs Group Inc. signals increasing regulatory scrutiny on financial companies.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, fell 3.5 percent in Tokyo after U.K. Prime Minister Gordon Brown called yesterday for the Financial Services Authority to start an inquiry into Goldman Sachs. BHP Billiton Ltd., the world’s biggest mining company, declined 1.5 percent in Sydney on lower commodity prices. Canon Inc., the world’s No. 1 camera maker, sank 2.3 percent after the yen strengthened against the dollar.

“The Goldman news, in isolation, undermines credibility in the financial system,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “It also creates uncertainty as to whether this is a one-off action, or the first of many that results in greater scrutiny regarding the integrity of U.S. financial institutions.”

The MSCI Asia Pacific Index slumped 1.8 percent to 126.01 as of 10:42 a.m. in Tokyo, with 15 stocks declining for each one that advanced. The measure dropped the most since Feb. 19. The gauge posted its third straight weekly advance last week as better-than-estimated economic and U.S. earnings reports fueled confidence in the global economic recovery.

Japan’s Nikkei 225 Stock Average sank 1.8 percent and South Korea’s Kospi index dropped 1.5 percent. China’s Shanghai Composite Index slumped 2.4 percent and Hong Kong’s Hang Seng Index lost 1.7 percent after the government stepped up measures to curb gains in real-estate prices. China Vanke Co., the nation’s biggest publicly traded developer, tumbled 3.7 percent in Shenzhen.

Banks, Mining Companies

Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge slumped 1.6 percent on April 16 after the Securities and Exchange Commission sued Goldman Sachs for misstating and omitting facts about collateralized debt obligations. Germany’s financial regulator has asked the SEC for details on the suit.

The MSCI Asia Pacific Index tumbled 39 percent from Sept. 15, 2008 to March 9, 2009 as the credit crisis caused the collapse of Lehman Brothers Holdings Inc. and dragged the global economy into its worst slowdown since World War II. The MSCI gauge has since surged 78 percent.

HSBC Holdings Plc, which made 20 percent of its 2009 revenue in North America, fell 2.1 percent to HK$82.75 in Hong Kong. Mitsubishi UFJ dropped 3.5 percent to 496 yen in Tokyo. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, sank 4.6 percent to 3,140 yen. In Sydney, Westpac Banking Corp. fell 1.8 percent to A$27.67.

Oil, Metals

Banks and material companies posted the biggest declines among the MSCI Asia Pacific Index’s 10 industry groups. Companies in the gauge trade at an average 16 times estimated earnings, compared with 15.2 times for the S&P 500.

BHP Billiton retreated 1.5 percent to A$42.90. Newcrest Mining Ltd., Australia’s biggest gold producer, slid 1.3 percent to A$34.16. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, declined 1.2 percent to A$46.14. In Wellington, New Zealand Oil & Gas Ltd. fell 1.9 percent to NZ$1.53.

Gold futures for June delivery fell 2 percent in New York on April 16, the most since February, as the SEC’s lawsuit against Goldman Sachs, one of Wall Street’s biggest traders and brokers of raw materials, spurred investors to seek a haven in the dollar and eroded the metal’s appeal as an alternative asset.

Crude oil futures slumped 2.7 percent in New York on April 16, while the London Metals Index, a measure of six metals including copper and zinc, declined 2.1 percent.

Risk Aversion

“The Goldman shock is discouraging investors from taking on risk in stocks, currencies and commodities,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. in Tokyo.

Japanese exporters declined as the yen strengthened to as much as 91.82 to the dollar after trading at 92.74 at the close of the Tokyo stock market on April 16. A stronger yen reduces companies’ revenue from overseas sales when converted into the local currency.

Canon slid 2.3 percent to 4,250 yen. Panasonic Corp., the world’s biggest maker of plasma televisions, retreated 1.7 percent to 1,368 yen. Mazda Motor Corp., Japan’s second-largest car exporter, fell 1.5 percent to 255 yen.

China’s property-related equities fell after the nation said banks should stop loans for third-home purchases in cities with excessive property price gains and suspend lending to buyers who cannot provide tax returns or proof of social security contributions in that city, the State Council said.

China Developers

China Vanke tumbled 3.7 percent to 8.71 yuan in Shenzhen. Poly Real Estate Group Co. sank 4.2 percent to 17.87 yuan in Shanghai. In Hong Kong, China Overseas Land & Investment Ltd., controlled by the country’s construction ministry, slumped 4.1 percent to HK$14.86. Guangzhou R&F Properties Co., the biggest real-estate company in the southern Chinese city, slumped 6.5 percent to HK$11.16.

Airline stocks slumped after a volcanic eruption in Iceland prompted airlines to cancel flights. Airlines worldwide are losing at least $200 million a day in revenue as an ash cloud over Europe grounded planes, the International Air Transport Association said on April 16.

All Nippon Airways Co., Asia’s No. 2 carrier, declined 3.1 percent to 281 yen. Australia’s Virgin Blue Holdings Ltd. tumbled 6.1 percent to 61.5 cents in Sydney. Singapore Airlines Ltd., the world’s second-largest carrier by market value, lost 2.7 percent to S$15.10.

Hong Kong’s Cathay Pacific Airways Ltd. lost 2.4 percent to HK$15.48. Separately, the company said its Deputy Chairman Philip Chen resigned to pursue personal interests.

To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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U.S. Stock Futures Fall as Goldman Sachs Faces Probes in Europe

By Lynn Thomasson and Chris Nagi

April 19 (Bloomberg) -- U.S. stock futures fell, extending the biggest one-day decline in more than two months, after the U.K. and Germany signaled inquiries into Goldman Sachs Group Inc.

Contracts on the Standard & Poor’s 500 Index expiring in June slipped 0.3 percent to 1,186.9 as of 10:27 a.m. in Tokyo. The benchmark index for American equities retreated 0.2 percent last week, halting the longest streak of gains in a year. Nasdaq 100 Index futures dropped 0.2 percent to 2,005 today.

Goldman Sachs faces a regulatory probe in Britain and scrutiny from the German government after the U.S. Securities and Exchange Commission sued the firm for fraud tied to collateralized debt obligations. U.S. equities decreased the most since February after the suit spurred concern fallout from the financial crisis isn’t over.

“You get a punch in the gut with these Goldman Sachs issues,” said Don Wordell, who oversees the RidgeWorth Mid-Cap Value Equity Fund, which has beaten 97 percent of its peers during the past five years. “It brings investors back to reality. There’s a tremendous amount of skepticism.”

The Nikkei 225 Stock Average fell 1.6 percent to 10,924.78 in Tokyo. The broader Topix index dropped 1.6 percent to 972.7, with more than 10 times as many stocks declining as advancing.

Weekly Decline

Goldman Sachs sank 10 percent last week, the most since March 2009, after the SEC sued the bank and one of its vice presidents. The 1.6 percent retreat in the S&P 500 on April 16 erased gains earlier in the week spurred by better-than- estimated earnings results from S&P 500 companies.

The most profitable firm in Wall Street history wiped out its 2010 advance and ended the week at $160.70, the lowest price since March 3. The SEC said the bank created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Paulson wasn’t accused of wrongdoing.

Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co. lost more than 4.7 percent on April 16. The lawsuit comes as President Barack Obama is trying to pass the most sweeping overhaul of financial regulations since the 1930s. The proposal would mean more oversight of derivatives trading and hedge funds, a consumer financial-protection authority and a system for unwinding large systemically important firms when they fail.

European Losses

Deutsche Bank AG, Germany’s largest lender, fell 7.3 percent to 55.99 euros on the day of the suit for the biggest retreat in more than eight months. UBS AG, Switzerland’s biggest bank by assets, slipped 2.8 percent to 17.93 Swiss francs. BNP Paribas SA, France’s biggest bank, slumped 3.8 percent to 55.35 euros.

U.K. Prime Minister Gordon Brown yesterday called for the Financial Services Authority to start an investigation, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

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Gold May Weaken as Goldman Fraud Case Spurs Demand for Dollar

By Kim Kyoungwha

April 19 (Bloomberg) -- Gold may weaken, after slumping Friday by the most since Feb. 4, on speculation that a fraud suit by U.S. regulators against Goldman Sachs Group Inc. will increase demand for the dollar as a safe investment.

Gold for immediate delivery fell as much as 0.3 percent to $1,134 an ounce before trading little changed at $1,137.10 at 8:55 a.m. in Singapore. The metal tumbled 1.9 percent on April 16. The dollar strengthened 0.2 percent against a basket of six currencies as Goldman faces a probe in Britain and scrutiny from Germany after being sued for fraud.

Investors “saw Goldman’s case as a sell signal and we did see the U.S. dollar firmer,” said Toby Hassall, a commodity analyst with CWA Global Markets Pty Ltd. in Sydney. “It seems to have shaken confidence. If we see flight-to-safety buying of the dollar, that might put gold prices on the defensive.”

The Securities and Exchange Commission alleged that Goldman created and sold securities linked to subprime mortgage-backed securities. The firm failed to disclose to investors that hedge fund Paulson & Co. was betting against the instruments and influenced the selections in the portfolio, the SEC said. Paulson wasn’t accused of wrongdoing.

As of Dec. 31, Paulson was the largest holder of the SPDR Gold Trust, the biggest exchange-traded fund back by the metal, and Goldman was the 11th biggest. Paulson is also the top investor in AngloGold Ashanti Ltd., Africa’s largest producer.

Silver was little changed at $17.72 an ounce, platinum fell 0.3 percent to $1,687.50 an ounce and palladium lost 0.5 percent at $527.25 an ounce.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Oil Falls a Third Day on Speculation Gains Have Outpaced Demand

By Gavin Evans and Yee Kai Pin

April 19 (Bloomberg) -- Crude oil fell for a third day on speculation the commodity’s climb to an 18-month high has outpaced a recovery in global demand.

Oil extended losses after tumbling 2.7 percent on April 16, the most in 10 weeks. Prices are being driven by speculation and currency movements and there’s no need for OPEC to review output before its October meeting, Qatar’s oil minister Abdullah bin Hamad al-Attiyah said yesterday. The dollar strengthened against the euro, reducing the appeal of commodities.

“We’ve still got higher-than-average stockpiles in various markets, including the U.S.,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. OPEC “will want to see those stockpiles drawn down further before they consider increasing supply.”

Crude oil for May delivery fell as much as $1.58, or 1.9 percent, to $81.66 a barrel in electronic trading on the New York Mercantile Exchange. It was at $81.94 at 12:09 p.m. Singapore time. Prices have declined in eight of the nine trading days after touching $87.09 on April 6, the highest since October 2008.

The May contract, which expires tomorrow, lost $2.27 on April 16 to $83.24 a barrel, the biggest drop since Feb. 5. Prices slumped after the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of fraud, triggering a selloff in commodity and equity markets. The more-widely held June future was down $1.10, or 1.3 percent, at $83.57 today.

Greece Bailout

The euro fell to a one-week low against the dollar after European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions on a bailout package. The U.S. currency was at $1.3462 per euro at 12 p.m. in Singapore from $1.3503 in New York.

“There will be fits and starts to do with the recovery story and I think this Goldman news is another event that seems to have exposed the fragility of market confidence,” said CWA’s Hassall. “Longer term, the global recovery story is going to continue to drive the oil market.”

Oil at $90 a barrel would be harmful and may “jeopardize the market,” according to Angola’s oil minister, Jose Maria Botelho de Vasconcelos. A “good level” is between $70 and $80, he said yesterday at a gas conference in Oran, Algeria.

Angola and Qatar are members of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil. The group slashed output by a record 4.2 million barrels a day beginning January 2009 to prevent a supply glut as the global economy sank into recession. Ministers voted to maintain official output targets at a March 17 meeting in Vienna.

Speculators

Hedge-fund managers and other large speculators trimmed bets on rising oil prices for the first time in three weeks, U.S. Commodity Futures Trading Commission data showed.

Speculative net-long positions, or the difference between orders to buy and sell the commodity on the New York Mercantile Exchange, decreased 12 percent to 113,364 contracts on April 13, the commission said last week.

Brent crude oil for June settlement fell as much as $1.36, or 1.6 percent, to $84.63 a barrel on the London-based ICE Futures Europe exchange. The contract was at $84.97 at 12:09 p.m. Singapore time.

To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Yee Kai Pin in Singapore at kyee13@bloomberg.net.

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