Asian stocks and U.S. equity-index futures dropped, while the euro weakened for a third day after Italy’s credit rating was lowered at Standard & Poor’s, fueling concern Europe’s sovereign-debt crisis will worsen.
The MSCI Asia Pacific Index slipped 1.1 percent as of 9:24 a.m. in Tokyo. Standard & Poor’s 500 Index futures retreated 0.8 percent. Europe’s shared currency dropped 0.4 percent to $1.3627 and slid 0.4 percent to 104.45 yen. The Australian dollar weakened before the release of minutes from the central bank’s last policy meeting. Oil and copper retreated for a third day, while wheat climbed for the first time in four days.
Italy was lowered to A from A+ on concern that weaker growth and a “fragile” government mean the country won’t be able to reduce the euro-region’s second-largest debt load, S&P said. Greece will hold another call tonight with its main creditors after a “productive” round of talks aimed at staving off default. The U.S. Federal Reserve will start a two-day meeting today amid data forecast to show that housing starts and building permits declined.
“The Italian downgrade will just renew concerns about sovereign-debt issues spreading from Greece to Italy and Spain,” said Belinda Allen, a Sydney-based senior investment analyst at Colonial First State Global Asset Management, which oversees $150 billion. “The focus continues to be on making sure Greece has the liquidity to survive. There is no easy solution.”
About seven shares declined for every two that climbed on MSCI’s Asia Pacific Index. The Nikkei 225 Stock Average sank 1.5 percent in Japan, where financial markets were closed yesterday for a holiday. South Korea’s Kospi Index slid 1.2 percent, while Australia’s S&P/ASX 200 Index lost 0.5 percent.
Futures expiring in December indicate the S&P 500 may extend yesterday’s 1 percent drop. Equities had trimmed losses as Greece’s Finance Ministry said it had a “productive and substantive discussion” with international officials who will determine if the country gets more bailout funds.
President Barack Obama called for $1.5 trillion in tax increases over the next decade to help trim the deficit.
To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
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