By Shiyin Chen - Oct 20, 2011 10:03 AM GMT+0700
Asian stocks fell, wiping out this week’s gains, and the won weakened from a one-month high, as a split emerged among European leaders on a rescue plan and the Federal Reserve said companies grew more pessimistic about the U.S. economy. Industrial metals sank for a fourth day.
The MSCI Asia Pacific Index dropped 1.4 percent as of 12:01 p.m. in Tokyo. Standard & Poor’s 500 Index futures retreated 0.1 percent, erasing an earlier gain of 0.3 percent. The won slipped 0.6 percent against the dollar and the euro depreciated 0.2 percent to $1.3732. The cost of insuring Asia-Pacific debt from default increased. Copper and zinc fell more than 3 percent in London, while oil declined a second day in New York.
Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting of European leaders in Frankfurt yesterday failed to resolve differences ahead of a summit scheduled for this weekend. The Fed’s Beige Book survey released yesterday showed companies reported more doubt about the recovery even as the economy maintained its expansion last month.
“All eyes are on Europe,” Kirk Hartman, who oversees $355 billion as the Los Angeles-based chief investment officer of Wells Capital Management, said in a Bloomberg Television interview. “The market would like to see overwhelming force in terms of a resolution but unfortunately I don’t think you’re going to see that.”
U.S. Earnings
About four shares declined for every one that gained in the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average slid 0.9 percent, Australia’s S&P/ASX Index retreated 1.6 percent and Hong Kong’s Hang Seng Index slumped 1.8 percent. BHP Billiton Ltd. (BHP), the world’s largest mining company, sank 2.3 percent in Sydney, tracking declines in raw material prices.
The S&P 500 lost 1.3 percent yesterday, led by Apple Inc. (AAPL), after the maker of iPhones and iPads posted profit that missed analyst estimates. About two-thirds of the 66 companies in the index that reported earnings since Oct. 11 have beaten analysts’ profit estimates. Microsoft Corp., the world’s fourth-largest company by market value, will release quarterly results after the close of U.S. trading today.
The Beige Book said many Fed districts described the pace of growth as ‘modest’ or ‘slight’ in September, even though overall economic activity continued to expand. Data today may show initial jobless claims eased to 400,000 in the week ended Oct. 15 from 404,000 previously, while a gauge of leading indicators grew at a slower pace. Treasury 10-year yields were little changed at 2.17 percent before the economic reports.
Stabilization Fund
“U.S. economic conditions don’t appear to be getting any better, and in fact there’s some risk it might get worse, so that doesn’t give investors much comfort at all,” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney. “There appears to be growing concern about whether or not European leaders meeting on the weekend will be able to come up with a credible plan.”
The euro traded at 105.40 yen from 105.69. French President Nicolas Sarkozy flew to Frankfurt yesterday for a meeting with German Chancellor Angela Merkel, the European Central Bank’s President Jean-Claude Trichet and International Monetary Fund Managing Director Christine Lagarde.
Europe’s leaders are looking for ways to maximize the firepower of the 440 billion-euro ($605.5 billion) European Financial Stability Facility as the region’s debt crisis threatens to engulf Italy and Spain. Boosting the fund “would be extremely difficult,” Kimmo Sasi, who heads Finland’s parliament finance committee and advises lawmakers how to vote on European rescue policy, said in an interview.
Won, Ringgit
The won weakened to 1,138.80 per dollar after reaching 1,128.52 yesterday, the strongest level since Sept. 19, while Malaysia’s ringgit declined 0.6 percent to 3.1256.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced seven basis points to 206 basis points, Credit Agricole CIB prices show. That will be the biggest increase since Oct. 4, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Copper for three-month delivery dropped 3.3 percent to $6,969 a metric ton on the London Metal Exchange, extending a three-day, 4.4 percent decline. Zinc futures slipped 3.2 percent to $1,780, also bound for a fourth day of losses, and tin sank 3.1 percent.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
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