Asia Stocks Rise for 6th Day as Bond Risk Falls

By Shiyin Chen - Oct 13, 2011 12:31 PM GMT+0700

Asia stocks rose for a sixth day, while bond risk fell on speculation policy makers in Europe, the U.S. and China will prevent the global economy from sliding into a recession. Commodities declined.

The MSCI Asia Pacific Index jumped 1.4 percent at 2:28 p.m. in Tokyo and Standard & Poor’s 500 Index futures were little changed. The Markit iTraxx Asia index of default risk among 40 investment-grade borrowers outside Japan sank a seventh day. The euro traded at $1.3803, near the strongest level in almost four weeks. The Australian dollar and South Korea’s won climbed to the strongest levels in three weeks. Oil lost 0.9 percent in New York, while copper sank 1.9 percent.

European Commission President Jose Barroso yesterday called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund. The Fed said some officials last month wanted to keep further asset purchases as an option to boost the economy. China unveiled a package of measures to help small companies, including tax breaks and easier access to bank loans.

“There’s definitely been a change in the rhetoric if not the policy action,” Mohammed Apabhai, head of Asia trading at Citigroup Inc., said in a Bloomberg Television interview in Hong Kong. Fed Chairman Ben S. Bernanke and German Chancellor Angela Merkel “have stepped in and said they’ll do whatever it takes. You’ve seen the turnaround in China and the loosening they seem to be embarking on, and there’s probably more to come.”

About five shares rose for every two that fell on MSCI’s Asia Pacific Index, which was poised for its longest winning streak since Sept. 1. The Nikkei 225 Stock Average added 1 percent and Australia’s S&P/ASX 200 Index gained 1 percent.

Korea, China

The Kospi Index rallied 1.5 percent after the U.S. Congress cleared legislation for a free-trade agreement with South Korea. Hyundai Mobis (012330) Co. rose 2.1 percent, pacing gains among automobile parts makers, on speculation the companies will benefit from the accord.

The CSI Smallcap 500 Index (SZ399905), comprising companies with a average market value of 6.28 billion yuan ($985 million), rose 1.1 percent, more than the 0.2 percent increase on the Shanghai Composite Index. The Chinese government will provide financial support and preferential tax policies for small companies, the State Council said yesterday after a meeting at which Premier Wen Jiabao presided. The government will be more tolerant of bad loan ratios for small-company loans, the Cabinet said.

Data today showed Chinese exports climbed 17.1 percent last month, the least since February, and imports growth slowed to 20.9 percent.

The S&P 500 gained 1 percent yesterday, rounding off a three-day, 4.4 percent rally. JPMorgan Chase & Co. may say today profit slid 10 percent in the third quarter, the biggest drop in more than two years, according to estimates by analysts surveyed by Bloomberg.

Fed Minutes

Minutes from the Fed’s Sept. 20-21 meeting showed policy makers saw “considerable uncertainty” that U.S. growth will pick up. Most participants favored giving additional information on the central bank’s goals and how they influence decisions, and most “saw advantages” in tying the Fed’s near-zero interest rates to more-specific developments in the economy, according to the minutes. Treasuries snapped a six-day drop, dragging 10-year yields down one basis point to 2.20 percent today.

The cost of insuring Asia corporate and sovereign bonds against non-payment decreased, with the Markit iTraxx Asia index sliding 6 basis points to 207.5 basis points in Singapore, Royal Bank of Scotland Group Plc prices show. That’s set for a seventh consecutive day of declines and the lowest level since Sept. 21, according to data provider CMA.

The Markit iTraxx Japan index fell 7 basis points to 193.5 in Tokyo, Citigroup Inc. prices show. A close of 193.5 would be the lowest since Sept. 21, CMA data show.

Australian Jobs

The Australian dollar climbed 0.4 percent to $1.0195 after earlier rising to $1.0233 after the unemployment rate fell for the first time since March. The number of people employed rose by 20,400, from a revised 10,500 fall in August and the jobless rate fell to 5.2 percent from 5.3 percent, the statistics bureau said in Sydney. South Korea’s won gained 0.9 percent to 1,155.88 per dollar and earlier touched 1,154.78, the strongest level since Sept. 21. The Bank of Korea left its seven-day repurchase rate unchanged at 3.25 percent during a review, a decision predicted by all 15 economists surveyed by Bloomberg.

The euro yesterday rallied 1.1 percent against the dollar. The 17-nation currency fell 0.2 percent to 106.39 yen. It reached 107.05 yen yesterday, the most since Sept. 9. The dollar lost 0.2 percent to 77.08 yen. Slovakia is set to approve Europe’s enhanced bailout fund today or tomorrow, completing the ratification process across the 17 euro countries.

Copper, Oil

The U.S. will intensify its call for forceful action from Europe at a meeting of Group of 20 nations in Paris this week, Lael Brainard, the Treasury undersecretary for international affairs, said yesterday. An Oct. 23 summit of euro leaders looms as a deadline for a breakthrough in combating the crisis.

“Risk appetite has improved because of the positive news from Europe and the U.S.,” said Syhiful Zamri, director of investment, research and advisory at Kenanga Investors Bhd. in Kuala Lumpur.

Copper dropped as much as 2.3 percent to $7,355 a metric ton on the London Metal Exchange, after yesterday climbing to the highest level in two weeks yesterday. Nickel retreated 0.9 percent and tin sank 1.4 percent.

Oil for November delivery dropped 0.9 percent to $84.83 a barrel after American Petroleum Institute data showed U.S. implied gasoline demand fell the most in more than five years. The International Energy Agency yesterday cut its 2012 demand estimate for oil by 210,000 barrels a day and said Libyan output will rebound to 50 percent more than earlier forecast.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; at echew16@bloomberg.net.

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net.