Asia Stocks Slump as U.S. Consumer Spending Adds to Global Economy Concern

By Shani Raja and Yoshiaki Nohara - Oct 3, 2011 11:31 AM GMT+0700

Asian stocks fell, extending the regional benchmark index’s biggest quarterly decline in three years, after U.S. consumer spending slowed as incomes unexpectedly dropped, souring the earnings outlook for exporters.

Sony Corp. plunged 5.8 percent in Tokyo, touching its lowest price in more than two decades. Toyota Motor Corp. (7203), the world’s largest carmaker, fell 3.6 percent. James Hardie Industries SE (JHX), a building-materials supplier that gets almost 70 percent of its sales from the U.S., sank 3.7 percent in Sydney. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, dropped 2.8 percent after oil and metal prices slid. HSBC Holdings Plc (5), Europe’s biggest lender, led banking stocks lower.

“The U.S. is not falling into recession, but it’s definitely slowing down,” said Diane Lin, a fund manager with Sydney-based fund Pengana Capital Ltd., which manages about $1.1 billion in global assets. “We might face more risks, particularly in a market that hasn’t had enough of a correction.”

The MSCI Asia Pacific Index fell 3.5 percent to 109.22 as of 1:20 p.m. in Tokyo, ahead of a meeting of European finance ministers to weigh the threat of a Greek default. About 14 stocks fell for each that rose in the measure and all 10 industry groups declined. The gauge has dropped more than 20 percent this year amid concern the global economy is poised for another recession as Europe’s debt crisis worsens and U.S. economic growth slows.

Tankan Survey

Japan’s Nikkei 225 Stock Average fell 2.6 percent as the quarterly Tankan index showed that sentiment among Japan’s largest manufacturers remains worse than before the March earthquake. Australia’s S&P/ASX 200 slumped 2.7 percent as a gauge of Australian manufacturing fell for a third month in September. Hong Kong’s Hang Seng Index plunged 5 percent.

Futures on the Standard & Poor’s 500 Index lost 0.7 percent today. In New York, the index fell 2.5 percent on Sept. 30, sending the measure to its biggest quarterly drop since 2008, after reports from China and Germany fueled concerns the global economy is slowing.

Consumer spending in the U.S. slowed in August as incomes unexpectedly dropped for the first time in almost two years, forcing households to dip into savings. Purchases rose 0.2 percent after a 0.7 percent increase in July, Commerce Department figures showed on Sept. 30. Incomes decreased 0.1 percent, the first decline since October 2009. Economists had forecast incomes would rise 0.1 percent, according to a Bloomberg survey.

Jobs, Manufacturing

Gains in U.S. payrolls in September were probably too small to reduce joblessness and manufacturing almost stalled as concern mounted that the global recovery was losing momentum, economists said before reports this week.

Sony plunged 5.8 percent to 1,419 yen in Tokyo. Toyota dropped 3.6 percent to 2,592 yen and Canon Inc., the biggest global camera-maker, slid 3.1 percent to 3,440 yen. James Hardie declined 3.7 percent to A$5.54 in Sydney. In Hong Kong, Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., sank 5.3 percent to HK$12.52.

Banks in Asia also slumped. HSBC sank 4 percent to HK$58.45 in Hong Kong. Mitsubishi UFJ Financial Group Inc., Japan’s No. 1 listed lender by market value, declined 4.5 percent to 338 yen, while in Sydney, Commonwealth Bank of Australia (CBA), the nation’s biggest bank, slid 3.5 percent to A$43.96.

Debt Crisis

European officials gathering in Luxembourg today will grapple with how to shield banks from the debt crisis and consider a further boost to the region’s rescue fund. The Greek government said yesterday it approved 6.6 billion euros ($8.8 billion) of austerity measures as part of efforts to secure a pending aid payment and a second rescue package.

“To keep paying Greece money doesn’t actually solve a long-term problem,” said Pengana’s Lin.

Asian commodity stocks also sank. BHP Billiton retreated 2.8 percent to A$34.03 in Sydney. Rival Rio Tinto Group sank 3.7 percent to A$59.50. Aluminum Corp. of China Ltd., the nation’s largest producer of the light metal, slumped 4.6 percent to HK$3.32 in Hong Kong.

Oil fell today, extending declines after the worst quarter since 2008. Crude for November slid as much as 1.6 percent in electronic trading in the New York. A measure of primary metals traded in London fell 3.4 percent on Sept. 30, when copper futures declined for a third straight quarter, the longest slump since 2001.

Yearly Decline

“While a deceleration of the global economy has largely been priced into the markets, we’re not seeing anything to change this,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “For this reason, we’ll likely see stocks move lower.”

The MSCI Asia Pacific Index declined 18 percent this year through Sept. 30, compared with a 10 percent drop by the S&P 500 and an 18 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.5 times estimated earnings on average, compared with 11.4 times for the S&P 500 and 9.5 times for the Stoxx 600.

The Asia Pacific index tumbled 16 percent in the third quarter, the biggest drop since 2008, as concern mounted that Europe’s sovereign-debt crisis combined with a slowdown in the U.S. economy may drag the world back into recession.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net. Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net.