Asian Stocks Decline as European Leaders Struggle to Resolve Debt Crisis

By Yoshiaki Nohara - Oct 26, 2011 9:21 AM GMT+0700

Asian stocks fell, snapping a three- day rally, as uncertainty grew over how much progress European leaders are making on a plan to fight the sovereign-debt crisis ahead of a summit today in Brussels.

Nissan Motor Co., Japan’s third-largest carmaker by market value that gets 15 percent of its revenue in Europe, fell 0.9 percent. Mitsubishi Corp., a Japanese trading company, slid 1.6 percent after United Parcel Service Inc. slumped as declining shipments from Asia to the U.S. curbed growth in the company’s international business. Newcrest Mining Ltd., Australia’s biggest gold producer, rose 3.5 percent as gold futures gained.

The MSCI Asia Pacific Index fell 0.5 percent to 118.71 as of 11:18 a.m. in Tokyo. About two stocks dropped for each that rose on the index and nine of the 10 industry groups on the gauge slid.

“At the end of the day, every asset class globally will be hostage to the announcements out of Europe,” saidPrasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. The market “is still volatile, but I don’t think there’s any directional implication to it until we know what happens in Europe.”

The cancellation of a meeting of European Union finance ministers spurred concern that the region’s leaders will fail to agree on how to tame the sovereign-debt crisis. European leaders will hold a summit today in Brussels as they seek to bolster a rescue fund, recapitalize banks and provide debt relief to Greece.

Nikkei, Kospi

Japan’s Nikkei 225 Stock Average slid 0.6 percent and South Korea’s Kospi Index lost 0.4 percent. Australia’s S&P/ASX 200 rose 0.5 percent, reversing an earlier loss of as much as 1.3 percent after a report showed inflation slowed last quarter.

Asian firms tied to Europe fell. Nissan lost 0.9 percent to 685 yen. Sony Corp., Japan’s No. 1 exporter of consumer electronics that gets 21 percent of its sales in Europe, declined 0.6 percent to 1,541 yen. HSBC Holdings Plc, Europe’s biggest lender, slid 0.5 percent to HK$65.05 in Hong Kong. Esprit Holdings Ltd., a clothier that counts Europe as its biggest market, shed 1.2 percent to HK$10.30.

Futures on the Standard & Poor’s 500 Index gained 0.3 percent today. In New York, the index fell 2 percent yesterday as UPS reduced its airlift capacity for Asia as shipments to the U.S. decreased, the Atlanta-based company said after announcing third-quarter earnings. International deliveries overall increased 4.6 percent, trailing the 6.2 percent gain in the previous three months. UPS stock fell 2.1 percent to $69.35 in New York.

Asia traders fell. Mitsubishi Corp. slid 1.6 percent to 1,507 yen, while Marubeni Corp., a Japanese trading company, lost 1.9 percent to 424 yen.

Consumer Confidence

U.S. stocks extended losses yesterday after consumer confidence unexpectedly slumped in October to the lowest level since March 2009, when the economy was in a recession. A separate report showed home prices in 20 U.S. cities dropped more than forecast in August, highlighting one of the obstacles facing the economic recovery in its third year.

“You can’t say the U.S. economy is going well, judging from economic reports,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “People are also concerned Europe’s crisis will slow a recovery in the global economy, and they want to wait for the results of the European summit.”

Exporters to the U.S. dropped. Honda Motor Co., Japan’s second-largest carmaker by market value, lost 1.6 percent to 2,304 yen. Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics that gets 22 percent of its sales in America, dropped 1.3 percent to 933,000 won.

Gold Rises

The MSCI Asia Pacific Index declined 13 percent this year through yesterday, compared with a 2.3 percent loss by the S&P 500 and a 13 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.1 times estimated earnings on average, compared with 12.4 times for the S&P 500 and 10.3 times for the Stoxx 600.

Gold producers advanced as gold futures for December delivery gained 2.9 percent. Newcrest Mining rose 3.5 percent to A$34.40. Rival St. Barbara Ltd. added 2.8 percent to A$2.24.

Gold futures settled at $1,700.40 on the Comex in New York, after touching $1,704.70, the highest for a most-active contract since Sept. 23.

Olympus Corp., the maker of endoscopes that has lost more than half its market value amid a scandal involving $687 million in payments to advisers, dropped 7.8 percent to 1,096 yen after being placed on margin trading watch list by the Tokyo Stock Exchange.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.