Asia Stocks, Copper Drop as Bond Risk Gains

By Shiyin Chen - Nov 10, 2011 1:06 PM GMT+0700

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Nov. 10 (Bloomberg) -- Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney, talks about the impact of Europe's political and economic turmoil on global financial markets. McCarthy speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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Nov. 10 (Bloomberg) -- Scott Wren, senior equity strategist with Wells Fargo Advisors, talks about Europe's debt crisis, its implications for global financial markets and his investment strategy. U.S. stocks sank as a surge in Italian bond yields intensified the credit crisis and concern grew that European leaders may be unable to keep the euro zone intact. Wren speaks with Susan Li on Bloomberg Television's "First Up."(Source: Bloomberg)

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Nov. 10 (Bloomberg) -- Roger Bootle, managing director of Capital Economics Ltd., talks about Europe's sovereign debt crisis and its implications for the global economy and financial markets. Bootle speaks with Rishaad Salamat, Susan Li, John Dawson and Zeb Eckert on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Asian stocks tumbled the most in seven weeks, bond risk rose to a one-month high and copper dropped for a fifth day as Europe’s debt crisis drove Italian bond yields above 7 percent, Japanese machinery orders fell and Chinese exports grew at a slower-than-forecast pace.

The MSCI Asia Pacific Index sank 3 percent at 3:04 p.m. in Tokyo. Standard & Poor’s 500 futures were little changed after the U.S. index slumped 3.7 percent yesterday. The Markit iTraxx Asia Index of debt-default risk headed for the highest close since Oct. 11. The euro reached a one-month low, while South Korea’s won sank 1.5 percent. Copper dropped 2.4 percent and rubber fell as much as 7.2 percent.

Italy will seek to sell 5 billion euros ($6.8 billion) of Treasury bills today after yields on 10-year notes surged to 7.25 percent yesterday, more than the 7 percent level at which Greece, Ireland and Portugal sought international bailouts. German Chancellor Angela Merkel’s Christian Democratic Union may adopt a motion at a party congress next week to allow euro members to exit the currency area, a senior CDU lawmaker said.

“The market is going to be focused on Italy,” Scott Wren, a senior equity strategist at Wells Fargo Advisors LLC, said in a Bloomberg Television interview from St. Louis, Missouri. “A lot of people have made that 7 percent level to be the line in the sand and we’re well ahead of that now. Italy has a ton of debt to refinance next year so my best guess is that we’re going to see some sort of band-aid solution.”

Stocks Slump

About 15 shares declined for every one that advanced on MSCI’s Asia Pacific Index, which was set for the largest loss since Sept. 22. Japan’s Nikkei 225 Stock Average lost 2.9 percent, South Korea’s Kospi Index sank 3.5 percent, Australia’s S&P/ASX 200 Index tumbled 2.4 percent, and Hong Kong’s Hang Seng Index dropped 4.4 percent.

Fanuc Corp., Japan’s biggest maker of industrial robots, retreated 4.1 percent after data today showed the nation’s machinery orders fell 8.2 percent in September from August, more than the 7.1 percent decline forecast of economists surveyed by Bloomberg News. Noble Group Ltd., the Hong Kong-based supplier of raw materials, plunged 26 percent in Singapore after Chief Executive Officer Ricardo Leiman quit following the company’s first loss in about 14 years.

HSBC Holdings Plc (5) sank 8.1 percent in Hong Kong after Europe’s largest bank said investment banking profit fell in the third quarter. Industrial & Commercial Bank of China (1398) Ltd. tumbled 7.9 percent in Hong Kong after people with knowledge of the matter said Goldman Sachs Group Inc. raised $1.1 billion selling shares of the world’s largest lender by market value.

U.S. Trade

The S&P 500 dropped yesterday by the most since Aug. 18. Just one stock on the index gained yesterday, the least since June 2010. A Commerce Department report today may show the trade gap was $46 billion in September, little changed from $45.6 billion in August, economists surveyed by Bloomberg News said. Treasury 10-year yields gained five basis points, rebounding from a 12 basis point drop.

Jefferson County, Alabama, filed the biggest U.S. municipal bankruptcy after an agreement among elected officials and investors to refinance $3.1 billion in bonds fell apart. The county, home to Birmingham, the state’s most-populous city, listed assets and debt of more than $1 billion in Chapter 9 papers filed today in U.S. Bankruptcy Court in Birmingham.

Customs bureau data showed China’s export growth slowed to 15.9 percent in October from 17.1 percent the previous month. The median forecast in a Bloomberg News survey of 25 economists was for an increase of 16.1 percent. Imports jumped a more-than- forecast 28.7 percent, leaving a trade surplus of $17 billion.

Won, Peso

The South Korean won weakened as much as 1.7 percent to 1,136.75 per dollar, the most in a month. The Philippine peso fell 0.7 percent to 43.335 per dollar after a government report showed exports tumbled the most in two years in September.

The 17-nation euro fell to as low as $1.3515, its weakest since Oct. 10, before trading at $1.3547. The shared currency fetched 105.23 yen from 105.38 yesterday and earlier dropped 0.3 percent to 105.11, the least since Oct. 26.

Italy will auction one-year bills today. It paid 3.57 percent the last time it sold 12-month bills on Oct. 11, while similar-maturity debt currently yields about 8.46 percent. The country’s 10-year bond yield climbed as high as 7.48 percent yesterday. LCH Clearnet SA, a clearing house that guarantees investors’ trades are completed, increased the extra deposit it demands from clients to trade Italy’s government bonds.

Italian Vote

The Italian Senate will vote tomorrow on the package of debt-reduction measures that includes asset sales and an increase in the retirement age, with the Chamber of Deputies set to vote the following day. The vote will pave the way for the resignation of Prime Minister Silvio Berlusconi within days and the formation of a new government in a bid to restore confidence in Europe’s second-biggest debtor.

“The big concern is that Italy will need to get its funding from other sources than the market, but because of its size, people are very worried,” said Stephen Halmarick, Sydney- based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outcome of all this is the European economy will go into recession. That’s a big negative.”

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 12 basis points to 215.5, Royal Bank of Scotland Group Plc prices show. The index is headed for the highest daily close since Oct. 11, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Copper, Rubber

The Markit iTraxx Australia index jumped 14 basis points to 195 basis points, according to Westpac Banking Corp. The gauge is set for its highest daily close since Oct. 13, according to data provider CMA.

Three-month copper tumbled as much as 2.6 percent to $7,430.50 a metric ton before trading at $7,451 on the London Metal Exchange. Zinc slipped 3.1 percent to $1,875 a ton and lead fell 2.7 percent to $1,925.

Rubber in Tokyo slumped as much as 7.2 percent to 252.8 yen a kilogram ($3,250 a ton), the lowest level since May 2010, before trading at 255.30 yen as Thai flooding cut vehicle production, reducing demand for the material used in tires.

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

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net