Asia Stocks, U.S. Futures Fall as Yen Gains

By Shiyin Chen and Yoshiaki Nohara - Nov 21, 2011 2:08 PM GMT+0700

Asian stocks fell, extending three weeks of losses, Standard & Poor’s 500 Index futures declined and the yen and dollar gained as U.S. lawmakers approached an impasse on budget cuts, Spain replaced its government and data signaled faltering economic growth from Japan to Singapore.

The MSCI Asia Pacific Index sank 1.1 percent at 4:05 p.m. in Tokyo, set for its first five-day slump since August. S&P 500 futures declined 0.6 percent and Euro Stoxx 50 contracts dipped 1.1 percent. Treasuries advanced. The yen strengthened against 15 of its 16 major peers, the dollar traded at $1.3515 per euro and Malaysia’s ringgit lost 0.4 percent. Copper and oil retreated a third day.

The U.S.’s deficit-cutting congressional supercommittee is expected to announce today it has failed to reach agreement on at least $1.2 trillion in federal budget savings, a Democratic aide said. Japan’s exports fell the first time in three months and Singapore said growth will probably slow from 5 percent this year. Spain’s Mariano Rajoy told the country to brace for difficult times after the debt crisis helped sweep his People’s Party to the biggest parliamentary majority in almost 30 years.

“There’s likely to be a continuing impasse and people will focus on the stability of the U.S. politically,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “People will probably sit on the sideline and wait for clarity.”

About five shares declined for every two that gained on MSCI’s Asia Pacific Index, which was set for its lowest close since Oct. 7. Japan’s Nikkei 225 Stock Average retreated 0.3 percent, Taiwan’s Taiex index lost 2.6 percent and Hong Kong’s Hang Seng Index sank 1.5 percent.

Japanese Exporters

Honda Motor Co. and Toyota Motor Corp. dropped more than 2 percent each in Tokyo, leading losses among Japanese exporters after the Ministry of Finance said today shipments declined 3.7 percent in October from a year earlier. Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, tumbled 3.4 percent in Hong Kong after the official Xinhua News Agency reported Chinese Vice Premier Wang Qishan said the global economic situation is “extremely severe.”

Futures expiring in December signal the S&P 500 may extend last week’s 3.8 percent slump. Today is the deadline for the Congressional Budget Office to receive a plan that it can analyze before the committee’s Nov. 23 target date for reaching an agreement.

The Congressional panel has been deadlocked over taxes, with Democrats seeking increases on high earners while Republicans were pushing for an extension of cuts enacted under President George W. Bush. Another sticking point has been the Republicans’ call for cuts, over Democrats’ opposition, in entitlement programs such as Medicare.

Treasuries, Dollar

Treasury 10-year yields decreased three basis points to 1.98 percent. The Treasury Department is scheduled to sell $35 billion of two-year notes today, the first of three auctions of coupon-bearing debt this week totaling $99 billion.

The dollar traded at 76.82 yen from 76.91 in New York on Nov. 18. Treasuries and the dollar have gained even after Standard & Poor’s cut U.S.’s AAA credit rating on Aug. 5 for the first time, saying the government has become “less stable, less effective and less predictable.”

“The policy in the U.S. is as bad as the policy in Europe,” said Roger Bridges, who oversees the equivalent of $15 billion of debt as the Sydney-based head of fixed income at Tyndall Investment Management Ltd., a unit of Japan’s Nikko Asset Management Co. “Investors will be attracted in a flight to quality,” to U.S. government debt.

The euro weakened against the yen even after Rajoy’s People’s Party won 186 of the 350 seats in Spain’s parliament, compared with 110 seats for the Socialist Party’s candidate Alfredo Perez Rubalcaba. Rajoy, who said on Nov. 18 he hoped Spain wouldn’t need a bailout before his new government takes over in a month’s time, has pledged to cut the budget deficit and regain the nation’s AAA credit rating.

Singapore’s Exports

Malaysia’s ringgit lost 0.4 percent to 3.1740 per dollar after neighboring Singapore forecast economic growth of 1 percent to 3 percent in 2012. The baht slipped 0.2 percent to 31.04 per dollar as Thailand’s government cut its forecast for economic growth this year to 1.5 percent, compared with an earlier forecast of between 3.5 percent and 4.5 percent. The Australian dollar weakened 0.5 percent to 99.57 U.S. cents.

The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment increased, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbing seven basis points to 215.5 basis points, BNP Paribas SA prices show. The gauge is set for its highest close since Oct. 11, according to data provider CMA.

The Markit iTraxx Australia index advanced four basis points to 201, Westpac Banking Corp. prices show, while the Markit iTraxx Japan index rose two basis points to 194 basis points, according to Deutsche Bank AG prices.

Three-month copper sank as much as 1.3 percent to $7,424.50 a metric ton in London before trading at $7,460. Futures were poised for a third day of declines. Zinc tumbled 1.3 percent, while lead retreated 0.4 percent. Oil for January delivery slid to $97.03 a barrel in New York before trading at $97.26.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net