Asian Stocks, Won Snap Two-Day Drop

By Shiyin Chen and Jonathan Burgos - Nov 9, 2011 3:06 PM GMT+0700

Stocks gained a third day and metals advanced after Chinese inflation slowed and Italian Prime Minister Silvio Berlusconi offered to resign. U.S. equity-index futures declined, while Treasuries climbed.

The MSCI All Country World Index rallied 0.4 percent at 8:06 a.m. in London and the Stoxx Europe 600 Index jumped 0.8 percent. Standard & Poor’s 500 contracts slid 0.5 percent after a 1.2 percent gain yesterday. Treasury 10-year yields decreased three basis points. The euro slid 0.3 percent against the dollar. The won strengthened for the first time in three days after South Korea’s unemployment rate fell. Nickel and tin each gained 1.1 percent, while Brent oil advanced for a fifth day.

China’s consumer price inflation slowed to 5.5 percent in October from 6.1 percent the previous month, while producer prices fell by more than economists had forecast, signaling the government may be able to reduce measures to cool its economy. Italy’sBerlusconi agreed to step down after the approval of an austerity plan in a vote next week, following a surge in the nation’s bond yields to a euro-era record yesterday.

“Now that we see inflation easing, it suggests that Asian central banks can switch to a more pro-growth strategy,” said John Woods, Hong Kong-based chief Asian strategist at Citigroup Inc.’s private bank. “The markets will take the near-term resolution of political uncertainties in Europe positively,”

About six shares advanced for every one that fell on the Stoxx 600. Italy’s FTSE MIB Index increased 1.4 percent, France’s CAC 40 rose 1.1 percent and the U.K.’s FTSE 100 Index added 0.8 percent.

The MSCI Asia Pacific index rose 1.1 percent, rebounding from a two-day 0.9 percent loss. Japan’s Nikkei 225 Stock Average and Australia’s S&P/ASX 200 Index climbed 1.2 percent each and Hong Kong’s Hang Seng Index added 1.7 percent.

Nomura, Olympus

Nomura Holdings Inc. rose 4.1 percent in Tokyo, rebounding from yesterday’s 15 percent plunge, after Japan’s biggest securities firm said it is unaware of any involvement in Olympus Corp.’s concealment of losses. Olympus sank 20 percent, extending yesterday’s 29 percent plunge.

Industrial & Commercial Bank of China (1398) Ltd., the world’s largest lender by market value, gained 3.6 percent in Hong Kong, pacing an advance among Chinese companies. The decline in consumer prices matched analysts’ forecasts and was the slowest since May. The producer price index was expected to fall to 5.8 percent, according to economists surveyed by Bloomberg News.

Separate figures showed industrial production rose 13.2 percent last month and retail sales increased 17.2 percent.

“The trend is in favor of China taking measures to improve economic development,” Peter So, co-head of research at CCB International Securities Ltd., said in a Bloomberg Television interview in Hong Kong.

Copper, Oil

Copper for three-month delivery rallied as much as 2.1 percent to $7,959.75 a metric ton on the London Metals Exchange, rebounding from a three-day, 1.3 percent decrease. Nickel added 1.1 percent and tin climbed 1.1 percent.

December-delivery Brent crude rose 0.4 percent to $115.47 a barrel on speculation Iran’s nuclear plans will threaten Middle East stability. New York-traded oil was little changed at $96.81 a barrel. U.S. gasoline supplies dropped 1.49 million barrels last week, the American Petroleum Institute said. An Energy Department report today may show they rose 1 million barrels, according to a Bloomberg News survey.

South Korea’s won strengthened as much as 0.9 percent to 1,111.38 per dollar. The unemployment rate fell to 3.1 percent in October from 3.2 percent the previous month, Statistics Korea said today. The median estimate in a Bloomberg News survey of 11 economists was for an increase to 3.3 percent. Taiwan’s dollar rose 0.1 percent to NT$30.066, and Malaysia’s ringgit gained 0.3 percent to 3.114.

Berlusconi’s Pledge

The 17-nation euro traded at 106.99 yen from 107.52 yesterday and pared yesterday’s 0.4 percent gain versus the dollar. Berlusconi’s pledge to resign came after he failed to muster an absolute majority on a routine parliamentary ballot after key lawmakers defected from his party this week.

The yield on Italy’s benchmark 10-year bond jumped 11 basis points yesterday to 6.77 percent before Berlusconi’s announcement, the most since the euro’s introduction in 1999 and near the 7 percent level that drove Greece, Ireland and Portugal to seek international bailouts. The extra premium investors demand to hold the debt instead of German bunds closed at a euro-era record 497 basis points. The yield was little changed today.

LCH Clearnet SA increased the so-called deposit factor charged for Italian bonds due in seven-to-10 years will be raised to 11.65 percent, according to a document on its website dated yesterday. That compares with a charge of 6.65 percent announced in an Oct. 7 document.

Bond Risk

The cost of protecting Asia-Pacific corporate and sovereign bonds from default decreased, with the Markit iTraxx Japan index falling three basis points to 175 basis points, Citigroup Inc. prices show. The gauge is set for its biggest one-day drop since Nov. 4, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Treasury 10-year yields declined to 2.05 percent, following a four-basis-point increase yesterday. The U.S. is scheduled to sell $24 billion of 10-year securities today and $16 billion of 30-year bonds tomorrow, after an auction of three-year notes yesterday attracted the highest demand on record.

Futures signal the S&P 500 may snap a two-day, 1.8 percent rally. International Monetary Fund Managing Director Christine Lagarde warned of the risk of a “lost decade” for the global economy unless nations act together to counter threats to growth.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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