By Lynn Thomasson - Nov 16, 2011 3:30 PM GMT+0700
Nov. 16 (Bloomberg) -- Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Bank, talks about the impact of Europe's debt crisis on Asian equity markets and her asset allocation. Roth speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Nov. 16 (Bloomberg) -- Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., talks about the impact of Europe's sovereign debt crisis on global financial markets and his investment strategy. Naeimi speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Asian stocks and U.S. equity futures fell, while the euro sank to a five-week low against the dollar on concern economic growth in China and Japan is slowing and as Italian Prime Minister-designate Mario Monti prepared to form a new government.
The MSCI All-Country World Index slid 0.6 percent as of 8:01 a.m. in London for a third day of declines, the longest stretch in a month. The Stoxx Europe 600 Index rose 0.2 percent. Standard & Poor’s 500 Index futures lost 0.8 percent. The euro weakened 0.6 percent to $1.3457. Japan’s 10-year bond yield fell to the lowest level in a year after the Bank of Japan cut its economic assessment. The Indonesian rupiah dropped to a seven- week low after the central bank lowered the 2012 growth forecast yesterday.
“The problem is that while we’ve seen some kind of political resolution there, we are still waiting to see what’s the fiscal solution for Europe,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Bank, told Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” “The risk of a recession is still concentrated in the euro zone.”
Monti said after European markets closed that he is convinced Italy can overcome the crisis and he’ll meet with President Giorgio Napolitano tomorrow to present his Cabinet. The extra yield investors demand to hold 10-year bonds from France, Belgium, Spain and Austria instead of German bunds all climbed to euro-era records yesterday.
Futures on the S&P 500 expiring in December fell to 1,244.50. The index gained 0.5 percent yesterday. Economic reports today may show that U.S. industrial production climbed 0.4 percent in October, twice as much as the previous month.
Stocks Fall
The MSCI Asia Pacific Index dropped 1.4 percent. The Shanghai Composite Index tumbled 2.5 percent, the biggest decline in almost two months. The Hang Seng China Enterprises Index tumbled 2.9 percent and South Korea’s Kospi Index retreated 1.6 percent.
Hong Kong’s Hang Seng Index (HSI) slumped 2 percent. The city’s “rapid” credit growth has increased the risk that banks make bad loans as Hong Kong faces a potential recession, according to a report from the International Monetary Fund today.
“There are still worries about economic growth next year and a possible decline in company earnings,” said Larry Wan, Beijing-based head of investment at Union Life Asset Management Co., which manages the equivalent of $2.2 billion. “There’s not much optimism.”
China Bonds
China’s 10-year government bonds climbed after the finance ministry sold debt at a lower yield than estimated, bolstering speculation monetary policy will ease. The Ministry of Finance sold at least 28 billion yuan ($4.4 billion) of 10-year bonds at an average yield of 3.57 percent, according to a trader at a finance company that participates in government debt auctions. The yield on the 3.99 percent government bond due June 2021 dropped seven basis points to 3.63 percent, according to the National Interbank Funding Center.
Japan’s Nikkei 225 (NKY) Stock Average lost 0.9 percent. The country’s benchmark 10-year yield dropped one basis point to 0.955 percent at Japan Bond Trading Co. The central bank left its asset-buying fund unchanged at 20 trillion yen ($260 billion) and held the overnight lending rate between zero and 0.1 percent.
Euro Drops
The euro weakened against 12 of its 16 major counterparts. Spain is scheduled to sell as much as 4 billion euros ($5.4 billion) of bonds due 2022, while France will auction notes maturing from 2013 to 2016 tomorrow. Spain and Belgium sold less than the maximum target of bills at auctions yesterday as financing costs increased.
U.S. 10-year bond yields dropped two basis points to 2.01 percent. The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 0.5 percent to 78.25.
“France, Spain, they’re all seeing yields move out, so you get the impression that we’re at some sort of juncture where banks, investors and corporations are starting to prepare for the worst-case outcome,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The euro will remain under pressure.”
Rupiah, Oil
Indonesia’s rupiah fell 0.5 percent to 9,041 per dollar. Bank Indonesia estimates gross domestic product will increase 6.5 percent next year from a previous estimate of 6.7 percent. The central bank unexpectedly cut its benchmark interest rate by 50 basis points to 6 percent last week.
The cost of protecting corporate and sovereign bonds from default rose in Australia and Asia outside of Japan, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advancing 3 basis points to 208.5 basis points, Royal Bank of Scotland Group Plc prices show. The gauge is set for its highest close since Nov. 9, according to CMA.
Oil dropped from the highest level in more than three months, retreating 0.7 percent to $98.70 a barrel. Gold for immediate delivery fell 0.6 percent to $1,769.70 an ounce. Copper in London declined 0.9 percent to $7,618 a metric ton, reversing an advance of as much as 1.8 percent.
To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
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