By Shiyin Chen - Nov 30, 2011 10:44 AM GMT+0700
Asian equities (MXAP) dropped for the first time in three days and U.S. stock futures fell after Standard & Poor’s cut credit ratings on lenders from Bank of America Corp. to Goldman Sachs Group Inc. Copper and oil retreated.
The MSCI Asia Pacific Index lost 0.8 percent as of 12:33 p.m. in Tokyo, snapping the steepest two-day gain this month, while S&P 500 Index futures fell 0.7 percent. The yen weakened against 12 of its 16 major peers, while the Australian dollar and South Korea’s won climbed 0.3 percent. Copper dropped as much as 1.7 percent, oil lost 0.6 percent in New York and gold gained for a third day.
S&P’s downgrade of some of the world’s biggest lenders may pressure firms already grappling with slower economic growth and Europe’s mounting debt crisis. Euro-area finance ministers approved enhancements to the European Financial Stability Facility, while backing off setting a target for its firepower and seeking a greater role for the International Monetary Fund in fighting the debt crisis.
“Major banks are under pressure and this is happening globally because of the funding issues in Europe,” Anthony Crescenzi, executive vice president at Pacific Investment Management Co., said in a Bloomberg Television interview from Newport Beach, California. “Regulators will be sure to keep the fire under the feet of bankers to ensure that their balance sheets are fortress-like. This will keep pressure on earnings.”
MSCI’s Asia Pacific Index extended its November drop to 7.8 percent, the third decline in four months. Japan’s Nikkei 225 Stock Average sank 1.2 percent, Hong Kong’s Hang Seng Index fell 1.8 percent and Taiwan’s Taiex index decreased 1.3 percent.
China Policies, HSBC
The Shanghai Composite Index sank 2.7 percent after Xia Bin, an adviser to the People’s Bank of China, said the nation’s restructuring of its economy will depend on fiscal policy rather than on a loosening of monetary policies.
HSBC Holdings Plc retreated 2.4 percent in Hong Kong. S&P cut HSBC Holdings Plc to A+ from AA-. It upgraded Bank of China Ltd. and China Construction Bank Corp. to A from A-.
S&P 500 futures expiring in December dropped, signaling the U.S. gauge may halt a two-day rally, after Bank of America, its Merrill Lynch unit, Goldman Sachs, Citigroup Inc., and Morgan Stanley had their long-term credit grades cut to A- from A at S&P. JPMorgan Chase & Co., UBS AG and Barclays Plc were also downgraded to A from A+.
Credit-default swaps on Bank of America, which were little changed before yesterday’s announcement, increased 16.9 basis points to 478.8 and those on Merrill Lynch climbed 24.1 to 524.9, according to data provider CMA. Contracts on Goldman Sachs increased 8 to 403.6.
EFSF’s Capacity
The yen traded at 103.98 against Europe’s 17-nation currency, compared with 103.77 yesterday after European ministers agreed to expand the bailout fund’s capacity by “introducing sovereign bond practical risk participation and a co-investment approach.”
The EFSF has a current lending capacity of 440 billion euros ($586 billion). Without knowing the exact amounts needed, EFSF should be able to leverage its own resources of up to 250 billion euros, the fund statement said. Europe’s finance ministers will meet again in Brussels today.
“Policy makers are taking various measures to contain the crisis,” said Kengo Suzuki, a foreign-exchange analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest bank by market value. “Optimism toward the finance-minister meeting in Europe is resulting in the selling of the yen.”
The Dollar Index, which tracks the currency against those of six trading partners, was little changed after retreating for two days. The euro climbed 0.2 percent to $1.3347, the Aussie rallied to $1.0070 and the won advanced to 1138.95 per dollar.
Economic reports today showed Japan’s industrial production increased more than analysts expected in October, Australia’s capital expenditure surged, and New Zealand home-building approvals climbed. U.S. pending home sales, or contract signings for existing homes, rose 2 percent in October after falling 4.6 percent the prior month, economists surveyed by Bloomberg News forecast the National Association of Realtors will report today.
The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment climbed, with the Markit iTraxx Australia index rising three basis points to 214, according to Westpac Banking Corp. That’s set for its first increase since Nov. 25, according to data provider CMA, which is owned by CME Group Inc., and compiles prices quoted by dealers in the privately negotiated market.
Immediate-delivery gold gained 0.4 percent to $1,722.77 an ounce, set for a third straight day of gains. Oil slipped 0.6 percent to $99.22 a barrel in New York, while copper dropped 1.5 percent to $7,375 a metric ton in London.
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
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