By Lynn Thomasson and Yoshiaki Nohara - Jan 16, 2012 10:16 AM GMT+0700
Asian stocks fell the most in a almost a month, the euro touched an 11-year low versus the yen and copper slid after Standard & Poor’s stripped France of its top credit rating and cut eight other euro-zone nations.
The MSCI Asia Pacific Index tumbled 1.3 percent as of 11:38 a.m. in Tokyo following a 2.2 percent gain last week. Standard & Poor’s 500 Index futures sank 0.5 percent. The euro weakened 0.4 percent to 97.17 yen, which rose against 16 major counterparts. Australian 10-year bond yields fell the most in four months. Copper lost 0.7 percent as zinc and nickel slumped.
France will auction as much as 8.7 billion euros ($11 billion) of bills today, followed by the European Financial Stability Facility’s 1.5 billion-euro sale tomorrow. Europe’s debt crisis will inevitably affect Asia, Hong Kong Chief Executive Donald Tsang said. Japan’s Prime Minister Yoshihiko Noda said containing the country’s public debt load, the world’s largest, is critical.
“It’s unrealistic to expect Europe to make progress in dealing with debt issues in a straight line without having hiccups,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. S&P’s ratings downgrades are “not going to help investor sentiment.”
Ratings Cut
S&P warned on Jan. 13 that Europe’s efforts to fight its crisis are falling short as it lowered the top ratings of France and Austria one level to AA+. The New York-based company downgraded Italy, Portugal, Spain and Cyprus by two steps and cut Malta, Slovakia and Slovenia by one level. It affirmed the ratings of countries including Germany, Belgium, and Ireland.
The euro fell as much as 0.5 percent to 97.04 yen, the lowest since December 2000. The shared currency slid 0.3 percent to $1.2644. Greek officials will reconvene with creditors on Jan. 18 after discussions stalled last week over the size of investor losses in a proposed debt swap, raising the threat of default.
Japanese machinery orders rose 14.8 percent in November, the most in almost four years, and data later today may show India’s inflation eased to a two-year low, based on the median economist estimate from a Bloomberg survey.
The MSCI Asia Pacific Index (MXAP) has climbed 7.5 percent since a two-year low in October and capped four weeks of gains on Jan. 13, the longest stretch in a year. The equity benchmark trades at 12.2 times estimates earnings, 27 percent less than the six- year average, according to data compiled by Bloomberg.
Nikkei, Hang Seng
About six stocks fell for each that gained in the MSCI Asia index. Financial and technology companies contributed the most to the decline in the gauge. The Nikkei 225 Stock Average slid 1.6 percent and the Hang Seng Index lost 1 percent.
S&P 500 futures declined to 1,282.4. Wells Fargo & Co. and Citigroup Inc. are among companies to report quarterly results this week. U.S. stock markets are closed for a holiday today.
Copper for delivery in three months declined as much as 1.1 percent to $7,909.50 a metric ton on the London Metal Exchange. Zinc fell 1.3 percent to $1,934.50 a ton and nickel lost 1.2 percent to $19,375 a ton. Oil traded at $98.83 a barrel, little changed near the lowest in almost four weeks.
The Australian dollar slid 0.4 percent to $1.0277. The currency maintained its decline even after data showed home loans rose for an eighth straight month in November. New Zealand’s dollar weakened 0.2 percent to 79.33 U.S. cents.
Australia’s benchmark 10-year bond yield dropped 16 basis points to 3.68 percent, poised for the biggest decline since Sept. 5. Japan’s 10-year government bond yield fell one basis point to 0.94 percent, matching the lowest rate since November 2010.
Limited Fallout
History suggests fallout from S&P’s ratings downgrades of European countries may be limited. JPMorgan Chase & Co. research shows that 10-year yields for the nine sovereigns that lost their AAA status between 1998 and last year’s U.S. downgrade rose an average of two basis points the following week.
French 10-year yields climbed four basis points on Jan. 13 to 3.08 percent. The extra yield investors demand to hold French 10-year debt instead of German bunds has widened to 131 basis points, compared with an average of 69 basis points over the past year.
To contact the reporters on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
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