Asia Stocks Fluctuate as Europe Concern Offsets U.S. Data

By Adam Haigh - Jun 27, 2012 8:35 AM GMT+0700

Asian stocks swung between gains and losses after falling for four days ahead of the 19th summit on Europe’s debt crisis in three years. Declines were tempered by speculation the U.S. housing market is bottoming and that China may step up efforts to support its economy.

Boral Ltd. (BLD), the Australian seller of building materials, slumped 4.2 percent after cutting its profit forecast. Japan Tobacco Inc. (2914), Asia’s largest cigarette maker by market value, climbed 3 percent as investors sought shares of companies with earnings less tied to economic growth. Oracle Corp. Japan advanced 2.1 percent, a 14th day of advance in 15 days, as its profit forecast topped estimates.

The MSCI Asia Pacific Index (MXAP) was little changed at 113.3 at 10:32 a.m. in Tokyo, before markets in China and Hong Kong opened. The gauge fell 0.5 percent this year through yesterday amid concern that growth in the U.S. and China is slowing as Europe’s debt crisis spreads from the periphery to core countries like Spain and Italy.

“Markets have already priced in a lot of the bad news,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “All you need for a rally in equities is for the backdrop to become less bad. When the housing sector improves it has a strong trickle-down effect to the wider U.S. economy. But there’s still a struggle with what’s going on in Europe.”

The fall in the Asian benchmark this year compares with a gain of 5 percent by the Standard & Poor’s 500 Index and the Stoxx Europe 600 Index’s drop of 0.8 percent. Shares in the MSCI Asia Pacific trade at 11.5 times estimated earnings versus 12.7 times for the S&P 500 and 10.2 times projected net income for companies in the Stoxx 600.

Regional Indexes

Futures on the Standard & Poor’s 500 Index slid 0.2 percent today. Homebuilder shares helped lead the gauge 0.5 percent higher yesterday after a report showed house prices decreased at the slowest pace since 2010, tempering concern about a drop in the Conference Board’s consumer confidence index to a five-month low.

Hong Kong’s Hang Seng Index (HSI) swung between gains and losses. Japan’s Nikkei 225 declined 0.1 percent and South Korea’s Kospi Index slid 1.1 percent. Australia’s S&P/ASX 200 Index gained 0.3 percent.

The MSCI Asia Pacific has retreated 12 percent from this year’s highest level in February and has fallen 11 percent this quarter, heading for its first quarterly drop since September.

Spanish and Italian bond yields jumped yesterday as German Chancellor Angela Merkel repeated her opposition to a shared debt burden in Europe before a summit of the region’s leaders starting tomorrow.

China may introduce “more proactive” policies to ensure stable growth, according to a commentary in the China Securities Journal by reporter Zhang Zhaohui. Policies to expand infrastructure investment, fine-tune monetary policies and structurally reduce taxes may be introduced, according to the commentary, which was published on the front page of the newspaper.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net