Stocks Fall on China Manufacturing, Spain Rating

Asian stocks fell, dragging down the MSCI Asia Pacific Index towards its lowest level in three weeks, after Chinese manufacturing growth slowed and Moody’s Investors Service said it may cut Spain’s top credit rating.

Mining companies BHP Billiton Ltd. and Rio Tinto Group, which get at least a fifth of their revenue from China, retreated in Sydney after the Purchasing Managers’ Index, a gauge of Chinese manufacturing, fell more than economists estimated. Nissan Motor Co., which gets 13 percent of its revenue in Europe, lost 3.2 percent in Tokyo after Moody’s said it may lower Spain’s Aaa classification.

“Investors are already finding difficulty traversing the wall of worry,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “A downgrade of Spanish sovereign debt would be another piece of negative news that adds to demand for perceived safe-haven investments.”

The MSCI Asia Pacific Index dropped 1.3 percent to 111.36 as of 7:21 p.m. in Tokyo, extending its biggest quarterly decline in more than a year. The measure is set to close at the lowest level since June 10. The gauge has fallen 14 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will hurt global growth.

Japan’s Nikkei 225 Stock Average slumped 2 percent, a fifth day of declines. An increase in the Bank of Japan’s Tankan index of sentiment among the country’s largest manufacturers to a two- year high failed to stem the slump in stocks.

South Korea’s Kospi dropped 0.7 percent. The S&P/ASX 200 Index declined 1.5 percent in Sydney and China’s Shanghai Composite Index decreased 1 percent. Markets in Hong Kong are closed today for a public holiday.

Biggest Declines

Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The gauge yesterday fell 1 percent as ADP Employer Services said companies in the U.S. added fewer workers in June than forecast.

All 10 industry gauges represented on the MSCI Asia Pacific Index declined. Utilities stocks, perceived to be less sensitive to economic growth cycles, fell the least.

“Investor sentiment is certainly negative and we’ve seen that reiterated in buying of defensive asset classes,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne. “Traders are pricing in a double dip, which is not a healthy stalking ground for equities.”

BHP, which is also Australia’s biggest oil producer, sank 1.4 percent to A$37.11 as crude oil and copper futures in New York retreated. Rio Tinto slumped 2.3 percent to A$65.10. Jiangxi Copper Co., China’s largest producer of the metal, lost 2.6 percent to 23.44 yuan in Shanghai.

Manufacturing Slowdown

China’s manufacturing expanded at a slower pace for a second month in June, adding to signs that growth in the world’s third-largest economy is moderating. The Purchasing Managers’ Index fell to 52.1 from 53.9 in May, the Federation of Logistics and Purchasing said today. That was less than the median 53.2 estimate in a Bloomberg News survey of 12 economists. A reading above 50 indicates expansion.

Gree Electric Appliances Inc., the largest Chinese maker of home air-conditioners, lost 2.3 percent to 18.37 yuan in Shenzhen, southern China. Tokyo-based Hitachi Construction Machinery Co., which counts China as its biggest market, lost 2.6 percent to 1,613 yen.

Speculation global growth will slow has helped drag down the average price of stocks in the MSCI Asia Pacific Index to about 14 times estimated profit, compared with 24 times a year ago. The gauge lost 0.5 percent last week after new-home sales in the U.S. tumbled to a record low.

Nissan, Sony

Stocks also fell today after Moody’s announced its review on Spain. “Deteriorating” growth prospects and challenges in meeting fiscal targets mean Spain’s Aaa classification may be lowered by as much as two grades, Moody’s analysts in New York said yesterday in a statement. The review will be concluded within a three-month period, the ratings company said.

Nissan slipped 3.2 percent to 606 yen. Mazda Motor Corp. plunged 5.2 percent to 199 yen, the fifth-biggest drop on the MSCI Asia Pacific Index. Sony Corp., which gets 21 percent of its revenue from Europe, declined 3.7 percent to 2,296 yen. Sony separately said it’s recalling 535,000 Vaio personal computers because they may overheat due to a temperature-control defect.

Also in Tokyo, Softbank Corp., Japan’s No. 3 mobile-phone company, dropped 4.4 percent to 2,267 yen after the company’s Yahoo Japan Corp. affiliate was ordered to pay more taxes. Softbank was the largest contributor to the Nikkei’s decline. Yahoo Japan slumped 3.2 percent to 34,500 yen.

Shipping stocks declined after the Baltic Dry Index, which measures the cost of transporting commodities, sank 1.7 percent yesterday, extending a 24-day slump to 43 percent.

Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, retreated 2.5 percent to 357 yen. Cosco Corp. Singapore Ltd., a China-based shipbuilder that also operates bulk carriers, dropped 3.4 percent to S$1.44 in Singapore, while STX Pan Ocean Co., South Korea’s biggest bulk carrier, dipped 1.3 percent to 11,150 won.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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