Asian Stocks Slump, Commodities Drop While Dollar Strengthens

Asian shares slumped the most in almost two weeks and U.S. stock index futures fell as commodity prices dropped and the dollar strengthened. Australia’s currency weakened after the nation’s inflation rate rose less than economists estimated.

The MSCI Asia Pacific Index fell 1.3 percent to 128.84 as of 1:15 p.m. in Tokyo. Standard & Poor’s 500 Index futures retreated 0.4 percent. The so-called Aussie traded at 97.23 U.S. cents and the yen weakened to 81.76 against the dollar.

Oil dropped, snapping three days of gains, as investors sold futures contracts against a strengthening dollar and on speculation U.S. crude stockpiles climbed to the highest since June. BYD Co., the Chinese carmaker backed by Warren Buffett, plunged in Hong Kong trading after JPMorgan Chase & Co. cut its investment rating on the company, while Asciano Group dropped the most in more than four months in Sydney after Australia’s largest port operator said coal shipments missed its estimates.

“In the short term, expect Asian markets to see a correction,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd., which oversees $400 million. “I’m a bit cautious at the moment.”

More than twice as many stocks declined as advanced in the MSCI Asia index. Hong Kong’s Hang Seng Index retreated 1.5 percent, South Korea’s Kospi Index decreased 0.7 percent and Australia’s S&P/ASX Index fell 0.7 percent. Most Asia-Pacific indexes reversed gains from this morning.

Asicano Tumbles

Asciano Group lost 5.5 percent in Sydney, the most in more than four months, after Australia’s largest port operator said first-quarter coal shipments missed its expectations.

Australia’s dollar tumbled as government price data curbed expectations the central bank will need to increase interest rates to restrain inflation.

The currency dropped 1.3 percent. It briefly reached parity on Oct. 15. The U.S. dollar reached as strong as $1.3810 per euro, the most since Oct. 20, before trading at $1.3813 from $1.3859 in New York yesterday. It gained to 81.74 yen from 81.43 yesterday.

Australian consumer prices rose 2.8 percent in the third quarter from a year earlier, after increasing at a 3.1 percent pace in the previous three months. The median estimate of 24 economists surveyed by Bloomberg News was for a 2.9 percent increase.

Swaps prices indicated a 16 percent chance that the Reserve Bank of Australia will boost borrowing costs next week from 47 percent yesterday, according to a Credit Suisse Group AG index.

‘Gradual Rate Increases’

“Any rate increase in Australia will be only gradual, even if the Reserve Bank of Australia were to resume the monetary tightening cycle next week,” said Akira Maekawa, a senior economist at online currency trading company Global Futures & Forex Ltd. in Tokyo. “Given such a benign rate outlook, the Aussie will struggle in extending its gains far above parity.”

U.S. Treasuries snapped a five-day decline after Federal Reserve Bank of New York President William Dudley said momentum in the economy has slowed.

“The Great Recession has been followed by a tepid recovery,” Dudley said yesterday in a speech in Rochester, New York. “Since 2009, economic activity has grown, but not robustly,” he said. “The momentum has slowed.”

Yields on benchmark 10-year notes fell two basis points to 2.63 percent in Tokyo, according to BGCantor Market Data. The yield may rise to between 3.10 percent and 3.20 percent by year’s end as further monetary easing by the Federal Reserve increases expectations for faster inflation, Citigroup Inc. said.

Longer-term bond yields are poised to rise from recent troughs, analysts led by New York-based Tom Fitzpatrick said in a note to clients, citing technical patterns and historical parallels.

To contact the reporters on this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

To contact the editor responsible for this story: Patrick Chu in Tokyo at pachu@bloomberg.net.

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