Asian stocks fell on concern Europe may be unable to halt the spread of its sovereign-debt crisis, denting the outlook for the global economy. The regional benchmark pared its decline after Hong Kong reversed losses.
Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, declined 2.7 percent after the cost of insuring against default on European sovereign and financial debt surged to records. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, slumped 2.2 percent after commodity prices declined. Kansai Electric Power Co., a Japanese nuclear-power operator, jumped 3.5 percent after the country’s new leader indicated atomic power will continue to be used.
The MSCI Asia Pacific Index pared losses as Hong Kong’s Hang Seng Index reversed a 1.7 percent drop to gain 0.5 percent after European markets opened higher. The MSCI Asia-Pacific gauge fell 1.3 percent to 119.19 at 7:40 p.m. in Tokyo, with three stocks falling for each two that rose.
Japan’s Nikkei 225 (NKY) Stock Average decreased 2.2 percent. South Korea’s Kospi Index retreated 1.1 percent. China’s Shanghai Composite index dropped 0.3 percent after swinging between losses of 0.8 percent and a gain of 0.1 percent.
The MSCI Asia-Pacific measure slumped 8.6 percent last month, the most since May 2010, amid concern global economic growth is slowing as Europe’s sovereign debt crisis spreads and after Standard & Poor’s cut the U.S. credit rating.
“It’s another market riot,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “Volatility is likely to remain high until there’s clarity around Europe’s ability to work out a lasting solution. Right now, it seems policy makers are going in the opposite direction. While the fundamentals in Asia are in better shape than elsewhere, shares here will get caught up in the crossfire.”
Stocks fell as an election loss for German Chancellor Angela Merkel’s party and reports of a rift between Greece and the International Monetary Fund fueled concern that support for bailing out indebted European nations is waning.
Australia’s S&P/ASX 200 Index fell 1.6 percent as the Reserve Bank of Australia left its benchmark interest rate unchanged for a ninth straight meeting, citing unstable financial markets and weaker growth prospects at home and abroad.
The Stoxx Europe 600 Index swung between gains and losses today after plunging 4.1 percent to 223.45 yesterday, when all 19 industry groups fell as it suffered its biggest two-day drop since March 2009. Standard & Poor’s 500 Index futures expiring in September retreated 1.5 percent after falling as much as 2.8 percent today. U.S. stock markets were closed yesterday for the Labor Day holiday.
Stocks declined as investors drove yields higher on the bonds of Greece, Portugal, Spain and Italy on doubt that Europe’s leaders will be able to stop the crisis spreading. The yield on the Greek two-year note rose above its price for the first time yesterday, indicating mounting concern the nation will default on the debt.
Deutsche Bank AG Chief Executive Officer Josef Ackermann said yesterday in Frankfurt that conditions in stock and bond markets were reminiscent of the financial crisis of late 2008.
Bank shares were the biggest contributors to the MSCI Asia Pacific Index’s decline. Mitsubishi UFJ fell 2.7 percent to 325 yen in Tokyo, the biggest drag on Japan’s Topix index. National Australia Bank Ltd. sank 2.8 percent to A$22.14. HSBC Holdings Plc., Europe’s largest bank by market value, declined 1.8 percent to HK$64.10 in Hong Kong.
“There’s growing concern that the sovereign-debt crisis in the EU is now manifesting into a sharp slowdown in the economy and a banking crisis,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “There is a real sense this could get worse before it gets better. Equity and bond markets are reflecting this increased level of concern.”
The MSCI Asia Pacific Index declined 12 percent this year through yesterday, compared with a 6.7 percent drop by the S&P 500 and a 19 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.7 times estimated earnings on average, compared with 11.7 times for the S&P 500 and 9.3 times for the Stoxx 600.
Raw-material producers and commodity related shares slid today as metals and crude oil prices fell during Asian trade.
BHP dropped 2.2 percent to A$36.88 in Sydney, the biggest contributor to the MSCI Asia Pacific Index’s decline. Japanese commodity trading company Mitsui & Co. declined 4.5 percent to 1,205 yen in Tokyo.
The London Metal Exchange Index of prices for six industrial metals including copper and aluminum slid 1.6 percent yesterday. Crude oil for October delivery fell as much as 3.5 percent to $83.42 a barrel in electronic trading on the New York Mercantile Exchange.
Among stocks that rose, Kansai Electric led Japanese electricity supply companies higher after the nation’s new prime minister said atomic power is needed to save the economy after the worst nuclear accident in 25 years led his predecessor to call for an end to atomic energy.
Kansai Electric jumped 3.5 percent to 1,429 yen while Chubu Electric Power Co. increased 2.6 percent to 1,528 yen. Tokyo Electric Power Co., the utility at the center of the nuclear crisis, advanced 1.3 percent to 384 yen.
Utilities posted the biggest gains among the 10 industry groups on the MSCI Asia Pacific Index.
Shares in Hong Kong rose, propelling the Hang Seng Index to a 437-point increase in the last 76 minutes of trade, after European markets gained today. The Stoxx Europe 600 Index rose as much as 0.7 percent after the biggest two-day drop since 2008 left it trading at the cheapest in more than two years.
Esprit Holdings Ltd., a global clothing retailer that gets more than 80 percent of its sales in Europe, surged 4.9 percent to HK$19.96. Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, climbed 0.5 percent to HK$9.85. Cnooc Ltd. (883), China’s biggest offshore oil explorer, increased 0.3 percent to HK$13.88, reversing an earlier loss of as much as 4.8 percent.
Ministers from Germany, Finland and the Netherlands will meet today to discuss a Finnish demand for collateral in a bailout for Greece, while the Italian Senate will debate an austerity plan amid a strike.
“The political stuff is too hard to call,” said Don Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which has about $1.1 billion under management. “What’s happening right now doesn’t always make sense. You could get a great a great rally in Europe in the morning, and the U.S. could ruin it in the afternoon. The volatility is still very elevated in some markets. You’ve just got to ride it.”
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