Japan Stock Futures Drop as Europe Manufacturing Shrinks

Asian stocks fell, sending its benchmark index to its biggest weekly loss this year, as a surprise drop in profit at China’s third-largest bank compounded concern the global economy is slowing as manufacturing shrinks from Europe to Asia.

Agricultural Bank of China Ltd., slid 3.1 percent after posting lower-than-expected earnings and HSBC Holdings Plc (HSBA), Europe’s largest lender by market value, dropped 1.3 percent in Hong Kong. Honda Motor Co. (7267), which gets about 80 percent of its revenue overseas, fell 2.9 percent in Tokyo after the yen strengthened. BHP Billiton Ltd. (BHP), the world’s largest mining company, lost 1.2 percent in Sydney after metal and oil prices fell yesterday.

“If you look at the situation rationally, there a lot of risks still out there,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees the equivalent of $68 billion. “Investors have been looking at the situation in the U.S. and Europe optimistically and have been buying shares, but that energy is exhausting itself.”

The MSCI Asia Pacific Index (MXAP) declined 0.6 percent to 126.08 as of 6:43 p.m. in Tokyo, dropping 1.5 percent for the week. The gauge rose 11 percent this year through yesterday as the U.S. showed signs of economic recovery and amid optimism China will ease its monetary policy. Stocks in the index are valued at 14.9 times estimated earnings on average, compared with 13.4 times for the Standard & Poor’s 500 Index and 11.1 times for the Stoxx Europe 600 Index.

Japan’s Nikkei 225 Stock Average (NKY) slid 1.1 percent. Australia’s S&P/ASX 200 Index fell 0.1 percent and South Korea’s Kospi Index was little changed. Singapore’s Straits Times Index (FSSTI) rose 0.4 percent as a report showed the city-state’s inflation rate unexpectedly slowed for a third month in February.

U.S. Futures

Hong Kong’s Hang Seng Index fell 1.1 percent, while China’s Shanghai Composite Index declined 1.1 percent amid concern slowing economic growth is hurting earnings.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.3 percent today. The gauge lost 0.7 percent in New York yesterday as a report showing manufacturing contracted in Europe added to pessimism about the global economic outlook after an earlier index showed China manufacturing is also shrinking.

In Europe, a euro-area composite index based on a survey of purchasing managers in both industries dropped to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate yesterday. Economists forecast a gain to 49.6. A reading below 50 indicates contraction.

HSBC slid 1.3 percent to HK$69.10 in Hong Kong. Esprit Holdings Ltd., a clothier that gets most of its revenue from Europe and is aiming to build its market share in China, declined 2.3 percent to HK$16.44. Nintendo Co. (7974), a manufacturer of game consoles that gets a third of its sales in Europe, slid 2.7 percent to 12,670 yen in Osaka.

Chinese Manufacturing

In China, a preliminary report yesterday showed manufacturing in the world’s second-biggest economy may contract for a fifth month in March. The preliminary 48.1 reading in a purchasing managers’ index from HSBC Holdings Plc. and Markit Economics is the lowest since November and compares with a final 49.6 in February.

Agricultural Bank of China slumped 3.1 percent to HK$3.41 in Hong Kong. Net income declined 14 percent to 21.2 billion yuan ($3.4 billion) for the fourth quarter, from 24.7 billion yuan, according to data compiled by Bloomberg based on full-year figures reported yesterday. That fell short of the 28.84 billion-yuan average estimate of 20 analysts in a Bloomberg survey.

Yen Appreciates

“People already knew Europe’s economy is in a bad shape and China is slowing down,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $27.6 billion. “Considering how much Japan has risen, it wouldn’t be a surprise if we saw some correction given the slowing in the yen’s weakness and the slowdown in Europe and China.”

The yen appreciated to as high as 108.49 against the euro today in Tokyo, compared with 110.44 at the close of stock trading yesterday. Against the dollar, Japan’s currency strengthened to 82.33 from 83.39. A stronger yen cuts the value of overseas income at Japanese companies when repatriated.

Automakers Slip

Honda fell 2.9 percent to 3,180 yen in Tokyo, while Nissan Motor Co. (7201), a carmaker that also gets about 80 percent of its revenue overseas, lost 2.6 percent to 855 yen.

BHP dropped 1.2 percent to A$34.40 in Sydney. Cnooc Ltd., China’s biggest offshore oil producer, declined 1 percent to HK$16.38 in Hong Kong. Crude oil for May delivery fell 1.8 percent yesterday in New York, while the London Metal Exchange Index of prices for six industrial commodities including copper and aluminum sank 2 percent.

QR National Ltd. (QRN), an Australian coal-train operator, slid 3.1 percent to A$3.77 in Sydney after cutting its profit forecast for the year ending June.

Huaneng Power International, Inc., operator of coal-fired plants in China, declined 4.9 percent to HK$4.29 in Hong Kong. The stock was cut to “hold” from “outperform” by Daiwa Securities Capital Markets Ltd. Profits for 2011 were weak and consensus estimates for 2012 may be reduced, the brokerage’s analyst Dave Dai wrote in a report.

Among stocks that rose, Li & Fung Ltd. (494), a supplier of clothes and toys to Wal-Mart Stores Inc., jumped 4.2 percent to HK$19.86 after reporting a bigger-than-expected increase in 2011 profit.

Genting Singapore Plc (GENS), a casino operator, rose 6.8 percent to S$1.74 in Singapore after the Casino Regulatory Authority awarded its first casino junket licenses.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

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