Asian Stocks Drop on Europe Debt Concern, U.S. Confidence

Asian stocks fell, with the regional benchmark index headed for its biggest drop in almost two weeks, after the cost of insuring against a Spanish default climbed and U.S. consumer confidence dropped, clouding the earnings outlook for Asia’s exporters.

Nintendo Co. (7974), a manufacturer of game consoles that gets a third of its sales in Europe, fell 3.2 percent in Osaka. James Hardie Industries SE (JHX), an Australian supplier of building materials that gets more than half of its sales from the U.S., dropped 1.2 percent in Sydney. Industrial & Commercial Bank of China (601398) Ltd. declined 0.8 percent in Hong Kong after Goldman Sachs Group Inc. was said to sell a $2.5 billion stake at a discount.

“The U.S. and China economies are in limbo,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees the equivalent of $68 billion. “They’re not weak enough to expect easing measures, yet they’re not strong enough to lead global growth. When Europe’s debt issue creeps up in such an environment, that takes over investor sentiment.”

The MSCI Asia Pacific Index (MXAP) declined 0.9 percent to 123.96 as of 7:49 p.m. in Tokyo after rallying through the final two days of last week. It’s headed for the steepest drop since April 4, with more than two shares retreating for each that rose.

The Asia-Pacific index pared its gain to 9.8 percent this year through April 13 amid signs China’s economy and the U.S. recovery are slowing, damping the outlook for demand in the world’s biggest economies.

Japan’s Nikkei 225 Stock Average fell 1.7 percent with trading volume 26 percent below the 30-day average. Australia’s S&P/ASX 200 Index sank 0.5 percent, while South Korea’s Kospi Index retreated 0.8 percent its target for economic growth was lowered by the central bank. Singapore’s Straits Times Index rose 0.1 percent after swinging between gains and losses.

Yuan Trading Band

Hong Kong’s Hang Seng Index (HSI) declined 0.4 percent, paring losses toward the close. China’s Shanghai Composite Index fell 0.1 percent after rising as much as 0.2 percent and retreating 0.7 percent.

Shares in Hong Kong and the mainland fell even after the People’s Bank of China increased the flexibility of its exchange rate against the dollar for the first time since 2007, a move that Baochuan Capital Management LLC said suggests a further liberalization of the economy. The yuan’s trading band was doubled to 1 percent, effective today.

Stocks in the MSCI Asia Pacific Index were valued at 12.7 times estimated earnings on average on April 13, compared with 13.1 times for the S&P 500 and 10.5 times for the Stoxx Europe 600 Index.

Futures on the Standard & Poor’s 500 Index (SPXL1) advanced 0.3 percent today after falling as much as 0.3 percent. The gauge lost 1.3 percent in New York on April 13, capping its first back-to-back weekly decline since November, as confidence among U.S. consumers cooled in April from a one-year high.

Spanish CDS

James Hardie fell 1.2 percent to A$7.67 in Sydney. Toyota Motor Corp., which gets 28 percent of its revenue from North America, retreated 1.7 percent to 3,270 yen in Tokyo.

Stocks also fell after five-year credit-default swaps on Spain surged to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro- region member to need a bailout.

“Concern is mounting about the Spanish bond sales this week, with yields rising and credit-default swaps extending a record,” said Toshiyuki Kanayama, a market analyst at Tokyo- based Monex Inc.

Nintendo dropped 3.2 percent to 11,220 yen in Osaka. Esprit Holdings Ltd. (330), a clothier that depends on Europe for almost 80 percent of sales, slid 1.6 percent to HK$16.14 in Hong Kong.

Mining Stocks Retreat

BHP Billiton Ltd. (BHP), the world’s biggest mining company, dropped 0.5 percent to A$34.31 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, slumped 0.9 percent to HK$18.58 in Hong Kong after metal prices declined.

The London Metal Exchange Index of prices for six industrial metals including copper and aluminum fell 2.4 percent on April 13.

ICBC sank 0.8 percent to HK$5.17 in Hong Kong after two people with knowledge of the matter said Goldman Sachs will sell shares in the world’s biggest bank by market value at HK$5.05 each. Temasek Holdings Pte today said it will buy 3.55 billion ICBC shares, which closed at HK$5.21 on April 13. Global banks have divested $24 billion in Chinese lenders’ shares since 2009 to meet regulatory requirements to safeguard against risk.

Chongqing Rural Commercial Bank (3618) Co., a personal and corporate lender, sank 8 percent to HK$3.80. The southwestern city of Chongqing has investigated construction projects related to outstanding local government debt, China Business Journal reported, without citing a source.

Among stocks that rose, jet fuel producer Linc Energy Ltd. (LNC) surged 19 percent to A$1.27 in Sydney after signing an agreement with GCL Projects for a joint venture in China.

Shougang Fushan Climbs

Shougang Fushan Resources Group Ltd. (639), a Chinese coking coal producer, rose 8.1 percent to HK$2.68 in Hong Kong, the steepest gain in the MSCI Asia Pacific Index. The stock rose after the company made a statement regarding a short seller’s report, calling allegations by Glaucus Research about mine acquisitions and charity donations “groundless.”

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.