Japan Stock Futures Drop on Record Spain Borrowing Costs

Japanese and Australian stock futures fell as borrowing costs in Spain climbed to a euro-area record and optimism faded that Greece’s election will calm Europe’s sovereign-debt crisis.

American Depositary Receipts of Sony Corp. (6758), a Japanese consumer electronics exporter that gets a fifth of its sales in Europe, slid 0.9 percent. ADRs of Woodside Petroleum Ltd. (WPL), Australia’s second-biggest oil producer, fell 0.9 percent as crude prices dropped for the first time in three days.

Futures on Japan’s Nikkei 225 Stock Average expiring in September closed at 8,680 in Chicago yesterday, down from 8,730 in Osaka, Japan. They were bid in the pre-market at 8,680 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index declined 0.3 percent today. New Zealand’s NZX 50 Index rose 0.1 percent in Wellington.

“We are positioned quite negatively,” said Tim Riordan, of Parker Asset Management Ltd., a hedge fund in Sydney that has about $200 million under management. “We see Europe escalating rather than solving its problems. The focus is rolling on to Spain, and with bond yields going over 7 percent, this has been a red flag in the past. You’re in a bit of a downward spiral and this leads us to be fairly cautious.”

Futures on the Standard & Poor’s 500 Index fell less than 0.1 percent today. The gauge advanced just 0.1 percent yesterday as surging Spanish bond yields tempered optimism about Greece’s attempts to form a coalition government.

Spain, which has asked euro-region governments for as much as 100 billion euros ($126 billion) to help shore up its banks, reported a jump in bad loans in April to 8.72 percent of total lending, the highest since 1994.

No Leeway

German Chancellor Angela Merkel said Greece should not be given more leeway to comply with austerity measures needed to secure international aid after pro-bailout parties won enough seats to form a majority in parliament.

Group of 20 chiefs began a two-day meeting in Mexico yesterday as Spanish borrowing costs soared above 7 percent to a euro-era record. With elections in Greece failing to damp the threat of contagion, policy makers are discussing ways to stimulate the world economy if necessary, a Canadian official said. Merkel, who last week criticized U.S. debt levels, said June 15 she’ll press the G-20 to hold to prudent government spending.

The MSCI Asia-Pacific (MXAP) Index, which lost 10 percent through yesterday from this year’s highest level in February, is trading at 1.2 times book value, compared with 2.1 times for the S&P 500 and 1.3 times for the Stoxx 600, according to data compiled by Bloomberg. A number below one means companies can be bought for less than value of their assets.

Oil for July delivery fell 76 cents to settle at $83.27 a barrel on the New York Mercantile Exchange. Prices are down 19 percent in the second quarter and 16 percent this year.

The Bloomberg China-US Equity Index of the most-traded Chinese companies gained 1.1 percent in New York yesterday.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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