Euro Weakens Before Factory Data; Asian Shares, Palladium Fall

The euro weakened and European stocks extended a retreat from a 4 1/2-year high before reports forecast to show weaker manufacturing data in the region. Asian shares (MXAP) dropped from a 19-month high while palladium fell.

The euro declined 0.3 percent versus the dollar as of 8:18 a.m. in London, and fell against most of its 16 major peers. The Stoxx Europe 600 Index slid for a second day, down 0.1 percent. The MSCI Asia Pacific Index of stocks slipped 0.5 percent after rising as much as 0.3 percent and closing yesterday at the highest level since August 2011. The Shanghai Composite Index lost 1 percent. Standard & Poor’s 500 Index futures slipped 0.1 percent. Oil fell 0.5 percent, snapping three days of gains and palladium dropped 0.4 percent.

European Union leaders will meet in Brussels for a summit on March 14-15 to discuss rescue plans for Cyprus. U.K. industrial production probably stalled in January after increasing 1.6 percent in December, while factory output for the euro region is forecast to drop 0.1 percent from a month earlier, according to separate Bloomberg surveys. U.S. retail sales rose, according to an economist survey before a report due tomorrow.

“Recent growth is a bit uneven comparing the U.S. with generally weak industrial numbers from Europe and Asia,” said Pang Cheng Duan, a managing director in Singapore at Manulife Asset Management, which oversees about $45.3 billion in Asia. “Sentiment is ahead of reality and stock markets are one or two steps ahead of the real economy. The rally cannot go on liquidity alone, and we need more impetus like better corporate earnings.”

‘Profit Taking’

Stocks rallied worldwide this week amid optimism global policy makers will sustain or boost their stimulus efforts as economic data from the world’s biggest economy improved. Asian equities reached a 19-month peak, European shares traded at a 4 1/2-year high and the S&P 500 Index rose to the highest since October 2007, driving equity valuations in the MSCI All-Country World Index to the highest since May 2010.

“The market was overheating in the short term and poised for profit taking,” said Yutaka Miura, a senior technical analyst at Mizuho Securities Co., a unit of Japan’s third- biggest lender by market value. “The market sentiment remains strong. From here, investors will wait and see what policy the BOJ will actually take.”

Kospi Drops

About two stocks fell for each that rose in the MSCI Asia Pacific gauge. Hong Kong’s Hang Seng Index (HSI) slid 0.9 percent, while Korea’s Kospi Index declined 0.5 percent.

Sinopec Shanghai Petrochemical Co. fell 7.8 percent in Hong Kong, while Shinsei Bank Ltd. lost 4.1 percent. Japan Tobacco Inc. declined 0.7 percent after the finance ministry sold a stake at 2 percent below yesterday’s closing price.

The yen weakened 0.2 percent, after earlier losing as much as 0.5 percent as Bank of Japan (8301)’s deputy governor nominee Kikuo Iwata fanned speculation that the central bank will boost cash infusions in coming months after saying decisive monetary easing is needed. Iwata, a professor at Gakushuin University in Tokyo, told lawmakers today that the BOJ can meet its 2 percent inflation target in two years by buying bonds. Kuroda said yesterday the existing asset-purchase program isn’t enough to achieve the goal. Palladium dropped 0.4 percent to $775.05 an ounce. Aluminum for delivery in three months climbed 0.2 percent to $1,956 a metric ton, after declining to a 15-week low of $1,934.85 yesterday. Zinc was little changed at $1,9861 a ton.

Oil Falls

West Texas Intermediate oil traded near the highest level in almost two weeks before a report that may show U.S. stockpiles climbed to the highest in eight months. Futures fell 0.5 percent in New York after gaining for a third day yesterday.

Ten-year Treasury yields dropped 2 basis points to 2.04 percent. Bill Gross, the manager of the world’s biggest bond fund at Pacific Investment Management Co., reduced his allocation of U.S. government notes in the company’s Total Return Fund to 28 percent of assets in February, from 30 percent in January, according to a report on Pimco’s website.

Retail sales in the U.S. probably rose 0.5 percent in February, a fourth consecutive gain, according to a survey of economists before a report due tomorrow.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net;

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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