Asian Stocks Drop Before China Factory Data as Oil Climbs

Asian stocks declined, with the regional index headed for a three-month low before manufacturing data from China to the U.S. and as investors awaited this week’s Federal Reserve meeting. Silver, gold and copper futures dropped while crude oil rallied.

The MSCI Asia Pacific Index lost 0.3 percent by 9:55 a.m. in Tokyo, falling a fourth day in its longest slump in six weeks as Japanese shares drove declines. Standard & Poor’s 500 Index futures gained 0.1 percent after the gauge sank 1.7 percent last week. Australia’s currency weakened versus the dollar. Copper futures dropped 0.2 percent while silver and gold slipped at least 0.3 percent. Brent crude climbed 0.6 percent in a second day of gains as natural gas futures extended declines.

Reports today may signal growth in factory output for China, the euro region and the U.S., according to Bloomberg surveys, after Japan’s Tankan index beat estimates, indicating confidence among large manufacturers was the highest since 2007. India also reports inflation data today. Economists have bolstered bets Fed policy makers will start reducing stimulus as soon as this week amid signs of improvement in the U.S. labor market and after lawmakers passed a bipartisan budget.

“It’s a 50/50 call whether the Fed will go this week but certainly some of the things that they were worried about in September have been resolved or are looking better and they’re definitely closer to tapering,” Bevan Graham, chief economist in Wellington at AMP Capital Investors, said by phone. “The market is more ready for it now.”

Fed Survey

The Fed will probably start cutting its $85 billion of monthly bond purchases at this week’s meeting -- which starts tomorrow and concludes Dec. 18 -- according to 34 percent of economists surveyed Dec. 6 by Bloomberg. That was up from 17 percent in a Nov. 8 poll. A tapering of Fed stimulus would curb the supply of cheap dollar financing that has spurred demand for higher-yielding assets globally.

Japan’s Topix Index (TPX) declined 0.6 percent after gaining 0.3 percent in its fourth weekly advance in five weeks. The Tankan large manufacturers index came in at 16 for the fourth quarter, up from 12 in the previous period and exceeding the median economist estimate of 15. The outlook gauge, however, delivered a reading of 14, up from 11 in the third quarter though below the median projection in a Bloomberg survey for 17.

Australia’s S&P/ASX 200 Index (AS51) dropped less than 0.1 percent, paring an earlier decline of as much as 0.8 percent, while South Korea’s Kospi Index (KOSPI) added 0.1 percent after the measure slid 0.9 percent last week in Seoul. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in New York gained 0.8 percent Dec. 13, reducing its first weekly drop in five weeks to 3 percent.

Emerging Markets

China will start to supervise pricing in certain industries and punish companies that break antitrust rules after cracking down on makers of products such as baby formula and cars, the National Development and Reform Commission said in a statement on its website, citing a meeting in Beijing yesterday.

The MSCI Emerging Markets Index rose 0.1 percent in early trading today after falling 1.2 percent last week. Dubai’s DFM General Index climbed 0.9 percent yesterday to the highest close since 2008, as real-estate stocks rallied. Egypt’s EGX 30 Index gained 1.1 percent in a third day of gains as interim President Adly Mansour called for a referendum on the nation’s constitution to be held Jan. 14, paving the way elections.

Australia’s dollar, known as the Aussie, slipped 0.2 percent to 89.46 U.S. cents today following last week’s 1.5 percent decline, the eighth straight weekly slide and the longest slump since 1985. Central bank Governor Glenn Stevens, who has signaled his preference for a weaker Aussie, said in an interview with the Australian Financial Review Dec. 13 that a level of 85 cents would be “closer to the mark than 95 cents.”

Yen Swings

The yen was little changed at 103.18 per dollar. Japan’s currency gained 0.2 percent Dec. 13 after touching the weakest level since October 2008 the day before. Expectations of swings in the dollar-yen exchange rate climbed toward a two-month high with three-month implied volatility rising four basis points, or 0.04 percentage point, to 10.5 percent today. It touched 10.65 percent Dec. 13, the highest level since Oct. 11.

The euro was little changed at $1.3747 after veteran German Finance Minister Wolfgang Schaeuble was confirmed to continue in the post with Chancellor Angela Merkel beginning her third term this week. European Central Bank President Mario Draghi is scheduled to speak to the European Parliament in Brussels today.

Manufacturing Measures

The HSBC Holdings Plc/Markit Economics flash manufacturing purchasing managers’ index for China may deliver a reading of 50.9 for December, according to a Bloomberg survey, after coming in at 50.8 in November. Readings above 50 signal expansion. The manufacturing PMI for the euro zone is expected to climb to 51.9 from 51.6 in November, while economists predict the U.S. Empire State manufacturing survey will come in at 5 after falling to negative 2.21 last month.

In India, wholesale-price growth is projected to have held at 7 percent in November from the previous month, a survey before today’s figures showed.

Ten-year Treasury yields were little changed at 2.86 percent today after falling one basis point Dec. 13 following two days of gains. Similar maturity Australian government debt yielded 4.27 percent, down five basis points. Japanese 10-year bond yields declined one basis point to 0.68 percent.

The S&P 500 closed at a one-month low of 1,775.32 Dec. 13, paring a drop of as much as 0.2 percent after the U.S. House of Representatives passed the first bipartisan budget in four years, clearing the way for final Senate passage this week. The deal would avoid another government shutdown and ease automatic spending cuts.

The agreement “removes another potential negative” for the Fed, according to AMP Capital’s Graham.

Libyan Ports

Brent futures rose to $109.46 a barrel after falling 2.5 percent last week, while West Texas Intermediate crude gained 0.1 percent to $96.70. Libyan rebel leader Ibrahim Al Jedran told reporters yesterday that three key oil ports closed since the end of July will remain shut after the government rejected demands that included a share of crude revenue.

Gas futures declined 2.2 percent after dropping 1.3 percent Dec. 13 to trim their sixth straight weekly advance to 5.8 percent. Contracts on gasoline gained 0.6 percent.

Silver slipped 0.4 percent to $19.6301 an ounce, while gold lost 0.3 percent to $1,235.60 an ounce following last week’s 0.8 percent climb.

To contact the reporter on this story: Emma O’Brien in Wellington at eobrien6@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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