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Asian Stocks, U.S. Index Futures Drop Amid Iraq Violence

Asian stocks fell, after the regional benchmark index posted a fifth week of gains, and U.S. futures dropped amid an escalation of violence in Iraq.

Korean Air Lines Co. sank 2.2 percent, pacing a retreat among industrial firms as crude oil prices advanced. Panasonic Corp. (6752) dropped 1.5 percent in Tokyo as consumer shares retreated. Echo Entertainment Group Ltd. surged 7.6 percent in Sydney after the casino operator’s profit forecast beat expectations.

The MSCI Asia Pacific Index (MXAP) lost 0.3 percent to 143.68 as of 7:27 p.m. in Hong Kong, with about two shares falling for each that rose. The measure last week completed its longest weekly winning streak in 10 months as data indicated China’s economy is stabilizing and the U.S. recovery is intact. Futures on the Standard & Poor’s 500 Index dropped 0.3 percent today.

“Markets have reacted with movements in crude and in precious metals prices, some selling out of equities into bonds,” Toby Lawson, Sydney-based head of futures, options and cash equities trading for Asia Pacific at Newedge Group SA, told Bloomberg TV. “That’s pretty normal when you see some escalation of geopolitical shocks to markets. Impacts on oil supply are going to be minimal at this point in time, but that’s not saying that the crisis couldn’t escalate.”

Japan’s Topix index slid 0.8 percent as Panasonic retreated 1.5 percent to 1,182 yen. The yen rose, approaching the strongest level in four months against the euro.

Australia’s S&P/ASX 200 Index, Taiwan’s Taiex index and South Korea’s Kospi index all added 0.1 percent. New Zealand’s NZX 50 Index climbed 0.2 percent. Hong Kong’s Hang Seng Index declined 0.1 percent, while China’s Shanghai Composite Index climbed 0.7 percent to a two-month high. India’s BSE S&P Sensex Index slipped 0.2 percent, and Singapore’s Straits Times Index fell 0.1 percent. Thailand’s SET Index rose 1.1 percent to take its rally from a January low to 20 percent, meeting the common definition of a bull market.

Relative Value

The Asia-Pacific gauge traded at 13.2 times estimated earnings at its last close, compared with 16.4 for the Standard & Poor’s 500 Index and 15.5 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

An escalation of violence in the Middle East pushed oil prices higher and contributed to declines in Asia-Pacific equities on the final two trading days last week. Army troops killed more than 270 rebels yesterday in Iraq, OPEC’s second-biggest crude producer, as the prospect of civil war intensifies with Sunni Muslim insurgents controlling territory north of Baghdad.

U.S. stocks fell last week as lower estimates for global growth and escalating violence across Iraq halted a three-week rally that had sent benchmark indexes to all-time highs.

Leading Declines

Industrial shares declined in Asia today. Korean Air Lines fell 2.2 percent to 33,450 won, while AirAsia BHD (AIRA) slid 2.9 percent to 2.33 ringgit in Kuala Lumpur. Fanuc Corp. retreated 1.9 percent to 17,245 yen in Tokyo.

Kobe Bussan Co. slumped 3.9 percent to 2,969 yen after the Japanese supermarket operator’s first-half net income plunged.

GCL-Poly Energy Holdings Ltd., the world’s biggest maker of polysilicon, tumbled 5.4 percent to HK$2.45 in Hong Kong after BNP Paribas SA said installation of solar energy panels in China will slow this year.

Echo Entertainment gained 7.6 percent to A$2.98 in Sydney. The casino operator said it sees earnings in the 2014 fiscal year of A$430 million ($404 million) to A$435 million, above the median estimate of analysts.

Jewelry retailer King Fook Holdings Ltd. jumped 45 percent to HK$1.07 after saying its controlling stakeholder was approached by potential investors.

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

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net John McCluskey, Tom Redmond

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