Asia Stocks Fall on Strong Yen, Global Slowdown; Oil Snaps Loss
Asian stocks fell, with Japan’s benchmark index reaching a 16-month low, on signs the global recovery is slowing. The yen retreated from a 15-year high on prospects authorities will act to stem its gains, and oil prices snapped a five-day loss.
The MSCI Asia Pacific Index lost 1.4 percent to 116.15 as of 4:15 p.m. in Tokyo, led by Japanese equities that sank into a bear market yesterday. Futures on the Standard & Poor’s 500 Index were little changed, while those for the Euro Stoxx 50 lost 0.5 percent. The yen weakened against all its major peers after Japan’s finance minister pledged “appropriate action” on the currency.
U.S. shares reached a seven-week low yesterday after an industry report showed a record plunge in home sales in July, adding to evidence the world’s biggest economy is stumbling. Risk aversion has driven gains in the yen, hurting the competitiveness of Japanese companies, whose export growth slowed for a fifth month in July, the government said today.
“No one wants to take risks right now,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co., which oversees $6 billion. “The effects of the stimulus measures are waning in the U.S., and fears about the global economic recovery are increasing. The market can’t help but be worried.”
About four stocks fell for each that rose on the MSCI Asia Pacific Index. South Korea’s Kospi index lost 1.5 percent and Australia’s S&P/ASX200 Index retreated 1.4 percent. China’s Shanghai Composite Index declined 1.8 percent.
Japan’s Nikkei 225 Stock Average fell 1.7 percent to 8,845.39, the least since April 13, 2009, and down 22 percent from its high this year. Some analysts use a threshold of a 20 percent fall to define when an index enters a bear market.
Japanese exporters led declines after the Finance Ministry said a recovery in overseas sales slowed last month amidst gains in the yen. Sales of previously owned U.S. homes slumped 27.2 percent in July, National Association of Realtors data showed yesterday, more than double a Bloomberg survey’s forecast.
“The Japanese government and the Bank of Japan’s response to the stronger yen is too slow and I doubt they can really address this problem,” Yamashita said.
Toyota Motor Corp., the world’s largest automaker, fell 2.4 percent. Canon Inc., which makes 78 percent of its sales outside Japan, retreated 2.7 percent.
The yen weakened today after Japanese Finance Minister Yoshihiko Noda told reporters he’s watching currency movements very closely and authorities will “take appropriate action when necessary.” The dollar fell against 11 of its 16 major counterparts.
Japan’s currency fell to 84.35 yen per dollar in Tokyo from 83.90 in New York yesterday, when it reached 83.60, the highest since June 1995. The yen dropped to 106.68 per euro from 105.97, after yesterday reaching 105.44, the strongest since July 2001. The dollar was at $1.2648 per euro from $1.2627.
The Bank of Japan may add to monetary easing and the Ministry of Finance may consider intervention if speculators drive up the currency by several yen in a day, Nikkei English News said, without citing where it obtained the information.
“We are actually now looking for more intervention over the next five to six business days,” said Winston Barnes, the head of sales and trading for Asian markets at WJB Capital Group Inc. in San Francisco. “Our experience over the past 20 plus years has shown that the BOJ rarely loses and will start soon; however, we continue to be in historic and uncertain times.”
Bernanke to Speak
The South Korean won dropped 0.4 percent to 1,196.00 on concern the recovery in the U.S. economy, South Korea’s second- biggest export market, is stalling. Federal Reserve Chairman Ben Bernanke will discuss the outlook for the world’s largest economy on Aug. 27, and economists predict the Commerce Department will report on the same day that the economy grew at a slower pace in the second quarter than previously estimated.
“The market will be equities-led,” said Wai Ho Leong, a regional economist at Barclays Plc in Singapore. “The big factor will be Bernanke’s speech. It’s important for him not to close the door completely for the Fed to continue to use its balance sheet to support growth.”
Crude oil snapped a five-day losing streak, gaining 0.3 percent to $71.82 a barrel in New York, as the dollar fell against the euro, bolstering speculative demand for commodities as a hedge against inflation.
Oil also gained from an 11-week low after the American Petroleum Institute said yesterday that commercially held crude stockpiles in the U.S., the world’s biggest oil-consuming nation, decreased for the third time in four weeks last week.
The cost of protecting Asia-Pacific corporate and sovereign bonds from default rose, according to traders of credit-default swaps.
The Markit iTraxx Australia index increased 2 basis points to 126 basis points as of 10:26 a.m. in Sydney, the highest since July 20, according to Nomura Holdings Inc. and CMA. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 2 basis points to 130 basis points as of 8:12 a.m. in Hong Kong, the highest level since July 19, Credit Agricole CIB and CMA prices show.
The Markit iTraxx Japan index climbed 1 basis point to 115.5 as of 9:30 a.m. in Tokyo, the highest since Aug. 17, Morgan Stanley and CMA prices show.