Australian Shares Fall From Four-Year High, Japan Futures Drop

Australian shares fell, dragging the benchmark equities gauge from the highest level in four years, as profit at Australia and New Zealand Banking Group Ltd. declined. Japanese stock futures dropped.

ANZ Bank lost 1.6 percent after Australia’s third-largest bank by market value said first-quarter profit fell 20 percent. Shares of Kirin Holdings Co., Japan’s largest beverage maker, may be active after forecasting a 60 percent increase in profit to a record this year as it books a gain from its investment in Fraser & Neave Ltd. Auckland International Airport Ltd. slumped the most in four years after a New Zealand pension fund reduced its stake in the nation’s busiest terminal.

Futures on Japan’s Nikkei 225 Stock Average expiring next month closed at 11,225 in Chicago yesterday, down from 11,250 at the close in Osaka, Japan. They were bid in the pre-market at 11,220 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index retreated 0.3 percent and New Zealand’s NZX 50 Index fell 1.1 percent. Equity markets in China, Taiwan and Vietnam remain shut today for public holidays.

“There is a risk of a correction, but it may be shallow,” David Cassidy, Sydney-based head of equity strategy at UBS AG, said in a telephone interview. “A lot of the sentiment indicators look overbought. We’re seeing some tentative signs that earnings downgrades have stopped for now, which is good, but that could be temporary. People aren’t positioned for this rally and they are still scrambling to buy. So I wouldn’t be getting too bearish on equities right now.”

Relative Value

The MSCI Asia Pacific Index, the benchmark regional equities gauge, gained 3.5 percent this year through yesterday. The measure trades at 14.9 times average estimated earnings compared with 13.7 for the Standard & Poor’s 500 Index and 12.4 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Of the 328 companies on the MSCI Asia Pacific Index that have reported earnings this quarter and for which Bloomberg has estimates, 52 percent exceeded profit expectations and 51 percent missed sales projections. That compares with 73 percent of S&P 500 companies that topped profit forecasts during the period, while 33 percent fell short of sales estimates, data compiled by Bloomberg show.

Futures on the Standard & Poor’s 500 Index were little changed. The gauge yesterday climbed 0.1 percent, to a five-year high, as a drop in jobless claims and Warren Buffett’s deal for H.J. Heinz Co. overshadowed concern over shrinking economies in Europe and Japan.

Gross domestic product in the euro area shrank 0.6 percent in the fourth quarter from the previous three months, the worst performance since the first quarter of 2009. Japanese GDP declined for a third straight quarter, stoking speculation Prime Minister Shinzo Abe will step up efforts to end deflation.

The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. dropped 0.3 percent to 96.55 in New York yesterday.

Before it's here, it's on the Bloomberg Terminal.