Asian Stocks Pare Weekly Gain as Airlines Decline on Oil

Asian stocks slipped, paring the regional index’s fifth straight weekly gain, as airlines retreated on surging oil prices amid escalating violence in Iraq. Energy explorers jumped.

Korean Air Lines Co. dropped 1.6 percent, pacing losses among carriers. Inpex Corp., Japan’s biggest energy explorer, surged 4.5 percent. Advantest Corp. climbed 3.6 percent in Tokyo after the Nikkei newspaper reported that the maker of chip-testing equipment raised its target for operating margins on rising orders. Fortescue Metals Group Ltd. sank 6.2 percent after iron-ore futures fell.

The MSCI Asia Pacific Index lost 0.1 percent to 144.26 as of 4:15 p.m. in Hong Kong, after falling 0.7 percent earlier. The gauge is set to advance for a fifth week, its longest streak of gains since August, amid signs China’s economy is stabilizing and the U.S. recovery is intact. A surge in violence across Iraq, three years after U.S. troops withdrew from the country, raised the prospect of a return to civil war in OPEC’s second-biggest oil producer.

“The Iraq situation has the potential to become more significant, so people are naturally concerned,” said Angus Gluskie, a fund manager who helps oversee more than $550 million at White Funds Management in Sydney. Any pullback will be limited because “the underlying factors that have driven the market higher haven’t really changed. They’re still reasonably strong.”

Regional Gauges

Japan’s Topix index gained 0.5 percent. The Bank of Japan today maintained its policy of expanding the monetary base at a pace of 60 trillion yen ($588 billion) to 70 trillion yen per year, in line with expectations.

Hong Kong’s Hang Seng Index rose 0.6 percent and China’s Shanghai Composite Index added 0.9 percent as data showed China’s retail sales increased 12.5 percent in May from a year earlier, while industrial output expanded 8.8 percent.

“The global recovery looks sustainable,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $131 billion, said by phone. “There’s a little bit of concern on Iraq but that will have limited impact on growth. The impact of higher oil prices on the economy won’t be as significant given the availability of alternative fuels like shale gas.”

China’s money-supply growth topped estimates in May as the government supports economic growth while reining in shadow banking. Data released yesterday after markets closed showed new local-currency loans rose last month to 870.8 billion yuan ($140 billion). That compared with the 750 billion yuan median estimate of 43 economists surveyed by Bloomberg. M2, the broadest measure of money supply, rose 13.4 percent, compared with a median projection for 13.1 percent.

Korea, Australia

South Korea’s Kospi index dropped 1 percent. Australia’s S&P/ASX 200 Index fell 0.4 percent and New Zealand’s NZX 50 Index slid 0.5 percent. India’s S&P BSE Sensex Index decreased 1.1 percent and Singapore’s Straits Times Index was little changed. Taiwan’s Taiex index slipped 0.1 percent.

Futures on the Standard & Poor’s 500 Index added 0.1 percent today. The U.S. equity benchmark index fell 0.7 percent yesterday, capping three days of losses, the longest losing streak in two months, as industrial and consumer-discretionary shares plunged after violence in Iraq sent oil to an eight-month high while economic data missed estimates.

President Barack Obama has said he won’t rule out using air strikes to help Iraq’s government beat back Islamist militants who’ve seized cities and threatened to re-ignite a sectarian war.

Retail Sales

U.S. retail sales rose 0.3 percent in May as American consumers took a respite following a three-month surge in shopping. The gain followed a revised 0.5 percent gain in April that was larger than previously estimated, Commerce Department figures yesterday showed. The median forecast of 83 economists surveyed by Bloomberg called for a 0.6 percent advance.

A separate report indicated applications for unemployment benefits in the U.S. rose to 317,000 last week. The median forecast of 52 economists surveyed by Bloomberg called for 310,000. Claims have averaged around 324,000 in 2014.

Shares on the Asia-Pacific gauge traded at 13.3 times estimated earnings yesterday, compared with a multiple of 16.3 for the S&P 500.

Energy explorers advanced today. Inpex climbed 4.5 percent 1,635 yen in Tokyo. Cnooc Ltd., China’s largest offshore oil producer, rose 1.9 percent to HK$13.86 in Hong Kong. Woodside Petroleum Ltd., Australia’s second-largest oil producer, gained 1.9 percent to A$42.79.

Advantest, Weichai

Advantest increased 3.6 percent to 1,253 yen in Tokyo. Chip-testing equipment orders in the three months to June may reach 50 billion yen, Nikkei reported, citing Advantest president Haruo Matsuno. The company originally projected orders for the quarter at between 40 billion yen and 45 billion yen.

Weichai Power Co. climbed 6.5 percent to HK$31.10 in Hong Kong after the diesel-engine maker announced it took control of Germany’s Kion Group AG.

Airlines declined. Korean Air slipped 1.6 percent to 34,200 won. Japan Airlines Co. decreased 2.9 percent to 5,280 yen. Singapore Airlines Ltd. dropped 1.8 percent to S$10.43.

Fortescue, Australia’s third-largest iron ore producer, sank 6.2 percent to A$4.06. Iron ore futures for July settlement fell below $90 per metric ton in Singapore for the first time since the contract started in April 2013.

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