Bloomberg News

Asian Stocks Decline by Most in a Week on U.S. Economy, Greece

June 27, 2011

June 27 (Bloomberg) -- Asian stocks fell by the most in a week ahead of the release of data that may show the U.S. economy is faltering and on concern Greece won’t pass budget cuts to meet bailout conditions, hurting the outlook for exporters.

Toyota Motor Corp., the world’s No. 1 carmaker by sales, dropped 2.3 percent. Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, declined 2 percent in Seoul after Apple Inc. sued the company charging patent infringement. Commonwealth Bank of Australia Ltd., the nation’s largest lender by market value, slipped 1.3 percent in Sydney after regulators raised capital adequacy requirements for the world’s biggest lenders.

“The consumer is the key driver of the U.S. economy, and if confidence is looking weak, it drags down the whole economy. said Sydney-based Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “And if the U.S. consumer is struggling, it basically takes away the market for Asian exports.”

The MSCI Asia Pacific Index slipped 1 percent to 130.86 as of 7:56 p.m. in Tokyo, with more than two stocks falling for each that rose. The gauge tumbled 6.1 percent from this year’s May 2 high through June 24 amid mounting concern that a slowing U.S. economy, Europe’s sovereign debt crisis and China’s steps to curb inflation will crimp earnings.

Japan’s Nikkei 225 Stock Average and South Korea’s Kospi Index and Australia’s S&P/ASX 200 Index fell 1 percent. Hong Kong’s Hang Seng Index dropped 0.6 percent, while China’s Shanghai Composite Index advanced 0.4 percent.

U.S. Data

Futures on the Standard & Poor’s 500 Index were little changed today. In New York, the index fell 1.2 percent on June 24, as concern about the European debt crisis intensified and Oracle Corp. dragged down technology shares.

Consumer spending in the U.S. probably climbed at the slowest pace in almost a year and manufacturing cooled as dimmer job prospects and elevated commodity costs weighed on the recovery of the world’s biggest economy, economists said reports this week will show.

Purchases rose 0.1 percent in May, the smallest gain since June 2010, according to the median estimate of 63 economists in a Bloomberg News survey before a Commerce Department report today. The Conference Board’s consumer confidence index due out tomorrow is expected to rise to 61 in June from a six-month low of 60.8 in May, according to the survey.

The Institute for Supply Management’s factory index fell to 51.8 this month from 53.5 in May, according to the survey median before the July 1 release. Readings above 50 signal expansion.

Toyota dropped 2.3 percent to 3,210 yen in Tokyo. Sony Corp., the maker of the PlayStation gaming consoles and Bravia televisions, slipped 2.1 percent to 2,033 yen. Nintendo Co., the maker of Wii gaming consoles that gets 45 percent of its sales from the Americas, lost 1.2 percent to 14,520 yen.

Samsung, Apple Dispute

Samsung Electronics Co., the world’s second-biggest maker of mobile phones by sales, dropped 2 percent to 835,000 won in Seoul. Apple Inc. sued the South Korean company charging patent infringement, escalating the legal dispute between the rivals over designs and technologies used in mobile devices.

The MSCI Asia Pacific Index lost 4 percent this year through June 24, compared with a gain of 0.9 percent by the S&P 500 and a drop of 4.3 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.5 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.6 times for the Stoxx 600.

Asia-Pacific lenders fell after the Basel Committee on Banking Supervision, a body of central bankers and regulators that sets capital standards for banks worldwide, said in a statement on June 25 that banks deemed too big to fail must hold as much as 2.5 percentage points in additional capital as part of efforts to prevent another financial crisis. As many as 30 lenders may face some level of surcharges, according to a person familiar with the discussions.

‘Negative Externalities’

Commonwealth Bank of Australia slipped 1.3 percent to A$50.45 in Sydney. China Construction Bank Corp., the country’s second-largest lender by market value, lost 0.8 percent to HK$6.44 in Hong Kong. HSBC Holdings Plc, Europe’s biggest bank by market value, declined 1.5 percent to HK$75.20.

The steps “will help address the negative externalities and moral hazard posed by global systemically important banks,” Jean-Claude Trichet, president of the European Central Bank, said in the banking committee statement after a meeting in Basel, Switzerland.

Prime Minister George Papandreou faces his second survival test in a week as lawmakers vote on a five-year austerity plan that must pass for the cash-strapped nation to secure more international aid. Greece needs loans from Europe and the International Monetary Fund in order to cover 6.6 billion euros ($9.3 billion) of maturing bonds in August.

Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, fell 3.3 percent to HK$13.42 in Hong Kong. Esprit Holdings Ltd., the Hong Kong-based clothier that counts Europe as its biggest market, slipped 4 percent to HK$23.05. Mazda Motor Corp., the Japanese carmaker that gets about 18 percent of its sales from Europe, fell 1 percent to 204 yen.

--With assistance from Akiko Ikeda and Satoshi Kawano in Tokyo. Editor: Brian Fowler

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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