Bloomberg News

Japanese, Australian Stock Futures Fall on U.S. Goods Orders

July 27, 2011

July 28 (Bloomberg) -- Japanese and Australian stock futures dropped after U.S. durable goods orders unexpectedly declined amid stalled negotiations between Republicans and Democrats over raising the federal debt limit.

American depositary receipts of Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, lost 1.3 percent from the closing share price in Tokyo. Those of Canon Inc., the world’s biggest camera maker by market capitalization, sank 1.4 percent after Greece had its debt rating cut by Standard & Poor’s. ADRs of BHP Billiton Ltd., the Australia’s No. 1 oil producer, retreated 1.9 percent after crude prices declined.

Futures on the Nikkei 225 Stock Average expiring in September closed at 9,910 in Chicago yesterday, compared with 10,040 in Osaka, Japan. They were bid in the pre-market at 9,940 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index lost 1.4 percent today. New Zealand’s NZX 50 Index slid 0.6 percent in Wellington.

“In addition to the recent debt impasse in the U.S., investors need to be more conscious about the deterioration of the actual economy,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Risk avoidance is increasing again and that’s a negative driver for the Japanese market.”

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today. The index sank 2 percent yesterday in New York, its biggest decline since June 1, as lawmakers indicated they were no closer to reaching a compromise on the federal debt limit ahead of an Aug. 2 deadline for default, while a government report showed orders for durable goods unexpectedly decreased.

‘True Compromise’

Equities declined as a debt agreement remained elusive. House Speaker John Boehner’s reworked deficit-cutting plan was gaining support among Republicans, while Senate Majority Leader Harry Reid said his competing proposal to avert a potential U.S. default is the only “true compromise.”

The U.S. Commerce Department yesterday said bookings for goods meant to last at least three years fell 2.1 percent in June after a 1.9 percent gain in May that was smaller than last reported. The median forecast of 76 economists surveyed by Bloomberg News projected a 0.3 percent increase. Demand for business equipment, including machinery and computers, also dropped.

Greece Rating Cut

The Federal Reserve said the economy grew at a slower pace in more parts of the country since the beginning of June as shoppers restrained spending and factory production eased. Growth slowed in eight of the Fed’s 12 regions, compared with four in the last survey, the central bank said.

In Europe, Greece had its debt rating cut to CC, two steps above default, from CCC by Standard & Poor’s, which said a proposed restructuring would amount to a “selective default.” Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill of a second bailout agreed to last week in Brussels, S&P said. The outlook on the debt is negative.

The euro depreciated to as low as 111.85 yen today in Tokyo, its weakest level in a week. A weaker euro cuts the value of European income at Japanese companies when converted into their home currency.

Crude oil for September delivery fell 2.2 percent to $97.40 a barrel in New York yesterday, the lowest settlement since July 18. The London Metal Exchange Index of prices for six metals including copper and aluminum slid 0.2 percent, the biggest drop since July 21.

The MSCI Asia Pacific Index rose 0.9 percent this year through yesterday, compared with a gain of 3.8 percent by the S&P 500 and a drop of 3.2 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.7 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 10.9 times for the Stoxx 600.

The Japanese government is scheduled to release a report on retail sales at 8:50 a.m. in Tokyo.

--Editors: John McCluskey, Jason Clenfield.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

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


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