Bloomberg News

Asia Stocks, Oil Snap Three-Day Drop on Europe Banks; Euro Falls

October 04, 2011

Oct. 5 (Bloomberg) -- Asia stocks and oil rose for the first time in four days on speculation Europe will recapitalize its banks to tame the region’s debt crisis. The euro weakened against the dollar and yen.

The MSCI Asia Pacific Index added 0.4 percent at 9:28 a.m. in Tokyo. Standard & Poor’s 500 Index futures fell less than 0.1 percent after a rally in the U.S. stocks gauge in the final hour of trading yesterday. Oil jumped 2.9 percent to $77.86 a barrel in New York. Copper gained 1.9 percent to $6,927 a metric ton in London. The euro fell 0.3 percent to 102.25 yen after yesterday jumping the most in more than five months. The 17-nation currency declined 0.3 percent to $1.3309.

Belgian Prime Minister Yves Leterme said a “bad bank” to hold Dexia SA’s troubled assets will be set up as the debt crisis spreads from the continent’s periphery to its heartland. European Union Commissioner for Economic Affairs Olli Rehn said ministers see a need to adopt a “coordinated approach,” the Financial Times reported yesterday. Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank can take further steps to sustain a recovery that’s “close to faltering.”

“The markets are trading on news of the day, rumors, announcements and innuendo,” Michael Cuggino, who helps manage about $15 billion at Permanent Portfolio Funds in San Francisco, said in a Bloomberg Television interview. “That’s going to continue until we have some visibility into the future with respect to the U.S. economy, what’s happening in Europe as well as what’s going on in Asia.”

An index of financial companies on MSCI’s Asia Pacific Index rose 0.8 percent, helping the benchmark gauge snap a three-day, 5.7 percent slump. Australia’s S&P/ASX 200 Index climbed 1.1 percent, and South Korea’s Kospi Index slid 0.5 percent.

Banks, Dexia

EU finance ministers are discussing ways of coordinating recapitalizations of the region’s lenders after recognizing that they hadn’t succeeded in convincing financial markets that the banks could survive the current debt crisis, the FT reported, citing unnamed officials.

The board of Dexia, a Paris- and Brussels-based municipal lender, met Oct. 3 to discuss a breakup of the bank after the sovereign debt crisis reduced its ability to obtain funding, said three people with knowledge of the talks. The bank’s shares have dropped 59 percent this year, the fourth-largest loss on the Bloomberg Europe 500 Banks and Financial Services Index.

The S&P 500 fell 1.4 percent at 3 p.m. New York time and ended the day with a 2.3 percent advance. It was the 10th time since 1985 that the index posted a loss of 1 percent or more at 3 p.m. and was up when the market closed, according to data compiled by Harrison, New York-based Bespoke Investment Group LLC. The measure declined the next day eight times, with losses averaging 1.3 percent, the data show.

--With assistance from Susan Li in Hong Kong, Kristine Aquino in Singapore and Monami Yui, Anna Kitanaka and Toshiro Hasegawa in Tokyo. Editor: Patrick Chu

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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