Bloomberg News

Asian Stocks Rise as U.S. Earnings Spur Global Recovery Outlook

October 19, 2011

Oct. 19 (Bloomberg) -- Asian stocks rose on signs a global economic recovery may be strengthening after Bank of America Corp. swung to a profit and Intel Corp. forecast sales that beat analyst estimates, boosting the earnings outlook for Asia’s companies.

Mitsubishi UFJ Financial Group Inc., Japan’s largest lender, advanced 0.9 percent, after Bank of America climbed 10 percent in New York. Cnooc Ltd., China’s largest offshore energy explorer, rose 1.1 percent after crude rose to the highest price in more than a month. Suppliers of Apple Inc., fell after the maker of iPhones and iPads posted profit that missed analyst estimates.

“There’s bound to be some residual optimism because of the strong gains in the U.S. on the back of some earnings optimism,” said Will Seddon, who helps oversee more than $300 million at White Funds Management in Sydney. “We’re bound to see some positive momentum in Asian markets, but the risks with the European situation are still very, very high.”

The MSCI Asia Pacific Index rose 0.9 percent to 117.47 as of 7:57 p.m. in Tokyo. About two stocks advanced for each that fell on the gauge. The measure dropped 15 percent this year through yesterday.

All 10 groups in the Asia-Pacific measure gained after Intel delivered a sales forecast that beat analyst estimates and boosted a share buyback program after U.S. markets closed. Intel shares rose 4.4 percent to $24.44 in afterhours trade, adding to a 0.5 percent increase in regular trading. Goldman Sachs Group Inc. advanced 5.5 percent even after reporting its second quarterly loss in 12 years as the firm lost money on investments and revenue declined from trading, asset management and securities underwriting.

U.S. Futures

Banks increased. Mitsubishi UFJ Financial Group advanced 0.9 percent to 338 yen. Commonwealth Bank of Australia, Australia’s biggest lender by market value, rose 1.2 percent to A$48.01. Australia’s banks are being shielded from the effects of Europe’s debt crisis by rising domestic deposits and demand for their debt by U.S. funds, Reserve Bank Assistant Governor Guy Debelle said.

Futures on the Standard & Poor’s 500 Index climbed 0.3 percent. In New York, the index rose 2 percent to the highest level since August yesterday after the National Association of Home Builders/Wells Fargo sentiment index climbed to 18, the highest level since May 2010, the Washington-based group reported yesterday.

“Some good data flow in the past 24 hours helped support markets, as has profit reporting in the banking sector,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $145 billion. “Worries about Europe are likely to persist ahead of the weekend European leaders’ meeting.”

Exporters Gain

Japan’s Nikkei 225 Stock Average gained 0.4 percent. Hong Kong’s Hang Seng Index rose 1.3 percent. Australia’s S&P/ASX 200 rose 0.6 percent, while South Korea’s Kospi Index was up 0.9 percent.

Asian exporters rose with Canon Inc., the camera maker that gets 81 percent of its revenue abroad, increasing 1.9 percent to 3,475 yen. Korea’s Hankook Tire Co., which makes more than 60 percent of sales overseas, jumped 7.3 percent to 44,200 won in Seoul. James Hardie Industries SE, a building-materials supplier that gets 68 percent of sales from the U.S. rose 3.2 percent to A$5.76.

The MSCI Asia Pacific Index declined 15 percent this year through yesterday, compared with a 2.6 percent drop by the S&P 500 and a 15 percent loss by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 11.8 times estimated earnings on average, compared with 12.3 times for the S&P 500 and 10.1 times for the Stoxx 600.

France and Germany are engaged in “intensive talks” on bolstering the European Financial Stability Facility, said Steffen Seibert, a spokesman for German Chancellor Angela Merkel.

‘No Deal’

Seibert declined in an interview to comment on a report in the Guardian that they reached agreement on increasing the size of the fund, saying he won’t comment on intermediate results of the negotiations. A person with direct knowledge of the talks told Bloomberg News no deal has been reached.

“Markets in Asia will trade rather cautiously given there’s doubt about the validity of that article,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. There’s “a lot of nervousness around what solution we are likely to see regarding Europe at the moment. We will see things move a little bit higher in Asia, but they will remain fragile.”

Spain Cut Again

Spain’s credit rating was cut for the third time since June 2010 by Moody’s Investors Service as Europe’s sovereign-debt crisis threatens to engulf the nation. Moody’s reduced Spain’s ranking to its fifth-highest investment grade, cutting it by two levels to A1 from Aa2, with the outlook remaining negative, the rating company said yesterday.

Standard & Poor’s downgraded Spain on Oct. 14 to its fourth-highest investment grade after Fitch Ratings cut it to the same level on Oct. 7, the day it also downgraded Italy.

Energy producers rose after crude oil for November delivery rose $1.96 to $88.34 a barrel on the New York Mercantile Exchange yesterday, the highest settlement price since Sept. 15. Oil was little changed today.

Cnooc rose 1.1 percent to HK$13.18 in Hong Kong. Caltex Australia Ltd., a refiner and distributor of petroleum products, jumped 5.6 percent to A$13.53.

Apple suppliers slumped. Largan Precision Co., which supplies camera lenses, lost 6.9 percent to NT$685 in Taipei. Catcher Technology Co., a casing maker of iPhones, fell 6.8 percent to NT$152. Foxconn Technology Co., which assembles Apple products, slipped 5.9 percent to NT$104.

Fourth-quarter profit was $6.62 billion, or $7.05 a share, compared with $4.31 billion, or $4.64 a share, a year earlier, Cupertino, California-based Apple said in a statement. That missed analysts’ predicted profit of $7.31 a share, the first time Apple disappointed in at least 26 quarters.

--Editors: Nick Gentle, John McCluskey

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@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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