Bloomberg News

Oil Falls From Five-Month High of $102; Asia Stocks Pare Losses

November 18, 2011

Nov. 17 (Bloomberg) -- Oil fell from a five-month high as concern increased that Europe’s debt crisis may spread and China’s central bank said it’s not ready to loosen inflation controls. Asian stocks pared losses and Treasuries rose.

Crude slid 0.5 percent to $102.09 a barrel as of 12:55 p.m. in Tokyo, after reaching $102.89 yesterday. The MSCI Asia Pacific Index swung between a loss of 0.8 percent and a gain of less than 0.1 percent. A gauge of financial stocks lost 0.5 percent. Yields on U.S. 10-year notes fell one basis point to 1.99 percent and futures on the Standard & Poor’s 500 Index rose 0.3 percent. The euro was little changed before today’s 12.2 billion-euro ($16.5 billion) sale of French and Spanish debt.

The MSCI China Index fell for a third day, the longest streak of losses in almost seven weeks. While inflation may continue to moderate, “the foundation of price stability is not yet solid,” the People’s Bank of China said yesterday in its third-quarter monetary policy report. The spread of the euro zone’s debt woes to “core countries” in the 17-nation group may cause “systemic risks” in the global economy, the central bank said.

“The problem really resides with the European banking sector,” said Khiem Do, Hong Kong Kong-based head of multi- asset strategy at Baring Asset Management Ltd., which oversees about $49 billion. “Something has to happen in terms of the policy regarding the sovereign-debt issue in Europe, otherwise I’m afraid equity market indices might revisit the lows again.”

France Debt Auction

France auctions as much as 8.2 billion euros of debt today after yields on the nation’s 10-year bonds rose yesterday to a euro-era record relative to benchmark German bunds. Spain is issuing as much as 4 billion euros of a new benchmark security maturing in January 2022. The nation’s 10-year yield reached the highest since August yesterday.

Futures on the Standard & Poor’s 500 Index rose 0.3 percent to 1,235.00. The U.S. equity benchmark sank 1.7 percent yesterday, the most in a week, after Fitch Ratings said that while American lenders have “manageable direct exposures” to Greece, Ireland, Italy, Portugal and Spain, further turmoil in those markets poses a “serious risk.”

Economic reports later today may show U.S. housing starts fell 7.3 percent in October from a month ago, the biggest drop since April, while the number of Americans filing applications for unemployment benefits increased by 5,000 to 395,000, based on economists’ estimates from Bloomberg surveys.

Nikkei, Kospi

Almost two stocks fell for each that rose on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average lost 0.03 percent and South Korea’s Kospi Index gained 0.2 percent.

The Hang Seng Index dropped 0.8 percent, extending yesterday’s 2 percent slump. China Vanke Co., the nation’s biggest listed property developer, fell 7.5 percent in Shenzhen for the biggest decline in the MSCI Asia Pacific Index.

Housing prices in Beijing, Shanghai, Guangzhou and Shenzhen -- collectively home to 66 million people -- dropped from a month earlier by as much as 0.3 percent in October, a government report will show tomorrow, according to five analysts surveyed by Bloomberg News. Prices in the cities have stalled since July, data has showed.

Lotte Shopping Co. sank 3.5 percent in Seoul after third- quarter net income dropped 57 percent. Sales at major South Korean department stores rose 3.1 percent in October from a year earlier, the slowest pace in 30 months.

The euro traded at 1.3473 from 1.3463 against the dollar yesterday in New York, ending a three-day losing streak. Spanish Finance Minister Elena Salgado said the economy will grow about 0.8 percent this year, less than the government’s target, and it’s too early to know if the regions will meet their deficit goal this year.

Copper, Zinc Drop

“We are seeing diverging trends with the U.S. economy picking up and the European economy headed for recession,” said Richard Grace, Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia. “Those diverging economic trends and the likelihood of further ECB rate cuts are going to gradually weigh on the euro.”

Oil jumped 3.2 percent yesterday after Enbridge Inc. said it will reverse the direction of the Seaway pipeline, adding an outlet for crude from the central U.S. and Canada. The change may reduce supplies at the Cushing, Oklahoma, storage hub that has lowered the price of benchmark WTI against Brent.

Copper dropped as much as 2.4 percent to $7,542.25 a metric ton, the biggest decline in a week, leading falls in base metals. Zinc weakened 0.7 percent to $1,945 a ton and lead slipped 0.9 percent to $2,011.

The cost of protecting corporate and sovereign bonds from default in the Asia-Pacific region rose. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 3 basis points to 209 basis points, Credit Agricole SA prices show. The gauge is set for its highest close since Oct. 9, according to data provider CMA.

--Editors: Shelley Smith, Nick Gentle

To contact the reporters on this story: Lynn Thomasson in Hong Kong at

To contact the editor responsible for this story: Shelley Smith at

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