Bloomberg News

Japan Stock Futures, Australian Share Fall as Bank Ratings Cut

November 29, 2011

Nov. 30 (Bloomberg) -- Japanese stock futures and Australian shares fell after Standard & Poor’s cut credit ratings for lenders including Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc.

American depositary receipts of Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., Japan’s two biggest lenders by market value, fell 1.8 percent from the closing share price in Tokyo yesterday. Honda Motor Co., a Japanese carmaker that gets almost 85 percent of its sales abroad, lost 1.3 percent. Commonwealth Bank of Australia, the nation’s biggest lender by market value, declined 1.2 percent in Sydney.

Futures on Japan’s Nikkei 225 Stock Average expiring in December closed at 8,445 in Chicago yesterday, compared with 8,480 in Osaka, Japan. The contracts were bid in the pre-market at 8,430 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index lost 0.5 percent today. New Zealand’s NZX 50 Index was little changed in Wellington.

“Banks are in a difficult position,” Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc., which oversees $4.1 billion, said in a telephone interview. “There are so many unknowns for the industry, including Europe. The reward is not worth the risk right now.”

Bank of America Corp., Goldman Sachs and Citigroup had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the largest global lenders.

Chinese Banks

Standard & Poor’s made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit. JPMorgan Chase & Co. was reduced one level to A from A+. S&P upgraded Bank of China Ltd. and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial and Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks.

In Europe, the region’s effort to expand its bailout fund is falling short, forcing euro-area finance ministers to consider greater roles for the International Monetary Fund and the European Central Bank to insulate Spain and Italy from the debt crisis.

An agreement hammered out last month to expand the European Financial Stability Facility’s firepower to 1 trillion euros with leveraging will be “very difficult to reach,” Luxembourg Finance Minister Luc Frieden told reporters before euro-area finance chiefs met in Brussels.

“The European situation is still at the center of market concerns,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “Investors will likely sell shares to lock into profit after recent gains.”

U.S. Futures

Futures on the Standard & Poor’s 500 Index fell 0.6 percent today. Yesterday, the index rose 0.2 percent in New York as consumer confidence increased by the most since 2003, overshadowing reports showing less-than-forecast new home sales and a bigger-than-expected drop in home prices in 20 cities in the U.S.

The MSCI Asia Pacific Index declined 18 percent this year through yesterday, compared with a 5 percent drop by the S&P 500 and a 16 percent slump by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.6 times estimated earnings on average, compared with 12.1 times for the S&P 500 and 10.1 times for the Stoxx 600.

The Japanese government is scheduled to release a report on industrial production at 8:50 a.m. today in Tokyo.

--Editors: John McCluskey, Jason Clenfield

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

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


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