Bloomberg News

Japan Futures Up, ECB Backs Deposit Guarantee

June 12, 2012

Japanese and Australian stock futures rose as the European Central Bank endorsed a plan to guarantee bank deposits and amid speculation the Federal Reserve will take steps to stimulate the U.S. economy.

American Depositary Receipts of Sony Corp. (6758), a Japanese consumer electronics exporter that gets a fifth of its sales in Europe, climbed 1.5 percent. ADRs of Komatsu Ltd. (6301), the world’s second-largest maker of earth-moving equipment, gained 0.5 percent. Those of BHP Billiton Ltd. (BHP) , the world’s No. 1 mining company, advanced 1.2 percent in Sydney as investors sought shares of companies with earnings tied to economic growth.

Futures on Japan’s Nikkei 225 Stock Average expiring in September closed at 8,565 in Chicago yesterday, up from 8,530 in Osaka, Japan. They were bid in the pre-market at 8,550 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index advanced 0.4 percent today. New Zealand’s NZX 50 Index rose 0.2 percent in Wellington.

There’s a “much higher likelihood for upside than downside at current low valuations,” said Markus Rosgen, head of Asian equity strategy at Citigroup Inc. in Hong Kong. “There is now greater faith in the backstop of the ECB’s liquidity support. The global outlook is certainly confusing, and far from rosy, but the market has discounted this already.”

The MSCI Asia-Pacific Index (MXAP) fell 12 percent from this year’s highest level on Feb. 29 through yesterday amid concern growth in the U.S. and China is slowing and as Europe’s debt crisis intensified. Greece holds elections June 17 that may determine the country’s future in the euro.

Yearly Loss

The Asian benchmark dropped 0.9 percent this year through yesterday, compared with a 5.3 percent advance by the S&P 500 and a 0.5 percent drop by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 1.2 times book value, compared with 2.1 times for the S&P 500 and 1.3 times for the Stoxx 600, according to data compiled by Bloomberg. A number below one means companies can be bought for less than value of their assets.

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The gauge advanced 1.2 percent yesterday in New York.

The ECB backed European Commission proposals for a banking union based on three pillars, according to its biannual Financial Stability Review published in Frankfurt yesterday. These are: strengthening euro-area supervision of lenders, establishing a deposit guarantee program and “minimizing the risks for taxpayers” through contributions from the financial industry, the report showed.

Job Done

Bundesbank board member Andreas Dombret said the ECB has done its job to buy time for governments to fix weaknesses in the euro’s foundations.

The intensification of the debt turmoil has forced Spain to apply for external aid. Spain last week became the fourth nation in the euro region to seek assistance since the start of the debt crisis more than two years ago with a request of as much as 100 billion euros ($125 billion) to rescue its banks.

In the U.S., Federal Reserve Bank of Chicago President Charles Evans said he would support more stimulus.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. rose 1.4 percent to 91.28 in New York yesterday, the highest level since May 29.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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