Bloomberg News

Asian Stocks Fall as Central Banks Disappoint; Oil Climbs

August 03, 2012

Asian Stocks Drop as Draghi Fails to Offer Quick Fix; Oil Rises

Sharp shares plunged as much as 25 percent in Tokyo, the most since at least 1974, while Sony’s stock dropped 7.2 percent. The Japanese consumer-electronics makers slashed full-year earnings forecasts amid slumping demand for televisions and a strengthening yen. Photographer: Tomohiro Ohsumi/Bloomberg

Asian stocks fell a third day and Japan’s bonds gained after central banks in Europe, China and the U.S. this week failed to deliver immediate measures to boost a slowing global economy.

The MSCI Asia Pacific Index (MXAP) lost 1 percent as of 7:24 a.m. in London, trimming its weekly gain to 0.7 percent. Futures on the Euro Stoxx 50 index were little changed, while those on the Standard & Poor’s 500 Index rose 0.2 percent. The Dollar Index (DXY) halted a two-day advance. Yields on Japanese government debt slid toward nine-year lows even as the cost of insuring the country’s bonds rose to a two-month high. Oil rallied 0.8 percent from the lowest close in three weeks.

European Central Bank President Mario Draghi yesterday declined to intervene in bond markets, while China’s central bank said it will pursue “prudent” policy, and the Federal Reserve a day earlier refrained from adding fresh stimulus. A U.S. jobs report today may show employers didn’t add enough workers in July to trim an 8.2 percent unemployment rate.

“What was delivered was a commitment to action but not immediately,” Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management, said about the ECB decision. “China has more scope to do more both in terms of monetary policy and fiscal policy, but it’s not doing much.”

Retail Sales

A report today is forecast to show retail sales in the euro zone decreased 0.1 percent in June from the previous month, when they grew a revised 0.8 percent. The Stoxx Europe 600 Index dropped 1.3 percent yesterday, headed for its first weekly decline in nine weeks.

More than three shares fell for each that rose on MSCI’s Asia Pacific index today after Draghi postponed action by demanding euro-zone governments turn to existing rescue funds before the ECB intervenes. Asian stocks had their biggest four- day advance this year after Draghi on July 26 said the central bank would do “whatever it takes” to preserve the euro.

The Topix Index, Japan’s broadest gauge of stocks, fell 1.2 percent, the most among Asia’s benchmarks. Sharp Corp. tumbled as much as 30 percent in Tokyo, the most since at least 1974, while Sony Corp.’s stock dropped 7 percent. The Japanese consumer-electronics makers slashed full-year earnings forecasts yesterday amid slumping demand for televisions and a strengthening yen.

Default Swaps

The cost of insuring Japanese corporate and sovereign bonds from default jumped, according to traders of credit-default swaps. The Markit iTraxx Japan index rose 7 basis points to 192, headed for the highest close in two months, Citigroup Inc. prices show.

Japan’s benchmark 10-year note yield dropped toward the lowest since 2003 as investors sought safer assets. Yields fell four basis points to 0.73 percent, compared with the nine-year low of 0.72 percent reached last week. The five-year rate touched 0.165 percent, the least since 2003.

The Dollar Index, a gauge of the currency against six major peers, lost 0.1 percent to 83.258 before a report today forecast to show the U.S. jobless rate held above 8 percent.

American employers added 100,000 workers in July, following an 80,000 gain in June, according to economists’ estimates ahead of a Labor Department report today. Monthly jobs growth slowed to an average of 75,000 in the quarter through June from 226,000 in the previous period.

Oil rebounded from the lowest close since July 13 as a tropical storm formed near production platforms in the Gulf of Mexico. Crude for September delivery increased to as much as $87.83 on the New York Mercantile Exchange after falling 2 percent yesterday. Prices are 2.8 percent lower this week and down 11 percent this year.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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