Bloomberg News

Australian Stocks Drop on U.S. Budget Concern, Israel

November 14, 2012

Australian shares fell and Japanese stock futures were little changed amid concern about the impact of the U.S. budget debate on economic growth and as conflict in Israel spurred an advance in crude oil prices.

BHP Billiton Ltd. (BHP), the world’s largest mining company, dropped 1.5 percent in Sydney. American Depositary Receipts of Sony Corp., the Japanese electronics maker reeling from four consecutive annual losses, slumped 9.4 percent after saying it plans to raise 150 billion yen ($1.9 billion) from convertible bonds. ADRs of Panasonic Corp. (6752) lost 4.3 percent as the Japanese TV maker plans to cut 8,000 jobs in the second half of this fiscal year amid falling demand and a rising yen.

Australia’s S&P/ASX 200 Index fell 0.8 percent and New Zealand’s NZX 50 Index retreated 0.3 percent. Futures on Japan’s Nikkei 225 Stock Average expiring next month closed at 8,675 in Chicago yesterday, up from 8,670 in Osaka, Japan. They were bid in the pre-market at 8,690 in Osaka at 8:05 a.m. local time.

“Political uncertainty seems likely to remain a persistent and potentially critical factor for investors,” said Gerard Minack, Sydney-based global strategist at Morgan Stanley. “Investors hate uncertainty. Trading ahead of any fiscal cliff will remain challenging.”

Futures on the Standard & Poor’s 500 Index advanced 0.1 percent today. The S&P 500 lost 1.4 percent yesterday and the Dow Jones Industrial Average slid to the lowest level since June. Investors’ attention remained fixated on Washington, where lawmakers need to reach a budget agreement in order to avoid a so-called “fiscal cliff” of $607 billion in automatic tax increases and spending cuts next year for the world’s largest economy.

Clear Message

President Barack Obama told reporters yesterday that voters sent a “very clear message” at the Nov. 6 election that they want both parties to stop bickering and take the necessary action to cut the budget deficit. He warned that Republican “stubbornness” could trigger the fiscal cliff and push the nation into a recession.

The president’s remarks spurred concern that lawmakers were not making progress in reaching an agreement to avert the fiscal cliff. Obama will sit down with Democratic and Republican congressional leaders Nov. 16 for an opening round of negotiations.

A number of Federal Reserve officials said the U.S. central bank may need to expand its monthly purchases of bonds next year after the expiration of Operation Twist, according to minutes of their last meeting.

Gaza Strip

“A number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity-extension program,” according to the record of the Federal Open Market Committee’s Oct. 23-24 gathering released yesterday in Washington.

Oil halted a two-day slump as Egypt recalled its ambassador to Israel and Ahmed al-Jabari, a leader of Hamas’ militant wing, and another Palestinian man were killed by Israel jets in the Gaza Strip.

The MSCI Asia Pacific (MXAP) Index gained 9.9 percent through yesterday from this year’s low on June 4 as central banks added stimulus to spur economic growth and data showed a slowdown in China may be ending. The measure traded at 13.2 times estimated earnings yesterday, compared with 13 for the S&P 500 and 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. fell 1.2 percent to 89.63 in New York yesterday, the lowest close since Sept. 11. China’s Politburo Standing Committee, the supreme decision-making body in China that will be announced today, is forecast to include Vice President Xi Jinping and Vice Premier Li Keqiang.

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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