Bloomberg News

Japan Stock Futures, Australian Equities Drop on Growth Concern

November 27, 2012

Japanese stock futures and Australian equities fell as the Organization for Economic Cooperation and Development warned of the risk of a “major” global recession and Senate Majority Leader Harry Reid said U.S. budget talks have made little progress.

BHP Billiton Ltd. (BHP), the world’s largest mining company, sank 1 percent in Sydney, leading losses among companies with earnings closely tied to economic growth. American Depositary Receipts of Komatsu Ltd. (6301), which gets about a quarter of its sales in the U.S., fell 1.5 percent as Reid said he is “disappointed” in the lack of progress to avoid the so-called fiscal cliff. Aristocrat Leisure Ltd. surged 3.3 percent as the Australian maker of slot machines said full-year profit topped its forecast.

Futures on Japan’s Nikkei 225 Stock Average expiring next month closed at 9,365 in Chicago yesterday, down from 9,430 in Osaka, Japan. They were bid in the pre-market at 9,370 in Osaka at 8:05 a.m. local time. Australia’s S&P/ASX 200 Index declined 0.4 percent and New Zealand’s NZX 50 Index slipped 0.1 percent.

“Most investors are still cautious to bearish in terms of their outlook, and certainly in terms of their positioning,” said Markus Rosgen, chief Asian strategist at Citigroup Inc. in Hong Kong. “As far as the markets are concerned here in Asia, increasingly people feel less about Greece and more about the fiscal cliff.”

Budget Talks

Futures on the Standard & Poor’s 500 Index were little changed today. The S&P 500 sank 0.5 percent yesterday, a second day of declines, as concern about progress in Washington budget negotiations overshadowed a European agreement on aid to indebted Greece and a better-than-forecast report on U.S. durable goods.

The OECD cut its growth forecast for the U.S., warned of the risk of a “major” global recession and urged the European Central Bank and the People’s Bank of China to ease monetary policy.

“After five years of crisis, the global economy is weakening again,” OECD Chief Economist Pier Carlo Padoan said yesterday in the organization’s semi-annual economic outlook. “The risk of a major contraction cannot be ruled out.”

Senator Reid said that following a Nov. 16 White House meeting, Republicans backed away from earlier openness to considering new tax revenue as part of a year-end deal to avert the fiscal cliff, $607 billion in tax increases and spending reductions set to begin in January.

The MSCI Asia Pacific (MXAP) Index rose 13 percent from this year’s low on June 4 through yesterday as central banks added stimulus to spur economic growth and data showed a slowdown in China may be ending. The gauge traded at 13.9 times estimated earnings, compared with 13.5 times for the S&P 500 Index and 12.4 times for the Stoxx Europe 600 Index.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. retreated 1.1 percent yesterday in New York. Carson Block, founder of research firm Muddy Waters LLC, said he’s lost interest in betting against Chinese stocks and speculates the government is protecting fraudulent companies.

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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