Asian Stocks Decline as Yen Climbs on Drop in U.S. Home Sales
By Shiyin Chen and Anna Kitanaka
June 23 (Bloomberg) -- Asian stocks fell the most in two weeks, led by Japanese exporters, and the yen rose after an unexpected drop in U.S. home sales added to speculation the global recovery may be faltering. The won weakened.
The MSCI Asia Pacific Index retreated 1.2 percent to 116.77 at 2:08 p.m. in Tokyo, set for its largest drop since June 7. The yen strengthened against all major counterparts, climbing to the highest against the euro since June 11 and touching 90.37 against the dollar. Standard & Poor’s 500 Index futures rose 0.3 percent after U.S. stocks plunged the most in three weeks.
The U.S. Commerce Department may today report new home sales plunged after sales of previously owned homes unexpectedly fell 2.2 percent in May, despite mortgage rates near an all-time low. Treasury Secretary Tim Geithner and White House economic adviser Lawrence Summers urged the Group of 20 nations before a weekend summit to avoid budget cuts that would hurt growth.
“The outlook for the global economy is rapidly getting hazier,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc. “Investors are becoming more inclined to avoid risk.”
Almost four shares dropped for every one that rose among the MSCI Asian index’s 983 companies. The Nikkei 225 Stock Average slumped 1.7 percent, leading stock index declines in Asia. Honda Motor Co. and Canon Inc. dived at least 2.1 percent.
PetroChina Co., the nation’s largest oil company, fell 1.2 percent while Inpex Corp., Japan’s largest energy explorer, dropped 2.9 percent following a decline in crude prices. Oil for August delivery fell 0.8 percent to $77.21 a barrel in New York, extending yesterday’s 1 percent loss. Copper lost 0.4 percent in London after losing as much as 1.1 percent.
Shipping Costs
The Baltic Dry Index, a measure of shipping costs of commodities, also fell for an 18th day, the longest losing streak in more than a year. Mitsui O.S.K. Lines Ltd. slumped 2.9 percent and China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, lost 2 percent.
The yen gained to as much as 110.78 per euro, the strongest level since June 11, from 111.14 in New York yesterday. Japan’s currency was as strong as 90.37 against the dollar from 90.57 yen yesterday, while yields on Japan’s benchmark bonds reached the lowest since December 2008.
“A slew of economic data now signals a soft patch in the recovery,” said Kazumasa Yamaoka, senior analyst at Tokyo investment adviser GCI Capital Co. “Investors are shunning riskier assets and shifting back to the dollar and yen.”
Currencies weakened elsewhere in Asia. The won fell 0.2 percent to 1,184.45 per dollar, extending its retreat from the one-month high set on June 21. Malaysia’s ringgit dropped 0.8 percent to 3.227 per dollar. The Chinese yuan was little changed at 6.8107 per dollar after yesterday declining the most since December 2008.
G-20 Meeting
“We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth,” Geithner and Summers wrote in an opinion piece posted today on the Wall Street Journal’s website ahead of the G-20 meeting this weekend in Toronto. “Without growth now, deficits will rise further.”
New U.S. home sales probably plunged 19 percent to a 410,000 annual pace in May, according to the median forecast of economists surveyed. Today’s report was preceded by figures from the National Association of Realtors yesterday that showed purchases of previously owned homes in the U.S., which accounted for 90 percent of the market, decreased to a 5.66 million annual rate. The median forecast in a Bloomberg News survey was for an increase to a 6.12 million pace. Declining U.S. home sales helped drag the S&P 500 lower by 1.6 percent yesterday.
Australian bonds rose for a second day. The yield on the benchmark 10-year note fell six basis points to 5.33 percent, according to data compiled by Bloomberg.
Fed Meeting
Treasuries were little changed ahead of the Federal Reserve policymakers meeting today and tomorrow. The Fed will keep interest rates near zero, according to a survey of economists by Bloomberg News.
The benchmark 10-year note yielded 3.17 percent in Tokyo, according to BGCantor Market Data. The 3.5 percent security security due May 2020 fell 1/32, or 31 cents per $1,000 face amount, to 102 26/32. The yield dropped to 3.15 percent yesterday, the lowest level since June 8.
The cost of insuring Asian bonds against default rose, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 8 basis points to 131 basis points, Royal Bank of Scotland Group Plc prices show. The risk benchmark is on track for its biggest increase since June 4, according to CMA DataVision in New York.
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