Asian stocks sank toward the lowest close in two weeks and the yen touched a one-month high versus the dollar after U.S. Federal Reserve officials fueled concerns about the sustainability of the global recovery. Oil slipped before OPEC meets to decide on output targets.
The MSCI Asia Pacific Index slid 0.3 percent as of 3 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index were little changed following a five-day slump. Euro Stoxx 50 Index futures decreased 0.7 percent. The yen strengthened against 15 of its 16 most-active peers. The Australian dollar fell 0.5 percent. Crude lost 0.4 percent in New York. Copper snapped a three-day rally.
Fed Chairman Ben S. Bernanke said record monetary stimulus is still needed to boost a “frustratingly slow” U.S. recovery, while New York Fed President William Dudley said the rebound remains “distinctly subpar.” Global gross domestic product may expand 3.2 percent this year, less than the 3.3 percent forecast in January, the World Bank said. Data today showed South Korea’s economy grew 1.3 percent in the three months ended March from the previous quarter, slower than an earlier estimate.
“The hot debate on whether global economic conditions are heading into a soft patch or double dip will continue in the next few months, affecting investors’ sentiment,” said Kang Shin Woo, chief investment officer at Seoul-based Korea Investment Management Co., which oversees $17 billion. “No signs of solid recovery are seen in major economies.”
Stocks Decline
About five shares declined for every three that gained on MSCI’s Asia Pacific Index, which is on course for the lowest close since May 25. South Korea’s Kospi index retreated 0.8 percent, Hong Kong’s Hang Seng Index lost 0.7 percent while Japan’s Nikkei 225 Stock Average climbed 0.1 percent, after earlier sliding as much as 0.5 percent.
Japanese utilities sank, led by Tokyo Electric Power Co.’s 7.4 percent slump, after the Nikkei newspaper reported that all of the nation’s nuclear reactors may be idled by next spring. Nintendo Co. plunged 5.7 percent after the unveiling of its first high-definition video-game console prompted some analysts to question the company’s ability to repeat the success of its Wii model. Hyundai Motor Co. (005380) and Acer Inc. led exporters lower.
U.S. shares retreated yesterday, dragging the S&P 500 Index lower by 0.1 percent, after Bernanke gave no hint of a new round of economic stimulus. The five-day drop in the gauge was the longest stretch of losses in almost a year. The spread between two- and 10-year Treasury yields was three basis points from the widest in two weeks before the Federal Reserve releases its Beige Book report today.
‘Somber Outlook’
Bernanke said yesterday in Atlanta the economy is producing at “levels well below its potential” and that “accommodative monetary policies are still needed.” Recent data showing weakness in the economy, including a rise in the unemployment rate to 9.1 percent in May, have increased the odds the Fed will hold the benchmark interest rate near zero into next year.
“Bernanke’s somber outlook, combined with no hint of further quantitative easing being used as a policy response near term, has led to a negative tone in markets,” said Tim Schroeders, who helps manage about $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “In a glass-half-empty environment, investors globally are adopting a much more cautious stance.”
The Washington-based World Bank cut its forecast for a U.S. expansion to 2.6 percent this year from a January estimate of 2.8 percent. It urged faster spending cuts and interest rate increases in emerging regions, which are forecast to grow almost three times faster than their developed counterparts, according to the institution’s Global Economic Prospects report.
Yen, Euro
The yen reached as high as 79.75 per dollar, the strongest level since May 5, before trading at 80.04. It rose to 117.45 per euro from 117.67 after the International Monetary Fund said its billion-euro ($38 billion) loan to Portugal “entails important risks,” spurring demand for Japan’s currency as a refuge. The euro also slipped after German Finance Minister Wolfgang Schaeuble said bondholders must contribute a “substantial” share of a second aid package for Greece.
The Australian dollar, known as the Aussie, traded at $1.0675, set for the biggest drop in a week, while New Zealand’s dollar weakened 0.3 percent to 81.81 U.S. cents.
Crude fell 0.4 percent to $98.68 a barrel in New York. Brent crude oil declined 0.6 percent to $116.06 a barrel after rallying 2 percent on the London-based ICE Futures Europe exchange yesterday. The Organization of Petroleum Exporting Countries will raise its output target at a meeting in Vienna today, according to a Gulf delegate with knowledge of the matter.
Copper for three-month delivery lost 0.7 percent to $9,080.25 a metric ton on the London Metal Exchange, halting a three-day, 2.5 percent rally. Aluminum, tin and lead also retreated. Cash silver slid 0.8 percent to $36.88 an ounce, also snapping a three-day advance.
Source: Bloomberg.com
Vivek Agrawal
Summer Intern-Fundamental Analysis
DENIP Consultants Pvt. Ltd.
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