Stocks, Euro Plunge on Concern Austerity Plans to Curb Recovery
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By Will McSheehy and Shani Raja
May 17 (Bloomberg) -- Asian
stocks<http://www.bloomberg.com/apps/quote?ticker=MXAP%3AIND>fell the
most since Feb. 5, the cost of insuring bonds from default jumped
and the euro dropped to its lowest against the dollar since 2006 on concern
European austerity measures will derail the economic recovery.
The MSCI Asia Pacific Index dived 2.5 percent to 117.05 at 12 p.m. in Tokyo,
the Markit iTraxx Asia index of credit-default swaps climbed 10 basis points
to 125 basis points, the euro fell to as low as $1.2244 and futures on the
Standard & Poor’s 500 Index declined 1.1 percent.
“Europe is certainly the scary story at the moment,” said Jason
Teh<http://search.bloomberg.com/search?q=Jason+Teh&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
who helps manage $2.6 billion at Investors Mutual in Sydney. “Corporate debt
risk was the 2008 story, now its sovereign debt risk. The countries that can
print money may have to do it again to keep their economies afloat.”
Investors are growing increasingly skittish after Greek Prime Minister George
Papandreou<http://search.bloomberg.com/search?q=George+Papandreou&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>said
Greece is considering legal action against U.S. banks that may have
contributed to the country’s debt crisis. One week after agreeing to a $1
trillion financial lifeline for the euro region, European finance ministers
meeting in Brussels today are under pressure to show they can reduce
deficits fast enough to satisfy investors and then police budgets
effectively once targets are met.
Japan’s Nikkei 225 Stock
Average<http://www.bloomberg.com/apps/quote?ticker=NKY%3AIND>plunged 2
percent as a government report showed machinery orders rose less
than economists estimated in March. Australia’s S&P/ASX 200 Index sank 2.8
percent and South Korea’s Kospi slumped 2.7 percent.
European Sales
Canon Inc <http://www.bloomberg.com/apps/quote?ticker=7751%3AJT>., which
gets 31 percent of revenue from Europe, lost 2.1 percent to 3,060 yen in
Tokyo. Sony Corp., which gets 21 percent of revenue from the European
region, slumped 4.1 percent to 2,830 yen. BHP Billiton
Ltd.,<http://www.bloomberg.com/apps/quote?ticker=BHP%3AAU>the world’s
largest mining company, dropped 4 percent on lower commodity
prices.
China’s Shanghai Composite
Index<http://www.bloomberg.com/apps/quote?ticker=SHCOMP%3AIND>fell for
a second day, declining 2.3 percent on concern government measures
to cool property speculation. China Vanke Co., the country’s largest listed
developer, lost 2.9 percent after Premier Wen
Jiabao<http://search.bloomberg.com/search?q=Wen+Jiabao&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>said
the government will “decisively” contain excessively fast increases in
home prices.
South Korea’s won slid 1.9 percent to 1,152.18 per dollar as foreign
investors sold more shares than they bought, adding to net sales of $2.7
billion in the first two weeks of this month. The Chinese yuan’s 12-month
non-deliverable forwards fell 0.3 percent to 6.6820 per dollar on
speculation China will delay appreciation of its currency as Europe’s debt
crisis threatens to damp global demand.
Refuge Currencies
The euro fell and the yen and dollar climbed as investors sought refuge from
the European crisis. The pound tumbled to a 13-month low after a U.K. report
showed London house prices recorded their first drop this year.
The euro sank the least since April 21, 2006, from $1.2358 in New York on
May 14. The Japanese currency gained against all of its 16 most-traded
counterparts, rising to as much as 113.01 yen from 114.38 yen last week. The
yen was at 92.06 versus the dollar from 92.47.
“The fact that European leaders have failed to restore confidence in the
single currency is worrying,” Khoon
Goh<http://search.bloomberg.com/search?q=Khoon+Goh&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
a senior economist at ANZ National Bank Ltd. in Wellington, wrote in a note
to clients today. “Markets are now focusing on the tough austerity measures
that will come and the impact that will have on the euro-zone economy.”
Thai Clashes
Thai sovereign bond risk climbed the most in two months and the baht
weakened after at least 35 people were killed in fighting between the
military and anti-government protesters.
Credit-default swaps on Thai government debt jumped 20 basis points to 175
basis points, according to Royal Bank of Scotland Group Plc prices. That
increase is the most since March 12, according to CMA DataVision. The baht
weakened for a third day, dropping 0.1 percent to 32.41 per dollar in
Bangkok, after the biggest withdrawal by foreign funds from equities in
almost three years.
The Markit iTraxx Asia index’s 10 basis point rise to 125 basis points puts
the index on track for its highest close since May 7, according to CMA in
New York. Bond risk benchmarks also climbed in Australia and Japan.
Crude oil declined for a fifth day in New York, falling as much as $1.38, or
1.9 percent, to $70.23 a barrel in electronic trading on the New York
Mercantile Exchange.
Copper for three-month delivery dropped 2.1 percent to $6,778 per metric
ton. Aluminum fell 1.7 percent to $2,065 per ton. Commodities
tumbled<http://www.bloomberg.com/apps/quote?ticker=CRY%3AIND>the most
in nine months on May 14, with the Reuters/Jefferies CRB index of
19 commodities slumping 2.7 percent to 258.55.
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