Tuesday, 5 June 2012

European, Asian Stocks Gain on Stimulus Speculation, Oil Climbs

June 5 (Bloomberg) -- European and Asian stocks rose, the Australian dollar strengthened and oil 
advanced amid speculation policy makers will take more steps to stimulate economic growth. 
Yields on U.S. Treasuries and Japanese bonds climbed.

The Stoxx Europe 600 Index added 0.4 percent as of 8:49 a.m. in London. The MSCI Asia 
Pacific Index advanced 1.4 percent, rising for the first time in five days while futures on 
the Standard & Poor’s 500 Index gained 0.1 percent. The Australian dollar rose for a second day 
and crude oil in New York climbed 0.3 percent. Yields on 10-year Treasuries increased three 
basis points to 1.55 percent.

Leaders from the Group of Seven countries will hold a conference call to discuss the European 
debt crisis today ahead of the G-20 meeting this month. The Reserve Bank of Australia lowered 
its key interest rate today by 25 basis points to 3.5 percent, the lowest level since 2009. China’s 
insurance regulator said it will allow insurers’ to broaden their investment scope, and four Taiwan 
government-controlled funds bought stocks yesterday to help pare losses, according to the 
Taipei-based Commercial Times.

 “We are likely to see a reasonably strong policy response in a number of countries,” said Angus 
Gluskie, managing director at White Funds Management in Sydney, who manages more than 
$350 million. “It’s stacking up to be a reasonably good buying opportunity.”

MSCI Asia Pacific Index rebounded from the lowest close since November, as declines yesterday 
dragged down valuations on the region’s benchmark to 11.2 times estimated earnings on average, 
the lowest this year.

Qantas Tumbles

Australia’s S&P/ASX 200 Index advanced 1.5 percent after central bank Governor Glen Steven’s 
second rate cut in as many meetings. Thirteen of 27 economists surveyed by Bloomberg News 
predicted the move, while four forecast a half-point reduction and 10 expected borrowing 
costs to remain unchanged.

“The RBA has put more weight on global factors,” said Matthew Sherwood, Perpetual Investments’ 
head of investment markets research in Sydney. Perpetual manages funds of about $23 billion. “The 
bank is clearly worried about the outlook for Europe and households domestically are showing 
cautionary behavior.”

Qantas Airways Ltd., Australia’s largest carrier, plunged to a record low in Sydney after saying annual 
profit may decline as much as 91 percent amid mounting losses on international routes and increased 
fuel costs. Qantas slumped as much as 19.7 percent before trading at A$1.16.

Shanghai Composite

Taiwan’s Taiex Index climbed 1.5 percent amid speculation the government will take steps to bolster 
Taiwanese lawmakers are trying to find a compromise solution among 20 draft bills and 10 versions 
of a capital gains tax on stock trading, the official Central News Agency reported yesterday.

Searches for “Shanghai Composite” were blocked from China’s most-used microblogging service 
after the stock index’s drop on the 23rd anniversary of the Tiananmen Square crackdown 
corresponded to the date of the event. The Shanghai Composite Index dropped by 64.89 points 
yesterday, matching the date on which Chinese authorities crushed student-led protests on June 4, 
1989. The gauge added 0.2 percent today.

Korea’s Kospi Index advanced 1.1 percent, while the Nikkei 225 Stock Average gained 1 percent 
in Tokyo. Japan’s broader Topix Index, which entered a bear market yesterday as it plunged to a 
level not seen since 1983, added 1.8 percent.

Factory Orders Decline

The S&P 500 closed up less than 0.1 percent in New York yesterday after it fell 9.9 percent from a 
four-year high on April 2 through last week.

The Institute for Supply Management’s non-manufacturing index, which covers almost 90 percent 
of the economy, probably held at 53.5, matching April’s four-month low, according to median 
forecast of economists surveyed by Bloomberg before a report from the Tempe, Arizona-based group 
today. Orders to U.S. factories unexpectedly declined 0.6 percent in April from the previous 
month, according to the Commerce Department report yesterday.

Oil for July delivery gained as much as 94 cents to $84.92 a barrel in electronic trading on the 
New York Mercantile Exchange and was last at $84.18. The contract rose for a second day 
before a government report that may show crude stockpiles dropped for the first time in 11 
weeks in the U.S., the world’s biggest consumer of the commodity.

U.S. inventories probably slipped 1 million barrels last week as refineries increased gasoline output 
to meet peak summer consumption, according to the median estimate of analysts in a Bloomberg 
News survey before an Energy Department report tomorrow.

Aussie Dollar

The Australian dollar appreciated 0.3 percent to 97.56 U.S. cents. Yields on Australia’s 10-year 
securities rose 17 basis points to 2.94 percent while Japan’s 10-year rate was up four basis points 
at 0.86 percent from yesterday, when it touched 0.79 percent, the lowest since 2003.

The cost of insuring Asia-Pacific corporate and sovereign bonds from non-payment fell, according 
to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers 
outside Japan dropped 4 basis points to 206 basis points, Royal Bank of Scotland Group Plc prices 
show. The gauge is set for its lowest close since May 31, according to data provider CMA.

--With assistance from Sarah McDonald in Sydney, Weiyi Lim in Singapore, Allen Wan in Shanghai. 
Editors: Shelley Smith, Nick Gentle