By Glenys Sim and Susan Li - Jul 23, 2012 8:47 AM GMT+0400
Asian stocks fell, while the euro weakened to an 11-year low against the yen and Treasury 10-year yields dropped to a record as a Chinese central bank board member warned of slowing growth and on concern Greece may exit the currency bloc. Commodities declined.
The MSCI Asia Pacific Index tumbled 1.6 percent at 1:42 p.m. in Tokyo as Hong Kong’s Hang Seng Index slid 2.6 percent. Futures on the Standard & Poor’s 500 Index dropped 0.6 percent while those on the FTSE 100 Index futures lost 0.8 percent. The euro touched a two-year low against the greenback. The yield on the U.S. 10-year note slumped to 1.4347 percent, while Asian government bonds rallied. The S&P GSCI gauge of 24 raw materials lost 1.2 percent.
Traders work in the corn options trading pit of the CME Group's Chicago Board of Trade in Chicago. Corn for December delivery in Chicago fell 0.6 percent to $7.91 a bushel, after earlier surging to $8 as a drought scorched crops in the U.S., the world’s top producer and exporter. Photographer: Tim Boyle/Bloomberg
“It’s going to be volatile, it’s going to be difficult,” said Raymond Chan, chief Asia-Pacific investment officer at Allianz Global Investors, which oversees about $300 billion. “We’ve not seen any solutions to make sure that the euro stays intact.” In China, “we don’t expect a strong recovery but we’ve probably seen the worst already,” Chan said in a Bloomberg Television interview.
China’s economic expansion may cool for a seventh straight quarter to 7.4 percent in the three months to September, said Song Guoqing, a member of the People’s Bank of China monetary policy committee. Greece’s creditors meet this week amid doubts that the country will meet its bailout commitments. German Vice Chancellor Philipp Roesler said he’s “very skeptical” that European leaders will be able to rescue Greece. A July 27 report may show the U.S. economy grew in the second quarter at the slowest pace in a year.
Euro Declines
The euro slipped 0.7 percent to 94.73 yen after touching 94.63, the lowest since November 2000, before a Spanish bill sale tomorrow. It dropped 0.4 percent to $1.2115 after earlier sliding to $1.2106, a level unseen since June 2010, as Spain’s 10-year note yields climbed toward a euro-era record last week.
The Australian and New Zealand dollars retreated for a second day, as global growth concerns reduced demand for riskier assets. South Korea’s five-year government bond yield slumped to a record low and Japan’s 10-year yields tumbled to the lowest since June 2003.
The MSCI Asia Pacific Index slid 0.8 percent on July 20, the most in a week, as China pledged to keep curbs on its property market. Economic growth in the country slowed to 7.6 percent in the three months ended June, the sixth straight deceleration, as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand.
About eight stocks fell for every one that rose on the MSCI Asia Pacific Index. Ricoh Co., a producer of office equipment that counts on Europe for 21 percent of revenue, retreated 5.8 percent in Tokyo.
U.S. Earnings
McDonald’s Corp., the world’s largest restaurant chain, releases results today. Earnings at U.S. companies have exceeded analyst estimates at about 73 percent of the 118 S&P 500companies that reported quarterly results so far, according to data compiled by Bloomberg. While profits are up 0.4 percent for the group, sales rose an average 2.9 percent, the weakest since a drop of 0.6 percent in the third quarter of 2009.
The S&P 500 rose last week, posting its first back-to-back gain since June, as results from International Business Machines Corp. to Baker Hughes Inc. (BHI) beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus. U.S. consumer confidence and equity valuations are diverging the most in 17 years as price-earnings ratios fall, according to data compiled by Bloomberg.
U.S. gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Factory orders softened and new-home sales were little changed, other data may show this week.
Corn, Soybeans
Corn for December delivery in Chicago fell to $7.8750 a bushel, after earlier surging to $8 as a drought scorched crops in the U.S., the world’s top producer and exporter. The previous peak for the most-active contract was $7.9925 on June 27, 2008. Soybeans were 1.3 percent lower after touching an all-time high of $16.9150 a bushel.
Roesler, who is Germany’s economy minister, told broadcaster ARD that Greece was unlikely to be able to meet its obligations under a euro-area bailout program as its troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- hold talks this week in Athens. Should that be the case, the country won’t receive more bailout payments, Roesler said.
The International Monetary Fund will stop paying further rescue aid to Greece, making the country’s insolvency in September more likely, the Der Spiegel magazine reported, citing unidentified European Union officials. Data today may show an index (SPX) of consumer sentiment in the euro region probably fell to minus 20 in July from minus 19.8 a month earlier, economists predicted in a Bloomberg survey.
To contact the reporters on this story: Glenys Sim at gsim4@bloomberg.net;
Susan Li in Hong Kong at sli31@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
