Wednesday, 7 November 2012

Asian Equities Slide, Yen Advances as U.S. Fiscal Cliff Looms

By Jason Clenfield - Nov 8, 2012 9:25 AM GMT+0400

Asian stocks slid the most in six weeks and the yen advanced as President Barack Obama’s re- election set up a showdown to avert the so-called fiscal cliff. New Zealand’s dollar declined after the nation’s unemployment rate unexpectedly surged.
The MSCI Asia Pacific Index (MXAP) dropped 1.3 percent as of 2:15 p.m. in Tokyo. Standard & Poor’s 500 Index futures added 0.3 percent after yesterday decreased 2.4 percent. Oil climbed 0.7 percent to $84.99 after plunging 4.8 percent. The yen strengthened against all its major peers and the dollar traded at $1.2750 per euro, the strongest level two months.

Asia Stocks Fall on U.S. Budget Debate, as China Congress Begins
The MSCI Asia Pacific Index lost 0.6 percent to 122.63 as of 9:30 a.m. in Tokyo, before markets opened in China and Hong Kong. Photographer: Tomohiro Ohsumi/Bloomberg
Obama, who was re-elected yesterday, now faces negotiations to avoid more than $600 billion of automatic tax increases and spending cuts, while anti-austerity protests in Greece and weaker economic data in Asia added to concern global growth may slow. President Hu Jintao said China must double per-capita income by 2020, setting a target for new leadership that will be announced at the close of a Communist Party Congress, which started today.
“Investors are taking a step back and thinking the fiscal cliff is looming,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “There’s going to be a protracted battle to resolve it and markets are moving to price that uncertain outcome accordingly.”
Unless the U.S. Congress can strike an agreement on a budget that reduces the debt, $607 billion of tax increases and federal spending cuts are set to kick in automatically in January. The Congressional Budget Office has said the U.S. economy will contract by as much as 0.5 percent next year if Congress fails to keep the increases from taking effect.

U.S. Treasuries

Treasuries held gains after surging yesterday the most since August. Ten-year U.S. notesyielded 1.68 percent, versus a one-month low of 1.62 percent yesterday.
The Dow Jones Industrial Average (INDU) tumbled 2.4 percent yesterday, its worst drop since Nov. 9, 2011. The Standard & Poor’s 500 Index (SPX) also lost 2.4 percent, dropping to its lowest since August. The S&P benchmark dropped more than 10 percent in the two days following Obama’s win in the 2008 presidential election.
About eight shares fell for each one that rose on the MSCI Asia Pacific Index today, with energy stocks leading the decline. The regional benchmark index has risen about 5 percent from Sept. 6 after the European Central Bank started a global wave of stimulus to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit.

Wal-Mart Supplier

Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., dropped 3 percent in Hong Kong. Oki Electric Industry Co. and watchmaker Citizen Holdings Co. slid more than 7 percent in Tokyo.
Japan’s Nikkei 225 Stock Average (NKY) fell 1.6 percent as orders for Japanese machinery declined 4.3 percent in September from the previous month, more than double the drop predicted by economists.
Fifty-six percent of MSCI Asia Pacific Index companies have reported quarterly profit that missed analyst estimates since the end of September, according to data on 464 corporate results compiled by Bloomberg.
In Greece, Prime Minister Antonis Samaras got enough support to approve austerity measures needed to unlock bailout funds as more than 50,000 protesters ringed Parliament. A bill on pension, wage and benefit cuts was approved with 153 votes in favor in the 300-seat Parliament early today, according to acting speaker Athanasios Nakos.

China Transition

China’s yuan touched the top end of its permitted trading range for a fourth day, rising 0.01 percent to 6.2429 per dollar, as the Communist Party opened a congress to choose its fifth generation of leaders since taking power in 1949. Vice President Xi Jinping is expected to replace Hu as general secretary of the 82 million-member party.
New Zealand’s dollar traded at 81.70 U.S. cents, down about 1 percent from before the statistics office in Wellington released its jobs data at 6:45 a.m. Tokyo time. The currency fell after the country’s unemployment rate unexpectedly rose last quarter to a 13-year high of 7.3 percent.
The dollar and yen remained stronger against most major peers as investors sought refuge assets. The yen gained 0.2 percent to 79.88 against the greenback. The dollar added 0.2 percent to $1.2750 per euro from yesterday, when it touched $1.2737, the strongest since Sept. 7.
Oil advanced after slumping yesterday the most since December as U.S. stockpiles rose. Crude prices have fallen 14 percent this year.
To contact the reporter on this story: Jason Clenfield in Tokyo at;
To contact the editor responsible for this story: Shelley Smith at