Asian stocks retreat with commodities on US budget deadlock
Asian stocks fell, halting a rally that drove the regional benchmark index to a seven-month high, while commodities slid amid a deadlock in US budget talks. The Australian dollar climbed even after interest rates were cut.
The MSCI Asia Pacific Index declined 0.1 per cent as of 2:38 p.m. in Tokyo after a three-day advance as Standard & Poor’s 500 Index futures lost 0.2 per cent. The S&P GSCI gauge of 24 raw materials fell 0.4 per cent. The yen strengthened against most of its major peers and the so-called Aussie rose 0.2 per cent against the dollar.
House Republicans rejected President Barack Obama’s demand for higher tax rates, heightening the confrontational tone of budget negotiations, while a report showed US manufacturing unexpectedly contracted last month. Europe’s finance chiefs voiced confidence Greece will succeed in buying back bonds, a key element in efforts to stem the debt crisis. The Reserve Bank of Australia cut the benchmark interest rate to the half-century low set during the 2009 global recession.
“There were few tangible signs of any material progress on the fiscal cliff,” Cameron Peacock, a Melbourne-based market strategist at IG Markets Ltd., said in an e-mail. Budget talks are “the single biggest issue in markets right now and one that will influence how all asset classes trade into year-end.”
More shares fell than rose on the MSCI Asia Pacific Index, which yesterday rallied to its highest since May 2. The gauge is up more than 9 per cent this year, boosted by central bank stimulus and data signaling China’s slump may have bottomed.
The Nikkei 225 Stock Average fell 0.2 per cent as Korea’s Kospi slid 0.1 per cent and Hong Kong’s Hang Seng gained 0.2 per cent. Yue Yuen Industrial Holdings Ltd., a maker of shoes for Nike Inc. that gets about 29 per cent of sales from the US, dropped 2 per cent in Hong Kong. Olam International Ltd., the commodity trader that short seller Carson Block said might fail, jumped 3.2 per cent in Singapore as it seeks to sell as much as US$1.25 billion of bonds and warrants.
House Speaker John Boehner and other Republican leaders proposed a plan that would reduce entitlement program costs by at least US$900 billion, including raising the Medicare eligibility age, and cut US$300 billion in discretionary spending.
The proposal “does not meet the test of balance,” White House Communications Director Dan Pfeiffer said in a statement. “In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill.” He said the plan included “nothing new.”
The Institute for Supply Management’s factory index fell to 49.5, the lowest since July 2009, from 51.7 in October. The median forecast in a Bloomberg survey called for 51.4. Fifty marks the dividing line between expansion and contraction.
Australia’s dollar strengthened against almost all major counterparts after the central bank cut the benchmark interest rate to 3 per cent from 3.25 per cent. The reduction had been forecast by economists surveyed by Bloomberg News.
The euro traded near a six-week high versus the dollar before a meeting of European Union finance ministers today on measures to stem the region’s debt crisis. The shared currency bought US$1.3057 from US$1.3054 yesterday, when it touched US$1.3076, the most since October 23.
Greece offered to spend as much as 10 billion euros (us$13 billion) to buy back bonds and Spain said it expects funds for bank recapitalization next week.
Euro sentiment has brightened and there is reason to be optimistic,’’ said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “I still can’t help but think that the missing ingredient for sustained gains is some improvement in the economic data out of Europe.”
Gold fell 0.8 per cent to US$1,702 an ounce, while copper for three-month delivery dropped 0.4 per cent to US$7,969 a tonne. Crude oil declined 0.6 per cent to US$88.58 a barrel in New York.