Asian Stocks, Won Fall for 3rd Week on Korea Risk; Metals Drop
Nov. 26 (Bloomberg) -- Asian stocks and the won fell for a third week and commodities dropped after North Korea threatened war and as investors speculated that China will tighten monetary policy. The euro fell on concern Europe's debt crisis may deepen.
The MSCI Asia Pacific Index slid 1.2 percent to 129.07 as of 4 p.m. in Tokyo, taking its weekly decline to 1.9 percent. The won sank 1.9 percent while the euro traded near a two-month low against the dollar. Zinc slumped as much as 4.4 percent in London. Futures on the Euro Stoxx 50 index slumped 0.8 percent while those of the Standard & Poor's 500 Index slipped 0.6 percent as U.S. markets reopen after the Thanksgiving holiday.
Explosive shots were heard today from a South Korean island that was shelled this week by North Korea, which warned of retaliation to any encroachment of its sovereignty. Chinese banks declined after the Shanghai Securities News said the government may cut the target for new lending in 2011. Yields on Portuguese, Spanish and Italian bonds jumped yesterday even as European Central Bank council member Axel Weber said governments can increase the size of the region's bailout fund if necessary.
"We have both economic and geopolitical events that have taken a toll on investor appetite for risk," said Wan Murezani Mohamad, an analyst at Malaysian Rating Corp. in Kuala Lumpur. "The market tends to turn to safe-haven assets."
About two stocks fell for each that gained on the MSCI Asia Pacific. The gauge's three-week slump, its longest stretch of declines since the period ended Feb. 5, has wiped out its gains this month. South Korea's Kospi index fell 1.3 percent, led by declines of at least 2.3 percent in Kia Motors Corp. and LG Display Co.
China's Banks
China's Shanghai Composite Index slipped 0.8 percent, adding to its third straight weekly retreat. Industrial & Commercial Bank of China Ltd. lost 1.6 percent after the Shanghai Securities News reported that new loans in the nation next year will likely be close to 7 trillion yuan ($1.1 trillion), less than this year's target of 7.5 trillion yuan.
Zinc for three-month delivery fell to as low as $2,098 a metric ton on the London Metal Exchange before trading at $2,106.50. The contract for copper retreated as much as 2.2 percent to $8,161 a ton. Futures also slumped in China after the Shanghai Futures Exchange said yesterday it will raise margins and daily price limits to curb speculation and cool inflation.
Crude oil for January delivery traded at $83.68 a barrel in New York, after settling at $83.86 on Nov. 24. Floor trading was closed yesterday for Thanksgiving in the U.S. and electronic trades will be booked with today's for settlement purposes.
Korean Shelling
The won, which slid to a two-month low of 1,172.50 per dollar a day after this week's attack by North Korea, traded at 1,159.63 per dollar, according to data compiled by Bloomberg.
North Korea said today that it is "greatly enraged at the provocation" from the South and warned that any "escalated confrontation" will lead to war, according to state news agency KCNA. It fired artillery shells on South Korea's Yeonpyeong island on Nov. 23, killing four and wounding 20. South Korea is preparing for joint military exercises with the U.S.
"This is really a big risk for the whole region, leading to a massive sell-off of the won," said Minoru Shioiri, chief manager of currency trading in Tokyo at Mitsubishi UFJ Morgan Stanley Securities Co. "People don't want to hold the won and other regional currencies over the weekend when we don't know what would happen."
Dollar, Euro
The dollar rose versus 14 of its 16 major counterparts as speculation of an escalation in the Korean conflict boosted demand for the safety of the greenback. The currency traded at 83.87 yen from 83.60 yen in New York yesterday, after earlier touching 83.89 yen, the strongest since Oct. 5.
The euro fell to $1.3305 in Tokyo from $1.3360 in New York yesterday and traded at 111.58 yen from 111.69 yen. The 16- nation currency has declined this week against 15 of its 16 major peers.
Bonds of the euro region's most-indebted nations fell yesterday after LCH Clearnet Ltd. increased its margin requirements, or cost of trading, in Irish government securities for the third time this month. The yield on Ireland's 10-year debt climbed 18 basis points to 9.04 percent, while the Spanish 10-year yield rose 11 basis points to 5.18 percent yesterday.
Portugal faces a final vote in parliament today on its 2011 spending plan, which includes measures to pare the deficit. The government said in September that it would cut wages, freeze hiring and raise value-added taxes.
Spending, Rates
Elsewhere in the region, a report today may show French consumer spending declined 0.5 percent in October from the previous month when it increased 1.5 percent, according the median estimate of economists surveyed by Bloomberg. From a year earlier, spending increased 0.4 percent last month, the survey showed.
Australia's dollar dropped versus 15 of its 16 major peers as central bank governor Glenn Stevens said the nation's interest-rate setting is appropriate for the "period ahead," damping speculation of further rate increases. The so-called Aussie appreciated 1.2 percent to 96.94 U.S. cents.
Stevens' statement suggests the Reserve Bank of Australia "is pretty comfortable with the current level of policy and will hardly change it," said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. "The market hasn't got another hike fully priced in until July next year."
Japan's 10-year government bonds fell for a second day, pushing yields up by 2.5 basis points to 1.18 percent, an 11- week high. Consumer prices excluding fresh food fell 0.6 percent in October from a year earlier after dropping 1.1 percent in September, the statistics bureau said today in Tokyo, matching the median forecast of 28 economists surveyed by Bloomberg News. Overall consumer prices rose 0.2 percent from a year ago, the first increase since December 2008.
To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net David Yong in Singapore at dyong@bloomberg.net .
To contact the editor responsible for this story: Nicolas Johnson at nicojohnson@bloomberg.net .
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