Euro Slips on Irish Debt Concerns; Asian Stocks Hit 2-Year High
Nov. 8 (Bloomberg) -- The euro weakened as concerns about Ireland's capacity to gain support for its budget and political uncertainty in Greece reduced the appeal of the region's assets. Asian stocks and crude oil traded near two-year highs.
The euro fell 0.7 percent to $1.3938 as of 4 p.m. in Tokyo and lost 0.7 percent to 113.21 yen. The MSCI Asia Pacific Index rose 0.2 percent to 135.07 and crude oil was steady at $86.90 a barrel after the U.S. reported a bigger-than-expected pickup in hiring. Futures for the Euro Stoxx 50 slid 0.1 percent while those for the Standard & Poor's 500 Index declined 0.4 percent, following last week's 3.6 percent jump in the U.S. stock gauge.
Europe's currency weakened versus 13 of its 16 major counterparts before European Union Economic and Monetary Affairs Commissioner Olli Rehn arrives in Dublin today to look at Ireland's budget plan. The extra yield investors demand to hold Irish debt rather than German bunds surged to a record last week, while Portugal's spread is near a euro-era high.
"Sovereign debt concerns in Europe may have a short-term effect on market sentiment but any fallout there should be reasonably contained," said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management Co., which has $123 billion in assets globally.
Rehn will be in Dublin for two days after Ireland's government laid out a plan last week to cut spending and raise taxes by as much as 6 billion euros ($8.4 billion) in 2011. He is due to hold a press conference with Irish Finance Minister Brian Lenihan at 8 p.m. today in Dublin.
'Worried'
The difference in yield, or spread, between 10-year Irish bonds and similar-maturity benchmark German bunds rose to 521 basis points on Nov. 5 from 237 points on Aug. 6, according to data compiled by Bloomberg.
"People are a little bit worried about sovereign debt in Greece, Ireland and Portugal," said Derek Mumford, a Sydney- based director at Rochford Capital, a currency and rates risk management firm. "Certainly there has been some selling-off of the euro and buying of the U.S. dollar."
That also sent the Australian dollar down to $1.0128 from $1.0159 on Nov. 5, when it climbed to $1.0183, the strongest since exchange controls were scrapped in 1983.
In Greece, candidates backed by the socialist Pasok party will win eight of 13 regional authorities, projections from the Interior Ministry yesterday showed. Prime Minister George Papandreou has called the vote a test of support for his government after it reduced wages and pensions to secure a 110- billion-euro rescue package.
Stocks Rally
The MSCI Asian index of shares climbed 4.2 percent last week, the weekly biggest gain of 2010, and was today headed for its best close since July 2008. Japan's Nikkei 225 Stock Average rose 1.1 percent while the FTSE Bursa Malaysia KLCI Index was poised to close at a record high.
The S&P 500 index climbed to a two-year high on Nov. 5 after the Labor Department said payrolls climbed by 151,000 in October, the first gain in five months and more than was predicted by all 83 economists in a Bloomberg survey. The Federal Reserve last week unveiled plans to buy $600 billion of Treasuries through June, expanding record stimulus, a move that has improved the outlook for growth in the world's biggest economy, according to Goldman Sachs Group Inc.
"The U.S. economy is in better shape than when the Fed first announced its new quantitative easing measures," said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney. "The solid payroll numbers may be another indication that it's coming out of its soft patch. A strong U.S. economy is immensely helpful in supporting growth around the world."
Honda, Cnooc
Honda Motor Co., which sells five vehicles in North America for every two it sells in Asia Pacific, gained 3.3 percent while Cnooc Ltd., China's largest offshore oil explorer, rose 0.7 percent in Hong Kong. The price of crude oil rose 0.1 percent to $86.90 a barrel on the New York Mercantile Exchange. It earlier touched $87.49, the highest level since October 2008.
Goldman Sachs, which warned a month ago that the U.S. economic outlook was "fairly bad" at best, said the Fed's decision to increase bond purchases will spur growth. The Fed bought $1.7 trillion of assets between December 2008 and March of this year to help end a recession.
"Downside risks to the economic outlook have declined significantly," Jan Hatzius, Goldman's New York-based chief U.S. economist, wrote in an e-mail to clients. "As we move through 2011, the lagged effects of the renewed monetary easing combined with a gradual slowdown in the pace of private deleveraging should result in a substantial pickup in GDP growth."
Cotton futures rose to records in New York and Zhengzhou while rubber set new highs in Shanghai and Singapore amid supply concerns. Palm oil climbed as much as 4.9 percent to the highest level in more than two years, extending a 10-week rally.
Gold slumped as much as 0.4 percent to $1,388.03 an ounce after earlier reaching an all-time high of $1,398.60.
To contact the reporter for this story: James Regan in Hong Kong jregan19@bloomberg.net Jonathan Burgos in Singapore at jburgos4@bloomberg.net .
To contact the editor responsible for this story: Shiyin Chen at schen37@bloomberg.net
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