Asian Stocks Drop for Second Day; Metals Rise, Dollar Weakens

By Darren Boey and Shani Raja
Jan. 19 (Bloomberg) -- Asian stocks fell for a second day, led by shares of banks and technology companies, on concern earnings growth will slow. Metals rose and the dollar declined.
The MSCI Asia Pacific Index lost 0.4 percent to 125.73 as of 5 p.m. in Tokyo. A measure of financial stocks on the gauge dropped 0.3 percent, while technology shares declined 2.3 percent. Platinum for immediate delivery gained as much as 1.3 percent, while palladium climbed 1 percent. Futures on the Standard & Poor’s 500 Index added 0.3 percent ahead of trading in the U.S., where markets were closed yesterday. The Dow Jones Stoxx 600 fell 0.2 percent to 257.80 at 8 a.m. in London.
Stocks on the MSCI World Index are trading near the highest level versus earnings since 2002, raising concerns valuations may have outpaced profit growth. Citigroup Inc. is due to report earnings later today after JPMorgan Chase & Co.’s results disappointed investors last week. Sixty-five companies in the S&P 500 are scheduled to release quarterly results this week.
"Markets are pausing for a breath," said Prasad Patkar, who helps manage $1.6 billion at Platypus Asset Management in Sydney. "Expected corporate earnings are now factoring in the economic recovery. For markets to press on from here upwards, we’ll need to see the earnings growth come through."
Two stocks declined for each one that rose on the MSCI Asia Pacific Index. The Shanghai Composite Index rose 0.3 percent to
3,246.87 though China’s central bank guided its benchmark one- year bill yield to the highest level in 14 months to curb record loan growth and prevent asset bubbles.

Higher Interest Rates

The People’s Bank of China sold the bills at a rate of
1.9264 percent in open-market operations. The yield increased eight basis points, the same as last week, after five months during which the benchmark was held unchanged. The Hang Seng Index climbed 0.8 percent to 21,622.90.
Commonwealth Bank of Australia, the country’s biggest lender by market value, sank 2.4 percent to A$56.64, while Westpac Banking Corp., the second biggest, dropped 1.2 percent to A$25.70. Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, lost 2.4 percent to 486 yen after Barclays Capital said that Japanese banks’ income from lending may slump.
"Investors who chased the banks the last few days are taking risk off the table ahead of the U.S. open tonight," said Angus Gluskie, who oversees $300 million at White Funds Management Pty in Sydney. "With banks having been weak after JPMorgan’s earnings, investors will be uncertain as to the trend of profitability in the U.S."
JPMorgan, the largest U.S. bank by market value, reported fourth-quarter net income on Jan. 15 that beat analyst estimates, though said it was "cautious" about the outlook for consumer loan defaults. Its retail unit posted the first quarterly loss since the first three months of 2008.

Chipmakers Fall

A measure of technology companies on the MSCI Asia Pacific Index was the biggest decliner of 10 industry groups, after a benchmark gauge of prices for dynamic-random-access memory chips retreated 1.7 percent, the sixth straight day of declines, according to Dramexchange Technology Inc.
Inotera Memories Inc. plunged 6.3 percent to NT$25.85 in Taipei, Nanya Technology Corp. lost 6 percent to NT$31.95 and Powerchip Semiconductor Corp. sank 6.8 percent to NT$4.52.
Japanese car and electronics makers fell as a weaker dollar threatened the value of exports earnings. The dollar slipped to
90.46 yen in Tokyo from 90.78 yesterday in New York after earlier falling to 90.41, the weakest since Dec. 21.
Toyota Motor Corp., which gets 31 percent of its revenue in North America, lost 1.2 percent to 4,140 yen. Canon Inc., which gets 28 percent of its sales from the Americas, fell 1.4 percent to 3,810 yen.

Posco Rises

Among stocks that rose, Posco, South Korea’s biggest steelmaker, gained 1 percent to 604,000 won, reversing a 1.7 percent drop. The company said Warren Buffett, chairman of Berkshire Hathaway Inc., wants to buy more shares. Berkshire didn’t immediately respond to a message left with Buffett’s assistant Debbie Bosanek.
The dollar fell versus 14 of its 16 most-traded counterparts before U.S. reports this week forecast to show building permits rose at a slower pace and manufacturing in the Philadelphia region fell. The pound strengthened to a six-week high against the U.S. currency.
The dollar was at $1.4400 per euro from $1.4384, and dropped to $1.6411 per pound from $1.6343 after earlier reaching $1.6421, the weakest since Dec. 8.

Building Permits

The Commerce Department will say tomorrow building permits increased at a 580,000 pace in December, compared with a revised 589,000 in November, according to a Bloomberg News survey. The Federal Reserve Bank of Philadelphia’s general economic index, due Jan. 21, declined to 19.4 this month from 20.4 in December, a separate Bloomberg survey showed.
The Philippine peso rose 0.1 percent to 45.84 per dollar, reaching a 17-month high, after the central bank reported the largest balance of payments surplus in almost a year. Bangko Sentral ng Pilipinas yesterday announced a $1.22 billion surplus for December, boosting last year’s total to $5.3 billion. The Malaysian ringgit gained 0.1 percent to 3.339.
Platinum and palladium climbed to their highest levels in at least 17 months on speculation investment and industrial demand will increase and as the dollar weakened. Gold and copper advanced.
Platinum for immediate delivery gained as much as 1.3 percent to $1,643 an ounce, the highest price since August 2008, and recently traded at $1,640. Palladium gained as much as 0.8 percent to $462.31 an ounce, the highest since July 4, 2008.

New ETFs

"Assets are obviously being reallocated in favor of the newly issued platinum and palladium ETFs," Commerzbank AG analysts led by Eugen Weinberg, said in a note. "They seem to establish themselves as a large demand component alongside the jewelry and car industry demand."
Palladium held in ETF Securities Ltd.’s exchange-traded commodities products rose 2.6 percent to a record 679,938 ounces on Jan. 15 from 662,776 ounces the day before, according to the company’s Web site. Platinum and palladium are used mainly in catalytic converters that curb pollution from automobiles.
Gold gained 0.3 percent to $1,137.50 an ounce and copper advanced 1 percent to $7,583.75 a metric ton.
The cost of protecting Asia-Pacific bonds from default fell, after climbing yesterday, credit-default swaps show. A drop signals improving sentiment in credit markets, and vice versa.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 3 basis points to 94 basis points today, Royal Bank of Scotland Group Plc prices show. The index reached the highest level since Jan. 4 yesterday. The Markit iTraxx Australia index dropped 4 basis points to 79.5 basis points in Sydney, according to Citigroup Inc.
The Markit iTraxx Japan index declined 1.5 basis points to 125.5 basis points, according to Morgan Stanley prices.