Asia Stocks Slide as Russia’s Micex Drops on Ukraine
Asian stocks fell, with the regional benchmark index heading toward a weekly loss. Russian shares fell a fifth day, wheat climbed and nickel pared the biggest monthly advance since 2012 as the U.S. warned Russia of an “expensive mistake” in Ukraine.
Hong Kong’s Hang Seng Index dropped 1.2 percent by 7:19 a.m. in London, with the MSCI Asia Pacific Index heading to a 0.8 percent loss for the week. Futures on the Euro Stoxx 50 Index slipped 0.2 percent as Moscow’s Micex Index headed for its longest losing streak in seven weeks and the ruble sank after Standard & Poor’s cut the country’s credit rating. S&P 500 Index futures were little changed. Wheat contracts rose for a fourth day, adding 0.3 percent. Nickel traded at $18,260 a ton in London and is headed for a 15 percent jump this month.
U.S. Secretary of State John Kerry said Russia will be making a “grave mistake” if it doesn’t halt provocations in Ukraine. Russia is the world’s fifth-biggest wheat exporter, followed by Ukraine. Tokyo’s consumer prices rose 2.7 percent in April from a year earlier, the biggest jump since 1992, driven by a sales-tax increase and stimulus from the Bank of Japan. The U.K. releases retail sales figures today.
“The level of tension between the U.S. and Russia is obviously fueling concern among investors, lending support for assets like nickel, wheat, palladium and oil,” said Kazuhiko Saito, a Tokyo-based analyst at commodities broker Fujitomi Co. “Even though we may see some technical retreat after a strong rally, the trend is likely to continue as the situation isn’t going to resolve itself anytime soon. Commodity prices aren’t much help for the global equity market.”
About five stocks fell for every three that gained on the Asia-Pacific gauge, with energy producers declining the most among the 10 industry groups in the measure.
Liquor Slump
The Hang Seng Index is heading for its biggest weekly retreat since March 14, having lost 4.5 percent this year. The Hang Seng China Enterprises Index (HSCEI) slid 1.2 percent and is headed for a second straight weekly drop.
The so-called H-share index is Asia’s worst-performing major index after Japan’s Nikkei 225 Stock Average and Topix index, both of which are down more than 10 percent this year.
The Shanghai Composite Index swung between gains and losses. Kweichow Moutai Co., the country’s biggest producer of baijiu liquor, plunged 6.7 percent after first-quarter profit growth plummeted. The company joins other global makers of premium spirits including Pernod Ricard SA, Diageo Plc and Remy Cointreau SA in reporting slumping sales amid a crackdown on extravagant spending among mainland officials.
The Micex slid 1.5 percent after tumbling 2.2 percent yesterday. The Russian RTS Index (RTSI$), which is priced in dollars, has lost more than any other major index globally this year.
Rating Cut
The ruble weakened 0.3 percent to 35.8795 versus the dollar and 0.5 percent to 49.6212 to the euro. The ruble is down almost 10 percent against the dollar this year.
Russia’s sovereign rating was cut to BBB- by Standard & Poor’s, the lowest investment grade, as the conflict in Ukraine escalates, hurting the country’s economy. Standard & Poor’s cut Russia’s rating from BBB after lowering its outlook to negative in March. S&P last downgraded Russia in December 2008.
“The tense geopolitical situation between Russia and Ukraine could see additional significant outflows of both foreign and domestic capital from the Russian economy and hence further undermine already weakening growth prospects,” S&P said in the statement.
Nickel Rally
Nickel touched a 14-month high during yesterday’s trading. The metal’s 14-day relative strength index has been above 70 since April 9, a level suggesting an impending drop to some analysts who study technical charts. The metal is up 32 percent this year, the most among the six main metals traded on the LME, on concern that global supplies will be disrupted as tensions mount in Ukraine and Indonesia’s ore export ban remains in place.
Wheat for July delivery rose as much as 0.7 percent to $7.01 a bushel on the Chicago Board of Trade, and was at $6.9825. Futures jumped 2 percent yesterday for the biggest increase since April 15. A fourth day of gains would be the longest such streak since Feb. 19.
China’s yuan fell for a sixth day, dropping 0.05 percent to 6.2524 per dollar in Shanghai, China Foreign Exchange Trading System prices show. It touched 6.2565, the weakest level since Dec. 12, 2012, and has declined 0.5 percent since April 18.
The country’s growth will weaken further, Credit Suisse Group AG’s Chief Regional Economist Dong Tao said at a conference in Hong Kong yesterday, adding that he’s pessimistic on the short-and medium-term outlooks. The current-account surplus was $7.2 billion in the first quarter, compared with $47.6 billion in the first three months in 2013, according to a statement on the State Administration of Foreign Exchange website today.
(By Jae Hur and Nick Gentle)
Source: bloomberg
