Asian stocks dropped for a second day, credit risk climbed and oil rose on concern the U.S. will take military action against Syria. India’s rupee sank to a record and government bonds in Australia advanced.
The MSCI Asia Pacific Index lost 1.9 percent at 1:48 p.m. in Tokyo. Standard & Poor’s 500 Index (SPX) futures were little changed, and FTSE 100 Index contracts slid 0.7 percent. The S&P GSCI Index of commodities jumped to a six-month high as crude climbed 2.7 percent. Credit risk in Asia advanced to the highest in two months. The rupee weakened past 68 per dollar and Australia’s currency slid against all its 16 major peers. The yield on Australian 10-year bonds declined.
Tension in Syria has worsened a rout that’s seen investors pull billions of dollars from emerging markets on speculation the Federal Reserve will begin tapering stimulus as the U.S. economy recovers. The rupee is leading losses in Asian currencies and stocks in Thailand have entered a bear market. Data today may show pending sales of previously owned U.S. homes stagnated.
“Syria’s taking attention away from what’s been generally better news out of the U.S. in terms of stronger growth,” Sean Fenton, a Sydney-based fund manager who helps oversee about $1 billion at Tribeca Investment Partners, said in a Bloomberg Television interview. “It’s probably even more concerning what’s happening within Asia in terms of capital flight. The sugar hit of credit expansion and capital inflows has been taken away with those tapering views.”
About eight stocks fell for every one that rose on the MSCI Asia Pacific Index, led by losses in Japanese shares as the Topix sank 2.4 percent, set for its lowest close since June 27. All 10 industry groups declined on the MSCI’s Asian gauge, which is down 2.7 percent in August.
Shares in the Philippines paced declines in emerging markets, tumbling 5.3 percent to a nine-month low. The MSCI Emerging Markets Index decreased 0.9 percent as stocks in South Korea, Malaysia and Indonesia dropped. Thai stocks retreated for a 10th day after the SET index yesterday slumped more than 20 percent from this year’s high.
Global funds have withdrawn about $44 billion from emerging-market stock and bond funds since the end of May through last week, according to data provider EPFR Global, a Cambridge, Massachusetts-based firm that tracks fund flows.
Philippine, Thai and Indonesian markets led a four-year rally in global stocks through May as corporate profits reached record highs on rising domestic demand and Fed stimulus spurred international investors to seek riskier assets. The U.S. central bank is expected to cut bond purchases next month, according to 65 percent of economists in a Bloomberg survey from Aug. 9-13.
U.S. President Barack Obama is working with allies including the U.K. and France to reach agreement on limited action against Syria after concluding the regime used chemical weapons against civilians, fanning concern unrest may disrupt Middle East oil supplies.
West Texas Intermediate rose to $111.93 a barrel, sending the S&P GSCI gauge of 24 raw materials up 1.7 percent. Oil in New York surged 2.9 percent yesterday, the most since May 2, before closing at the highest level since Feb. 2012. Brent in London jumped 2.4 percent to $117.08 a barrel, extending yesterday’s 3.3 percent gain. Gasoline futures and natural gas contracts also advanced.
The U.S., France and the U.K. are laying the legal groundwork to justify action against Syria, moving forces into place and gathering allies in the region. U.K. Prime Minister David Cameron said in London that while no decision has been made on a course of action, it would be legal and proportionate.
Australia’s currency slid 0.8 percent to 89.17 U.S. cents, the lowest since Aug. 6. New Zealand’s dollar reached 77.48 U.S. cents, the weakest since Aug. 5, before buying 77.74 cents, down 0.3 percent from yesterday’s close.
The rupee slumped to an all-time low of 68.025 against the greenback, extending its decline this year to 19.2 percent, the biggest among Asian currencies, compared with a 1.8 percent advance for China’s yuan. The rupee is set for its worst annual loss since 1991. India will set up a task force to identify partner countries for currency-swap agreements in its bid to stem the rupee’s slump and preserve foreign reserves, Commerce Minister Anand Sharma said yesterday in New Delhi.
The Philippine peso dropped 0.5 percent to 44.790 per dollar, after touching 44.653, the lowest since January 2011, amid concern protests over discretionary government budgets will slow state spending and weigh on economic growth.
Thailand’s baht weakened 0.4 percent to 32.29 per dollar on concern Southeast Asia’s second-largest economy will struggle to emerge from a recession this quarter. Bank of Thailand Governor Prasarn Trairatvorakul said today the central bank won’t hesitate to contain excessive moves in the market if necessary.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan, a measure of the cost of insuring corporate and sovereign bonds against non-payment, jumped 8 basis points to 175 basis points as of 8:13 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge, which advanced 9.7 basis points yesterday, is set for its highest close since June 24, according to data provider CMA.
Japan’s 10-year yield slid 2 basis points to 0.72 percent, the lowest since Aug. 21. Australia’s 10-year yield dropped 5 basis points to 3.89 percent.