Asia Stocks Fall as Treasury Warns of U.S. Impasse Impact

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Asian stocks fell, with the regional index heading for its first weekly loss in more than a month, as concern grew that the U.S. political impasse could lead to the government defaulting on its debt.

Blumont Group Ltd. slumped 56 percent in Singapore before trading was suspended after it agreed to buy an unnamed overseas coal producer. Digital Garage Inc. (4819) lost 5.7 percent after a Twitter Inc. filing failed to mention the Tokyo-based company as a shareholder. GS Yuasa Corp. (6674), a Japanese battery producer, slumped 4 percent as its rating was cut at Mitsubishi UFJ Morgan Stanley Securities Co.

The MSCI Asia Pacific Index lost 0.3 percent to 139.06 at 12:46 p.m. in Tokyo as all 10 industry groups on the gauge fell. U.S. President Barack Obama canceled plans to attend two economic summits in Asia next week as the fiscal standoff with congressional Republicans kept the U.S. government partially shuttered for a third day.

“Creeping worries about the U.S. debt ceiling are starting to unnerve investors,” Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in an e-mail to clients. “Expect more whippy and nervous trading.”

The Asia-Pacific gauge is set for a 1.2 percent drop this week as the failure of U.S. lawmakers to avert a government shutdown fueled concern they won’t be able to agree on raising the nation’s $16.7 trillion debt limit later this month. The Treasury Department warned that a federal default could lead to a recession as bad as the 2008 financial crisis or worse.

Relative Value

The MSCI Asia Pacific Index advanced 7.8 percent this year through yesterday, pushing valuations on the regional gauge to 13.5 times estimated earnings, according to data compiled by Bloomberg. That compares with 15.1 for the Standard & Poor’s 500 Index and 14.1 for the Stoxx Europe 600 Index, the data show.

Japan’s Topix index dropped 0.7 percent. The Bank of Japan today maintained its monetary policy at the end of a two-day meeting, as economists surveyed by Bloomberg forecast.

South Korea’s Kospi index lost 0.1 percent as it reopened after a holiday. New Zealand’s NZX 50 Index dropped 0.2 percent and Australia’s S&P/ASX 200 Index (AS51) retreated 0.3 percent. Hong Kong’s Hang Seng Index fell 0.5 percent. Singapore’s Straits Times Index added 0.1 percent and Taiwan’s Taiex index was little changed. China’s markets are closed for holidays until Oct. 8.

Futures on the S&P 500 were little changed today. The gauge declined 0.9 percent yesterday, the most in a month, as Treasury said the government will run out of borrowing authority Oct. 17, leaving only cash to pay the bills.

“Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments and slow economic growth could last for more than a generation,” the Treasury said in its report.

‘Catastrophic Effect’

“In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth — with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression,” the department said.

A report yesterday showed fewer Americans than forecast filed applications for unemployment benefits last week. Jobless claims rose to 308,000 in the week ended Sept. 28, from a revised 307,000, the Labor Department said. The median forecast of 50 economists surveyed by Bloomberg called for an increase to 315,000.

U.S. payrolls data won’t be released as scheduled today because of the government shutdown. The department said that an alternative date for the September payrolls report and jobless rate hasn’t been scheduled.

“The absence of the U.S. jobs data creates uncertainty, which is reflected generally in greater equity market volatility,” said Chad Padowitz, Melbourne-based chief investment officer at Wingate Asset Management. “The longer the current situation holds, the less information people know about what’s happening in the underlying economy.”

 

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