Yen, Dollar, Treasuries Gain as Stocks Drop on Growth Outlook

September 30, 2011, 3:28 AM EDT
By Shiyin Chen and Anna Kitanaka

Sept. 30 (Bloomberg) -- The yen and dollar strengthened, Treasuries rose, and stocks fell, dragging the MSCI All Country World Index to its biggest quarterly loss since 2008, on signs global growth is slowing. New Zealand’s bond yields jumped the most this year after the nation’s credit ratings were lowered.

The yen gained 0.9 percent to 103.52 per euro at 4:01 p.m. in Tokyo and the dollar climbed 0.7 percent to $1.3503 versus the European currency. New Zealand’s currency sank 0.9 percent and its 10-year yield increased 11 basis points. Treasury 10- year notes snapped a five-day drop. The MSCI All Country World Index slid 0.6 percent, taking its three-month decline to 17 percent. Standard & Poor’s 500 Index futures lost 0.7 percent. Copper erased an earlier slump, while oil gained a second day.

Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter, driving investors to the relative safety of the yen, dollar and Treasuries. Data today may show U.S. consumer spending slowed and German retail sales fell, after industrial production in Japan and South Korea grew less than economists had forecast and a China manufacturing index shrank for a third month.

“People are still very uncertain about the macro-economic outlook at this stage and risk off prevails until greater certainty comes to light in policy response,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Expectations are now at a much more realistic level moving forward given the ongoing concerns about sovereign debt bailouts and lack of self-sustaining growth in major economies.”

Yen, Dollar

The yen climbed 0.2 percent to 76.65 per dollar. The Japanese and U.S. currencies are the best performers this quarter among the 10 tracked by Bloomberg Correlation-Weighted Currency Indexes, gaining 13 percent and 6.6 percent, respectively.

Japan’s factory output increased 0.8 percent in August from July, the trade ministry said in Tokyo today, missing the 1.6 percent median estimate of 28 economists surveyed by Bloomberg News. South Korean industrial production rose 4.8 percent from a year earlier, trailing the median 6.1 percent gain forecast in a separate Bloomberg survey. The won weakened 0.4 percent to 1,178.10 per dollar, completing its largest monthly loss since February 2009.

The New Zealand dollar fell to 76.41 U.S. cents, on course for a second weekly loss. The nation’s sovereign credit rating was cut by one level to AA by Fitch Ratings. Its long-term local-currency rating was reduced to AA+ from AAA and long-term foreign-currency rating cut to AA from AA+ by Standard & Poor’s. Its benchmark 10-year yield climbed 0.11 percentage point to 4.42 percent, the biggest increase since Nov. 18, 2010.

U.S. Spending

Treasury 10-year yields fell three basis points to 1.97 percent. Personal spending probably rose 0.2 percent in August, slowing from a 0.8 percent increase the previous month, according to a Bloomberg economist survey. S&P 500 futures expiring in December signal the U.S. stocks gauge may snap yesterday’s 0.8 percent gain.

Consumer and financial shares led losses on MSCI’s Asia Pacific Index, which pared its weekly advance to 1 percent. The gauge has dropped 16 percent since June, bound for its largest quarterly loss since the final three months of 2008.

Japan’s Nikkei 225 Stock Average closed less than 0.1 percent lower, while Taiwan’s Taiex Index rose 0.6 percent. The Hang Seng Index declined 2.2 percent in Hong Kong, where markets were closed yesterday after Typhoon Nesat battered the city.

China Growth

In Hong Kong, Gome Electrical Appliances Holding Ltd. plunged 15 percent after Credit Suisse Group AG lowered its rating on the Chinese appliance retailer. Evergrande Real Estate Group Ltd. and Wynn Macau Ltd. sank at least 15 percent.

More than half the global investors surveyed by Bloomberg predict Chinese growth will slow to less than 5 percent annually by 2016, according to results released yesterday. HSBC Holdings Plc and Markit Economics today said their purchasing managers’ index held at 49.9 in September, the third month of contraction.

Three-month copper added 1.6 percent to $7,290 a metric ton on the London Metal Exchange, reversing a drop of as much as 1.8 percent. Prices have declined 22 percent this quarter, the most since 2008. Cash gold rose 0.9 percent to $1,628.55 an ounce.

Oil pared its biggest quarterly decline since the three months ended Dec. 31, 2008. Crude for November delivery gained as much as 1.3 percent to $83.23 on the New York Mercantile Exchange before trading at $82.58. Futures are down 13 percent this quarter.

The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment decreased, with the Markit iTraxx Japan index dropping eight basis points to 198.5 basis points, Citigroup Inc. prices show. That would be the biggest decline since Sept. 16, according to data provider, CMA.

The Markit iTraxx Australia index fell four basis points to 210 basis points, Westpac Banking Corp. prices show, while the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased six basis points to 232, Royal Bank of Scotland Group Plc prices show.

--With assistance from Paul Gordon in Hong Kong, Masaki Kondo in Singapore, Richard Dobson in Shanghai, Monami Yui and Mariko Ishikawa in Tokyo, and Tracy Withers and Chris Bourke in Wellington. Editors: Darren Boey, Richard Frost

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net.