Sept. 19 (Bloomberg) — The euro weakened against the dollar for a second day and stocks dropped amid increased concern that Greece may default on its debt. Gold rose and copper retreated to a six-week low.
The euro declined 0.9 percent to 1.3678 per dollar as of 2:41 p.m. in Hong Kong. The MSCI Asia Pacific Excluding Japan Index fell 2.4 percent. Futures on the Euro Stoxx 50 Index slumped 2.2 percent and contracts on the Standard Poor’s 500 Index sank 1.8 percent. Copper tumbled as much as 2.3 percent and oil lost 1.5 percent to $86.61 a barrel. Gold increased 0.5 percent. Japanese markets were shut for a public holiday.
“The Greek situation could be coming to a head,” said Khiem Do, the Hong Kong-based head of multi-asset strategy at Baring Asset Management, which oversees about $10 billion. “Some hair cut might be needed for Greece if they don’t receive additional funding. That could create a domino effect in countries like Spain, Italy and Portugal. That’s what the market is fearing.”
Greece’s ability to avoid default hangs in the balance this week as international monitors will assess whether Prime Minister George Papandreou can meet the conditions of rescue loans. Papandreou canceled a U.S. visit that was to begin yesterday, saying he needed to remain in the country for a “critical” seven days.
Finance chiefs from the euro region said last week that the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation. Federal Reserve policy makers will gather in Washington tomorrow for a two-day meeting to discuss whether additional measures are needed to help revive the economic recovery.
Aussie, Kiwi
The euro slid against 9 of its 16 major peers, while the Dollar Index advanced 0.8 percent. Australia’s currency fell 1.4 percent to $1.0214. South Korea’s won retreated to a six-month low.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, declined 0.8 percent, set for the biggest loss since March 2009. Indonesia’s rupiah traded near a seven-month low, falling 1.3 percent to 8,918 against the dollar.
“I don’t think it’s going to be smooth sailing ahead unless there are more coordinated efforts,” said Lydia So, a San Francisco-based fund manager for Matthews International Capital Management LLC, which oversees $17.7 billion. “The fundamentals of developed countries aren’t very good.”
SP 500 futures dropped to 1,190.10, indicating the U.S. equity benchmark will fall after posting the third-biggest weekly gain since 2009. President Barack Obama will propose a new levy on U.S. taxpayers making more than $1 million, adopting a suggestion from billionaire investor Warren Buffett, according to an administration official.
China Property Prices
Hong Kong’s Hang Seng Index tumbled 2.6 percent. The Hang Seng China Enterprises Index lost 3.5 percent, set for the lowest close since May 2009. The Shanghai Stock Exchange Composite Index slumped 1.5 percent. Home prices rose across China last month, defying government curbs and prompting speculation that Beijing may plan more measures to tame asset- price inflation.
China Coal Energy Co., a unit of the country’s second- biggest producer of the commodity, plunged 17 percent before trading was suspended in Hong Kong. The parent company, China National Coal Group Corp., was ordered to cease operations in Shanxi province in northern China after flooding at a pit killed 10 people, Xinhua News Agency reported Sept. 17.
Copper for three-month delivery dropped as low as $8,500.00 a metric ton, the lowest price since Aug. 9. Nickel lost 1.7 percent to $21,135 a ton and aluminum slipped 1.2 percent to $2,352 a ton.
Oil, Treasuries
Oil fell to the lowest in a week in New York on concern weaker economic growth in the U.S., the world’s largest consumer of crude, and Europe will hurt demand. The losses in oil futures today extended a 1.6 percent decline on Sept. 16.
“People were hoping for some positive interaction between European finance ministers and Geithner resulting in a firm, positive response to Europe’s debt crisis,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Instead, what they got was just greater uncertainty, and nothing was resolved.”
The yield on the 10-year Treasury note lost 4 basis points to 2.01 percent. The two-year yield fell to a record 0.1512 percent. Wall Street’s biggest bond traders are stockpiling Treasuries at the fastest pace since 2007 on speculation the Federal Reserve will announce a plan this week to buy longer- term debt to spur the faltering economy.
Default Insurance
The 20 primary dealers held $15.1 billion of Treasury securities due in more than one year as of Sept. 7, the most since December and up from a $75 billion bet against the debt on May 6, Fed data show.
The cost of protecting Asia-Pacific corporate and sovereign bonds from default increased. The Markit iTraxx Australia index rose 8.5 basis points to 180.5, according to Deutsche Bank AG. That’s the first increase in five trading days and puts the index on course for its biggest daily rise since Sept. 12, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 7 basis points to 169.5, Deutsche Bank prices show.
–With assistance from Sarah McDonald and Candice Zachariahs in Sydney, Chanyaporn Chanjaroen, Christian Schmollinger and Kristine Aquino in Singapore and Yumi Teso in Bangkok. Editor: Patrick Chu
To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net