Asian stocks drop as US job markets worsen

Asian stocks fell for a third day as a drop in profit at Seven & I Holdings Co., Japan’s largest retailer, and worsening job markets in the U.S. and Europe fanned doubts the global economy will recover soon.

Seven & I tumbled 6.3 percent after saying profit dropped 28 percent last quarter. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 bulk shipper, sank 3.6 percent amid speculation global trade will suffer after unemployment reached 9.5 percent in both the U.S. and Europe. BHP Billiton Ltd., the world’s biggest mining company, declined 2.9 percent as oil and metals dropped.

“People expected a drastic improvement in the U.S. job market, which turned out to be too optimistic,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages about $13 billion. “Household spending won’t recover anytime soon. Consumers are flocking to discounted products and that may damage the economy through deflation.”

The MSCI Asia Pacific Index lost 0.9 percent to 102.09 as of 1:31 p.m. in Tokyo. The gauge has slipped 1.5 percent this week, the second time in three weeks it has retreated.

Japan’s Nikkei 225 Stock Average fell 1.3 percent to 9,746.06. Benchmarks open for trade in the region fell except in China, Pakistan and Sri Lanka.

The MSCI Asia soared a record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing. The surge has driven the price of stocks on the measure to 23.4 times estimated earnings, compared with 15 times at the market trough in March and 15.2 for the U.S.’s Standard & Poor’s 500 Index.

Job Cuts

Sundance Resources Ltd. plunged in Sydney after the ore- exploration company said its chairman was stepping down. Orix Corp., Japan’s biggest non-bank lender, surged 6 percent even after saying it would sell 100 billion yen ($1 billion) in new shares.

In New York, the S&P 500 slumped 2.9 percent after the Labor Department said U.S. employers cut 467,000 jobs in June, over 100,000 more than economists had forecast. That pushed the nation’s unemployment rate to 9.5 percent, a level not seen since August 1983. Futures on the S&P 500 rose 0.2 percent today.

“The U.S. unemployment data confirms that the economy remains very fragile at the moment,” said Jason Teh, who helps manage more than $2.5 billion at Investors Mutual Ltd. in Sydney. “The sustainability of the share market recovery has to be confirmed by further improving economic fundamentals.”

Europe’s unemployment rate also increased to 9.5 percent in May, the highest level since 1999. Jean-Claude Trichet, the European Central Bank governor, said the bank will maintain interest rates at 1 percent.

‘State of Crisis’

Seven & I plunged 6.3 percent to 2,160 yen. The retailer said yesterday profit dropped 28 percent in the three months ended May 31. Worsening household income and job markets prompted consumers to save money, the company said.

Rival retailer Aeon Co. declined 4.4 percent to 895 yen. Isetan Mitsukoshi Holdings Ltd., Japan’s largest department- store operator, slumped 5.7 percent to 941 yen. The company said on July 1 sales fell 10.3 percent in June.

Yoshimasa Hayashi, who was appointed as Japan’s Economy and Fiscal Policy Minister on July 1, said yesterday the nation may slip back into deflation and that the economy is “in a state of crisis.”

Today marks the first three-day slump in MSCI’s Asian gauge since April 28, as economic reports this week pointed to a stalled recovery in the region. The Bank of Japan’s Tankan survey of manufacturer sentiment rebounded less than estimated, while government data showed Japan’s unemployment rate reached a five-year high in May. Australia’s exports dropped to a 14-month low, while building approvals declined by the most since 2002.

Oil, Metals, Shipping

The job reports raised concern demand for materials will wane. Crude oil tumbled 3.7 percent to $66.73 a barrel in New York, the lowest settlement since June 3, and extended its decline today. A gauge of six metals in London dropped 1.2 percent. The Baltic Dry Index, a measure of shipping costs for commodities, lost 1.8 percent to a three-week low.

Mitsui O.S.K. slumped 3.6 percent to 589 yen. BHP lost 2.9 percent to A$33.30. Fortescue Metals Group Ltd., Australia’s third-largest iron ore producer, dropped 4.4 percent to A$3.51.

Chinatrust Financial Holding Co., Taiwan’s biggest credit- card issuer, surged 3.9 percent to NT$21.45. The China Times reported China may open its credit card market to Taiwanese banks, citing Liu Mingkang, Chairman of the China Banking Regulatory Commission.

Electricity Output

Huaneng Power International Inc., the listed unit of China’s largest power group, rose 1.3 percent to 7.91 yuan. The nation’s electricity output gained 3.6 percent in June, the first monthly increase since October, the China Securities Journal reported today, citing China State Grid Corp.

Sundance Resources, which is seeking to build a $3.3 billion iron ore project in Camaroon, slumped 3.1 percent to 15.5 Australian cents. Chairman George Jones will retire on Aug. 31 and be replaced by non-executive director Geoff Wedlock, the company said.

Orix jumped 5.5 percent to 5,790 yen in Tokyo. The company will sell 18 million new shares in two sales, using the proceeds to repay debt and the rest for investment and loans, the company said yesterday.

“Orix’s financial position is very healthy,” said Shiro Yoshioka, an analyst at Japaninvest KK in Tokyo. “Orix is probably preparing to expand its business, which could boost profit.”

Source: Bloomberg