European, U.S. Index Futures Drop, Euro Slides

By Shiyin Chen - Aug 16, 2011 2:40 PM GMT+0800

The euro slid from a three-week high versus the dollar and European equity-index futures fell before data forecast to show economic growth for the region slowed. Asian stocks rose as Google Inc. (GOOG)’s largest acquisition boosted technology companies.

The shared currency weakened to $1.4386 as of 7:35 a.m. in London from $1.4445 yesterday, while Euro Stoxx 50 Index futures dropped 1.4 percent. Standard & Poor’s 500 Index futures lost 0.8 percent after a three-day rebound in the U.S. stock gauge. The MSCI Asia Pacific Index added 0.3 percent and the Malaysian ringgit strengthened. Oil retreated 0.9 percent in New York, while copper declined 0.6 percent.

Data today showed German growth almost stalled last quarter, ahead of a report that will probably show gross domestic product cooled in the euro-area. Commerce Department figures may also show U.S. housing starts fell. Billionaire Warren Buffett said his Berkshire Hathaway Inc. made its biggest bets on stocks this year on Aug. 8, saying that the slump in markets provided investors with an opportunity to buy shares “on sale.”

“There’s probably more uncertainty about Europe,” said Grant Turley, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “When you’ve got low growth, debt becomes a real issue.”

The euro slid against 13 of its 16 major peers and also depreciated 0.4 percent to 110.66 yen. Economic growth in the euro-region probably rose 0.3 percent from the first quarter, when it increased 0.8 percent, according to economists surveyed by Bloomberg before today’s data.

Germany’s Growth

A separate report showed Germany’s gross domestic product, adjusted for seasonal effects, rose 0.1 percent from the first quarter, when it jumped a revised 1.3 percent. Economists had forecast growth of 0.5 percent. The Swiss franc climbed 0.6 percent to 1.1251 per euro, from 1.1329.

A meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel earlier spurred speculation the leaders may take action to contain the region’s debt crisis.

After a July 21 European Union agreement to bolster the region’s rescue fund failed to calm markets, calls are growing for Merkel and Sarkozy to discuss joint borrowing or a mutual guarantee among the 17 euro states, policies that Germany and France have previously rejected. While not on the agenda, the issue is likely to come up at their press briefing scheduled for 6:30 p.m. Paris time after the talks.

Asian Valuations

About five shares advanced for every three that declined on MSCI’s Asia Pacific Index, with the gauge bound for its highest close since Aug. 5. The index yesterday jumped the most since March 22 as it rebounded from a three-week, 12 percent drop that dragged valuations down to 12.1 times estimated profits last week, the lowest level since December 2008, according to data compiled by Bloomberg.

Japan’s Nikkei 225 Stock Average gained 0.2 percent. The Kospi Index rallied 4.8 percent in South Korea, where markets were closed yesterday for a holiday. Indian markets also returned from a holiday, with the Bombay Stock Exchange Sensitive Index rising 0.8 percent.

Samsung Electronics Co., whose Galaxy mobile phones run Google’s Android operating system, climbed 6.1 percent, snapping a nine-day slump. Google said yesterday it will spend $12.5 billion buying Motorola Mobility Holdings Inc., gaining access to more than 17,000 patents.

Google’s purchase may be potentially positive for Asian Android phone makers as it helps to reduce litigation risk, Goldman Sachs Group Inc. said in a note today. Foxconn International Holdings Ltd. (2038) surged 14 percent in Hong Kong. The company is the biggest supplier to Motorola, according to Bloomberg data. ZTE Corp. (763), China’s second biggest maker of telephone equipment, added 4.6 percent.

‘Close’ to Lows

“We’re probably very close to the lows for the year,” said Adrian Mowat, JPMorgan Chase & Co.’s Hong Kong-based chief Asia and emerging-market strategist. Takeovers “should help valuations in the tech sector. Everyone talks about the amount of cash in the corporate sector, so the M&A gets that cash into the market,” he said in a Bloomberg Television interview.

S&P 500 futures expiring in September signal the gauge may snap its biggest three-day rally since March 2009. The index rose 2.2 percent yesterday, erasing all of its losses from last week, when S&P’s unprecedented reduction of the U.S. credit rating from AAA to AA+ spurred concern the recovery will falter.

Berkshire Hathaway increased its stake in Wells Fargo & Co., building equity holdings amid the market decline, according to a filing yesterday. The firm accelerated purchases on Aug. 8, when the S&P 500 plunged 6.7 percent, its steepest decline since December 2008.

Buffett Buys

“I like buying on sale,” Buffett, Berkshire’s chief executive officer and head of investments, said in an interview with Charlie Rose to be broadcast on PBS. “Last Monday, we spent more money in the stock market buying than any day this year.”

Treasury 10-year notes yielded 2.29 percent, down two basis points after a five-basis-point gain yesterday. Industrial production probably grew 0.5 percent in July after a 0.2 percent gain in June, according to the median forecast of analysts surveyed by Bloomberg before the data today. A separate Commerce Department report may show housing starts dropped 4.6 percent to a 600,000 annual pace in July.

The cost of insuring corporate and sovereign bonds in Asia against non-payment fell. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan slid seven basis points to 140, while the Markit iTraxx Australia index lost seven basis points to 142, according to Credit Agricole CIB prices. Both gauges are set for their lowest level since Aug. 5, according to data provider CMA.

Risk Appetite

Malaysia’s ringgit advanced for a sixth day, the longest winning streak since April, on speculation policy makers will favor a stronger currency or raise interest rates to stem gains in living costs. The currency strengthened 0.3 percent to 2.9715 per dollar. Government data tomorrow will show inflation held at a two-year high of 3.5 percent in July and the economy expanded in the second quarter, according to separate Bloomberg surveys.

“Asian currencies are higher because of rising risk appetite following better data from the U.S.,” said Akira Banno, a treasury adviser in Kuala Lumpur at Bank of Tokyo-Mitsubishi UFJ Bhd. “In Malaysia, second-quarter growth of 3 percent to 4 percent is acceptable to market players and there is a possibility the central bank will raise policy rates if inflation remains high.”

Oil dropped from the highest in almost two weeks, with futures for September delivery sliding as much as 0.9 percent to $87.06 a barrel. The contract yesterday gained 2.9 percent to $87.88, the highest settlement since Aug. 3. Prices are up 16 percent the past year.


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