Asian Stocks Drop as U.S. Jobs, Manufacturing Reports Disappoint

June 02, 2011, 6:57 AM EDT By Jonathan Burgos and Shani Raja

June 2 (Bloomberg) -- Asian stocks dropped for the first time in three days after U.S. manufacturing expanded at the weakest pace in more than a year and employers hired fewer workers than forecast, fueling concern the global economic recovery will slow.

Samsung Electronics Co., the Korean consumer-electronics company that gets 85 percent of its revenue from overseas, sank 3.1 percent in Seoul. Sony Corp., Japan’s largest exporter of consumer electronics, lost 1.7 percent in Tokyo. Toyota Motor Corp. and Honda Motor Co. led declines among Japanese carmakers as sales in the U.S. slumped. BHP Billiton Ltd., the world’s largest mining company and Australia’s No. 1 oil producer, retreated 2.2 percent after crude oil and metal futures dropped.

The MSCI Asia Pacific Index dropped 1.6 percent to 134.59 as of 7:37 p.m. in Tokyo, paring this week’s advance and set for its biggest drop since May 23. All of the 10 industry groups that make up the gauge declined. More than four stocks dropped for each that rose on the measure, which last week completed its longest streak of weekly losses in two years as concern deepened over Europe’s debt crisis and amid speculation a slowing global recovery will crimp earnings.

“The weak manufacturing and employment data coming on the back of soft data out of Europe and China and another downgrade for Greece have added to concerns about the strength of the global economy,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages $98 billion in Sydney. “Investors are worried it will be something worse, which will be bad for Asian exporters. As a result the risk on- risk off, the roller coaster in global and regional markets continues and right now it’s back to risk off.”

Kan Vote

Japan’s Nikkei 225 Stock Average decreased 1.7 percent ahead of a no-confidence vote on Prime Minister Naoto Kan after the country’s markets closed. The motion was rejected by the lower house of parliament after Kan, who faces discontent over his handling of the March 11 earthquake disaster that triggered the world’s worst nuclear accident in 25 years, signaled he’ll resign once a solution to the nation’s post-quake crisis is in sight.

South Korea’s Kospi Index retreated 1.3 percent. Hong Kong’s Hang Seng Index slipped 1.6 percent, while China’s Shanghai Composite Index sank 1.4 percent. Australia’s S&P/ASX 200 Index dropped 2.3 percent, its steepest fall in a year.

Futures on the Standard & Poor’s 500 Index added 0.3 percent today. In New York, the index retreated 2.3 percent yesterday, its biggest decline since August, after the Institute for Supply Management’s factory index fell last month to its lowest level since September 2009.

Manufacturing, Jobs

Companies in the U.S. last month added jobs at the slowest pace since September. Employment grew by 38,000 in May, data from ADP Employer Services showed yesterday, missing a 175,000 median estimate of economists surveyed by Bloomberg.

Manufacturing growth from China, the U.S. and Europe slowed in May, adding to signs that momentum is weakening in a global economy facing headwinds from rising commodity costs and financial shocks. Greece’s risk of default was raised to 50 percent by Moody’s Investors Service as European officials rushed to put together the second bailout plan in two years to stave off renewed financial turmoil in the region.

“The global economy has hit a soft patch and more investors are shying away from risk assets.” said Mitsushige Akino, who oversees the equivalent of $600 million at Ichiyoshi Investment Management Co. in Tokyo.

Billabong International Ltd., the world’s largest surfwear maker, dropped 3.4 percent to A$6.20 in Sydney. Samsung Electronics, which gets about 22 percent of sales from America, dropped 3.1 percent to 883,000 won in Seoul. LG Electronics Inc., the world’s third-biggest maker of mobile phones, tumbled 4.4 percent to 94,200 won. Sony, the maker of PlayStation gaming consoles and Bravia televisions, lost 1.7 percent to 2,142 yen in Tokyo.

Auto Slump

Acer Inc., the world’s second-biggest supplier of notebook computers, slumped 7 percent to NT$51.90 in Taipei, its steepest drop since December 1997. The company said it will book an operating loss of $150 million because of an inventory write-off. It also plans to cut 300 jobs in Europe, the Middle East and Africa to reduce expenses.

Carmakers declined as industry-wide U.S. auto sales fell to 1.06 million cars and light trucks last month from 1.1 million a year earlier, according to a report from Autodata Corp., of Woodcliff Lake, New Jersey. Toyota and Honda, the automakers hardest hit by Japan’s record earthquake, led U.S. sales declines among Asian-based car manufacturers in May as supplies of some models ran low, the report showed.

Toyota, the world’s biggest carmaker, decreased 3.3 percent to 3,270 yen. Honda, which gets about 44 percent of sales from North America, dropped 2.4 percent to 3,045 yen. Nissan Motor Co., Japan’s No. 3 automaker by market value, sank 3.2 percent to 781 yen.

Oil, Metals

A gauge of raw material producers led the drop among the 10 industry groups in the MSCI Asia Pacific Index. BHP dropped 2.2 percent to A$43.55 in Sydney. Rio Tinto Group, the world’s second-biggest mining company by sales, fell 1.8 percent to A$80.10. Jiangxi Copper Co., China’s No. 1 producer of the metal, slipped 3 percent to HK$25.65 in Hong Kong. Cnooc Ltd., the nation’s largest offshore oil producer, dipped 2.2 percent to HK$18.96.

Crude oil for June delivery declined 2.4 percent to settle at $100.29 a barrel in New York yesterday, the biggest drop in a single-session since May 11. The London Metal Exchange Index of prices for six metals including copper and aluminum lost 1 percent.

The MSCI Asia Pacific Index slid 0.6 percent this year through yesterday, compared with gains of 4.5 percent by the S&P 500 and 0.9 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.8 times estimated earnings on average, compared with 13.3 times for the S&P 500 and 11.2 times for the Stoxx 600.

--With assistance from Norie Kuboyama and Satoshi Kawano in Tokyo. Editors: John McCluskey.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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