Asian Stocks Decline as Yen Climbs on Drop in U.S. Home Sales

June 23 (Bloomberg) -- Asian stocks fell the most in two weeks, led by Japanese exporters, as the yen rose after a drop in U.S. home sales added to speculation the global recovery may be faltering. South Korea’s won slid for a second day.

The MSCI Asia Pacific Index retreated 1.1 percent to 116.84 at 12:50 p.m. in Tokyo, set for its largest drop since June 7. The yen strengthened against all major counterparts, climbing to the highest against the euro since June 11 and touching 90.37 against the dollar. Standard & Poor’s 500 Index futures rose 0.3 percent after U.S. stocks plunged the most in three weeks.

Investors are concerned a U.S. slowdown, along with Europe’s sovereign-debt crisis, may derail the global economy. A U.S. report yesterday showed sales of previously owned homes unexpectedly fell in May, while a Commerce Department report today may show new home sales plunged, adding to speculation Federal Reserve policy makers meeting today and tomorrow will need to keep interest rates near zero to help sustain the U.S. recovery given the hazards posed by the European crisis.

“The outlook for the global economy is rapidly getting hazier,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc. “Investors are becoming more inclined to avoid risk.”

Almost four shares dropped for every one that rose among the MSCI Asian index’s 983 companies. The Nikkei 225 Stock Average slumped 1.8 percent, leading stock index declines in the region. Honda Motor Co. and Canon Inc. dived at least 2 percent.

Energy Companies

PetroChina Co., the nation’s largest oil company, fell 1.5 percent while Inpex Corp., Japan’s largest energy explorer, dropped 2.4 percent following a decline in crude prices. Oil for August delivery fell 0.7 percent to $77.34 a barrel in New York, extending yesterday’s 1 percent loss. Copper was little changed in London after losing as much as 1.1 percent.

The Baltic Dry Index, a measure of shipping costs of commodities, also fell for an 18th day, the longest losing streak in more than a year. Mitsui O.S.K. Lines Ltd. slumped 3 percent and China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, lost 1.9 percent.

The yen gained to as much as 110.78 per euro, the strongest level since June 11, from 111.14 in New York yesterday. Japan’s currency was as strong as 90.37 against the dollar from 90.57 yen yesterday, while yields on Japan’s benchmark bonds reached the lowest since December 2008.

‘Soft Patch’

“A slew of economic data now signal a soft patch in the recovery,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., an investment advisory firm. “Investors shun riskier assets and are shifting allocation back to the dollar and yen.”

Currencies weakened elsewhere in Asia. The won fell 0.4 percent to 1,186.15 per dollar, extending its retreat from the one-month high set on June 21, while Malaysia’s ringgit dropped 0.6 percent to 3.227 per dollar. The Chinese yuan was little changed at 6.8107 per dollar after yesterday declining the most since December 2008.

New U.S. home sales probably plunged 19 percent to a 410,000 annual pace in May, according to the median forecast of economists surveyed. Today’s report was preceded by figures from the National Association of Realtors yesterday that showed purchases of previously owned homes in the U.S., which accounted for about 90 percent of the market, decreased to a 5.66 million annual rate. The median forecast in a Bloomberg News survey was for a rise to a 6.12 million pace.

Declining U.S. home sales helped drag the S&P 500 lower by 1.6 percent and sent the cost of insuring Asian bonds against default higher, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 8 basis points to 131 basis points, Royal Bank of Scotland Group Plc prices show. The risk benchmark is on track for its biggest increase since June 4, according to CMA DataVision in New York.