Asian Stocks, Oil Fall on China Manufacturing, Spain’s Rating

July 1 (Bloomberg) -- Asian stocks fell for the third day, continuing the global first-half slump, as China’s manufacturing growth slowed and Moody’s Investors Service said it may cut Spain’s top credit rating. Commodities and the euro declined.

The MSCI Asia Pacific Index of shares sank to a three-week low, dropping 1.4 percent to 111.25 at 10:27 a.m. in Hong Kong. Futures on the Standard & Poor’s 500 Index dropped 0.8 percent. The euro weakened 0.3 percent to $1.2201 and reached a record low against the Swiss franc. Crude oil slipped 1.1 percent to $74.81 a barrel and copper dropped 0.8 percent.

Stock returns trailed bonds by the widest margin in nine years during the first six months on signs growing budget deficits from Greece to Spain would stunt the global economic recovery. Concerns deepened today as Moody’s said Spain faces challenges in meeting fiscal targets and an industry group said China’s manufacturing grew at a slower pace for a second month.

“Investors are already finding difficulty traversing the wall of worry,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “A downgrade of Spanish sovereign debt would be another piece of negative news that adds to demand for perceived safe-haven investments.”

The MSCI World Index of 24 developed countries dropped 9.6 percent including dividends in the first half. Bonds gained 4.2 percent, the Bank of America Merrill Lynch Global Broad Market Index shows. Growing budget gaps in Greece, Spain and Portugal sent the euro down 15 percent and oil dropped 9 percent.

BHP, Nissan

Japan’s Nikkei 225 Stock Average slumped 1.9 percent today and the S&P/ASX 200 Index declined 1.8 percent in Sydney. BHP Billiton Ltd., the world’s largest mining company, sank 2.2 percent to A$36.82. Woodside Petroleum Ltd., Australia’s second- largest oil and gas producer, lost 1.4 percent to A$41.24.

Nissan Motor Co., which gets 13 percent of its revenue in Europe, sank 1.6 percent to 616 yen in Tokyo. Sony Corp., which gets 21 percent of its revenue from Europe, declined 3.4 percent to 2,303 yen. Sony separately said it’s recalling 535,000 Vaio personal computers because they may overheat due to a temperature-control defect.

“Investor sentiment is certainly negative and we’ve seen that reiterated in buying of defensive asset classes,” said Chris Weston, head of institutional dealing at IG Markets in Melbourne. “Traders are pricing in a double dip, which is not a healthy stalking ground for equities.”

South Korea’s Kospi stock index fell 1.5 percent, the most in more than three weeks. Hyundai Motor Co., South Korea’s largest carmaker, retreated 4.5 percent, the most in a month, after Chosun Ilbo reported its parent group may bid for a controlling stake in Hyundai Engineering & Construction Co. Hyundai Engineering gained 4.6 percent.

China Manufacturing

China’s Shanghai Composite Index lost 0.1 percent, led by commodity producers. Jiangxi Copper Co. dropped 1.2 percent, falling for an eighth day. The Purchasing Managers’ Index fell to a lower-than-expected 52.1 in June from 53.9 in May, the Federation of Logistics and Purchasing said today. A reading of above 50 signals expansion.

“Today’s economic data is evidence of weakening growth, but most of that has already been priced into stocks,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.

Twelve-month yuan non-deliverable forwards weakened 0.2 percent to 6.6755 per dollar. Policy makers have this year raised banks’ reserve requirements three times, tightened mortgage requirements and curbed lending targets.

South Korea’s won declined 1.1 percent to 1,235.41 per dollar, after dropping 7.4 percent last quarter. A purchasing managers’ survey today indicated South Korea’s business conditions in June were the worst this year. The HSBC South Korea PMI fell to 53.3 in June from 54.6 the previous month.

“Risk aversion is being emphasized,” said Ko Kyu Youn, a currency dealer at Korea Exchange Bank in Seoul. “Investors are seeking safe havens.”

Swiss Franc

The Swiss franc traded as high as 1.3085 per euro in Tokyo trading, the strongest since the common currency’s debut, from 1.3184 in New York. The yen rose 0.6 percent to 107.56 per euro near the eight-year high of 107.32 reached on June 29.

“Like most safe-haven assets, the dollar, the yen and the franc are rising at the moment due to risk aversion,” said Gareth Berry, a currency strategist in Singapore at UBS AG, the world’s second-largest foreign-exchange trader. “The weak PMI from China pushed” the franc higher, he said.

Three-month delivery copper fell as much as 1.3 percent to $6,430.75 a metric ton on the London Metal Exchange and dropped more than 16 percent last quarter. Aluminum declined 0.7 percent to $1,963 a ton. The Reuters/Jefferies CRB Index of 19 raw materials fell 5.4 percent in the second quarter, the worst three-month period since the end of 2008.

Crude oil declined for a fourth day in New York, its longest losing streak since May, after gasoline stockpiles unexpectedly increased in the U.S., raising concern about the growth of fuel demand in the world’s biggest energy consumer. The U.S. Energy Information Administration reported gasoline inventories rose 537,000 barrels to 218.1 million last week.

“There’s a lot of concerns about the pace of the U.S. economic recovery,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney.