Asian Stocks, Oil Fall on Global Recovery Concern; Won Weakens

June 30 (Bloomberg) -- Asian stocks dropped the most in more than two weeks, oil fell for a third straight day and the won weakened on concern that the global recovery is faltering.

The MSCI Asia Pacific Index retreated 1.4 percent to 112.36 as of 11:35 a.m. in Tokyo, the biggest decline since June 11 and set for its worst first half in two years. Chinese stocks fell to a 14-month low and South Korea’s won led a decline in emerging-market currencies. Crude extended its drop since June 25 to 3.9 percent, the sharpest three-day slide in six weeks.

Shares extended a global rout as an unexpected drop in U.S. consumer confidence added to concern sparked by the downward revision of an economic indicator for China. President Barack Obama said the U.S. economy faces “headwinds” from Europe’s debt crisis, while reports today and tomorrow may show gains in U.S. business activity and Chinese manufacturing are moderating.

“Equity markets are concerned about a slowdown in U.S. economic growth,” said Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management (Asia) Ltd. which oversees about $10 billion. “It’s not a bad thing that the Chinese government is trying to cool down the economy, but it’s having a negative impact on market sentiment.”

More than six stocks declined in the MSCI’s Asian gauge for each one that advanced. Japan’s Nikkei 225 Stock Average lost 2.1 percent, while Australia’s S&P/ASX 200 Index dropped 1.5 percent. The Kospi declined 1 percent in Seoul.

S&P Futures

Futures on the Standard & Poor’s 500 Index rose 0.4 percent. The gauge yesterday slumped 3.1 percent to its lowest since Oct. 30 after the Conference Board’s gauge of confidence among U.S. consumers slumped to 52.9 this month from a revised 62.7 in May.

Nissan Motor Co. and Canon Inc., which get more than a quarter of their revenue in the Americas, slid in Tokyo as a stronger yen dented their profit outlooks. Nissan fell 1 percent while Canon declined 3 percent.

BHP Billiton Ltd., the world’s largest mining company, sank 1.8 percent in Sydney. Rio Tinto Group, the world’s third- biggest mining company, lost 2.8 percent. Mitsubishi Corp., which trades commodities, fell 3 percent in Tokyo.

The Reuters/Jefferies CRB Index of 19 raw materials tumbled 2.8 percent yesterday, the most since Aug. 14. Copper for three- month delivery was little changed at $6,495 a metric ton, after tumbling 5.5 percent yesterday, the most in six weeks.

Crude fell below $76 a barrel in New York on concern a weakening global economic recovery will slow growth in fuel demand.

“Crude has been shellacked due to confidence around the world eroding,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney.

Mining Tax

Australian Prime Minister Julia Gillard said today “good discussions” are continuing with the mining industry amid speculation the government will unveil a compromise as soon as today on its planned resource tax.

The outlook for commodities demand dimmed yesterday after the Conference Board revised down its April leading economic index for China to show the smallest gain in five months. That triggered a global sell-off in riskier assets, with Chinese stocks dropping the most in six weeks.

China’s Shanghai Composite Index fell 1.1 percent to a 14- month low on concern economists may reduce their growth forecasts for the nation on policy tightening measures and the European debt crisis.

Jiangxi Copper Co. and Zhuzhou Smelter Group Co. lost at least 2.7 percent after metal prices retreated. Poly Real Estate Group Co., the second-largest developer by market value, dropped as much as 4.1 percent.

Foxconn Loss

Taiwan’s Taiex index dropped 1.6 percent. Hon Hai Precision Industry Co., the world’s largest electronics contract manufacturer, slipped the most in three weeks after its unit Foxconn International Holdings Ltd. forecast a wider first-half loss. Foxconn slid 7.7 percent in Hong Kong trading to the lowest since October.

“The view is spreading among investors that a recovery in the global economy won’t be as easy as people had expected,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $65 billion. “Moves by countries around the world to tighten fiscal policies are behind the plunge in markets.”

The Institute for Supply Management-Chicago Inc. will say today its U.S. business barometer fell to 59 this month from 59.7 in May, according to a Bloomberg News survey of economists. The Purchasing Managers’ Index for China dropped to 53.2 in June from 53.9 in May, another survey showed before tomorrow’s data.

Weaker Won

South Korea’s won weakened 1.1 percent to 1,230.09 per dollar, headed for its first quarterly loss in more than a year. Malaysia’s ringgit dropped 0.4 percent to 3.2630 against the U.S. currency. China and the U.S. are South Korea’s two largest export markets.

“The situation at home and abroad is psychologically vulnerable and stocks are not doing as well as we hoped,” said Ha Joon Woo, a currency dealer at Daegu Bank Ltd in Seoul. “We’ll have to see if exporter demand to repatriate foreign income can stop the slide.”

The won fell even as a Bank of Korea report today showed South Korean manufacturers’ confidence held near a seven-year high. The central bank said its index measuring expectations for July stayed at 104, unchanged from June.

The yen traded near the strongest in more than eight years against the euro and the highest in almost eight weeks against the dollar amid higher demand for Japan’s currency as a refuge.

Double Dip?

Japan’s currency was at 108.09 per euro in Tokyo from 107.98 in New York yesterday, when it touched 107.32, the strongest level since November 2001. The yen was at 88.54 per dollar from 88.60. Yesterday it reached 88.29, the strongest level since May 6. The euro fetched $1.2208 from $1.2188.

“Investors are growing more concerned about the global recovery story, with talk of double-dip recession rising,” said Khoon Goh, a senior markets economist at ANZ National Bank Ltd. in Wellington. “The dollar and the yen are back in favor as ‘safe-haven’ currencies.”

The cost of insuring Asian bonds against default rose to the highest in three weeks, according to traders of credit- default swaps.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan added 5 basis points to 147 basis points as of 8:17 a.m. in Singapore, the highest since June 10, Royal Bank of Scotland Group Plc and CMA DataVision prices show.