Yen Gains, South Korean Stocks Drop Before Europe Summit By Jason Clenfield - Jun 26, 2012

Asian stocks rose for the first time in five days and the yen strengthened for a third day before a European summit on the region’s debt crisis. Corn snapped a three-day advance that drove prices up 13 percent.

The MSCI Asia Pacific Index advanced 0.4 percent as of 11:39 a.m. in Tokyo. The yen rose 0.1 percent versus the dollar and gained against 14 of its 16 major peers. South Korea’s Kospi Index (KOSPI) dropped 0.3 percent. Standard and Poor’s 500 Index futures slipped less than 0.1 percent. Corn slid 0.8 percent after surging the previous three days amid dry weather that devastated U.S. crops. Natural gas advanced for a fifth day.

Trading volume on benchmark indexes in Japan and Hong Kong were more than 20 percent below the 30-day intraday average, on the eve of Europe’s 19th summit to tackle the debt crisis. Data showed confidence among South Korean manufacturers fell to the lowest level in four months, while the China Securities Journal said the country may introduce “more proactive” policies to ensure stable growth in the world’s second-largest economy.

“We’ve seen numerous summits come and go -- they usually deliver something but it’s often no more than the bare minimum,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages almost $100 billion. “In China, there’s no doubt their economy has slowed and the authorities have been slower to respond than they were in 2008 because they don’t want to set off another inflationary boom.”

Kospi Slides

Nine stocks gained for every seven that dropped in the MSCI Asia Pacific Index (MXAP), which lost 3 percent in the past four days. The gauge has tumbled 12 percent from its peak this year on Feb. 29 amid concern U.S. and Chinese economic growth is slowing as Europe’s debt crisis worsens.

South Korea’s Kospi dropped for a fifth day, headed for its longest losing streak in more than a month. Australia’s S&P/ASX 200 gained 0.6 percent, led by consumer staples. The Hang Seng Index rose 0.7 percent.

Japan Tobacco Inc. (2914), Asia’s largest cigarette maker by market value, climbed 3.4 percent in Tokyo as investors sought shares of companies with earnings less tied to economic growth. Hyundai Motor Co. dropped 2.5 percent in Seoul.

The yield on Japan’s 10-year bond fell 1 basis point and the cost of insuring Japanese bonds against default dropped after Prime Minister Yoshihiko Noda yesterday pushed a bill to double a sales tax through parliament’s lower house. The Markit iTraxx Japan index eased 1.5 basis points to 186.5 basis points, Deutsche Bank AG prices show. The benchmark rose 34.4 basis points this quarter through yesterday, according to CMA.

To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net