Azernews.Az

By Bloomberg

Japanese shares tumbled with U.S. index futures and the yen rebounded after the world’s third- largest economy unexpectedly entered recession. Chinese shares were mixed and the yuan gained as a link between Hong Kong and Shanghai began, while New Zealand’s dollar advanced.

Japan’s Topix index dropped 2.6 percent and the gained 0.7 percent by 2:49 p.m. in Tokyo as gross domestic product shrank 1.6 percent last quarter from a year before, missing projections for a 2.2 percent gain. Standard & Poor’s 500 Index futures slid 0.5 percent and the MSCI Asia Pacific Index lost 0.8 percent. The Hang Seng Index declined 0.6 percent and Shanghai shares rose as the yuan strengthened. The yield on 10-year Treasuries dropped. The so-called kiwi added 0.7 percent.

The yen is rebounding after touching the lowest level since 2007 amid speculation the GDP miss will prompt Prime Minister Shinzo Abe to postpone a planned sales-tax increase. As investors gain mutual access to China’s biggest stock-trading venues for the first time, the country’s banks reported the biggest jump in bad loans last quarter since 2005. Weaker outlooks in the world’s second- and third-largest economies underscore the challenge for Group of 20 leaders who agreed at the weekend to boost member output by a collective $2 trillion by 2018.

“It’s official, Japan is now in recession,” Jesper Koll, the head of Japan equity research in Tokyo at JPMorgan Chase & Co., said in a Bloomberg TV interview. “The prime minister in all likelihood is going to say, look, we’re going to reduce the likelihood of Japan falling into recession again next year by taking away the VAT hike. Vote for me, endorse me, to stick through with this policy.”

Tax Impact

Japan’s second straight drop in GDP, matching the textbook definition of a recession, followed a 7.1 percent contraction in the second quarter that coincided with an increase in the national sales tax from 5 percent to 8 percent. Unadjusted for price changes, the economy contracted an annualized 3 percent in the three months through Sept. 30, the Cabinet Office said. Japanese stocks slumped.

Just one of the 33 industry groups on the Topix climbed today. The Nikkei 225 Stock Average retreated 2.7 percent.

U.S. equity index futures are signaling declines after the S&P 500 closed at a record 2,039.82 on Nov. 14. The new high masked the smallest market moves since 1979 as the 9.5 percent rally from October’s low ground almost to a halt.

Contracts on the Dow Jones Industrial Average weakened 0.4 percent and those on the Nasdaq 100 Index slipped 0.4 percent.

U.S. 10-year yields declined four basis points to 2.28 percent, according to Bloomberg Bond Trader data. The price of the 2.25 percent security due November 2024 advanced 11/32, or $3.44 per $1,000 face amount, to 99 22/32. A basis point is 0.01 percentage point.

China Slowdown

Japan’s 10-year yield dropped to 0.475 percent. Australia’s slid seven basis points to 3.26percent.

The Bloomberg Dollar Spot Index dropped 0.2 percent, declining for a second day as the yen bounced off a seven-year low of 117.05 to the greenback that was hit immediately after the GDP report. Japan’s currency plunged 6.6 percent in the 12 trading days from the close on Oct. 30 -- the day before the Bank of Japan increased its record stimulus -- through to today’s low.

“Japan’s GDP data added to some of the market’s concerns about the global growth outlook and the extent to which the recent rallies in the U.S. dollar and U.S. assets can be justified,” said Greg Gibbs, head of Asia-Pacific Market Strategy at Royal Bank of Scotland Group Plc in Singapore.

The euro strengthened 0.2 percent to $1.2543 and the U.K. pound advanced 0.3 percent to $1.5721. The New Zealand dollar traded at 79.61 U.S. cents after a better-than-estimated retail sales report.

Stock Link

The yuan climbed 0.07 percent to 6.1258 per dollar in offshore trading, according to data compiled by Bloomberg. In Shanghai, the currency advanced 0.07 percent to 6.1262, China Foreign Exchange Trade System prices show.

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong retreated 1.4 percent and the Shanghai Composite Index swung to a gain of 0.5 percent. Hong Kong Exchanges & Clearing Ltd. dropped 2.3 percent.

About 82 percent of the 13 billion yuan ($2.1 billion) daily quota for international investors buying China shares was filled, compared with 11 percent for mainlanders purchasing Hong Kong shares. When the daily quotas are used up, buying through the program is halted for the day.

China is heading for the weakest economic expansion since 1990, and Communist Party leaders have discussed lowering the nation’s growth target for 2015, according to a person with knowledge of their talks.

Nonperforming loans rose 72.5 billion yuan from the previous quarter to 766.9 billion yuan, the China Banking Regulatory Commission said in a statement on Nov. 15. Soured credit accounted for 1.16 percent of lending, up from 1.08 percent three months earlier.