Aussie Falls on CPI as China Stocks, Yuan Drop on Factory Report
Bloomberg News
Australia's dollar fell to the lowest in two weeks as inflation in the country unexpectedly slowed and a preliminary China manufacturing report signaled continuing weakness in Asia's largest economy. Asian stocks and the yuan reversed gains.
The Aussie dropped 0.9 percent versus the greenback by 12:31 p.m. in Tokyo and local bonds jumped as the inflation report was seen dimming prospects for rate increases. China's yuan slipped 0.1 percent. Declines among Chinese shares in Hong Kong countered gains in Japan as the MSCI Asia Pacific Index swung to a loss after rising as much as 0.6 percent. Standard & Poor's 500 Index futures were little changed after a sixth day of gains in New York. Two-year Treasury yields rose the most in a month after an auction of the debt.
Manufacturing in Asia's largest economy is contracting for a fourth month, according to a preliminary survey from HSBC Holdings Plc and Markit Economics Ltd. Gauges of U.S. and European factory output are also due today as Ukraine considers resuming operations to dislodge militants in its east. Gains in drugmakers amid a takeover bid for and a better-than-estimated earnings season have helped U.S. stocks recover from their recent technology-driven rout.
'The CPI numbers undershot most analyst expectations and that's put the Aussie under some intra-day downward pressure,' said Peter Dragicevich, a currency strategist at Commonwealth Bank of Australia in Sydney. 'It shouldn't change the fundamental back drop for the Aussie and we don't think this move will extend too much further. Good support will probably be found down toward 92.47 cents.'
Australian Bonds
The Aussie plunged to as low as 92.81 U.S. cents, the weakest since April 8, and weakened against all 16 major peers. Trimmed mean consumer-price index came in at 0.5 percent, less than the 0.6 percent increase in the three months through Dec. 31 and below the estimate for a gain of 0.7 percent. The currency touched 93.78 U.S. cents in the last session, the strongest intraday level since April 17.
Australian government bonds due in a decade yielded 3.96 percent, seven basis points less than immediately before the inflation report. The S&P/ASX 200 Index pared a fifth advance to 0.6 percent.
China's yuan reversed an earlier gain and touched the weakest level in 16 months after the so-called flash purchasing-managers index came in at 48.3 for April from 48 in March, in line with economists' predictions. Readings below 50 signal contraction in the sector. China is the biggest trading partner for most Asia-Pacific countries.
Hong Kong's Hang Seng Index (HSI) fell 0.8 percent and the Hang Seng China Enterprises Index of mainland Chinese stocks listed in the city retreated 1.2 percent, headed for its lowest close this month. The Shanghai Composite Index dropped 0.5 percent.
Rupiah Slumps
South Korea's Kospi index reversed a gain to slide 0.2 percent. Singapore's Straits Times Index declined 0.7 percent.
Indonesia's rupiah weakened by the most in almost five weeks as uncertainty over the incoming government and concern over the current-account deficit damped investor demand for the nation's assets. The rupiah fell 1.1 percent in the biggest drop since March 20 to 11,641 per dollar.
The Markit U.S. manufacturing PMI is projected to deliver a reading of 56, while a similar measure for the euro region may hold at 53, according to economists polled by Bloomberg.
The S&P 500 added 0.4 percent to 1,879.55 yesterday, within 1 percent of its closing record of 1,890.90 reached April 2. Allergan -- which received a cash-and-stock bid valued at about $48 billion from Valeant Pharmaceuticals International Inc. April 21 -- soared 15 percent to close at a record. , Vertex Pharmaceuticals Inc. and Regeneron Pharmaceuticals Inc. led drugmaker gains in the S&P 500, rising more than 3 percent in the U.S. session.
Two-year Treasury yields climbed four basis points, the most since March 19, to 0.45 percent, while yields on 10-year Treasury notes were little changed at 2.71 percent. The U.S. Treasury auctioned $32 billion of two-year notes yesterday, drawing a more-than-forecast yield of 0.447 percent amid speculation the Federal Reserve will raise benchmark interest rates before the debt matures.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net John McCluskey
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