Asia Stocks Drop

Asia Stocks Fall on China's Manufacturing Report; Ringgit Drops

June 1 (Bloomberg) -- Asian stocks fell, extending the biggest monthly decline since October 2008, and emerging-market currencies weakened after Chinese manufacturing growth slowed more than estimated. The euro dropped after consumer confidence in the region declined.

The MSCI Asia Pacific Index sank 0.8 percent to 112.54 as of 4:07 p.m. in Tokyo. The Stoxx Europe 600 lost 0.9 percent to 242.90. The Malaysian ringgit and copper slid, while the euro weakened against the yen and the dollar. Futures on the Standard & Poor's 500 Index decreased 0.3 percent.

Chinese manufacturing expanded at a slower pace in May, raising concern the world's fastest-growing major economy is losing steam. The European Commission said yesterday its gauge of executive and consumer sentiment in the 16 nations using the euro fell last month, while a separate report today may show the unemployment rate increased in Italy.

"There seems to be a worry that China's strong economic expansion may be held back, and that may affect countries that depend heavily on China's demand," said Lim Chang Gue, a fund manager at Samsung Asset Management in Seoul, which manages $30 billion. "Also, if economic figures in troubled European countries turn out to be clearly deteriorating, that could add anxiety to the markets."

More than two stocks fell for every one that rose on the MSCI Asia Pacific Index. The measure lost 9.8 percent in May, the biggest monthly drop since the collapse of Lehman Brothers Holdings Inc. more than 18 months ago.

China's Manufacturing

China's Purchasing Managers' Index dropped to 53.9 from 55.7 in April, seasonally adjusted, the Federation of Logistics and Purchasing said, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists.

Japan's Nikkei 225 Stock Average declined 0.6 percent on concern the nation's political instability may slow the economic recovery, while South Korea's Kospi index lost 0.7 percent as the country's inflation accelerated in May. Australia's S&P/ASX 200 Index slid 0.4 percent.

Toyota Motor Corp., which gets 71 percent of its revenue outside Japan, slipped 0.5 percent. Sony Corp., which gets 69 percent of its sales outside Japan, dropped 1 percent. A stronger yen reduces the value of overseas sales at Japanese companies when repatriated.

Prime Minister Yukio Hatoyama said he will consider his political future and do "what's best for the people of Japan" after polls showed four in five voters want him to step down six weeks before mid-term elections.

Hitachi

Hitachi Ltd. slumped 3.5 percent. President Hiroaki Nakanishi said the "financial confusion in Europe is affecting various parts of our business," the Financial Times reported, citing an interview.

Utilities gained after Goldman Sachs Group Inc. upgraded its recommendation on Japan's power industry to "neutral" from "cautious," saying current valuations are "reasonable." Tokyo Electric Power Co. jumped 4.3 percent after Goldman Sachs boosted its rating to "buy" from "neutral."

The Malaysian ringgit weakened 0.8 percent to 3.2887 per dollar, the most in a week, following the manufacturing report from China, the nation's biggest overseas market. The South Korean won slid 1.2 percent to 1,216.18 per dollar.

"This could be the first sign of China feeling the slowdown in Europe," said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. "You can't expect super-strong currency appreciation in the second half."

Euro, Aussie

The euro weakened against 10 of 16 major counterparts, extending its longest monthly decline against the dollar in 10 years, after the index of executive and consumer sentiment in the nations sharing the euro tumbled. The euro fell to as low as $1.2245 in Tokyo from $1.2306 yesterday in New York. The common currency declined to as weak as 111.33 yen from 112.31 yen. The Aussie dollar sank as much as 0.9 percent to 83.84 U.S. cents.

The Australian dollar weakened for a third day after the nation's central bank left interest rates unchanged. The currency fell 0.8 percent to 83.91 U.S. cents from 84.59 cents in New York yesterday and 83.65 cents before the rate decision.

Joblessness in Italy, Europe's fourth-biggest economy, grew to a seasonally adjusted 8.9 percent in April from 8.8 percent the previous month, according to a Bloomberg News survey of economists before Istat releases the data today.

Copper tumbled as metals extended their decline on the reports from China, the world's biggest metals consumer. Copper for three-month delivery fell 2.4 percent to $6,770 a metric ton.

The cost of insuring Asia-Pacific bonds from non-payment rose, according to traders of credit-default swaps. The Markit iTraxx Japan index increased 7 basis points to 144 basis points, according to Morgan Stanley prices, and the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan rose 9 basis points to 144, according to Royal Bank of Scotland Group Plc.

To contact the reporters on this story: Linus Chua at lchua@bloomberg.net Saeromi Shin in Seoul at sshin15@bloomberg.net .