Asia: Stocks drop with oil as yen gains; australian bonds climb

[WELLINGTON] Asian stocks fell, led by Japanese shares, while the yen strengthened as data on the US economy and Chinese manufacturing fueled concern over the global slowdown. Crude oil and copper retreated as Australian bonds climbed.

The MSCI Asia Pacific Index lost 0.4 per cent in a fourth day of declines by 9.24am in Tokyo, as Japan's Topix index slipped 1.1 per cent. Standard & Poor's 500 Index futures dropped 0.1 per cent. The yen, regarded as a haven by some investors, touched its strongest level since Jan 16, while Korea's won slipped.

Australian three- and 10-year bond yields slid to record lows before an interest-rate review Tuesday. Copper futures lost 0.8 per cent and gold retreated, while US oil dropped 2.1 per cent after surging at the end of last week.

China's official purchasing managers' index unexpectedly slid into contraction territory, data at the weekend showed, boosting prospects Asia's largest economy will join the wave of global monetary easing.

A private report on Chinese manufacturing is due Monday, along with factory gauges for India and Japan, to the US and Europe. Data Jan 30 showed the US economy grew at a slower pace than forecast last quarter, while euro-area consumer prices fell more than estimated.

The "US gross domestic product reading will weigh on the stock market, which had been worried about slowing global economic growth since last year," Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo, said by phone.

"The global economy should benefit from cheaper oil, but we're being hit with the negative effects first, and this will likely ripple in to weaker stock prices as well."

GDP in the US rose an annualised 2.6 per cent in the fourth quarter, trailing the 3 per cent growth pitched by economists and falling from 5 per cent in the three months to the end of September.

In the euro region, where policy makers announced a plan to embark on quantitative easing last month, the annual inflation rate slipped to minus 0.6 per cent in January, exceeding the negative 0.5 per cent predicted by analysts to match the biggest decline in prices in the euro's history.

BLOOMBERG