Asian stocks retreat as copper slips with oil

[WELLINGTON] Most stocks in Asia fell as copper drove a retreat among industrial metals and crude oil slipped a second day. Australia's dollar rallied before an interest-rate review while the yen slid to a 12 1/2-year low.

The MSCI Asia Pacific Index decreased a second day, down 0.5 per cent by 12.02 pm in Tokyo as benchmarks in Australia and South Korea dropped at least 0.9 per cent. The yen weakened to less than 125 per dollar for the first time since 2002, as prospects for higher US interest rates this year spurred demand for the greenback. Copper declined 0.2 per cent, while oil in New York and London slipped 0.1 per cent ahead of an OPEC meeting. The Aussie snapped a five-day fall and the Korean won followed Japan's currency lower.

Australia's central bank is projected to hold key borrowing costs at a record low Tuesday, while India is forecast to cut rates as policy makers from Europe to Asia embrace stimulus amid an uneven global recovery. Prospects official efforts have arrested a slowdown in the Chinese economy spurred the steepest gain in Shanghai stocks Monday since January. European leaders and the International Monetary Fund agreed to step up the intensity of talks over Greece.

"We're getting increased volatility now because the market has risen to such high levels," Khiem Do, the Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., said by phone. "China's central bank will have to ease further because the economy is still quite sluggish. This will continue to provide liquidity to fuel the market rally. Should there be a Greek default, there's likely to be a negative market reaction."

The US releases its May payrolls report on Friday, with economists predicting employers added 228,000 workers to nonfarm payrolls, following an increase of 223,000 in April.

Hong Kong's Hang Seng Index decreased 0.4 per cent while he Hang Seng China Enterprises Index was down 0.5 per cent after a 1.4 per cent gain Monday that was the first rise in almost a week. The Shanghai Composite Index jumped 4.7 per cent Monday, paring last week's 1 per cent retreat, and was up 1.3 per cent Tuesday.

Chinese stocks in Hong Kong are "probably the largest pump and dump in history" given a number of companies stock prices are likely being "manipulated upward," Carson Block, founder of research firm and short seller Muddy Waters LLC, said in a TV interview. The Enterprises index, which tracks Chinese shares listed in Hong Kong, rose 1.4 percent Monday.

The Kospi index in Seoul fell 1.1 per cent. The won slid as much as 0.7 per cent to its weakest level since March as the yen's slide spurred speculation South Korea's central bank will intervene and cut interest rates to protect exports. The nation's three-year bond yield dropped two basis points to 1.73 per cent, below the benchmark interest rate of 1.75 per cent.

In Australia, all 10 major industry groups retreated in the S&P/ASX 200 Index, down 0.9 per cent, with Alumina Ltd and BHP Billiton Ltd, the world's biggest mining company, driving losses. The Aussie strengthened 0.3 per cent to 76.30 U.S. cents after sinking almost 2.8 per cent the past five days.

BLOOMBERG