Australia Stocks, Japan Futures Slump on Falling Oil, Currency

By Masaki Kondo and Shani Raja


Dec. 18 (Bloomberg) -- Australia shares and Japan’s stock futures slumped after tumbling crude prices and the surging yen dimmed earnings prospects for oil explorers and automakers.

Roc Oil Co., which explores for petroleum in China, Mauritania and Angola, retreated 1.6 percent in Sydney as crude fell below $40 a barrel for the first time in more than four years even after OPEC agreed to reduce production. U.S.-traded receipts of Toyota Motor Corp. dropped 0.7 percent from the closing price in Tokyo as the yen traded at a 13-year high against the dollar. Honda Motor Co. sank 0.6 percent after cutting its annual earnings forecast by two-thirds.

Australia’s S&P/ASX 200 Index fell 0.8 percent to 3,541.90 as of 10:17 a.m. in Sydney. New Zealand’s NZX 50 Index lost 0.2 percent to 2,689.73 in Wellington. In New York, the Standard & Poor’s 500 Index swung between gains and losses at least 26 times before closing 1 percent lower.

“The oil market’s telling us that even with production cuts, demand is exceptionally weak,” said Philip Schwartz, who directly manages $750 million at International Value Equities in New York. “The concern in Japan is that the yen is strengthening way beyond any previous expectation. It’s hurting exporters tremendously.”

The Bank of New York Mellon Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 1.9 percent. Nikkei 225 Stock Average futures expiring in March closed at 8,815 in Chicago, 1.9 percent higher than 8,650 in Osaka and 1.7 percent up from 8,670 in Singapore.

Yen Climbs

Crude oil for January delivery tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, after touching $39.88. Prices have plunged 73 percent from a record on July 11.

The Organization of Petroleum Exporting Countries yesterday agreed to trim current production by 2.46 million barrels to 24.845 million barrels a day, OPEC President Chakib Khelil said after the meeting in Algeria.

The yen appreciated against the dollar to as much as 87.14, the strongest level since July 1995, from 88.76 at the close of stock trading in Tokyo yesterday. The Japanese currency traded at 111.76 against the dollar at the beginning of this year.

Honda chopped its annual operating-profit target by 67 percent to 180 billion yen ($2.06 billion) and halved its third- quarter dividend, citing the surging yen and dwindling demand. Every 1 yen gain against the dollar cuts Honda’s full-year earnings by 18 billion yen.

“Honda’s earnings revision is likely to affect shares throughout the auto sector,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management, said in an interview with Bloomberg Television.

Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, had its rating raised by UBS AG to “buy” from “neutral.” A sounder capital base allows the lender to expand lending and investment, UBS analyst Nana Otsuki wrote in a report dated yesterday.