Asian Stocks, Euro Drop, Bond Risk Climbs on Europe Debt Risk

May 6 (Bloomberg) -- Asian stocks dropped the most in three months, European and U.S. futures declined and the euro weakened to its lowest level in almost 14 months on growing concern Greece’s debt crisis will spread and derail the global recovery.

The MSCI Asia Pacific Index fell 2.6 percent to 119.52 as of 3:33 p.m. in Tokyo, led by a 3.3 percent slump in the Nikkei 225 Stock Average as Japan’s markets opened after a three-day holiday. Two measures of credit-default swaps reached the highest level since Feb. 9. The euro dropped 0.5 percent to the lowest price since March last year. Standard & Poor’s Index futures lost 0.3 percent and those on the Euro Stoxx 50 Index retreated 1.1 percent.

“The Greece issues are raising concerns about the health of the financial system globally and slowing down the flow of money in markets,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages $300 billion.

Portugal may have its credit rating cut by Moody’s Investors Service as the country struggles to reduce its budget deficit. Greece’s Parliament will debate today the austerity measures demanded as a condition of an internationally led bailout, a day after three people were killed in protests in Athens against the plan.

New Zealand’s jobless rate fell the most since at least 1986, signaling an economic rebound that central bank Governor Alan Bollard said may prompt an interest-rate increase “over coming months.” U.S. reports today and tomorrow that may show an improving labor market supported stock futures.

Shares Tumble

All of the MSCI Asia Pacific Index’s 10 industry groups declined, with 10 stocks dropping for each one that advanced. Australia’s S&P/ASX 200 Index declined 2.2 percent and South Korea’s Kospi Index fell 2 percent.

Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 3.3 percent to 4,210 yen. Toyota Motor Corp., which receives about 10 percent of its revenue from Europe, lost 2.9 percent to 3,560 yen.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 8 basis points to 122 basis points as of 7:44 a.m. in Singapore, prices from Royal Bank of Scotland Group Plc and CMA DataVision in New York show.

The Markit iTraxx Australia index rose 7.5 basis points to 106.5 as of 9:46 a.m. in Sydney, also the highest since Feb. 9, according to Australia & New Zealand Banking Group Ltd. and CMA.

Euro Weakens

The euro dropped to $1.2752 in Tokyo from $1.2814 in New York yesterday, the lowest level since March 2009. The New Zealand dollar surged, gaining 0.8 percent to 72.26 U.S. cents in Tokyo from 71.72 cents in New York yesterday.

The British pound climbed to a nine-month high against the euro on concern Greece’s debt crisis will spread through the 16- nation region. Britain votes today in an election that polls show may produce no parliamentary majority for the first time since 1974.

“The pound is now considered to be a safe-haven currency from the euro-zone, which is suffering from concerns over a contagion of sovereign problems,” said Toshiya Yamauchi, a senior foreign exchange analyst at Ueda Harlow Ltd. in Tokyo.

The U.K. currency advanced to 84.68 pence per euro, the highest since Aug. 6, 2009, before trading at 84.76 pence at 3:45 p.m. in Tokyo from 84.86 pence in New York yesterday.

South Korea’s won dropped the most in five months, declining 1.7 percent from May 4 to 1,134.55 per dollar, after markets were closed for a public holiday yesterday. Malaysia’s ringgit weakened 0.5 percent to 3.2455 per dollar.

Yuan Forwards

Yuan forwards slumped for a fifth day, the longest losing streak in almost nine months, on speculation China will delay appreciation of its currency. U.S. Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Clinton are scheduled to travel to Beijing on May 24-25 to take part in the second U.S.- China Strategic and Economic Dialogue. Twelve-month non- deliverable forwards fell 0.3 percent to 6.6681 per dollar.

China’s Shanghai Composite Index lost 1 percent to a seven- month low on concern government curbs on property will hurt economic growth. China Vanke Co. and Poly Real Estate Group Co., the nation’s two biggest developers, fell at least 2 percent.

AU Optronics Corp. and LG Display Co. dropped after Tracfone Wireless Inc., the U.S. prepaid phone service division of America Movil SAB, sued the liquid-crystal display makers for price fixing. LG Display slid 2.7 percent in Seoul and AU Optronics retreated 1 percent in Taipei. Officials from the two companies declined to comment.

Copper for three-month delivery on the London Metal Exchange fell 0.3 percent to $6,940 a metric ton. Crude oil traded near a barrel after the biggest two-day drop in three months.