Asian Stocks May Drop for a Fourth Day on U.S. Spending Outlook

Asian stocks may fall for a fourth day after Lowe's Cos. cut its earnings forecast and an increasing number of economists said the U.S. may enter a recession, raising concern spending will slow in the world's biggest economy.

Financial companies including Kookmin Bank, South Korea's biggest, may decline after Goldman, Sachs & Co. recommended investors sell shares of Citigroup Inc.

Japanese exporters may also drop after the yen strengthened against the dollar. Companies dependent on the U.S. market for sales and profit such as Honda Motor Co. may fall.

U.S. stocks dropped to three-month lows yesterday with the Standard & Poor's 500 Index sliding 1.8 percent and the Dow Jones Industrial Average dropping 1.7 percent.

There's no escaping the negative impact from the tumbling U.S. market, said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo. If U.S. consumer spending starts to deteriorate, stocks here will be subject to another round of selling.

Australia's S&P/ASX 200 Index fell 1.8 percent to 6,415.90 as of 10:47 a.m. in Sydney.

Nikkei 225 Stock Average futures expiring in December fell 2 percent to 14,805 in Singapore, down from the close of 15,060 in Osaka and 15,040 in Singapore yesterday. The Bank of New York Asia ADR Index, which tracks the nation's American depositary receipts, slid 2.8 percent.

Citigroup Downgrade

U.S.-traded receipts of Kookmin Bank plunged 4.2 percent from the closing share price in Seoul yesterday. Those of Honda, which gets more than half of its revenue from North America, declined 2.7 percent. Receipts of Sumitomo Mitsui Financial Group Inc., Japan's third-biggest publicly traded lender, lost 3.3 percent.

Citigroup, the biggest U.S. bank, was lowered to sell by Goldman on the view that the lender's writedowns of collateralized debt obligations may total $15 billion over the next two quarters. That would be in addition to the $11 billion in writedowns already announced this month. Citigroup's shares plunged 5.9 percent to the lowest level since February 2003.

In Japan, Sumitomo Mitsui reported a 30 percent decline in first-half net income as the company took a charge of 32 billion yen ($292 million) on subprime mortgage investments. The bank also wrote down the value of a stake in OMC Card Inc. after that company lost almost half its market value in the two months after the acquisition.

U.S. Recession?

Lowe's, the second-largest U.S. home improvement retailer, slashed its full-year profit forecast for the second time in as many months because of the slumping housing market. Meanwhile, the number of economists forecasting the U.S. will slip into recession almost doubled over the last two months, a survey by the National Association for Business Economics showed.

U.S. consumers plan to spend less this year on holiday shopping, according to a survey by the Consumer Federation of America and the Credit Union National Association said today.

The yen strengthened to 109.74 versus the dollar, from 110.38 at the close of trading in Tokyo yesterday. Against the euro, Japan's currency recently traded at 160.99 from 162.01 yesterday. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted into local currency.

BHP Billiton Ltd., the world's largest mining company, slid 3.8 percent. Mitsui & Co., Japan's second-largest trading company, and Sumitomo Metal Mining Co., Japan's biggest nickel maker, may drop.

Copper futures plunged 5.4 percent in New York, the lowest closing price for a most-active contract since March 21. Gold, silver and crude oil prices also fell yesterday.

Olympus Corp., the world's biggest maker of endoscopes, may be active after the company agreed to buy Gyrus Group Plc for about 935 million pounds ($1.9 billion) in cash to expand its medical business.

Japan Tobacco Inc., the world's third-biggest maker of cigarettes, may climb. The company will make a bid for frozen- food processor Katokichi Co. and then sell a 49 percent stake in the company to Nissin Food Products Co., the Nikkei newspaper reported.

Source - Bloomberg