European debt crisis worsens, China's stock futures drop

April CSI 300 index futures dipped to 2500

April 11 (Bloomberg) -- China’s stock-index futures fell on concern Europe’s debt crisis is worsening and companies in Chongqing may drop after the former top official in the city was suspended from his Communist Party posts.

Futures on the CSI 300 Index expiring in April, the most active contract, lost 0.3 percent to 2,500 as of 9:20 a.m. local time. Chongqing Brewery Co. may lead a decline for companies in the municipality after the official Xinhua News Agency said Bo Xilai was removed from the Politburo. China Shipping Development Co. may retreat after forecasting a first-quarter loss. Kweichow Moutai Co. may rise after 2011 net income jumped 74 percent.

The Shanghai Composite Index climbed 20.09 points, or 0.9 percent, to 2,305.86 yesterday. The CSI 300 Index rose 1 percent to 2,519.79. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 2.5 percent in New York.

The Shanghai Composite reversed a loss of as much as 1.2 percent in the last hour of trading yesterday as some investors said measures may be introduced at today’s regular meeting of the State Council, or cabinet. About 6.7 billion shares changed hands in the gauge yesterday, 23 percent lower than the daily average this year. Thirty-day volatility was at 17.8, the lowest level this month.

The Shanghai index has gained 4.8 percent this year on speculation the government will cut lenders’ reserve requirements and possibly interest rates to boost the economy. Stocks in the gauge are valued at 9.7 times estimated earnings, compared with a record low of 8.9 times on Jan. 6, according to weekly data compiled by Bloomberg.

European Debt

The MSCI Asia Pacific Index retreated 0.6 percent today after Spanish bonds slumped after Economy Minister Luis de Guindos declined to rule out a rescue and Bank of Spain Governor Miguel Angel Fernandez Ordonez said the nation’s lenders may need more capital if the economy weakens more than expected. The Italian 10-year yield rose 23 basis points to 5.69 percent, sending the spread over bunds to 4.04 percentage points, the most since Jan. 31 on a closing basis.

Europe is China’s biggest export market, making up about 18 percent of the nation’s overseas shipments, according to Shenyin & Wanguo Securities Co.

China trade data yesterday showed an unexpected surplus for March and slowing growth in imports and exports. Overseas shipments rose 8.9 percent last month, more than economists’ forecast. Still, it was down from 18.4 percent growth in February.

“The slowdown in export growth was broad-based with the biggest drag coming from Europe, driven by the sovereign debt crisis that remains to be fully resolved,” HSBC Holdings Plc econimists Xiaoping Ma and Hongbin Qu said in a report yesterday. Exports to the European Union contracted by 3.1 percent in March, it said.

‘Further Easing’

“Net exports will likely become a major drag on GDP growth” in the first quarter, the HSBC economists wrote. “This reinforces the need for further easing.”

The statistics bureau is due to report the nation’s first- quarter gross domestic product and other March data including industrial production on April 13. The economy probably grew 8.4 percent in the first three months of the year, according to the median estimate of 38 economists surveyed by Bloomberg. The economy expanded 8.9 percent in the fourth quarter of 2011, the least in 10 quarters.

Chongqing-related stocks may decline after an investigation led to Bo’s wife being arrested on suspicion of murdering a U.K. citizen. Gu Kailai and a domestic helper are “highly suspected” of killing British businessman Neil Heywood, who died in Chongqing in November, Xinhua reported late yesterday. The U.K. was originally told that Heywood died of alcohol poisoning.

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