Sumitomo Mitsui Financial Group Inc. (8316), Japan’s No. 2 lender, lost 0.8 percent in Tokyo on speculation Europe’s worsening debt problems will hurt bank earnings. Tokio Marine Holdings Inc. decreased 2.6 percent on concern Japan’s second-biggest casualty insurer may be paying too much to buy Delphi Financial Group Inc. Jiangxi Copper Co., China’s largest producer of the metal, dropped 1.3 percent in Hong Kong as copper futures declined.

“The ECB doesn’t seem to have stepped up to the plate for bond buying, which I think is negative, but at least they are acting as a lender of last resort for banks,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “As we are heading closer to a holiday period, volumes decline.”

The MSCI Asia Pacific Index slid 0.5 percent to 112.68 as of 10:40 a.m. in Tokyo, with about two shares falling for each that rose. The gauge dropped to a three-week low on Dec. 19 after North Korean leader Kim Jong Il died and Fitch Ratings said it may cut the credit ratings of European nations.

Japan’s Nikkei 225 Stock Average (NKY) fell 0.5 percent, while South Korea’s Kospi Index lost 0.2 percent. Australia’s S&P/ASX 200 declined 0.9 percent and Hong Kong’s Hang Seng Index slid 0.5 percent.

Default Risks

Futures on the Standard & Poor’s 500 Index (SPX) lost 0.1 percent today. The index added 0.2 percent in New York yesterday after gains in energy and consumer shares helped the market recover from an early drop.

U.S. equities at first followed Europe’s shares lower as the ECB awarded 489 billion euros ($645 billion) in 1,134-day loans to banks yesterday, the most ever in a single operation and more than economists’ estimates. The increased funding sought by lenders may indicate institutions are wary of lending to each other as Europe’s two-year-old debt crisis has increased risk of government and bank defaults.

Crude oil for February delivery increased $1.43 to settle at $98.67 a barrel yesterday on the New York Mercantile Exchange. The Thomson Reuters/Jefferies CRB Index of raw materials rose 0.7 percent.

The MSCI Asia Pacific Index slumped 18 percent this year year through yesterday. Utilities were the worst performing industry in the gauge as Japan’s nuclear-power producers tumbled after the worst nuclear accident in 25 years engulfed Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant.

The regional benchmark index’s drop this year compared with a 1.1 percent decline by the S&P 500 and a 14 percent slide by the Stoxx Europe 600 Index. Stocks (MXAP) in the Asian gauge were valued at 12.7 times estimated earnings on average, compared with 12.6 times for the S&P 500 and 10.3 times for the Stoxx 600, according to data compiled by Bloomberg.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

http://www.bloomberg.com/news/2011-12-22/asian-equities-snap-two-day-rally-as-european-banks-rush-ecb-s-cash-offer.html

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