By James Regan Jan. 22 (Bloomberg) -- Stocks in Asia fell for a fifth day and commodities slumped on concern China will raise interest rates and banking curbs proposed by President Barack Obama will dent the U.S. recovery. The yen rose to a one-month high against the dollar and the risk of corporate defaults climbed. The MSCI Asia Pacific Index sank 1.4 percent to 122.09 at 5 p.m. in Tokyo, its longest losing streak in six months, and stock benchmarks in Japan, Taiwan and South Korea fell more than 2 percent. Futures on the S&P 500 Index rose 0.2 percent. The Dow Jones Stoxx 600 slid 0.5 percent to 251.47 at 8 a.m. in London. Copper fell and oil reached a four-week low. The yen rose against 16 of the most-traded currencies. Indexes tracking Asian credit-default swaps rose the most in almost two months. Investors are retreating from higher-yielding assets after China’s 10.7 percent growth in the fourth quarter ignited concerns that the nations responsible for leading the world out of a recession will raise borrowing costs to keep their economies from overheating. Obama’s plan to restrict proprietary trading by lenders triggered declines of more than 6 percent in JPMorgan Chase & Co. and Bank of America Corp. yesterday. “There are some worries about the extent of tightening in China,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees $90 billion. “I don’t think they’re seeking to crunch their economy, but obviously the market worries that that will be the case.” Stocks Slide Eight stocks fell on the MSCI Asia Pacific Index for each one that rose. Japan’s Nikkei 225 Stock Average slumped 2.6 percent, almost erasing this year’s advance. Benchmarks in Korea and Taiwan, which both count China as their No. 1 export market, sank 2.2 percent and 2.5 percent, respectively. Mitsubishi Corp., which gets 39 percent of its sales from commodities, lost 4.5 percent. Samsung Electronics Corp., which relies on China for more than 20 percent of its sales, slid 2.9 percent. The Shanghai Composite Index fell 1 percent, extending the year’s decline to 4.5 percent. China’s central bank will raise interest rates by the end of June and increase banks’ reserve requirements, according to the median forecasts of 17 economists surveyed by Bloomberg after government reports yesterday on gross domestic product and consumer prices. “We’re looking toward a small correction going forward,” Seth Freeman, chief executive officer at New York-based EM Capital Management, said in a Bloomberg Television interview in Hong Kong. “The change in economic policy should have some impact on the market.” China Sales Investors pulled $348 million from China equity funds in the week ended Jan. 20, the biggest drop in four months, according to EPFR Global, in Cambridge, Massachusetts. Shares of Jiangxi Copper Co. slumped 2.5 percent in Shanghai and Aluminum Corp. of China Ltd. dropped 1.8 percent after they were cut to “sell” from “neutral” at Goldman Sachs Group Inc., which said accelerating inflation has increased risks for the industry. China’s inflation accelerated to 1.9 percent in December, from 0.6 percent the previous month. Inflation may also lead to tighter credit controls in India, Asia’s fastest-growing economy after China. An index of wholesale food prices rose more than 15 percent for a ninth week in the period ended Jan. 9, according to data released yesterday. The central bank, which next meets to review monetary policy on Jan. 29, will raise its benchmark interest rate by 150 basis points this year from 3.25 percent, Morgan Stanley predicts. “If the Reserve Bank of India were not to hike policy rates this month, an inter-meeting increase in February will be imminent,” Morgan Stanley economist Chetan Ahya said in an e- mailed report today. “Any further delay in a rate hike may have to be followed by a sharper rise later.” Cheaper Metals Copper for May delivery in Shanghai fell for a third day, dropping as much as 3.9 percent to 58,600 yuan ($8,583) per metric ton in Shanghai. Zinc tumbled 4.8 percent. Gold for immediate delivery traded at $1,095.85 an ounce, near the low of $1,088.65 yesterday, a level not seen since Dec. 30. The metal is poised for its biggest weekly decline in seven as the dollar’s rebound curbed investor demand. The Dollar Index, a gauge of the greenback’s strength against the currencies of six major U.S. trading partners, has gained 1.2 percent this week and yesterday reached a four-month high of 78.81. Crude oil dropped as much as 0.6 percent to $75.62 a barrel, the cheapest since Dec. 23, after the U.S. Energy Department said refineries ran at 78.4 percent of capacity last week, the lowest rate outside the Atlantic hurricane season since at least 1989. Gasoline stockpiles were the highest since March 2008. Fuel consumption in the past four weeks was 1.8 percent less than a year earlier. Yen Gains The yen gained to 90.29 per dollar from 90.43 yesterday in New York after reaching 89.79, the highest level since Dec. 18. The yen fell 0.3 percent to 127.74 per euro, after earlier strengthening to a nine-month high of 126.56. Korea’s won was the worst performer among the most-traded currencies, falling 1.3 percent against the yen and 1.2 percent versus the dollar. “Weakness across global equity markets is suppressing risk appetite,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Against this backdrop, investors will continue to sell growth-sensitive currencies in favor of safe-haven currencies like the dollar and the yen.” Japan’s 10-year bonds rose the most in a week, pushing the yield on the 1.3 percent note due December 2019 down 1.5 basis points to 1.325 percent. Similar-maturity U.S. Treasuries yielded 3.60 percent, almost a quarter percentage point less than at the start of 2010. A basis point is 0.01 percentage point. ‘Double-Dip’ Risk “There’s a possibility of a double-dip recession,” said Hiromasa Nakamura, a Tokyo-based senior investor at Mizuho Asset Management Co., which oversees $21.1 billion. “There is limited room for stocks to rise. Those factors are positive for U.S. Treasuries.” The Asia-Pacific region’s three benchmark indexes for credit-default swaps were on track for their biggest daily increases since Nov. 27, prices from CMA DataVision show. The indicators rise when the credit outlook deteriorates. The Markit iTraxx Japan index rose 4.5 basis points to 137.5 basis points, according to Morgan Stanley prices. The Markit iTraxx Australia index climbed 10 basis points to 92 basis points, according to Australia & New Zealand Banking Group Ltd. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan increased 6 basis points to 106 basis points, BNP Paribas SA prices show. To contact the reporter on this story: James Regan at jregan19@bloomberg.net;

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