Asian Stocks Enter Bull Market (Source: Bloomberg)
Asian stocks entered a bull market yesterday after central-bank easing from the U.S. and Europe to China and Japan fueled the fastest rally in more than two years. China Shipping Container Lines Co. (2866), which surged 163 percent, led gains since a low on Oct. 5 as efforts to prevent the spread of Europe’s debt crisis and improving U.S. economic reports boosted the outlook for the region’s exporters. S-Oil Corp. (010950), Korea’s No. 3 refiner, led energy stocks higher as crude prices surged. Agile Property Holdings Ltd. (3383), a Chinese developer, rose 137 percent on speculation the country will ease property curbs as inflation slows.
The MSCI Asia Pacific Index rose 0.9 percent to 129.37 yesterday, marking a gain of more than 20 percent from its Oct. 5 low and entering a so-called bull market. The gauge has advanced the last 10 weeks, the longest such streak since its inception in 1988, as the European Central Bank expanded its balance sheet to a record, the U.S. Federal Reserve pledged near-zero interest rates and China lowered reserve ratios. “One would have expected some kind of a pause by now because the market has been rising since mid-December,” said Mark Matthews, Singapore-based head of research for Asia at Julius Baer, which oversees about $180 billion in assets under management globally. “The major thing that put the floor on markets was the European Central Bank’s long-term refinancing operations that were introduced in December. U.S. data has been pretty robust too. All these things are good. It’s all good.”
Asian Stocks Swing Between Gains and Losses on Bernanke Comments, Yen (Source: Bloomberg)
Asian stocks swung between gains and losses after Federal Reserve Chairman Ben S. Bernanke failed to signal further measures to stimulate the economy. Japanese exporters rose after the dollar strengthened against the yen, boosting their earnings outlook. Toyota Motor Corp. (7203), which gets almost 30 percent of its sales from North America, rose 2.1 percent in Tokyo. TDK Corp. (6762), a Japanese electronic equipment maker, rose 5 percent after saying it plans to buy back shares. James Hardie Industries NV, which makes most of its revenue selling home siding in the U.S., slid 0.6 percent in Sydney. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, retreated 0.9 percent after metal prices fell. The MSCI Asia Pacific Index (MXAP) rose 0.1 percent to 129.08 as of 9:34 a.m. in Tokyo, after falling as much as 0.5 percent. Japan’s Nikkei 225 Stock Average (NKY) rose 1.4 percent, while Australia’s S&P/ASX 200 Index fell 0.7 percent.
Japanese Stocks Advance as U.S. Economic Data Beat Estimates, Yen Weakens (Source: Bloomberg)
March 1 (Bloomberg) -- Japanese stocks rose, extending last month’s gains, after better-than-expected U.S. economic data strengthened the dollar against the yen, boosting the earnings outlook for exporters. Toyota Motor Corp. (7203), which gets 28 percent of its sales in North America, rose 1 percent. Softbank Corp. led communications companies higher after the mobile-phone operator was recommended for a spectrum license that will expand its data capacity. Elpida Memory Inc. (6665), which filed for bankruptcy this week, climbed to 9 yen. The Nikkei 225 Stock Average (NKY) rose 1 percent to 9,815.29 as of 9:25 a.m. in Tokyo. The gauge gained 10.5 percent in February, the biggest monthly advance since December 2009. The broader Topix Index gained 0.7 percent to 842.24.
“The fact that the economy is getting better in the U.S. and the global economy is getting better generally is positive,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “Investors see there’s less risk around, and they are prepared to put more money back in.”
S&P 500 Snaps Four-Day Advance (Source: Bloomberg)
U.S. stocks fell, trimming the longest monthly rally in a year for the Standard & Poor’s 500 Index, as Federal Reserve Chairman Ben S. Bernanke gave no indication of further measures to stimulate the economy. Commodity shares had the biggest decline in the S&P 500 among 10 groups as gold tumbled the most since December. Newmont Mining Corp. (NEM), the largest U.S. gold producer, slumped 4.2 percent. First Solar Inc. (FSLR), the world’s largest maker of thin- film solar panels, retreated 11 percent after reporting an unexpected loss. Apple Inc. (AAPL) topped $500 billion in market capitalization for the first time, rising 1.3 percent. The S&P 500 fell 0.5 percent to 1,365.68 at 4 p.m. New York time, retreating from an almost four-year high. It still rose 4.1 percent in February, capping a third straight month of gains. The Dow Jones Industrial Average (INDU) lost 53.05 points, or 0.4 percent, to 12,952.07.
The Nasdaq Composite Index topped 3,000 (CCMP) for the first time since 2000 before falling 0.7 percent to 2,966.89. The Russell 2000 Index slid 1.6 percent to 810.94. “We have a bit of investor nosebleed,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “There are still things to worry about. With the absence of more stimulus, that would lead us to question: what’s there to move us out of some of that? In addition, we’ve had a big run-up in stocks. No trees grow to the sky.”
European Stocks Are Little Changed, Post the Best Start to Year Since 1998 (Source: Bloomberg)
European stocks were little changed, erasing earlier gains, after U.S. Federal Reserve Chairman Ben S. Bernanke failed to signal further monetary easing in a testimony to the Congress. Hochtief AG shares had their biggest decline in a month after the company suspended its dividend payout. Holcim (HOLN) Ltd., the world’s second-biggest cement maker, climbed as sales and earnings topped forecasts. ITV Plc (ITV) jumped the most in a year. The Stoxx Europe 600 (SXXP)Index was unchanged at 264.32 at the close in London. Stocks earlier gained as much as 0.8 percent after the European Central Bank allotted more funds than projected under its long-term refinancing operation. The gauge rallied 3.9 percent in February and 8.1 percent so far this year, the biggest increase in the first two months of a year since 1998.
“While the evolving European developments have the potential to meaningfully impact the direction of markets, our central expectation is for continued uncertainty and associated high volatility in underlying markets,” said Morten Spenner, the London-based chief executive officer of International Asset Management Ltd., which oversees $2.5 billion.
Fed Says U.S. Economy Expanded at a ‘Modest to Moderate’ Pace Last Month (Source: Bloomberg)
The Federal Reserve said the U.S. economy expanded at a “modest to moderate pace” in January and early February as factories increased production. “Manufacturing continued to expand at a steady pace across the nation,” with “several districts indicating gains in capital spending, especially in auto-related industries,” the Fed said today in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy. Chairman Ben S. Bernanke said in congressional testimony today that maintaining monetary stimulus is warranted even as the unemployment rate falls and rising oil prices may cause inflation to rise temporarily. Policy makers, who next meet on March 13, said in January that economic slack and subdued inflation are likely to warrant exceptionally low rates through late 2014, extending a previous date of mid-2013.
“The Beige Book shows the economy continues to do better, but has a long way to go before it is robust,” said Ward McCarthy, chief financial economist at Jefferies & Co. in New York. “It is slightly more upbeat” than the prior two reports. “Growth is still very slow two and a half years into a recovery.”
U.S. Business Activity Improves in Sign Demand to Sustain Growth: Economy (Source: Bloomberg)
Companies took in more orders and stepped up production in February, a sign demand will sustain the U.S. expansion after a fourth-quarter pickup. The Institute for Supply Management-Chicago Inc. said today its business barometer climbed to a 10-month high of 64 from 60.2 in January. Readings above 50 signal expansion and the figure exceeded all forecasts in a Bloomberg News survey. The Commerce Department raised its growth estimate for the final three months of 2011, to 3 percent from 2.8 percent. Income gains in the second half of 2011 were stronger than previously reported, which may bolster household purchases that make up 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke signaled today to Congress that recent signs of strength won’t change the central bank’s view that low rates are necessary through 2014.
“We’re continuing to see moderate economic expansion driven by an improvement in the labor market,” said Conrad DeQuadros, a senior economist at RDQ Economics LLC in New York. “Even with growth at 3 percent, the Fed remains concerned about the outlook with the unemployment rate high, and that’s the driver of their highly accommodative monetary policy.”
Bernanke Says Volcker Rule’s Trading Curbs Won’t Be Ready by July Deadline (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke said the central bank and other regulators won’t meet a July deadline to complete work on the so-called Volcker rule limiting proprietary trading at banks. The ban is set to take effect by July 21 even if the rule- making is still in progress. It would include a two-year transition period; the Fed could issue one-year implementation extensions on a case-by-case basis after that. “I don’t think it will be ready for July,” Bernanke said in response to a question during testimony today to the House Financial Services Committee in Washington. “Just a few weeks ago we closed the comment period, we have about 17,000 comments, we have a lot of very difficult issues to go through, so I don’t know the exact date.”
The rule is named for former Fed Chairman Paul Volcker, who championed it as an adviser to President Barack Obama. It seeks to ban banks from proprietary trading while allowing them to continue short-term trades for hedging or market-making. It also would limit banks’ investments in private-equity and hedge funds.
Bernanke Affirms Low-Rate Pledge (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke affirmed that interest rates are likely to stay low at least through late 2014 without offering any indication that further monetary easing is under consideration. “At present, with the unemployment rate elevated and the inflation outlook subdued, the committee judges that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives” for stable prices and maximum employment, Bernanke said today in testimony to the House Financial Services Committee in Washington. While describing “positive developments” in the labor market, Bernanke said it “remains far from normal.” In the first day of his semiannual monetary policy report to Congress, he said a recent rise in gasoline prices “is likely to push up inflation temporarily” and reduce consumer purchasing power.
Stocks erased gains as the comments damped speculation of more easing. When he last appeared before Congress in July, Bernanke outlined steps that the Federal Open Market Committee subsequently took in its August and September meetings. Today, he made no mention of additional options to boost growth in prepared testimony or answers to lawmakers’ questions.
Iran Seen Suffering ‘Crippling Effect’ of Sanctions (Source: Bloomberg)
The cascade of U.S. and European sanctions imposed on Iran is crippling its ability to export oil and conduct trade, hitting the Gulf state’s economy and stoking internal dissent, sanctions specialists and U.S. officials say. An array of restrictions on banking, shipping, insurance, ports, trade, commodities and energy transactions and ventures have severed or complicated many of Iran’s commercial ties to the outside world. U.S. officials such as Secretary of State Hillary Clinton say there is limited time for sanctions to pressure Iran into giving up disputed nuclear activities before the U.S. or Israel may take military action. One of the latest examples of the sanctions’ impact is yesterday’s announcement by Noor Islamic Bank, whose chairman is a son of Dubai’s ruler, that it severed relations with Iranian banks in December in compliance with international rules.
Another example is the willingness expressed last week by Swift, the financial messaging service for most cross-border money transfers, to cut off more than 20 sanctioned Iranian banks and Iran’s central bank in a move that would be a further blow to Iran’s economy, according to two officials involved in the talks.
Banks in Europe Tap ECB for More Three-Year Cash Than Economists Estimated (Source: Bloomberg)
The number of financial institutions flocking to the European Central Bank’s three-year loans soared to 800 and borrowing rose to a record in an operation that may boost the euro-area economy. The Frankfurt-based ECB said it will lend banks 529.5 billion euros ($712.2 billion) for 1,092 days, topping the 489 billion euros handed out to 523 institutions in the first three- year operation in December. Economists predicted an allotment of 470 billion euros in today’s tender, according to the median of 28 estimates in a Bloomberg News survey. “The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money and it is likely they will pass it on to the economy,” said Laurent Fransolet, head of fixed income strategy at Barclays Capital in London. “So the impact may be bigger than with the first one.”
Bond and equity markets have rallied since the ECB’s first three-year loan, suggesting banks are investing at least some of the money in higher yielding assets. That’s helped ease concern about a credit crunch and won governments time to agree on measures to contain the sovereign debt crisis. The risk is that banks become too reliant on ECB money and fail to take the steps needed to strengthen their balance sheets.
IMF Staff Backs Currency Intervention as a Policy Tool in Emerging Markets (Source: Bloomberg)
Currency intervention is a valid instrument for central banks of emerging markets to use alongside interest rates, the International Monetary Fund staff said in a report. Many developing economies have chosen to set an inflation target to anchor expectations after a history of price instability, according to the report. Openly adopting a second policy tool focused on managing exchange rates is likely to strengthen central banks’ credibility rather than undermine it, the IMF economists argue. “The crisis has taught us that policy makers need to deliver more than stable consumer prices if they are to achieve sustained and stable growth, and that the instruments at their disposal include more than just the policy interest rate,” according to the report, whose authors include IMF Research Department Deputy Director Jonathan Ostry. For emerging markets “there are potentially two policy targets: inflation and the exchange rate.”
The report reflects recent efforts at the IMF to challenge macro-economic beliefs and adjust recommendations in the aftermath of the 2008 financial crisis, which the lender failed detect. The Washington-based IMF last year endorsed capital controls as part of the toolkit to manage inflows of money that threaten countries’ financial stability, marking a turn from its advice from crises in Latin America and Asia in the 1990s.
Australian Manufacturing Grows For Third Straight Month as Orders Pick Up (Source: Bloomberg)
Australian manufacturing expanded for a third straight month in February, led by clothing, footwear and transport equipment, as the industry adjusts to a stronger currency, a private survey showed. The manufacturing index was 51.3 last month compared with 51.6 in January, the Australian Industry Group and PricewaterhouseCoopers said in a survey released today. It was the first time since August 2010 the figure has held for three straight months above 50, the dividing line between expansion and contraction. “Australian manufacturing remains resilient in the face of the high dollar and difficult trading conditions,” Innes Willox, chief executive-designate at AIG, said in a statement. “The movement of new orders into positive territory for the first time since the middle of 2011 is also encouraging.”
The Reserve Bank of Australia reduced its benchmark interest rate in November and December last year as inflation cooled and global risks increased. Its unexpected pause in February at 4.25 percent and a resource investment expansion have spurred the currency, which reached a six-month high of $1.0845 following the decision and has appreciated 5 percent this year. The local dollar traded at $1.0733 earlier today.
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