Asian Stocks Gain on U.S. Jobs, Extend Wins (Source: Bloomberg)
Asian stocks rose, with the regional benchmark index set to extend its longest weekly winning streak on record, after U.S. jobless claims fell to a four-year low and concern about Europe’s debt crisis eased. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, gained 1.1 percent in Tokyo. James Hardie Industries NV, which makes most of its revenue selling home siding in the U.S., increased 1.2 percent in Sydney. Hyundai Motor Co. (005380), South Korea’s largest automaker, climbed 2.8 percent in Seoul after its combined U.S. sales with Kia Motors Corp. jumped 26 percent last month. The MSCI Asia Pacific Index (MXAP) rose 0.5 percent to 128.52 as of 9:26 a.m. in Tokyo. The gauge is set for a 0.4 percent gain for the week and is set to extend its 10-week winning streak, the longest such run of gains since its inception in 1988. Japan’s Nikkei 225 Stock Average (NKY) advanced 0.8 percent, Australia’s S&P/ASX 200 Index increased 0.5 percent and South Korea’s Kospi Index gained 0.5 percent.
U.S. Stocks Advance Amid Bank Rally (Source: Bloomberg)
U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the highest level since 2008, amid a rally in financial shares and after government data showed that jobless claims declined to a four-year low. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) climbed at least 1.8 percent as Spanish and French borrowing costs fell. ConocoPhillips (COP) added 2.2 percent, pacing gains in energy producers, as crude oil traded near $110 a barrel. Gap Inc. (GPS), the largest U.S. apparel chain, increased 7.2 percent as same-store sales exceeded estimates. General Motors Co. (GM) jumped 1.7 percent after the automaker reported a surprise U.S. sales gain. The S&P 500 added 0.6 percent to 1,374.09 at 4 p.m. New York time, after a three-month gain. The Dow Jones Industrial Average rose 28.23 points, or 0.2 percent, to 12,980.30.
“We’re not lighting the world on fire, but we’re seeing improvement in the economy,” said Mark Masterson, managing director and partner at HighTower’s Masterson, Emma & Associates in Naples, Florida. Hightower has over $25 billion in assets. “The risk from the European situation has been reduced. I don’t know that it’s been eliminated. Best I can say at this point is that it appears to have been postponed.”
Japan Stocks Advance on U.S. Jobs Data, Falling European Borrowing Costs (Source: Bloomberg)
Japanese stocks advanced after U.S. jobless claims fell to a four-year low and borrowing costs fell in Europe, easing concern on the debt crisis and boosting the earnings outlook for exporters. Sony Corp. (6758), Japan’s biggest consumer-electronics exporter, rose 1 percent. Mitsubishi UFJ Financial Group Inc. (8306), the country’s top bank by market value, gained 1.2 percent after successful Spanish and French bond auctions. Mitsui & Co., a trading house that counts commodities as its biggest source of revenue, climbed 1.2 percent on rising oil and metals prices. The Nikkei 225 Stock Average (NKY) rose 0.8 percent to 9,787.17 as of 9:03 a.m. in Tokyo, heading for the weekly gain of 1.4 percent. The broader Topix Index advanced 0.8 percent to 838.24, with more than four times as many shares advancing as falling.
European Stocks Rise as Spanish, French Borrowing Costs Drop; Veolia Jumps (Source: Bloomberg)
European (SXXP) stocks rose, extending the Stoxx Europe 600 Index’s best start to a year since 1998, as Spanish and French borrowing costs dropped and a report showed initial jobless claims fell to a four-year low in the U.S. Veolia Environnement SA, the world’s biggest water utility, jumped the most since Oct. 2008. Adecco SA (ADEN), the world’s largest provider of temporary workers, surged 8.5 percent after reporting better-than-expected earnings. Vivendi SA (VIV) tumbled 10 percent, its biggest plunge in nine years, after forecasting that profit growth will only resume in 2014. The Stoxx 600 (SXXP) advanced 1 percent to 267.06 at the close. The gauge climbed 3.9 percent last month and rose 8.1 percent from the beginning of the year through yesterday. That was the biggest January-February increase since 1998 as optimism mounted that the euro area will contain its sovereign-debt crisis and U.S. economic data beat estimates.
“The Spanish auction went well and Italian yields moving below 2 percent is very positive,” said Trung-Tin Nguyen, a hedge-fund manager at TTN AG in Zurich. “This helps the overall sentiment.”
Yen, Dollar Weaken Against Euro as Gains in Asian Stocks Sap Haven Demand (Source: Bloomberg)
The yen and dollar weakened as gains in Asian shares sapped demand for so-called haven currencies. The yen slid 0.3 percent to 108.26 per euro as of 9:33 a.m. in Tokyo. The dollar lost 0.1 percent to $1.3326 against Europe’s currency.
Euro Set for Weekly Decline Amid Signs of Economic Slowdown; Yen Near Low (Source: Bloomberg)
The euro was poised for a weekly drop against most of its major peers before European data that economists said will show a decline in retail sales and a contraction in services. The 17-nation currency maintained a two-day decline versus the dollar after reports on manufacturing and unemployment yesterday added to evidence Europe’s debt crisis is hurting the region’s economy. The euro remained lower against the yen before a European Central Bank meeting next week at which policy makers are predicted to keep borrowing costs at a record low. The yen was within 0.7 percent of a nine-month low against the greenback. “The European economy is already in a recession, and the only question is how bad the recession gets,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “We do not have a growth plan in Europe. That certainly weighs on the euro.”
The euro was at $1.3319 as of 8:58 a.m. in Tokyo from $1.3311 in New York yesterday, poised for a 1 percent drop this week. It has lost 1 percent against the yen since Feb. 24 and traded at 108.06 yen today. The yen was unchanged from yesterday at 81.12 per dollar after weakening to 81.67 on Feb. 27, the lowest since May 31.
Japan Stocks Advance on U.S. Jobs Data, Falling European Borrowing Costs (Source: Bloomberg)
Japanese stocks advanced after U.S. jobless claims fell to a four-year low and borrowing costs fell in Europe, easing concern on the debt crisis and boosting the earnings outlook for exporters. Sony Corp. (6758), Japan’s biggest consumer-electronics exporter, rose 1 percent. Mitsubishi UFJ Financial Group Inc. (8306), the country’s top bank by market value, gained 1.2 percent after successful Spanish and French bond auctions. Mitsui & Co., a trading house that counts commodities as its biggest source of revenue, climbed 1.2 percent on rising oil and metals prices. The Nikkei 225 Stock Average (NKY) rose 0.8 percent to 9,787.17 as of 9:03 a.m. in Tokyo, heading for the weekly gain of 1.4 percent. The broader Topix Index advanced 0.8 percent to 838.24, with more than four times as many shares advancing as falling.
Bernanke Defends Fed’s Asset Purchases as Creating Jobs in Senate Hearing (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke defended the central bank’s expansive monetary policy, telling a Senate hearing that it helped create jobs and stabilize prices. “We’ve had about 2.5 million jobs created,” since November 2010, when the Fed started its second round of large- scale securities purchases. “We’ve seen big gains in stock prices, improvement in credit markets.” Bernanke, 58, sought to justify policies that have come under growing scrutiny from Republicans in Congress and on the campaign trail. Presidential candidate Mitt Romney has said he wouldn’t give Bernanke another term as chairman, and lawmakers, including Senate Minority Leader Mitch McConnell and House Speaker John Boehner, sent Bernanke a letter in September asking him to “resist further extraordinary intervention” in the economy.
“If you look back at quantitative easing two, so-called, in November 2010, the concerns at the time were that it would be highly inflationary, it would hurt the dollar, that it would not have much effect on growth,” Bernanke said today in response to a question from Senator Robert Menendez, Democrat of New Jersey, during testimony before the Senate Banking Committee.
Initial Jobless Claims in U.S. Lowest Since March ’08 (Source: Bloomberg)
The number of Americans filing first-time claims for jobless benefits fell to a level matching a four-year low, more evidence the labor market is healing. Applications for unemployment insurance decreased 2,000 in the week ended Feb. 25 to 351,000, Labor Department figures showed today. Economists forecast 355,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls fell, while those getting extended payments also declined. Firing is on a downward trend as employers gain confidence in the outlook for economic growth. A smaller number of job reductions also puts those companies in place to hire additional employees as demand picks up. “Firing is not holding back the labor market,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who forecast 350,000 claims. “Businesses recognize that they don’t need to lay off any more people. Down the road, they’re going to realize they need to hire more people.”
U.S. Consumer Spending, Incomes Rise (Source: Bloomberg)
Consumer spending in the U.S. rose less than forecast in January after little change the previous month, showing a lack of improvement in the biggest part of the economy. Purchases climbed 0.2 percent, while incomes increased 0.3 percent, Commerce Department figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News called for a 0.4 percent increase in spending and a 0.5 percent rise in incomes. Warmer weather may have restrained spending on services such as utilities. Households, whose spending accounts for about 70 percent of the world’s largest economy, may be reluctant to increase purchases as gas prices continue to climb and home prices keep falling. Bigger gains in employment and wages may be needed to give consumers the confidence to boost spending.
“We’ve seen some pressures on the household sector in terms of gasoline prices,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “It doesn’t look like things are falling apart, but things aren’t booming either.”
Manufacturing Unexpectedly Slows as Orders Cool: Economy (Source: Bloomberg)
Manufacturing in the U.S. grew less than forecast in February as orders eased, slowing the industry that has powered the two-year expansion. The Institute for Supply Management’s factory index fell to 52.4 from 54.1 in January, the Tempe, Arizona-based group said today. Readings above 50 signal growth. Jobless claims fell to an almost four-year low last week, and household purchases adjusted for prices were little changed for a third straight month in January, other reports showed. “The economy is expanding, but the data are choppy and somewhat inconsistent,” said John Herrmann, president of Herrmann Forecasting LLC in Summit, New Jersey. For manufacturing, “you probably have to look at the glass as a little more than half full. Consumers have lingering concerns about job security and the durability of the expansion and are hesitant to grow their spending.”
Higher fuel prices may be discouraging Americans from spending more on other goods and services even as improvement in the labor market spurs wage gains. At the same time, faster auto sales and increased exports are helping to underpin manufacturing, which accounts for about 12 percent of the world’s largest economy.
Bernanke Quells Talk of Fresh Fed Stimulus (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke said elevated unemployment and subdued inflation mean interest rates are likely to stay low, without offering any sign that the economy needs an additional monetary boost. Bernanke repeated testimony today in the Senate that he delivered yesterday in the House, describing “positive developments” in the job market while saying it’s still “far from normal.” He said the inflationary impact of higher gasoline prices is likely to be temporary. The semiannual testimony to Congress is a contrast to last July, when Bernanke outlined steps that the Federal Open Market Committee took at later meetings, and to the Fed’s January gathering, when some policy makers said more bond-buying might be needed.
“There’s certainly nothing in the testimony, certainly nothing explicit, to suggest that the Fed is really actively considering additional action,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. The speech countered “a strong sense among some market participants that the Fed is ultimately going to do a third round of quantitative easing.”
U.S. Consumer Confidence Holds Near Four-Year High, Bloomberg Index Shows (Source: Bloomberg)
Consumer confidence in the U.S. held close to an almost four-year high last week as pessimism about the performance of the economy eased. The Bloomberg Consumer Comfort (COMFCOMF) Index was minus 38.8 in the period ended Feb. 26 after reaching minus 38.4, the highest level since April 2008, in the previous period. It marked the third straight week above minus 40, which is the level associated with recessions and their aftermath. The margin of error for the headline reading is 3 percentage points. For the fourth consecutive week, at least half the respondents viewed their personal finances as positive, a run that has been matched once since 2008. While job growth and higher stock values are underpinning sentiment, higher fuel costs pose a threat to further gains in confidence and may discourage households from spending more.
“Right now it does appear that stabilization in the labor market and rising share prices of equities are partially offsetting rising gasoline prices,” said Joe Brusuelas, a senior economist at Bloomberg LP in New York. “Should prices continue to rise at the pump, the Bloomberg Consumer Confidence Index, which has a strong inverse correlation with gasoline prices, will likely deteriorate.”
IMF Says Global Economy Still Facing Major Risk From European Debt Crisis (Source: Bloomberg)
The global economy faces “major downside risks” as its recovery continues to be threatened by stresses in the euro area, the International Monetary Fund said in a report prepared for the Group of 20 nations. The world economic expansion will slow to 3.3 percent this year from 3.8 percent in 2011, according to the surveillance report prepared for the meeting of G-20 finance ministers and central bank governors in Mexico City Feb 25-26. The euro economy is forecast to contract 0.5 percent this year, compared with growth of 1.6 percent in 2011. “The overarching risk remains an intensified global ‘paradox of thrift’ as households, firms, and governments around the world reduce demand,” the Washington-based IMF said in the report. “This risk is further exacerbated by fragile financial systems, high public deficits and debt and already-low interest rates.” “Advanced economies are experiencing weak and bumpy growth, reflecting both the legacies from the crisis and spillovers from Europe,” according to the report.
BOJ Board Openings Give Noda Chance to Shape Japan Monetary-Stimulus Talks (Source: Bloomberg)
Japan’s government will make two appointments to the central bank’s nine-member board in coming weeks, giving the administration scope to affect monetary policymaking as politicians press for greater stimulus. A group of lawmakers yesterday told ruling-party policy chief Seiji Maehara the replacements should favor doubling the Bank of Japan’s inflation target and stepping up asset purchases. The five-year terms of board members Seiji Nakamura, 69, and Hidetoshi Kamezaki, 68, former executives in the shipping and trading-company industries, conclude April 4. The picks may offer clues of Prime Minister Yoshihiko Noda’s intentions when BOJ Governor Masaaki Shirakawa’s term ends next year, and color policy discussions as the economy pulls out of its 2011 contraction. One hint would be any break from the practice of appointing members with similar backgrounds to those retiring, said economist Hiromichi Shirakawa.
“If they break tradition, or choose people clearly enthusiastic about beating deflation, that will make an impact on markets because it indicates more easing policies in the future,” said Shirakawa, who is chief Japan economist at Credit Suisse Group AG (CSGN) in Tokyo, used to work at the BOJ, and is no relation to the governor. “Politicians want some achievement before next year’s election,” he said, referring to a vote for the lower house of parliament due next year.
Japan Consumer Prices Fall for Fourth Month, Adding to Case for BOJ Easing (Source: Bloomberg)
Japan’s consumer prices fell for a fourth month, indicating the Bank of Japan (8301) may need to do more to counter deflation after expanding monetary easing. Consumer prices excluding fresh food dropped 0.1 percent in January from a year earlier, the statistics bureau said today in Tokyo. The median estimate was for a 0.2 percent decline, in a Bloomberg News survey of 28 economists. “The data reconfirm Japan’s deflation is deeply rooted,” said Masamichi Adachi, senior economist at JP Morgan Securities in Tokyo and a former central bank official. “The Bank of Japan will probably have to act more aggressively going forward.” The central bank last month set an inflation goal of 1 percent and increased bond purchases by 10 trillion yen ($123 billion) to aid a recovery in the world’s third-biggest economy.
EU Speeds Payments to Permanent Aid Fund (Source: Bloomberg)
European leaders agreed to provide capital faster for the planned permanent bailout fund in a concession to international pressure to strengthen the bloc’s defenses against the debt crisis. Euro governments might pay the first two annual installments into the 500 billion-euro ($666 billion) fund this year and complete the capitalization in 2015, a year ahead of schedule. A decision will come later today. “There will be an acceleration,” European Union President Herman Van Rompuy told reporters in Brussels late yesterday after an EU summit. “It could be starting with the payment of two tranches in 2012 but we have to take a definite decision.”. German Chancellor Angela Merkel, who last year pushed for the longer five-year payment schedule, reversed course this month and spearheaded the drive to speed up the timetable as world leaders and the International Monetary Fund pressed for bolder European action to stamp out the crisis.
Euro Bailout Fund Gets Ministers’ Approval to Raise Money for Greek Swap (Source: Bloomberg)
Euro-area finance ministers kept up pressure on Greece as they authorized the region’s bailout fund to raise money for a bond exchange, the first step in releasing funds from a 130 billion-euro ($173 billion) rescue package. Greece has passed “all required legislation” and the ministers “note with satisfaction” the progress achieved, Luxembourg Prime Minister Jean-Claude Juncker said after chairing a meeting of the finance chiefs in Brussels yesterday before he joined a European Union summit. As a result, they gave the go-ahead to the European Financial Stability Facility to issue bonds to finance their role in the debt swap. After the summit, Juncker said there was a back-up plan if the swap intended to ease the country’s financing load falls short. Speaking to reporters in Brussels after a European Union summit today, he declined to provide further details. “Yes, it exists,” he said, when asked, without saying more.
The progress toward wrapping up the second bailout for Greece came amid signs the crisis that has roiled the region since 2009 is easing. As leaders wrote a new budget rulebook, the European Central Bank pumped 1 trillion euros into the financial system, pushing the risk premium on Italian 10-year bonds compared to German securities to the lowest in six months. Yields on Italian two-year notes fell under 2 percent for the first time since October 2010.
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