Asia Stocks Fall After Record Win Streak (Source: Bloomberg)
Asian stocks fell, paring gains from last week that saw the benchmark index post its longest weekly winning streak on record, after China said it will target the slowest economic growth since 2004. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, fell 1 percent in Sydney as metal prices dropped, and was the biggest drag on the MSCI Asia Pacific Index. China Construction Bank Corp., the nation’s second-largest lender by market value, slid 0.9 percent in Hong Kong. LG Chem Ltd. (051910), a South Korean supplier of batteries for General Motors Co., slid 4 percent in Seoul after the U.S. automaker said it will temporarily stop making the Chevrolet Volt plug-in hybrid car.
“Asia is all about moderation now,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. “It’s a much more challenging market to be bullish in. While the risk of financial Armageddon in Europe is gone, Europe is still going to have a large recession. Europe is China’s biggest export market. That tempers optimism on how much the risk rally can continue.”
Nikkei Slips From Seven-Month High as Oil Prices Weigh on Energy Companies (Source: Bloomberg)
The Nikkei 225 Stock Average (NKY) slipped from a seven-month high as falling oil prices weighed on shares of energy companies and gains in the yen clouded the earnings outlook for exporters to Europe. Shares also slipped after China’s government targeted the slowest economic growth since 2004. Inpex Corp. (1605), Japan’s top energy explorer by market value, dropped 2.1 percent. Sony Corp., which depends on Europe for about one fifth of its sales, fell 1.8 percent. Tokyo Electric Power Co. paced gains among utilities on a report it will raise power rates. “Japanese stocks have had a strong rally and technical indicators suggest some overheating,” said Yumi Nishimura, analyst at Daiwa Securities Group Inc. “Sectors that have been performing strongly are slipping back a little, while investors are buying defensive shares that have gained a little less.”
The Nikkei 225 fell 0.2 percent to 9,761.15 as of 10:20 a.m. in Tokyo, retreating after the gauge rose last week to its highest level since Aug. 2. The broader Topix (TPX) lost 0.1 percent to 837.38 today.
U.S. Stocks Advance for Third Week as Data on Housing, Jobs Market Improve (Source: Bloomberg)
U.S. stocks rose this week, with the Standard & Poor’s 500 Index completing its best February since 1998, as data on housing and the jobs market improved and monthly sales from Gap Inc. to Ford Motor Co. (F) beat estimates. Equities trimmed their advance March 2 after the S&P 500 climbed to the highest since 2008 and the Dow Jones Industrial Average closed above 13,000 for the first time in nearly four years during the week. Consumer and financial stocks rose the most among 10 S&P 500 industries this week, each rising 1.4 percent as a group. JPMorgan Chase & Co. (JPM) added 6.1 percent as an analyst said it would be worth more if broken up. Alpha Natural Resources Inc. (ANR) fell 15 percent, leading a drop in energy shares. The S&P 500 added 0.3 percent to 1,369.63, a third straight weekly gain. The benchmark measure rallied 4.1 percent last month, and has risen for eight out of nine weeks in 2012.
The Dow Jones Industrial Average (INDU) fell 5.38 points, or less than 0.1 percent, to 12,977.57, its first retreat in three weeks. The gauge closed at 13,005.12 on Feb. 28.
European Stocks Gain on ECB Bank Loans, U.S. Confidence; Veolia, C&W Surge (Source: Bloomberg)
European (UKX) stocks climbed this past week as the European Central Bank lent to the region’s banks and consumer confidence and jobless claims in the U.S. added to optimism that the world’s largest economy continues to recover. Veolia Environnement SA, the world’s biggest water utility, jumped 22 percent after saying it’s in exclusive talks to sell its Transdev mass-transit unit. Cable & Wireless Worldwide Plc soared 20 percent as Tata Communications Ltd. said it may make a cash offer for the company. The Stoxx Europe 600 Index advanced 0.9 percent this past week to 267.21. The benchmark measure climbed 3.9 percent last month and rose 8.1 percent from the beginning of the year through the end of last month. That was the biggest January- February increase since 1998 as investors speculated that the euro area will contain its sovereign-debt crisis and as U.S. economic reports beat estimates.
“The global backdrop is improving with the ECB’s action coming in the context of a wide range of easing moves from other central banks around the world,” said Trevor Greetham, the head of asset allocation at Fidelity Worldwide Investment which manages 135.3 billion pounds ($214.5 billion). “There are increasing signs that stimulus is starting to take effect and a U.S.-led upswing in global growth is underway.”
Yen slips broadly, nears 9-month low vs dollar
SINGAPORE, March 2 (Reuters) - The yen slipped broadly and neared a recent nine-month low versus the dollar, retreating due to yen-selling by Japanese importers and as traders took aim at stop-loss levels.
"As you can see in yen crosses for example, there is now a strong trend of betting that market strains will calm down, and U.S. economic data has been recovering to some extent as well," Okagawa said.
Treasuries Snap Advance Before Reports on U.S. Services Industry, Jobs (Source: Bloomberg)
Treasuries snapped a gain before a private report that analysts said will show the U.S. services industry, which makes up almost 90 percent of the economy, grew at almost the fastest pace in a year. U.S. government securities have handed investors a 0.5 percent loss in the past month as the world’s biggest economy showed signs of improving, based on Bank of America Merrill Lynch indexes. The Institute for Supply Management’s non- manufacturing index was probably 56.2 in February, versus 56.8 the month before, according to a Bloomberg News survey of analysts before the report today. The January figure was the most since February 2011. “The U.S. economy is expanding,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “I don’t recommend longer-term U.S. Treasuries.”
Treasuries’ Yield Difference Widens on Bernanke Stance, Economic Strength (Source: Bloomberg)
The difference between yields on two- and 10-year notes increased for the first time in three weeks amid better-than-forecast economic data and Federal Reserve Chairman Ben S. Bernanke’s failure to indicate the central bank will boost stimulus. U.S. 10-year note yields rose Feb. 29 and March 1 as Bernanke’s two days of congressional testimony damped speculation the central bank would engage in a third round of buying Treasuries, known as quantitative easing. Two-year note yields fell for the first time in five weeks on concern that measures to increase lending in the euro region won’t boost economic growth, spurring safety demand. A government report next week is forecast to show February jobs gains exceeded 200,000 for a third straight month.
“The economic data has continued to come in better than expected and there was no announcement on QE3,” said Larry Milstein, managing director in New York of government- and agency-debt trading at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors.
Bullard Says Fed Should Forgo Additional Easing While U.S. Economy Expands (Source: Bloomberg)
The Federal Reserve should hold off on additional accommodation because the U.S. economy is growing moderately and risks from the European debt crisis have eased, said St. Louis Fed President James Bullard. “I wouldn’t take anything off the table,” Bullard said yesterday in an interview with BNN Television in Vancouver. “For now things are looking better for the U.S. economy and it is a good time to wait and see.”
Bullard said in a speech that he expects the U.S. unemployment rate to drop to 7.8 percent by year’s end, as a “moderate expansion” spurs improvement in the labor market. His comments echoed Chairman Ben S. Bernanke, who said in congressional testimony last week that maintaining monetary stimulus is warranted even as the unemployment rate falls and rising oil prices may push up inflation temporarily. The central bank could damage its credibility by signaling policy that will stay unusually easy for a specified time frame, Bullard said at Simon Fraser University in Vancouver.
Payrolls to Rise Again: U.S. Economy Preview (Source: Bloomberg)
Employers probably added more than 200,000 workers for a third straight month in February amid optimism about the U.S. expansion, economists said before a report this week. Payrolls increased by 210,000 last month after rising 243,000 in January, the most in nine months, and 203,000 at the end of 2011, according to the median projection of 55 economists surveyed by Bloomberg News. It would mark the strongest three- month stretch in almost a year. The jobless rate probably held at an almost three-year low of 8.3 percent. Bigger employment and wage gains would go further in bolstering household spending, which accounts for about 70 percent of the economy and is threatened by higher fuel costs. Federal Reserve Chairman Ben S. Bernanke said last week that while the labor market is making progress restoring the 8.7 million jobs lost as a result of the recession, it’s “far from normal.”
“There is a much more encouraging labor-market backdrop for the consumer in early 2012,” said Conrad DeQuadros, senior economist at RDQ Economics LLC in New York. “But economic growth is moderate, which leaves the unemployment rate fairly elevated by year-end, and that’s the Fed’s main focus.”
Intervention Call by Asia Executives as Currencies in Best Start Since ’06 (Source: Bloomberg)
Asian exporters, battling a slump in demand, are calling for their central banks to intervene after capital inflows contributed to the best start to the year since 2006 for the region’s currencies. Executives at LG Chem Ltd., South Korea’s biggest chemicals maker, and Bangkok-based Chengteh Chinaware (Thailand) Co. said policy makers should curb volatility, while TLtek Co., an exporter of auto-part making machines based on the outskirts of Seoul, cites the won’s strength against the euro for its currency losses. The chairman of the Malaysian American Electronics Industry, which represents U.S. companies such as Motorola Inc., and Dell Inc., said the central bank should “stabilize the ringgit.”
Asian policy makers switched focus to spurring economic growth after slowing inflation prompted Indonesia (IDBIRATE), the Philippines and Thailand to cut interest rates in the past six months. The ringgit, won and Chinese yuan climbed more than 5 percent against the euro in the past year, making exports less competitive as Europe’s debt crisis damps demand. The Bloomberg- JPMorgan Asian Dollar Index (ADXY) tracking regional currencies against the greenback rose 2.1 percent this year.
China Targets 7.5% Growth in 2012 as Euro Crisis Slows Exports (Source: Bloomberg)
China’s government will target economic growth of 7.5 percent this year, the lowest goal since 2004, suggesting leaders will tolerate slower expansion while they try to reduce the nation’s reliance on exports. Officials also set an inflation target of 4 percent, unchanged from last year’s goal, according to a state-of-the- nation speech that Premier Wen Jiabao will read to about 3,000 lawmakers at the annual meeting of the National People’s Congress in Beijing today. By cutting the 8 percent goal maintained from 2005 to 2011, Wen, 69, is signaling the ruling Communist Party is determined to shift the makeup of growth toward consumption and away from from exports and investment. Wen and fellow officials are also preparing to begin a once-in-a-decade handover of power later this year to a new set of leaders.
A lower target “would reduce the likelihood of a large- scale stimulus package, as authorities show that they understand that potential growth is declining,” Zhang Zhiwei, chief China economist at Nomura Holdings Plc in Hong Kong, said in a March 2 research note. “In the long run, it would help to reduce macro risks in China and make growth more sustainable.”
Myanmar Nearing Currency Float in Policy Shift (Source: Bloomberg)
Myanmar is nearing a decision to dismantle its fixed exchange rate, which risked holding back trade and investment as the country seeks economic ties with western nations after five decades of military rule. Authorities will soon announce a shift to a managed float of the kyat, and seek to keep it from rising beyond the informal rate of about 800 per dollar, a person familiar with the discussions said. Officials will then activate an interbank exchange market, in which the central bank will intervene to influence the kyat’s value, according to the person, who spoke on condition of anonymity because the talks are private. The step would mark President Thein Sein’s biggest economic shift since he began removing the remnants of military rule after taking office last year. With the U.S. and European nations pledging to review sanctions after April 1 by-elections involving dissident leader Aung San Suu Kyi, the change would lay the groundwork for reconnecting Myanmar to global commerce.
“It would be a considerable victory for the reformers,” said Sean Turnell, a professor at Macquarie University in Sydney who conducts research on Myanmar’s economy. “The people who would lose out the most would be the inner core of the highest echelons of the military, which used the old rate to accumulate reserves that were used to do what the military wanted to do.”
Noda Says Deal Possible With Japan’s Opposition to Double Consumption Tax (Source: Bloomberg)
Japanese Prime Minister Yoshihiko Noda reiterated yesterday the need to trim the scale of government to win public support for doubling the nation’s 5 percent consumption tax. “This is the first step to a politics considerate of future generations, from one valid only for the present,” Noda said in an interview on Nippon Television last night. He also pledged support for more reconstruction efforts in areas hit by last year’s earthquake, tsunami and nuclear crisis. Japan’s sixth prime minister in five years is pushing pay cuts and a thinning of the bureaucracy and legislature to make a tax increase more palatable. Noda said earlier he thinks a deal is possible with the opposition on raising the tax to shore up the social security system. “I believe we can come to an understanding,” he told journalists in Tokyo on March 3.
An aging society and a declining birthrate have put Japan in an “unprecedented situation” as the government seeks to rein in soaring welfare costs, Noda said. Political parties all recognize the urgency and must cooperate “to secure stable financing for a sustainable social security system.”
Greece Debt-Swap Deadline This Week to Show If Europe Moving Past Crisis (Source: Bloomberg)
The European Union faces a first test in its attempt to turn the page on the two-year debt crisis when Greece’s private creditors decide this week whether to sign off on the biggest sovereign-debt restructuring in history. The success of the 106 billion-euro ($140 billion) debt swap, confirmed on the eve of last week’s European Union summit, depends on how many investors agree to the writedown by the March 8 deadline. Euro-area finance ministers will hold a teleconference on March 9 to review the deal’s outcome. “The European crisis is not quite over yet,” Erik Nielsen, chief global economist at UniCredit SpA in London, wrote in a note to clients yesterday. He said enough creditors will probably participate in the writedown to avoid triggering so-called collective action clauses, which could be used by Greece to compel investors to participate and roil markets by triggering credit-default swap insurance contracts.
The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro- area finance ministers last week authorized the EFSF to issue bonds for the swap.
Greece Ratings Cut to Lowest Level by Moody’s (Source: Bloomberg)
Greece’s credit rating was cut to the lowest level by Moody’s Investors Service after the country began the biggest sovereign debt restructuring ever. Greece’s long-term foreign currency debt was downgraded to C from Ca late yesterday, with Moody’s saying in a statement that investors who participate in the nation’s debt exchange will get about 70 percent less than the face value of their holdings. The deal constitutes “a distressed exchange, and hence a default,” the New York-based rating company said. Greece has published the formal offer document for its agreement to exchange bonds for new securities. The restructuring uses so-called collective action clauses to discourage holdouts, the use of which would trigger credit- default swap insurance contracts, according to the rules of the International Swaps & Derivatives Association.
The debt exchange aims to help reduce national debt to 120.5 percent of gross domestic product by 2020, from 160 percent last year, and to meet the terms of a 130 billion-euro ($172 billion) international bailout. The swap will slice about 100 billion euros off more than 200 billion euros of privately held debt should all investors participate.
Euro Touches Two-Week Low Before Data on European Retail Sales, ISM Report (Source: Bloomberg)
The euro touched a two-week low against the dollar before data economists say will show the region’s retail sales dropped for a third month, adding to signs the currency bloc’s debt woes are hurting the economy. The Dollar Index advanced to the highest in more than two weeks before a U.S. report forecast to indicate a continued expansion in service industries, easing speculation the Federal Reserve will add to monetary stimulus. Australia’s dollar slid against the yen after its biggest trading partner China said it will aim for slower growth this year. “The euro is likely to weaken in the mid- to long-term,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s No. 3 bank by market value. “It’s hard to imagine the European economy being on a sustainable growth path as countries in the region are forced to take austerity measures because of the debt crisis.”
The euro slid to $1.3181, the lowest since Feb. 20, before trading little changed at $1.3205 as of 10:11 a.m. in Tokyo. It lost 0.1 percent to 107.82 yen. Japan’s currency strengthened 0.2 percent to 81.65 per dollar after earlier falling to 81.87, matching the weakest level since May.
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