Asian Stocks Fall Third Day on Greek Debt Concern, Europe, Australian GDP (Source: Bloomberg)
Asian stocks fell for a third day, with the regional benchmark index (CRY) headed for the lowest close in a month, amid concern about a Greece debt-swap deal and after reports showed Australia’s economy grew less than forecast and European gross domestic product contracted. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics that gets one-fifth of its revenue in Europe, slid 2.4 percent. Newcrest Mining Ltd. (NCM) declined 2.8 percent in Sydney, leading mining companies lower after metal and commodity prices dropped. Advantest Corp. (6857), a maker of memory-chip testers, fell 1 percent in Tokyo after the Philadelphia Semiconductor Index, which tracks the performance of 30 industry stocks, lost 0.9 percent yesterday. The MSCI Asia Pacific Index slid 0.8 percent to 124.50 as of 9:58 a.m. in Tokyo, set for the lowest close since Feb. 3. More than six stocks fell for each that rose.
“We are seeing a correction after a rapid rally,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co. “A major trend in Europe hasn’t changed in that banks strengthen their capital, which leads to a credit crunch and an economic slowdown. The market will remain sensitive to European news flow until Greece makes it through March 20,” a bond redemption date.
Asian Central Banks May Be Nearing End of Interest-Rate Cuts on Oil Risk (Source: Bloomberg)
Central banks in Asia will probably hold off on adding monetary stimulus this week as higher oil prices combine with diminishing concern of a euro-region meltdown to make the case for preserving firepower. South Korea (KORP7DR) and New Zealand (NZOCR) will hold interest rates when the decisions are announced tomorrow, according to all economists surveyed by Bloomberg News. Indonesia (IDBIRATE) will keep its key rate unchanged at 5.75 percent the same day after an unexpected reduction last month, 15 of 16 economists told Bloomberg, while Malaysia (MAOPRATE) will maintain borrowing costs for a fifth meeting a day later, according to 18 of 19 analysts in a separate survey. The 23 percent climb in crude oil in the past six months threatens to heighten inflation pressures in a region that’s seen little slackening in job markets as employers retained workers even with exports slowing.
Signs of improvement in the U.S. job market and Europe’s agreement on a second bailout of Greece have reduced the immediate need for more Asian stimulus. “Growth or inflation risks are not compelling enough to push central banks aggressively in any direction,” said Matt Hildebrandt, an economist at JPMorgan Chase & Co. in Singapore. “On the whole, central banks have probably shifted from growth concerns to being neutral.”
Japanese Stocks Drop for Third Day on Growing Concern Over Greek Debt Deal (Source: Bloomberg)
Japanese stocks fell for a third day, with the Nikkei 225 (NKY) Stock Average headed for a two-week low, amid concern Greece’s debt-swap deal will collapse, threatening the country’s bailout. Sony Corp. (6758), a consumer electronics maker that depends on Europe for a fifth of its sales, fell 2.3 percent after the yen strengthened against the yen. Mitsui & Co., a trading house that counts commodities as its biggest source of income, lost 2.3 percent after oil and metals prices dropped. Nomura Holding Inc., Japan’s biggest brokerage, slid 2.7 percent. “Investors are avoiding risky assets as uncertainty about the global outlook emerges because of the Greek debt issue,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “That’s strengthening the yen and dragging down U.S. and European stocks, with Japanese stocks likely to follow.”
The Nikkei 225 fell 0.9 percent to 9,548.55 as of 9:38 a.m. in Tokyo, headed for its lowest close since Feb. 22. The broader Topix (TPX) Index lost 1 percent to 818.85, with more than four times as many shares declining as advancing. Volume on the gauge was 15 percent higher than the 30-day average.
S&P 500 Caps Biggest Decline in 2012 (Source: Bloomberg)
U.S. stocks slumped, giving the Standard & Poor’s 500 Index its biggest decline this year, as concern grew about the success of a Greece debt-swap deal and after a report showed that the European economy contracted. All 10 groups in the S&P 500 fell as financial, industrial and commodity shares had the biggest losses. Alcoa Inc. (AA), Caterpillar Inc. and Bank of America Corp. decreased more than 3.2 percent. The Morgan Stanley (MS) Cyclical Index of companies most-dependent on economic growth slumped 2.7 percent as 29 of its 30 stocks retreated. Merck & Co. (MRK) dropped 2.6 percent as the drugmaker’s profit forecast trailed analysts’ projections. The S&P 500 decreased 1.5 percent to 1,343.36 at 4 p.m. New York time, falling the most since Dec. 8. The Dow Jones Industrial Average slid 203.66 points, or 1.6 percent, to 12,759.15. About 7.5 billion shares changed hands on U.S. exchanges, or 12 percent above the three-month average.
“Investors typically dislike uncertainty more than they dislike bad news,” Michael Koskuba, who helps oversee $28 billion at Victory Capital Management Inc. in New York, said in a telephone interview. “There’s concern about whether or not there will be enough participants in the Greek debt swap. The fear is that if it doesn’t happen the way most want it to happen, there’s potential for a greater recession in Europe.”
European Stocks Decline Most Since November, Led by Banks (Source: Bloomberg)
European (SXXP) stocks declined, with the Stoxx Europe 600 Index dropping the most since November, as a report confirmed a contraction in the euro-area economy and investors weighed Greece’s chances of getting bondholders to accept a debt swap. Commerzbank AG and Societe Generale SA led a slump in bank shares. Cable & Wireless Worldwide (CW/) Plc retreated 6.7 percent after a newspaper report speculating that a potential bidder won’t make an offer for the company. Nyrstar NV, the largest producer of refined zinc, paced commodity shares lower. The Stoxx 600 (SXXP) declined 2.7 percent to 258.46 at the close in London, for the biggest drop since Nov. 21, as bondholders owning a fifth of Greece’s debt agreed for the exchange, even as the government has set 75 percent participation as the threshold for proceeding with the plan. The benchmark measure has advanced 5.7 percent so far in 2012.
“With the debt-swap deadline approaching and only 20 percent acceptance so far by private investors, it’s easy to understand why market participants are nervous,” said Stephane Ekolo, chief European (SXXP) strategist at Market Securities in London. “We’re realizing once again that we are far from over with the problems.”
Yen Rises Against Most Peers as Greek Debt Concern Prompts Stock Declines (Source: Bloomberg)
The yen rose against most of its 16 major counterparts as Asian stocks fell amid concern over a Greek debt swap, boosting demand for the currency as a refuge. The euro remained lower after the biggest drop in four months versus the yen as the deadline nears for Greece to reach a deal with its creditors over the bond exchange to secure a second bailout package. Demand for the euro was also hampered before the European Central Bank meets tomorrow, where policy makers are expected to keep its interest rate at a record low. Australia’s dollar weakened after a report showed the nation’s economy expanded less than forecast in the fourth quarter. Because of the Greek debt talk, “the market is in risk-off environment, so the yen is more likely to be bought,” said Satoshi Okagawa, a senior global-markets analyst in Singapore at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-largest banking group by market value. “It’s quite possible that the yen will strengthen beyond 80 per dollar.”
Treasuries Snap Rally on Speculation Industry Report to Show Jobs Growth (Source: Bloomberg)
Treasuries snapped yesterday’s biggest rally this year on speculation an industry report today will show U.S. jobs growth quickened last month. Government securities also halted their gain before the U.S. announces tomorrow the sizes of three auctions next week of coupon-bearing debt. ADP Employer Services may say companies in the U.S. added 215,000 workers in February, versus 170,000 in January, according to a Bloomberg News survey of economists. Ten-year yields rose one basis point to 1.96 percent as of 10:16 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due in February 2022 fell 3/32, or 94 cents per $1,000 face amount, to 100 13/32. The rate slid seven basis points yesterday, or 0.07 percentage point, the most since Dec. 28. The record low was 1.67 percent set Sept. 23.
“Treasuries are very expensive,” said Tsutomu Komiya, who helps oversee the equivalent of $114.8 billion as an investor in Tokyo at Daiwa Asset Management Co., a unit of Japan’s second- biggest brokerage by market value. “The U.S. economy is improving. The labor market is warming.”
China May Expand Property-Tax Trials Beyond Cities of Shanghai, Chongqing (Source: Bloomberg)
Chinese Finance Minister Xie Xuren said the nation may expand property-tax trials, as the government prolongs efforts to cool the real-estate market, make housing affordable and limit asset bubbles. Taxes can guide housing demand, Xie said at a press briefing in Beijing today during the annual meeting of the National People’s Congress, without saying where more tests could take place. So far, the government has pilot projects in Shanghai and Chongqing. China’s benchmark stock index fell the most in a month today after the government yesterday set a lower economic growth target for this year than 2011 and officials reiterated that curbs on the real-estate market would stay. Anhui Conch Cement Co. (914), the nation’s biggest maker of the building material, tumbled 4.4 percent as property developer China Vanke Co. (200002)’s sales slumped.
“There is agreement among the authorities that a property tax is one mechanism that can prevent asset bubbles in the long run,” said Yao Wei, a Hong Kong-based economist for Societe Generale SA. Xie’s comments are “confirmation that they are going to do it on a wider scale,” she said.
Australia’s GDP Grows at Half the Pace Economists Forecast; Currency Drops (Source: Bloomberg)
Australia’s economy expanded at half the pace economists forecast last quarter as a housing construction slump slowed growth, sending the currency to a six- week low. Fourth-quarter gross domestic product advanced 0.4 percent from the previous three months, when it rose a revised 0.8 percent that was weaker than previously reported, a Bureau of Statistics report released in Sydney today showed. The result compared with the median of 25 estimates in a Bloomberg News survey for a 0.8 percent gain. The report covers a period when Europe’s sovereign-debt crisis weighed on Asian demand for commodities that prompted Reserve Bank Governor Glenn Stevens to make back-to-back interest-rate cuts for the first time since 2009. He held rates yesterday as a A$456 billion ($480 billion) pipeline of resource projects driven by companies such as BHP Billiton Ltd. (BHP) cushions a slump in manufacturing and services hit by a strong currency.
“We’ve seen weaker profits and slower wages drag down income growth,” said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney, who predicted a 0.6 percent gain. “Some companies have struggled with the high Aussie dollar and others are battling to reduce costs in a weak productivity environment.”
Euro-Region Economy Shrank in Fourth Quarter as Investment, Exports Fell (Source: Bloomberg)
Europe’s economy contracted in the fourth quarter as investment declined by the most since 2009 and exports and consumer spending dropped. Gross domestic product shrank 0.3 percent from the third quarter, the European Union’s statistics office said today, confirming an estimate published on Feb. 15. Exports fell 0.4 percent after a 1.4 percent gain in the previous three months, while household spending declined 0.4 percent and investment dropped 0.7 percent. While Europe is facing its second recession in less than three years, the economy shows “tentative signs of stabilization,” European Central Bank President Mario Draghi has said. ECB efforts to pump cash into the economy have helped ease concern about a credit crunch and won governments time to agree on measures to contain the debt crisis.
“The region is still facing major headwinds, notably including increased fiscal tightening in many countries and markedly rising unemployment,” said Howard Archer, chief European economist at IHS Global Insight in London. “Despite some recent overall improvement in euro zone surveys and evidence that Germany is returning to growth, we doubt that the euro zone will be able to avoid further contraction in the first quarter of 2012 and very possibly the second.’”
Brazil’s GDP Growth of 2.7% Last Year Underperformed BRIC Peers: Economy (Source: Bloomberg)
Brazil’s economy last year registered its second-worst performance since 2003 as higher borrowing costs and a currency that rallied to a 12-year high led it to underperform emerging-market peers China and India. Gross domestic product expanded 2.7 percent even after growth accelerated in the fourth quarter, the national statistics agency said today in Rio de Janeiro. The median estimate of 32 economists surveyed by Bloomberg was for the economy to grow 2.8 percent. The GDP figure underscores central bank President Alexandre Tombini’s view that the economy is growing below capacity amid Europe’s debt crisis, reinforcing bets that the central bank may accelerate the pace of interest-rate cuts tomorrow. Growth in Latin America’s biggest economy will gain speed and grow 4.5 percent this year, Finance Minister Guido Mantega said today.
“Brazil is losing international competitiveness,” John Welch, chief strategist for CIBC World Markets, the investment- banking arm of Canada’s fifth-largest bank, said by phone from New York. “They’re blaming all the problems on the exchange rate, but have ignored structural reforms.”
SocGen Joins Generali Taking Part in Greece’s Debt Swap Offer (Source: Bloomberg)
Societe Generale SA (GLE), France’s second-biggest bank, Assicurazioni Generali SpA and UniCredit SpA (UCG) joined firms saying they would participate in Greece’s debt swap as the country threatened to compel holdouts to take part. Greece’s six largest banks also plan to accept the offer, the country’s Finance Ministry said in a statement late yesterday. The lenders are among the biggest private holders of the nation’s sovereign debt, data compiled by Bloomberg show, making them crucial to the success of the exchange. The Greek government, which set a 75 percent participation rate as a threshold for proceeding with the transaction, said it will use collective action clauses to force holders of Greek-law bonds to accept the swap if it receives sufficient consent from investors. The goal of the exchange, which runs through March 8, is to reduce the 206 billion euros ($270 billion) of privately held Greek debt by 53.5 percent, helping avert a disorderly default that could roil markets and fuel contagion.
“It’s in the interest of the private creditors as well as international stability,” French European Affairs Minister Jean Leonetti said yesterday in an interview in Paris. “All private creditors know it’s better to lose a little to win a lot rather than lose a lot later and win nothing.”
U.K. House Prices Decline as Recovery Concerns Weigh on Consumers: Economy (Source: Bloomberg)
U.K. house prices fell for a third month in four in February and retail sales declined as economic uncertainty weighed on Britons’ spending. Home prices dropped 0.5 percent from January to an average 160,118 pounds ($252,600), Lloyds Banking Group Plc (LLOY)’s Halifax mortgage-lending unit said in a statement in London today. A separate report from the British Retail Consortium showed sales at stores open at least 12 months decreased 0.3 percent last month from a year earlier. While inflation is cooling, a recovery in consumer confidence is being kept in check by government job cuts and concern about the impact of Europe’s debt crisis on Britain’s economy. Housing demand may come under further pressure after a property-tax exemption ends this month and Halifax, the U.K.’s No. 1 mortgage provider, and two other lenders move to raise interest rates for some of their home-loan products.
“It is hard to be optimistic about the house-price outlook,” said Ed Stansfield, a property economist at Capital Economics Ltd. in London. “With mortgage interest rates edging up again and unemployment still rising, the downward trend in prices is likely to become entrenched this year.”
Investors Holding 20% of Greek Debt for Swap (Source: Bloomberg)
The private investors that so far declared their participation in Greece’s debt restructuring hold about 20 percent of the bonds involved in a swap required for an international bailout. The 12 members of the creditors’ steering committee that said yesterday they would join in the exchange have debt with a face value of at least 40 billion euros ($53 billion), compared with the 206 billion euros of Greek bonds in private hands, according to data compiled by Bloomberg from company reports. European officials are pressing investors to swallow the writedowns to avert even greater losses. The participating firms include some of Greece’s biggest creditors, including National Bank of Greece SA, Alpha Bank SA (ALPHA), BNP Paribas SA (BNP) and Commerzbank AG. (CBK) The goal of the swap, which runs through March 8, is to reduce by 53.5 percent the total of privately held Greek debt, helping avert an uncontrolled default that could roil markets and spur contagion to states such as Portugal.
“It’s in the interest of the private creditors as well as the international stability,” French European Affairs Minister Jean Leonetti said today in an interview in Paris. “All private creditors know it’s better to lose a little to win a lot rather than lose a lot later and win nothing. It’s better to lose 107 billion and win after in a more stable market.”
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