Most Asian Stocks Rise on Improving U.S. Jobs Data, Japan Machinery Orders (Source: Bloomberg)
Most Asian stocks rose after a rebound in Japan’s machinery orders and better-than-expected U.S. jobs data eased concern a slowdown in Europe and China will derail global economic growth. Hitachi Construction Machinery Co. (6305), a maker of bulldozers and cranes, rose 2.4 percent in Tokyo. Panasonic Corp., an electronics company that gets about 10 percent of its sales in the U.S., climbed 1.4 percent after the dollar strengthened against the yen. Samsung Electronics Co., South Korea’s No. 1 consumer electronics exporter, fell 1.1 percent in Seoul after Apple Inc. claimed the company violated a court order in a patent-infringement case. The MSCI Asia Pacific Index fell 0.1 percent to 126.80 as of 9:39 a.m. in Tokyo, with about three stocks advancing for every two that dropped. Two of 10 industry groups in the measure advanced. Japan’s Nikkei 225 Stock Average (NKY) rose 0.7 percent after the nation’s machinery orders rebounded in January, signaling company investment will help to drive a return to growth.
Australia’s S&P/ASX 200 slipped 0.4 percent, while South Korea’s Kospi Index slid 0.5 percent.
Japanese Stocks Advance For Third Day as U.S. Employment Data Lifts Dollar (Source: Bloomberg)
March 12 (Bloomberg) -- Japanese stocks rose for a third day, extending a rally of five consecutive weeks, after better- than-expected U.S. jobs data pushed the dollar to a 10-month high against the yen, boosting exporters’ earnings outlook. The Nikkei 225 Stock Average (NKY) rose 0.9 percent to 10,021.51 as of 9:01 a.m. in Tokyo. The broader Topix Index gained 0.5 percent to 853.13. The gauge added 1.3 percent last week, capping its fifth weekly gains.
European Stocks Decline as Best Annual Start Since 1998 Seen as Overdone (Source: Bloomberg)
European stocks fell this week as investors speculated the Stoxx Europe 600 Index’s best start to a year since 1998 has overshot the outlook for the economy. Enel SpA sank to a record low as Italy’s largest utility cut its dividend target to reduce debt. PSA Peugeot Citroen sank 7.8 percent after Europe’s second-biggest carmaker announced a 1 billion-euro ($1.3 billion) rights offer. Salzgitter AG lost 7 percent after the steelmaker said it was“impossible” to provide an earnings forecast. The benchmark Stoxx 600 (SXXP) slid 0.7 percent to 265.44 this past week, the biggest drop since Feb. 10. The gauge rose for the past three days as Greece persuaded most bondholders to accept a debt exchange, rebounding from the biggest two-day drop since November earlier in the week. The index had climbed 9.3 percent from the start of the year through March 2 as the European Central Bank lent the region’s lenders more than 1 trillion euros and U.S. data topped forecasts.
“The force of the move into the new year really took the market into extended overbought conditions; technically it looked like there was a need for some consolidation,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London. “We could see more of a consolidation phase going forward, but the fundamental picture is still looking more supportive than before.”
S&P 500 Caps Fourth Weekly Advance as Employment Growth Exceeds Forecasts (Source: Bloomberg)
U.S. stocks rose, capping the fourth straight weekly rally for the Standard & Poor’s 500 Index, after a government report showing stronger-than-forecast payroll growth bolstered optimism in the world’s largest economy. Financial shares had the biggest gain among 10 groups in the S&P 500 as Greece’s private creditors agreed to a debt swap. JPMorgan Chase & Co. (JPM) and BB&T Corp. (BBT) added at least 1.2 percent. Lennar Corp. (LEN) and D.R. Horton Inc. rallied more than 3 percent, pacing gains in homebuilders, after Credit Suisse Group AG raised its recommendations for the companies. Starbucks Corp. (SBUX) rose 2.9 percent on plans to introduce a new single-cup brewer.
The S&P 500 added 0.4 percent to 1,370.87 at 4 p.m. New York time. The index rose 2.1 percent in four weeks. The Dow Jones Industrial Average gained 14.08 points, or 0.1 percent, to 12,922.02. The Russell 2000 Index of small companies jumped 1.3 percent to 817. About 6.2 billion shares changed hands on U.S. exchanges, or 6.4 percent below the three-month average. “The jobs report was solid, but not spectacular,” said James McDonald, chief investment strategist at Northern Trust Corp. in Chicago. His firm manages $663 billion. “This helps depict the U.S. as the standout Western economy continuing to slowly, but steadily repair. We didn’t see any improvement in the unemployment rate. That tells me the Fed is going to stay accommodative. The path of least resistance for stocks is up.”
Emerging-Market Equity Funds Record 10th Week of Inflows, EPFR Global Says (Source: Bloomberg)
Emerging-market stock funds took in $907 million in the week ended March 7, the 10th week of inflows and the longest run of gains since 2010, according to EPFR Global. Inflows were lured as an easing in tensions with Iran outweighed the prospect of slower growth in China, according to EPFR. Net investment into developing-nation equity funds has totaled $22.6 billion in 2012, compared with outflows of $19.6 billion for the same period of 2011, according to a report e- mailed today by the Cambridge, Massachusetts-based data provider. So-called Global Emerging-Market funds, or GEM funds, recorded net inflow for the week of $1.3 billion, the data show. Asian funds excluding Japan recorded a net outflow of $418 million, Cameron Brandt, EPFR director of research, said by e- mail today. China cuts its economic growth target to 7.5 percent on March 5, from an 8 percent goal in place since 2005.
Retail Sales Likely Rose on Autos, Fuel (Source: Bloomberg)
Retail sales in the U.S. probably rose in February by the most in five months, spurred by the strongest demand for automobiles since 2008, economists said before reports this week. The 1.1 percent rise would follow a 0.4 percent gain in January, according to the median forecast of 67 economists surveyed by Bloomberg News ahead of Commerce Department figures due March 13. Industrial production picked up in February, while inflation excluding food and energy remained in check. Sales at retailers like Gap Inc. (GPS) and Target Corp. (TGT) last month beat analysts’ estimates, a sign an improving job market is helping bolster consumer spending, the biggest part of the economy. A pickup in payrolls, accompanied by limited wage growth, may not be enough to satisfy Federal Reserve officials, who this week will probably reaffirm their commitment to keeping interest rates low through 2014.
“Retail sales could be pretty strong for February,” said Omair Sharif, an economist at RBS Securities LLC in Stamford, Connecticut. “The better job growth numbers are helping. Fed policy makers are going to sit back and take stock” rather than make any new moves.
Operation Twist’s Impact on U.S. Yields Comparable to Fed Easing, BIS Says (Source: Bloomberg)
The Federal Reserve’s extension of the average maturity of its holdings is comparable to its two rounds of asset purchases in lowering borrowing costs, according to the Bank for International Settlements. The program known as Operation Twist may lower the Treasury 10-year note yield by about 85 basis points, or 0.85 percentage point, compared with a reduction of 164 basis points under the Fed’s $2.3 trillion purchases of assets known as quantitative easing, a report from the Basel, Switzerland-based BIS said. Operation Twist “may have a significant impact on the 10- year Treasury bond yield, comparable to that of outright asset purchases,” Jack Meaning, an economics doctoral candidate at the University of Kent, and Feng Zhu, a BIS economist, wrote in the report, which was released today.
They said part of Operation Twist’s reduction of yields may be erased by the Treasury Department, which has increased its average debt maturity to 62.8 months, the highest level since 2002. The U.S. government’s increase in the average maturity of outstanding debt added 41 basis points to the 10-year note yield, Meaning and Zhu wrote.
China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil (Source: Bloomberg)
China had its largest trade deficit since at least 1989 last month as Europe’s sovereign-debt turmoil damped exports and imports rebounded after a weeklong holiday. The shortfall was $31.5 billion, the customs bureau said yesterday. Imports rose 39.6 percent from a year earlier, after a 15.3 percent slump in January, while exports increased 18.4 percent, the bureau said. Data in the first two months are distorted by the timing of the Lunar New Year holiday, which fell in January this year and February in 2011. The data, along with lower-than-forecast inflation, industrial output and retail sales reported March 9, raise the odds PremierWen Jiabao will ease policies to support growth in the world’s second-biggest economy. Commerce Minister Chen Deming’s warning last week that boosting trade by 10 percent this year will require “arduous efforts” may also signal a slower pace of yuan gains as policy makers seek to aid exporters.
“Easing inflation and weakening economic activity send a strong signal for further loosening in the upcoming months,” said Shen Jianguang, Hong Kong-based chief greater China economist for Mizuho Securities Asia Ltd.
China Slowdown May Portend Easing as Asia Considers Options for Stimulus (Source: Bloomberg)
China’s economic growth slowed in the first two months of the year, with both exports and domestic demand moderating faster than analysts had forecast, building the case for Premier Wen Jiabao to accelerate stimulus measures. The world’s second-largest economy had the biggest trade deficit last month in at least 22 years, the weakest January- February factory-production gain since 2009 and retail sales below the median economist estimate, government data showed March 9 and 10. Inflation and lending growth also slowed, leaving Wen with more scope to loosen credit. The nation may cut interest rates for the first time since 2008 or lower banks’ required reserves a third time in four months as policy makers across Asia balance preserving firepower for a deterioration in Europe’s debt crisis with controlling inflation. India last week unexpectedly reduced its cash reserve ratio, while Australia’s central bank said it has scope to lower rates and South Korea and Indonesia held off from stimulus.
“Across Asia, the focus of macroeconomic policies is shifting towards supporting growth,” said Eswar Prasad, a former China division chief at the International Monetary Fund who’s now a senior fellow at the Brookings Institution in Washington. “Many economies are holding some policy room in reserve as they brace for possible spillovers from external shocks.”
Japanese Machinery Orders Signal Investment to Aid Rebound (Source: Bloomberg)
Japan’s machinery orders rebounded in January, signaling that company investment will help to drive a return to growth in the world’s third-biggest economy. Bookings (JNMOCHNG), an indicator of future capital spending, rose 3.4 percent from a month earlier, the Cabinet Office said in Tokyo today. The median estimate of 30 economists surveyed by Bloomberg News was for a 2.3 percent increase. In December, orders fell 7.1 percent. The Nikkei 225 Stock Average exceeded 10,000 for the first time in seven months on March 9 as Greece secured a rescue package, boosting prospects for European demand for Japanese exports. A weakening of the yen since the start of February will aid exporters such as Panasonic Corp. (6752) and Sony Corp. (6758) and the economy is set for a boost from reconstruction work after the earthquake a year ago.
“Global manufacturing activity is gaining momentum, and that’s positive for capital investment in Japan,” said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo. “We’re also seeing signs of improved overseas demand, particularly from Asia and the U.S., so that’s also good news.”
BRICs Fastest Inflation Accelerating Puts Subbarao on Hold: India Credit (Source: Bloomberg)
Indian inflation, the fastest among the biggest emerging markets, is poised to accelerate as oil costs rise for a nation that depends on imports for 80 percent of its energy requirements, interest-rate swaps show. The cost of locking in rates for five years rose to 7.49 percent in Mumbai on March 9, the highest in almost five months, according to data compiled by Bloomberg. Wholesale prices rose 6.69 percent last month after increasing 6.55 percent in January, according to the median forecast of economists in a Bloomberg survey before data due on March 14. That would compare with levels of 6.2 percent in Brazil, 3.2 percent in China and 3.7 percent in Russia. Reserve Bank of India Governor Duvvuri Subbarao on March 9 unexpectedly slashed the amount of deposits lenders need to set aside as reserves to ease a cash squeeze in the banking system.
He’ll refrain from lowering borrowing costs at this week’s policy meeting, a separate survey showed, as this year’s 16.4 percent rise in Brent threatens to fuel inflation in a nation where 80 percent of the population lives on less than $2 a day. “Oil prices are becoming a big concern and will aggravate inflation,” Killol Pandya, the Mumbai-based head of fixed- income investment at the local unit of Daiwa Asset Management Co. that oversees $225 million, said in an interview on March 9. “A rate cut is unlikely to happen this month.”
Philippines Central Bank May Pause After Its Two Rate Cuts, Tetangco Says (Source: Bloomberg)
The Philippine central bank may pause after reducing the benchmark interest rate at both of its meetings so far this year as elevated oil prices threaten to spur inflation, Governor Amando Tetangco said. “Pausing gives us time to digest and monitor the impact of past policy actions and to consider other relevant data,” Tetangco said in an e-mailed reply to questions March 10. “A pause is always on the table, as are other policy moves.”
Bangko Sentral ng Pilipinas cut interest rates by a quarter-percentage-point at each of its past two policy meetings, taking the overnight borrowing rate to 4 percent, the lowest level in a year. The Philippines reduced borrowing costs in a bid to shore up faltering growth and stave off the destabilizing effects of Europe’s debt crisis on the global economy. Crude oil prices have gained more than 8 percent so far this year, a jump that risks spurring price pressures in a nation that imports almost all its requirements, even as inflation cooled to its slowest pace in more than two years in February.
European Finance Ministers Set to Approve Greek Aid Payout, Examine Spain (Source: Bloomberg)
Euro-area finance ministers seeking to step past the largest sovereign debt restructuring in history will attempt to gain a foothold this week as they grapple with implementing the latest Greek bailout. Ministers from the 17 nations that share the euro will gather in Brussels today to sign off on the 130 billion-euro ($170 billion) second package for Greece after bondholders agreed last week to take a loss on the country’s debt. They’ll also focus on Spain’s budget-cutting efforts and Portugal’s aid program, underscoring their desire to prevent contagion. The debt swap seeks to wipe more than 100 billion euros off Greece’s books and contain an economic collapse in the country as European overseers work to hold Greek leaders to their commitments. The difficulties the government in Athens will confront in meeting creditors’ demands have prompted speculation of still further assistance.
“You have to see it very realistically,” Austrian Central Bank Governor Ewald Nowotny told state broadcaster ORF March 10 when asked about the possibility of a third Greek package. “It would be foolish to rule such a thing out completely, but I don’t see the necessity at this time.”
IMF Scales Back Aid to Greece in Nation’s 2nd Rescue Package (Source: Bloomberg)
The International Monetary Fund intends to contribute 18 billion euros ($23.6 billion) in fresh funds to the second aid package for Greece, scaling back IMF help for the nation that triggered Europe’s debt crisis. The planned IMF contribution disclosed yesterday represents 14 percent of the 130 billion-euro second rescue of Greece being arranged with the euro area. The IMF accounted for 27 percent -- or 30 billion euros -- of Greece’s initial 110 billion-euro bailout in May 2010. “The IMF is trying to manage a difficult balance between staying involved in the rescue package for Greece while limiting the risk to its own funds,” Eswar Prasad, a senior fellow at the Brookings Institution in Washington and a former IMF official, said in an e-mail. The IMF is “increasing its overall exposure to Greece. This poses both financial and political risks for the fund.”
India’s Central Bank Cuts Reserve Ratio as Cash Squeeze Threatens Economy (Source: Bloomberg)
India’s central bank unexpectedly cut the amount of deposits lenders need to set aside as reserves to ease a cash squeeze in the banking system that threatens to deepen an economic slowdown. The Reserve Bank of India reduced the cash reserve ratio to 4.75 percent from 5.5 percent, according to an e-mailed statement yesterday. The move, the first such action outside a policy meeting since July 2010, will add 480 billion rupees ($9.6 billion) into lenders, it said. The bank last reduced the ratio by 50 basis points, or 0.5 percentage point, on Jan. 24. The unscheduled step before a March 15 policy review underscores the RBI’s concern that a shortage of cash in the banking system will hurt the economy, forecast to expand at the slowest pace in three years in the fiscal period ending March 31. Asian nations including China and the Philippines have eased monetary policy to spur growth amid Europe’s debt crisis.
“The strong and surprise action by the RBI is aimed at ensuring that the rapid deterioration in growth momentum is arrested,” said Shubhada Rao, chief economist at Yes Bank Ltd. (YES) in Mumbai. “The CRR cut will help alleviate the stress in the banking system and guide the liquidity deficit to lower levels.”
Egypt Reports February Inflation Accelerated on Increases in Food Prices (Source: Bloomberg)
Egypt’s inflation rate accelerated in February on rising food prices, one of the causes of unrest that toppled President Hosni Mubarak in 2011. The annual inflation rate in urban parts of Egypt, the gauge the central bank monitors, increased to 9.2 percent from 8.6 percent in January, the official statistics agency said on its website today. Food and beverage costs, the biggest component of the consumer-price index, increased an annualized 12.6 percent compared with 11.2 percent in January. February’s higher inflation figure follows “a depreciated exchange rate as compared to the previous year,” said Nada Farid, a Cairo-based economist at investment bank Beltone Financial. “We believe the Central Bank of Egypt will keep policy rates unchanged” at its upcoming meeting, “to balance between slight inflationary pressures and still-weak economic prospects.”
Gross domestic product expanded 0.4 percent in the three months ended Dec. 31, compared with growth of 0.2 percent in the previous quarter and 5.6 percent a year earlier, according to a Ministry of Planning and International Cooperation report. The economy grew 1.8 percent in the fiscal year through June, the slowest pace in at least a decade.
Dubai Shares Advance Most in Two Years on Oil Price, U.S. Employment Gains (Source: Bloomberg)
Dubai’s shares surged the most in more than two years as oil rose and investors bet stronger-than- forecast U.S. jobs data will bolster global growth, helping the emirate’s benchmark index extend a rally. Arabtec Holding Co. (ARTC), the United Arab Emirates’ biggest construction company, surged the most since 2010. Dubai Financial Market PJSC (DFM) soared 9.7 percent. The DFM General Index (DFMGI) rallied 4.7 percent, the largest advance since December 2009, to 1,686.66, at the 2 p.m. close in the emirate. The Bloomberg GCC 200 (BGCC200) Index of Persian Gulf stocks added 1.1 percent. Dubai’s shares have rallied 25 percent so far this year after improved earnings and dividends boosted investor confidence. They posted their first weekly drop since January last week, tumbling 5.4 percent amid speculation the surge may have been overdone. A U.S. report showing the best six-month streak of job growth since 2006 helped lift the Standard & Poor’s 500 Index (SPX) 0.4 percent on March 9.
“With international markets performing well, local sentiment has picked up,” said Ziad Dabbas, a financial analyst at National Bank of Abu Dhabi PJSC, the U.A.E.’s second-biggest bank by assets. “After the strong correction last week, some believe this is an opportunity to go back in. We feel the market may ultimately continue to improve in the long term.”
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