Asian Stocks Drop as Japanese Exporters Fall on Stronger Yen (Source: Bloomberg)
Asian stocks fell, paring the benchmark index’s weekly gain, as a stronger yen damped the earnings outlook for Japanese exporters, outweighing optimism in the strength of the U.S. economy. Honda Motor Co. (7267), a carmaker that gets more than 80 percent of its revenue overseas, dropped 1.1 percent in Tokyo. Hyundai Wia Corp., an auto parts maker, slumped 4 percent in Seoul after Hyundai Motor Co. and Kia Motors Corp. said they’re selling shares in the company. BHP Billiton Ltd., Australia’s biggest oil producer, slipped 1 percent in Sydney after crude prices fell yesterday. The MSCI Asia Pacific Index fell 0.1 percent to 127.70 as of 9:43 a.m. in Tokyo, paring its weekly advance to 0.7 percent. About four stocks fell for every three that advanced, with all but one of the gauge’s 10 industry groups dropping. Japan’s Nikkei 225 Stock Average (NKY) slid 0.1 percent. Australia’s S&P/ASX 200 Index (AS51) dropped 0.2 percent and South Korea’s Kospi Index was little changed.
Japan Stocks Snap 3-Day Rally on Yen, Overheating Signs (Source: Bloomberg)
March 16 (Bloomberg) -- Japanese stocks fell, snapping a three-day rally, as the yen rebounded, hurting prospects for exporters. Shares also declined as technical indicators suggested the market may be overheated. Honda Motor Co. (7267), Japan’s second-largest carmaker by market value, slid 1.1 percent after yesterday closing at its highest level in a year. Bridgestone Corp., the world’s biggest tiremaker, fell 1.1 percent after a report the world’s rubber shortage will deepen this year. Nippon Yusen K.K. (9101) paced gains among shipping lines after a measure of cargo rates climbed for a 16th day. The Nikkei 225 Stock Average (NKY) fell 0.2 percent to 10,102.33 as of 9:24 a.m. in Tokyo. The benchmark gauge has added 1.7 percent this week, set for its sixth weekly gain, the longest streak since December 2010. The broader Topix Index lost 0.2 percent to 862.28. Losses were limited on reports U.S. manufacturing rose and jobless claims dropped.
“A downtrend in the yen is taking a pause, and chances are stocks will have a correction today following a rapid rally,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “The market remains in a mid-term uptrend with expectations mounting about earnings in the next fiscal year. The Nikkei is likely to stay above 10,000.”
Europe Stocks Extend Highest Level Since July; H&M Climbs (Source: Bloomberg)
European stocks climbed for a third day, extending the Stoxx Europe 600 Index’s highest level since July, as U.S. jobs and manufacturing data added to optimism the recovery in the world’s largest economy is gaining momentum. Hennes & Mauritz AB advanced 2.4 percent after Europe’s second-largest clothing retailer reported an unexpected gain in sales. Aixtron SE surged 15 percent as Deutsche Bank AG recommended the shares. Pernod-Ricard (RI) SA slid 2.1 percent as Groupe Bruxelles Lambert SA sold a 499 million-euro ($651 million) stake. The Stoxx 600 (SXXP)rose 0.3 percent to 270.98 at the close of trading, after swinging between gains and losses at least 20 times today. The gauge has surged 11 percent this year amid optimism that the euro area will contain its sovereign-debt crisis and as U.S. economic data topped forecasts. The rally has pushed the index’s valuation to 11.3 times estimated earnings, the most expensive since May, Bloomberg data shows.
“We’re getting some positive economic news from the U.S.,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. “Markets have come a long way in a short space of time and the scope to move considerably further upwards at this point in time is very limited.”
S&P 500 Tops 1,400 on Better-Than-Estimated Economic Data (Source: Bloomberg)
U.S. stocks advanced, sending the Standard & Poor’s 500 Index above 1,400 for the first time in almost four years, as data showed manufacturing in the New York region unexpectedly increased and jobless claims declined. Financial (S5FINL), industrial and commodity shares rose the most among 10 groups in the S&P 500. Bank of America Corp., General Electric Co. and Dow Chemical Co. added at least 1.6 percent. International Business Machines Corp. rallied for a seventh day to an all-time high. Apple Inc. (AAPL) reversed earlier gains after topping $600 for the first time. The Dow Jones Transportation Average, a proxy for economic growth, increased 3.3 percent. The S&P 500 advanced 0.6 percent to 1,402.60 at 4 p.m. New York time, exceeding the median 2012 projection of strategists surveyed by Bloomberg of 1,400. The Dow Jones Industrial Average increased 58.66 points, or 0.4 percent, to 13,252.76, gaining for a seventh straight day, the longest winning streak in 13 months.
About 7.1 billion shares changed hands on U.S. exchanges, or 7.5 percent above the three-month average. “It’s been a smooth ride,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.51 trillion as the world’s largest asset manager. “The economy is doing better than people thought. The buying is justified.”
Dollar gains; shares slip on China growth woes
TOKYO, March 15 (Reuters) - Asian shares eased on renewed concerns about Chinese growth, but a brighter global economic outlook underpinned the dollar and kept investor risk appetite intact, reducing the appeal of safe-haven government debts.
"The market is reviewing its view on the U.S. economy and scaling back expectations for further U.S. monetary easing or the risk that the U.S. economy will be doing poorly this year," Makoto Noji, senior strategist at SMBC Nikko Securities.
Dollar keeps rising on U.S. economic optimism, higher yields
TOKYO, March 15 (Reuters) - The dollar hit a fresh 11-month high against the yen and a one-month peak against the euro in Asia, supported by growing optimism about the U.S. economy and subsequent rises in U.S. bond yields.
"Don't think of this as risk-on bets on the global economy. The market has just reviewed its view on the U.S. economy, scaling back expectations of QE3 by the Fed or the view that the U.S. economy will be doing poorly this year," said Makoto Noji, senior strategist at SMBC Nikko Securities.
Russia may hike fuel oil export fee Apr-May-sources
MOSCOW, March 15 (Reuters) - Russia may increase its fuel oil export duty to 90 percent of the fee on crude oil from the current 66 percent starting in April or May, three government sources told Reuters on Thursday.
One government source said a government meeting discussing the duty was currently underway.
U.S. import prices rise in February on higher oil
WASHINGTON, March 14 (Reuters) - U.S. import prices rose in February on sharply higher oil costs, but there were few other signs of imported inflation pressure and food prices posted their largest decline in three years.
Import prices rose 0.4 percent after a downwardly revised flat reading in January, the Labor Department said. Prices in January were previously reported as having risen 0.3 percent.
Obama, UK's Cameron discussed tapping oil reserves-sources
WASHINGTON, March 14 (Reuters) - President Barack Obama and British Prime Minister David Cameron discussed the possibility of releasing emergency oil reserves during a meeting on Wednesday, two sources familiar with the talks said, the first sign that Obama is starting to test global support for an effort to knock back near-record fuel prices.
Obama raised the issue during a broad bilateral meeting at the White House, according to a UK official with knowledge of the discussion.
Yen Poised for Weekly Loss Against Most Peers on U.S. Data, BOJ (Source: Bloomberg)
The yen headed for a weekly drop against most peers as signs of growth in the U.S. economy and prospects for further stimulus by Japan’s central bank prompted investors to seek higher-yielding assets. The dollar traded 0.9 percent from an 11-month high versus the yen before U.S. data today that may show industrial production increased and consumer sentiment improved. The Australian and New Zealand dollars are set for a weekly gain against the yen after stocks rallied globally yesterday, boosting demand for higher-yielding assets. Most Bank of Japan (8301) board members said easing steps taken last month were “appropriate,” meeting minutes showed. “At this stage, I’d have to say the momentum is still firmly for a weaker yen,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “The BOJ’s easing stance definitely seems to have at least contributed to the upswing in dollar-yen.”
The yen rallied 0.1 percent to 83.43 per dollar as of 9:28 a.m. in Tokyo from the close yesterday, when it touched 84.18, the weakest level since April 13. The Japanese currency has fallen 1.2 percent this week, set for a sixth-straight decline. It rose 0.2 percent to 109.13 per euro, set for a 0.8 percent drop since March 9. The dollar fetched $1.3082 from $1.3083, having gained 0.3 percent this week.
Jobless Claims in U.S. Decrease, Matching Four-Year Low (Source: Bloomberg)
Claims for jobless benefits dropped last week to match a four-year low, and U.S. consumer confidence rose to the highest since 2008, signaling an improving labor market may boost household spending. Applications for unemployment insurance payments fell by 14,000 to 351,000 in the period ended March 10, Labor Department figures showed today. The Bloomberg Consumer Comfort Index rose to minus 33.7 from minus 36.7 in the week ended March 11. “There’s a steady, sustained improvement in the labor market,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, who was ranked the most-accurate forecaster of personal spending over the two years through February, according to data compiled by Bloomberg. “As more people have jobs, confidence is picking up. This is consistent with pretty solid gains in consumer spending.”
Prospects for stronger household demand, along with investment in new equipment, helped sustain manufacturing in the New York and Philadelphia regions this month, reports from the Federal Reserve showed today. At the same time, wholesale prices climbed in February by the most in five months, a reminder that higher gasoline costs pose a risk to corporate and consumer spending.
International Demand for U.S. Assets Rises Above Forecast (Source: Bloomberg)
International demand for U.S. financial assets rose more than forecast in January as investors sought a haven from the debt crisis in Europe. Net buying of long-term equities, notes and bonds totaled $101 billion during the month, compared with net purchases of $19.1 billion in December, the Treasury Department said today in Washington. Six economists surveyed by Bloomberg News had forecast net buying of $38.5 billion of long-term assets, according to the median estimate. “The surge in foreign demand for U.S. financial assets underscores the healthy appetite that continues to prevail globally for U.S. securities,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said. “Treasuries demand was especially strong, reflecting the appeal of this ‘safe haven’ asset to global investors even at a time when risk appetite was improving.”
U.S. assets maintained their attraction in January, as European leaders struggled to contain their debt crisis that started in Greece, Portugal and Ireland. Global risks posed by the European crisis diminished after euro area members this week approved a second bailout for Greece. The report showed that net foreign purchases of U.S. Treasuries totaled almost $83 billion in January, compared with net selling of $14.9 billion the month before.
Consumer Confidence in U.S. Rose Last Week to Four-Year High (Source: Bloomberg)
Consumer confidence rose last week to the highest level in four years as job gains put more Americans in the mood to spend. The Bloomberg Consumer Comfort Index (COMFCOMF) climbed to minus 33.7 in the period to March 11, the strongest since March 2008, from minus 36.7 the previous week. A buying-climate gauge reached the highest level since November 2007, and a measure of the state of the economy had its best showing since September 2008. The bounce in sentiment coincides with gains in employment and a pickup in incomes that are giving households the means to withstand rising fuel bills. A rally in stock prices also bodes well for consumer spending, which accounts for about 70 percent of the economy. “Improvement in the labor market has boosted the confidence of consumers,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Wage gains are “bolstering retail sales and consumer confidence despite rising gasoline costs.”
U.S. May Sanction India Over Level of Iran-Oil Imports (Source: Bloomberg)
India has failed to reduce its purchases of Iranian oil, and if it doesn’t do so, President Barack Obama may be forced to impose sanctions on one of Asia’s most important nations, Obama administration officials said yesterday. A decision to levy penalties under a new U.S. law restricting payments for Iranian oil could come as early as June 28, according to several U.S. officials who spoke on condition of anonymity because of the sensitivity of the issue. “Given the level of trade, and in particular oil, between Iran and India, targeting an Indian entity that facilitates Iran’s access to the international financial market should be top of mind for the U.S. Treasury,” Avi Jorisch, a former Treasury Department official who is now a Washington-based consultant on deterring illicit finance, said in an interview.
The U.S. law, which targets oil payments made through Iran’s central bank, applies to any country that doesn’t make a “significant” reduction in its Iranian crude oil purchases during the first half of this year. If India fails to cut Iranian imports sufficiently, Obama may be compelled to bar access to the U.S. banking system for any Indian bank processing oil payments through Iran’s central bank, the U.S. officials said.
Wholesale Prices in U.S. Increase by Most in Five Months (Source: Bloomberg)
Wholesale prices in the U.S. climbed in February by the most in five months, reflecting a jump in fuel costs that Federal Reserve officials project will be temporary. The producer price index rose 0.4 percent following a 0.1 percent increase the prior month, Labor Department figures showed today in Washington. Economists projected a 0.5 percent gain, according to the median estimate in a Bloomberg News survey. The core measure excluding volatile food and energy rose 0.2 percent, less than in the prior month. Rising energy costs may make it more expensive to manufacture goods, restraining profits as companies find it difficult to pass the increases to customers. Fed policy makers this week projected they’ll keep interest rates low at least until late 2014, predicting inflation will remain in check.
“There has not been a significant amount of price pressure at the producer level that would suggest they’ll have to increase prices anytime soon,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, and the third most accurate forecaster of wholesale prices.
New York Area Factories Grew in March by Most Since June 2010 (Source: Bloomberg)
Manufacturing in the New York region expanded in March at the fastest pace since June 2010, indicating factories are still driving the expansion. The Federal Reserve Bank of New York’s general economic index unexpectedly increased to 20.2 this month from 19.5 in February. The median forecast in a Bloomberg News survey of economists was 17.5. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. Investment in new equipment and inventory restocking this quarter will help keep American factories expanding even as slower global growth limits exports. A pickup in job creation that helps drive bigger gains in consumer spending may further fuel production.
“The economy is gaining momentum and gaining breadth,” John Herrmann, president of Herrmann Forecasting LLC in Summit, New Jersey, said before the report. “Manufacturing is benefitting from consumers pulling back so much in the past few years. There’s just this big replacement demand.”
Treasury 30-Year Debt Set for Biggest Weekly Drop in 31 Months (Source: Bloomberg)
Treasury (YCGT0025) 30-year bonds were poised for their biggest weekly drop in 31 months before U.S. data forecast to show consumer sentiment improved and factory output increased in the world’s largest economy. Yields on U.S. government debt with maturities ranging from two years to 30 years have risen this week after the Federal Reserve raised its assessment of the economy on March 13 and refrained from new actions to lower borrowing costs. “What’s behind the gains in Treasury yields is the improvement in the U.S. economy,” said Makoto Suzuki, senior debt strategist in Tokyo at Okasan Securities Co. “There’s an upside to yields.” Thirty-year yields were at 3.42 percent as of 9:48 a.m. in Tokyo, unchanged from yesterday’s close in New York. They have risen 24 basis points in the past five days, set for the biggest weekly gain since August 2009.
China to Slow Yuan Rise, Boost Volatility, HSBC’s Fung Says (Source: Bloomberg)
China will slow the pace of the yuan’s appreciation even as it steps up efforts to promote the currency’s use in international markets, says Anita Fung, HSBC Holdings Plc’s chief executive officer for Hong Kong. Yuan appreciation will “take a moderate pace,” Fung said at an event in New York. “There will be two-way flexibility. The internationalization of the renminbi remains on course,” she said, referring to the alternative name of the yuan. The People’s Bank of China set its daily fixing for the yuan at the lowest level since December yesterday, after allowing the currency to gain 31 percent since 2005. Premier Wen Jiabao said March 14 that the yuan may be near “equilibrium” and policy makers will allow greater exchange-rate volatility. “Currency policy is more cyclical and less structural,” Fung said.
The yuan has lost 0.5 percent against the dollar this year to 6.329, after gaining an average 4.3 percent annually over the past six years. Twelve-month non-deliverable forwards traded at 6.33 yuan yesterday, indicating traders expect the currency to be little changed for the period, according to data compiled by Bloomberg.
Bo’s Ouster Shows China Leaders Fear Specter of Maoist Politics (Source: Bloomberg)
Bo Xilai’s removal as head of a city that helped lead China’s economic growth is a signal that the country’s Communist leadership wants to keep his style of populism out of the inner corridors of power, sticking to a consensus-driven government that emphasizes gradual change. Bo, 62, fired yesterday by the party as head of Chongqing Municipality and replaced by a North Korea-educated vice premier, stood out in a Politburo that seeks consensus. His leadership style in the city of about 30 million emphasized a revival of songs and slogans from China’s Maoist past. This week, his strategy drew a rebuke from Premier Wen Jiabao. With a once-a-decade leadership change coming later this year, the party elders may have sought to keep Bo from advancing to the Communist Party’s Politburo Standing Committee.
The nine- man body, which exercises supreme authority in China, would have been altered by Bo’s independence, resulting in a leadership split in the world’s second-biggest economy, said Nicholas Bequelin, a China researcher for Human Rights Watch. “Bo was definitely too much of a maverick,” Hong Kong- based Bequelin said. “If you had put him in the Politburo Standing Committee it would have opened up a new era of competitive politics, and that is not what the party likes.”
India Holds Rate for Third Meeting as Inflation Accelerates (Source: Bloomberg)
India’s central bank left interest rates unchanged for a third consecutive meeting after inflation accelerated and as it awaits steps to curb the fiscal deficit in the budget tomorrow. The Reserve Bank of India kept the repurchase rate at 8.5 percent, it said in a statement in Mumbai today. The outcome was predicted by 19 of 22 economists in a Bloomberg News survey, with three forecasting a quarter-point reduction. It reiterated that future actions will be toward lowering rates. India joins nations from Indonesia to South Korea in holding borrowing costs this month, juggling price pressures with the need to prevent a deeper growth slowdown as investment falls and Europe’s debt crisis hurts exports. The central bank has signaled rate cuts to counter the weakest expansion in almost three years depend on a sustained easing in inflation and moves to curb the largest budget gap among BRIC economies.
“Oil prices and the decline in the currency pose a huge worry for the inflation trajectory,” said Anubhuti Sahay, an economist at Standard Chartered Plc in Gurgaon, near New Delhi. “The RBI wants to see an indication of reduction in the fiscal deficit in the budget tomorrow before embarking on cutting rates.”
Brazil Anticipates Keeping Rate at Near Low Over 18 Months (Source: Bloomberg)
Brazil anticipates keeping its benchmark borrowing cost near a record low for the next 18 months, a government official said, challenging higher market interest rates based on above-target inflation in 2013. The central bank said today inflation will slow to around its 4.5 percent target this year, giving policy makers room to reduce the Selic (BZSTSETA) rate to “slightly above” the historical low of 8.75 percent. Analysts expect prices to rise 5.3 percent in 2012 and 5.5 percent in 2013, according to the median estimates in a central bank survey. That has prompted traders to bet bank President Alexandre Tombini will have to reverse course early next year after reducing the rate to 9 percent by May, interest-rate futures show.
Slower global economic growth and a delay in a definitive solution for the European debt crisis mean that there is no reason to expect inflation will accelerate in Brazil, said the official, who asked not to be identified to comply with internal policy. As a result, the government anticipates interest rates may stay close to record low levels over the next 18 months, the official said.
Greek Restructuring Delay Helps Banks as Risks Shift (Source: Bloomberg)
Delaying Greece’s debt restructuring by more than a year reduced banks’ potential losses as firms trimmed their holdings and most of the risk shifted to European taxpayers. When Greece was first rescued by the European Union and the International Monetary Fund in May 2010, lenders in other EU nations held $68 billion of its sovereign debt, according to the Bank for International Settlements. If Greece had defaulted, banks would have lost $51 billion at a 25 percent recovery rate. Banks’ holdings of Greek bonds fell by more than half to about $31 billion over the next 15 months, according to BIS, cutting creditors’ losses at last week’s swap by at least 45 percent. Lenders are protected against further losses thanks to sweeteners from the EU to encourage the exchange. Meanwhile, Greece’s debt remains almost unchanged and the risk of future default is now mostly borne by the public. The same playbook is being used with Portugal and Ireland.
“This is a horrible deal for the EU taxpayer,” said Raoul Ruparel, chief economist at Open Europe, a London-based research group. “The longer we wait for these restructurings, the worse the deal gets for the public. There’s an ongoing risk transfer from the banks to the taxpayers.”
Spanish Stocks Miss Rally on Rajoy Budget Gap Skepticism (Source: Bloomberg)
Spanish stocks are the only developed market suffering losses this year as Prime Minister Mariano Rajoy fails to rein in the budget deficit fast enough to assure investors. The IBEX 35 Index (IBEX) dropped 2.1 percent in 2012 through yesterday, the only decline among 24 developed markets tracked by Bloomberg. That compares with an 11 percent rally in the Stoxx Europe 600 Index (SXXP), the best start to a year since 1998. The Spanish gauge has erased all gains that followed the European Central Bank’s Dec. 8 announcement of unlimited three-year loans for banks at below-market borrowing costs. Investors are shunning Spain after Rajoy said the budget deficit will be higher than forecast while Germany praised Italian Prime Minister Mario Monti’s “bold” austerity measures. Spanish benchmark borrowing costs rose above Italy’s for the first time in almost eight months in March, while analysts have cut profit estimates for Spain this year at the fastest pace among Europe’s 10 largest markets.
“Since you got Monti in Italy, the market has said, ‘Fine, Italy is in safe pair of hands,’” said Jacob de Tusch-Lec, a fund manager who helps oversee $18 billion at Artemis Investment Management in London. “It is tough to see in Spain for now what can resolve the crisis. Things are so bad that as an investor you ask yourself, ‘Do I need to be there?’”
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