Asian Stocks Fall as French Socialist Hollande Wins Poll (Source: Bloomberg)
Asian stocks fell, with the regional benchmark index heading for its biggest decline in almost six months, after U.S. employers added fewer jobs than forecast and amid growing concern over Europe’s debt crisis after Socialist Francois Hollande was elected president of France. Samsung Electronics Co., the world’s No. 1 maker of mobile phones by sales, dropped 2.5 percent in Seoul. Canon Inc. (7751), a camera maker that depends on Europe for almost a third of its sales, slipped 1.7 percent in Tokyo. BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, lost 3 percent as crude oil and copper futures fell. “There’s concern that the European debt problem may get serious,” said Toshiyuki Kanayama, a market analyst at Tokyo- based Monex Inc. “The euro is being sold in the currency market and that’s negative for Japanese stocks. In the U.S., the job recovery is getting sluggish, fueling concern that may have a bad impact on consumer spending and housing markets.”
The MSCI Asia Pacific Index declined 2.1 percent to 121.50 as of 10:22 a.m. in Tokyo, heading for its biggest drop since Nov. 10. About 19 shares dropped for each that rose on the gauge. The measure fell 0.2 percent last week after Australia’s central bank cut its economic growth forecast and U.S. services industries expanded less than forecast, sparking concern the global recovery may be faltering.
China’s Stocks Decline on Europe Debt, Property Market Concerns (Source: Bloomberg)
China’s stocks fell for the first time in four days on speculation housing demand will weaken and the election of a new president in France may deepen Europe’s debt crisis. China Vanke Co. (000002) and Poly Real Estate Group Co. led declines for developers after the Xinhua News Agency reported Industrial & Commercial Bank of China Ltd. suspended a discount on mortgages for first-time home buyers nationwide. Jiangxi Copper Co. and Huludao Zinc Industry Co. slid more than 1 percent on concern a global slowdown will curb demand for commodities. PetroChina Co., the nation’s second-largest refiner, dropped the most in two weeks after the Shanghai Securities News said fuel prices may be cut today. “Concerns about Europe’s debt are back and that will hurt global investors’ risk appetite,” said Wu Kan, Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Expectations for an easing of property curbs have faded and the overall policy tone is still tight.”
The Shanghai Composite Index (SHCOMP) slipped 5.52 points, or 0.2 percent, to 2,446.49 as of 9:49 a.m. local time. The CSI 300 Index (SHSZ300) fell 0.2 percent to 2,710.40. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.5 percent in New York on May 4. The Shanghai index advanced 2.3 percent last week, the biggest weekly gain since Feb. 24, after the securities regulator cut trading costs and manufacturing expanded for a fifth month in April. The gauge has climbed 11 percent this year on expectations the government will relax monetary policies to spur economic growth.
Japan Stock Futures Drop as French Socialist Wins Poll (Source: Bloomberg)
Japanese stocks fell, with the Nikkei 225 Stock Average heading for its biggest decline in six months, after a socialist was elected France’s president, raising concern austerity measures would be rejected in Europe. Shares also fell as U.S. employers added fewer jobs than expected. Brothers Industries Ltd. (6448), an office equipment company that relies on Europe for almost 30 percent of its sales, lost 4.8 percent after the euro fell against the yen. Honda Motor Co. (7267), a carmaker that counts North America as its biggest market, sank 4.8 percent. Gree Inc. (3632) plunged 23 percent on concern the government may halt some social network games over “questionable” sales methods. “The situation in Europe is tough,” Khiem Do, Hong Kong- based head of Asian multi-asset strategy at Baring Asset Management Asia Ltd., said on Bloomberg Television. The firm oversees about $10 billion. “Very few nations can stand austerity. If the European Monetary Union stays the same, something has to give.”
The Nikkei 225 (NKY) sank 2.6 percent to 9,134.26 at the 11:30 a.m. trading break in Tokyo, set for its steepest drop since Nov. 10. Volume on the gauge was about 2.5 percent below the 30-day average. The broader Topix Index lost 2.5 percent to 772.95, with all 33 industry groups declining.
European Stocks Post Biggest Weekly Retreat Since March (Source: Bloomberg)
European stocks posted their biggest weekly drop since March as Spain entered a recession, a report showed the U.S. economy added fewer workers than expected and investors awaited elections in France and Greece this weekend. Home Retail Group Plc (HOME) had its biggest weekly drop since 2006 after it said annual profit fell 60 percent and it won’t pay a final dividend. Man Group Plc plunged after saying clients withdrew a net $1 billion in the first quarter, while costs were higher than analysts had predicted. Vestas Wind Systems A/S (VWS) fell for a second week. The Stoxx Europe 600 Index (SXXP) retreated 2.4 percent to 253 this week, its biggest slide in six weeks. The Stoxx 600 gained 0.5 percent last week. The gauge has lost 7.1 percent since its 2012 high on March 16 amid renewed concern that the euro area has yet to contain its sovereign-debt crisis.
“The closely watched non-farm payrolls report came in significantly below expectations,” said Chris Beauchamp, a market analyst at IG Index in London. “The outlook does not look particularly promising.”
S&P 500 Futures Fall as France’s Hollande Wins Election (Source: Bloomberg)
U.S. stock futures fell, following the biggest weekly slump in 2012, after Francois Hollande’s election as France’s president and Greek voters flocking to anti-bailout parties spurred concern about Europe’s debt crisis. Standard & Poor’s 500 Index futures expiring in June dropped 1.1 percent to 1,347.60 at 10:42 a.m. Tokyo time. The benchmark index for American equities retreated 2.4 percent last week. The euro declined, slipping to the weakest level since November 2008 against the British pound and reaching a three- month low versus the U.S. currency. “There are still many hurdles in Europe,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “There are no easy answers and the electorate is rejecting austerity. People will take a renewed focus on Europe and that focus is not positive.”
Socialist Hollande got about 52 percent against about 48 percent for Nicolas Sarkozy, according to estimates by four pollsters. Hollande’s platform calls for policies German Chancellor Angela Merkel opposes, including higher taxes, increased spending and a delayed deficit-reduction effort. He has also advocated a more aggressive European Central Bank role. Greece’s poll casts doubt on whether the two main parties can put together a government strong enough to implement spending cuts to ensure the flow of bailout funds.
Buffett Targets Asia for Reinsurance, Ice Cream Expansion (Source: Bloomberg)
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A), said he’s pursuing more opportunities in Asia after boosting reinsurance sales and expanding the Iscar Metalworking Cos. unit on the continent. “Korea, Japan and you name it,” Buffett, 81, said May 5 at Omaha, Nebraska-based Berkshire’s annual meeting. Buffett visited South Korea, Japan and India last year, and China in 2010. Berkshire owned almost 4 million shares of South Korean steelmaker Posco and a stake in Chinese carmaker BYD Co. (1211) as of Dec. 31, according to regulatory filings. Japan, rebounding from a March 2011 earthquake and tsunami, and Thailand, which suffered record floods last year, are among countries where Berkshire has increased sales.
The reinsurance unit has done “far more business in Asia” in recent months that it did a few years ago, he said at the meeting. Berkshire’s International Dairy Queen Inc. ice-cream unit, led by CEO John Gainor, recently opened its 500th store in China, where the Green Tea Blizzard dessert is the No. 1 seller. The subsidiary has more than 270 outlets in Thailand and expanded into Singapore last year.
Asian Currencies Slide on European Election Results, U.S. Jobs (Source: Bloomberg)
Asian currencies fell, led by South Korea’s won and Malaysia’s ringgit, after the results of elections over the weekend in Europe stoked concern the region’s debt crisis may worsen. The won dropped by the most in 11 weeks as the MSCI Asia- Pacific Index (MXAP) of stocks lost 2 percent, sinking to the lowest level since January. Greek voters flocked to anti-bailout candidates, putting at risk austerity efforts needed to ensure the flow of financial aid. In France, Socialist Francois Hollande was elected president. He supports policies German Chancellor Angela Merkel opposes, including higher taxes, increased spending and a delayed deficit-reduction effort, “The French and Greek results were not encouraging,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “With the Greek result, it’s doubtful whether they can stick to the reform package. We’ve seen a fair bit of risk aversion coming in.”
The won slid 0.7 percent to 1,139.20 per dollar as of 10:44 a.m. in Seoul, according to data compiled by Bloomberg. The ringgit weakened 0.7 percent to 3.0633, the Singapore dollar dropped 0.6 percent to $1.2494 and the Philippine peso lost 0.2 percent to 42.400. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, fell for a fifth day to a two-week low. Its 60-day historical volatility dropped to 2.69 percent from 2.72 percent on May 4.
Euro Drops to 3-Month Low After Greek, French Elections (Source: Bloomberg)
The euro fell to a three-month low after Socialist Francois Hollande was elected president of France and as Greek voters flocked to anti-bailout parties, stoking concern austerity efforts in Europe may be derailed. The 17-nation currency slid for a sixth day, its longest series of losses since September 2011, after German Chancellor Angela Merkel’s party had its worst election result in more than half a century in the state of Schleswig-Holstein. The yen and the dollar rose versus most of their peers as Asian stocks extended a global rout, boosting demand for haven currencies. “There are major concerns about the euro,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency margin company. “What’s common to both Greek and French voting is that people aren’t feeling good about austerity measures, which are the crux to a resolution of Europe’s debt problems.”
The euro declined to $1.2955, the weakest since Jan. 25, before trading at $1.2981 as of 11:42 a.m. in Tokyo, 0.8 percent below last week’s close in New York. It dropped 0.8 percent to 103.64 yen. The U.S. dollar was little changed at 79.84 yen.
Treasury 10-Year Yield Falls to 3-Month Low on Jobs Datas (Source: Bloomberg)
Treasuries rose for the seventh week, the longest stretch since 2008, as employers in the U.S. added fewer jobs than forecast amid speculation the Federal Reserve may consider additional stimulus measures to boost the economy. Treasury 10-year yields fell to a three-month low as payrolls added the least jobs in six months to fuel concern the U.S. economic recovery is faltering. Yields fell before elections in Europe that may result in leadership changes and inflame the region’s sovereign-debt crisis. The U.S. will sell $72 billion in notes and bonds next week. “Yields are reflecting a fair amount of concern for growth, in both the U.S. and abroad,” said Jay Mueller, who manages about $3 billion of bonds at Wells Capital Management in Milwaukee. “We had unrealistically strong data for months and now we are paying for it. Weak growth, Fed policy and weakness in Europe are keeping yields low.”
The benchmark 10-year note yield this week fell six basis points, or 0.06 percentage point, to 1.88 percent in New York, according to Bloomberg Bond Trader prices. Yesterday it touched 1.87 percent, the lowest since Feb. 3.
Employers in U.S. Added Fewer Jobs Than Forecast in April (Source: Bloomberg)
American employers added fewer workers than forecast in April and the jobless rate unexpectedly fell as people left the labor force, adding to concern the economic expansion is cooling. Payrolls climbed 115,000, the smallest increase in six months, after a revised 154,000 gain in March that was larger than initially estimated, Labor Department figures showed today in Washington. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance. The jobless rate fell to a three-year low of 8.1 percent, and earnings stagnated. Stocks and bond yields fell on bets that a slowdown in hiring will restrain the wage growth needed to fuel the consumer spending that accounts for 70 percent of the world’s largest economy. The data pose a challenge for President Barack Obama, who was attacked by Republican challenger Mitt Romney’s campaign today for his “failed economic record.”
“We’re still very much on the recovery path, but we’ve got a huge amount of ground to make up in the labor market,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who accurately forecast the unemployment rate.
Job Gains Trailing Forecasts Add to U.S. Slowdown Concern (Source: Bloomberg)
American employers in April added the fewest number of jobs in six months and wages stagnated, adding to concern the almost three-year-old economic expansion is cooling. The 115,000 increase in payrolls was less than forecast and followed a revised 154,000 gain in March that was larger than initially estimated, Labor Department figures showed yesterday in Washington. The median estimate in a Bloomberg News survey called for a 160,000 advance. Unemployment fell to a three-year low of 8.1 percent as people left the labor force. “Employers are hiring, they’re just hiring at a very modest rate,” said Jonas Prising, president of the Americas at Milwaukee-based ManpowerGroup, a provider of temporary workers. “The current growth rate of employment is probably consistent” with economic growth of 2 percent, he said.
A slowdown in hiring, along with wage gains that are failing to keep pace with inflation, may make it difficult for consumers to boost their spending, which accounts for 70 percent of the world’s largest economy. The figures also represent a challenge for President Barack Obama, who was attacked by Republican opponent Mitt Romney’s campaign for his “failed economic record.”
Consumer Confidence Gains as Taiwan, U.S. Rise in Nielsen Survey (Source: Bloomberg)
Global consumer confidence rose in the first quarter as improvements in the U.S. economy and continued growth in Asian markets brought sentiment levels to the highest level since the global recession began, according to a survey by Nielsen Holdings NV. (NLSN) Nielsen, a global information and measurement company, said its index of consumer confidence rose five points in the period to 94. The company surveyed more than 28,000 online customers in 56 countries from Feb. 10 to Feb. 27, with sentiment increasing in 38 of those markets compared to the three months through December, according to an e-mailed statement. North America rose eight points to 92 in the period, its highest level since the quarter ended September 2007, as job prospects and confidence on personal finances improved. Europe is the most pessimistic region at 72 points, though confidence increased in 16 out of 27 markets there, and Asia-Pacific continues to be the most optimistic area at 103 points.
Trade Gap Probably Grew as Imports Rose: U.S. Economy Preview (Source: Bloomberg)
The U.S. trade deficit probably widened in March as imports rebounded from the biggest setback in three years, economists said before a report this week. The gap grew to $50 billion from $46 billion in February, according to the median forecast of 62 economists in a Bloomberg News survey taken ahead of a Commerce Department report set for May 10. Other data may show wholesale prices, the cost of imports and consumer sentiment were little changed. Companies probably bought more goods from abroad, reflecting higher fuel prices and a bounce back in shipments from China following the Lunar New Year holidays. At the same time, exports may fail to keep pace as a slower global expansion hurts sales at companies like Caterpillar Inc. (CAT) and United Technologies Corp. (UTX), indicating the U.S. economy won’t be able to count on an improving trade account to boost growth.
“We expect the oil-import bill to soar,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts. “We expect foreign trade to be a drag on growth for the year.”
China Market-Opening Pledge Yields JPMorgan Opportunity (Source: Bloomberg)
China raised the ceiling on foreign banks’ investments in securities ventures for the first time in more than a decade after two days of talks with the U.S. overshadowed by wrangling over activist Chen Guangcheng. China agreed to let foreign companies raise their stakes in joint ventures with domestic securities firms to as much as 49 percent, according to a joint statement released after annual Strategic and Economic Dialogue talks in Beijing yesterday. The current maximum is 33 percent. It will allow similar stakes in futures brokers. While Treasury Secretary Timothy F. Geithner hailed a strengthening in economic ties today, two decades of opening by China have failed to balance trade between the two, with the U.S. posting a $19.4 billion trade deficit in February. Global banks haven’t broken into underwriting rankings and China has stalled on agreements to lift restrictions on U.S. movies.
“This is a strong gesture from China’s policy makers to further open its financial markets,” said Hong Jinping, a Shenzhen-based analyst at China Merchants Securities Co.. At the same time, the new rules “won’t change the landscape of China’s brokerage industry, which is dominated by over 100 local firms” and where local political connections are important, Hong said.
Japan Enters Nuclear Recess After Sole Working Reactor Shut Down (Source: Bloomberg)
Japan began a recess from nuclear- generated electricity, its first in more than four decades, after its sole operating power reactor was halted for scheduled maintenance. Hokkaido Electric Power (9501) Co.’s Tomari No. 3 reactor in northern Japan stopped generating electricity at 11:03 p.m. on the night of May 5, and fission ceased at 4 a.m. yesterday, said Satoshi Takada, a spokesman for the utility. Shutting down the 912-megawatt Tomari unit leaves Japan without an operating power reactor for the first time since May 1970, as plant operators carry out mandatory maintenance or additional safety checks following the Fukushima disaster. The country’s 50 nuclear plants provided 30 percent of its electricity prior to March 11, 2011.
The utilities powering the world’s third-biggest economy have been forced to turn to coal, oil and gas-fired plants to keep factories, offices and households supplied with electricity. Buying and importing those fuels is driving up costs and may lead to higher electric bills and a further drag on an economy that’s contracted in three of the past four years.
Sarkozy Becomes First French President in 30 Years to Be Ousted (Source: Bloomberg)
Nicolas Sarkozy’s defeat in the French presidential election makes him the first incumbent in more than 30 years to fail to win re-election, and the ninth European leader to be booted out since the region’s debt crisis began. Sanctioned for his flamboyant personal style and slowing economic growth, Sarkozy lost to Socialist Francois Hollande, who got about 52 percent of the vote against 48 percent, polling estimates showed. Sarkozy is the second French president to lose a re-election bid since World War II after former President Valery Giscard d’Estaing was vanquished in 1981. “After 35 years of politics, after 10 years at the highest levels of government, after five years as head of state, I will become a Frenchman among the French,” Sarkozy said last night, conceding defeat.
With joblessness at a 12-year high and public debt at a record, the electorate proved unwilling to forgive the 57-year- old lawyer for foibles such as celebrating his 2007 victory at a chic Paris restaurant and a holiday on a billionaire’s yacht, making the election an anti-Sarkozy vote. “If the French had jobs and more money in their pockets, they’d be confident and ready to forgive,” said Laurent Dubois, a professor at the Institute of Political Studies in Paris.
End of Merkozy Leaves Franco-German Gulf as Greek Voters Rebel (Source: Bloomberg)
Voters in Greece and France challenged austerity as Europe’s sole prescription for the financial crisis, adding pressure on German Chancellor Angela Merkel to broaden her focus from debt reduction to save the 17-nation bloc. Greek elections left the two biggest parties short of the clear majority to keep bailout efforts there on track. In France, Socialist Francois Hollande defeated President Nicolas Sarkozy, Merkel’s preferred partner for enforcing fiscal rigor. “Europe is watching us,” Hollande, 57, told supporters in the central town of Tulle 90 minutes after his victory was announced. “The mission is now mine, to give European construction a growth dimension. That’s what I’ll tell our partners as soon as possible.”
Germany and France, whose leadership in fighting the crisis that began in Greece in 2009 gave rise to the partnership known as “Merkozy,” don’t have much time to patch up rifts between Merkel and Hollande. “To get anything done in Europe, Germany and France have to agree,” said Holger Schmieding, chief economist at Berenberg Bank in London.
Greek Election Gridlock Raises Risk for Bailout, Euro Future (Source: Bloomberg)
Greece’s political leaders struggled to find the support needed to form a coalition government after voters flocked to anti-bailout parties, calling into question the country’s ability to impose the measures needed to guarantee its future in the euro. New Democracy won 20 percent of the total vote with more than 50 percent of the ballots from yesterday’s elections counted at 12:30 a.m., according to the Interior Ministry website. Socialist Pasok, which partnered with New Democracy in securing a second rescue package for the country, trailed in third place with 42 seats. Official projections predicted the two would fall one short of the 151 seats needed to win a majority. Syriza, a coalition of left parties which has vowed to cancel the bailout terms, got 16.1 percent and has 49 seats as the second-biggest party, boosting its showing from the 2009 election nearly four-fold. The new Greek parliament will have three new anti-bailout parties represented.
“The chance of a pro-EU bailout coalition of New Democracy and Pasok is on a knife-edge,” Sarah Hewin, senior economist at Standard Chartered Plc, said in an e-mail. “The scale of opposition is such that even if a pro-bailout coalition can be formed it will be tough for the new government to push ahead with further austerity, risking a halt to EU bailout finance. This test could come within weeks.”
EU to Show Flexibility on Budget-Deficit Rules, Rehn Says (Source: Bloomberg)
European Union Economic and Monetary Affairs Commissioner Olli Rehn indicated the EU would show flexibility in enforcing the bloc’s deficit rules as nations across the region struggle to spur growth as they cut debt. With economies from Spain to the Netherlands sliding into recession, elections tomorrow in France and Greece may highlight concerns that German-led budget cuts aimed at taming the debt crisis could falter. Francois Hollande, the frontrunner in France’s presidential race, has called for more focus on growth in the region’s fiscal pact, while polls in Greece show many voters favor anti-bailout groups promising an end to austerity. “The pact entails considerable scope for judgment, based on economic analysis and its legal provisions, when it comes to its concrete application,” Rehn said today at an event sponsored by the Institute for European Studies in Brussels. The pact ’’implies differentiation among the member states according to their fiscal space and macroeconomic conditions.’’
Budget Surplus Best Defense for Australian Economy, Swan Says (Source: Bloomberg)
Returning Australia’s budget to surplus is the best defense against an uncertain global economic outlook and will continue to support the nation’s top credit ratings, Treasurer Wayne Swan said. Australia’s economy is forecast to return to its trend growth over the next couple of years with a strong outlook for mining investment, Swan said in his weekly economic note today. “Against the uncertain international backdrop, Australia’s fiscal discipline sends a strong message of confidence to the world, demonstrated in our AAA credit rating from all three major international ratings agencies, something never before achieved in our nation’s history,” Swan said.
Prime Minister Julia Gillard is set to unveil on May 8 a budget that seeks to end four years of deficits as support for her government has fallen to near-record lows in opinion polls. The budget comes as the Reserve Bank of Australia cut growth and inflation forecasts this week on slowing inflation after slashing its key rate by half a percentage point to a two-year low.
Philippine Growth Likely Passed 5.2%, Aquino Says (Source: Bloomberg)
The Philippine economy likely grew at least 5.2 percent in the first quarter, the fastest pace in more than a year, according to the nation’s president. “First quarter excluding agriculture, I was told already” indicates a 5.2 percent expansion, President Benigno Aquino said in an interview at Malacanang Palace in Manila May 4. “So far agricultural figures that have been sent my way, the prognosis is it has expanded also -- so it will not serve to bring down the 5.2 but it will probably enhance it.” The official gross domestic product report is scheduled for May 31. The acceleration would bring the Southeast Asian nation nearer to Aquino’s 7 percent target for sustained growth, and underscores forecasts for the central bank to be done cutting interest rates. Aquino, 52, plans to strengthen the economy by stepping up investment, which is currently the second-lowest in Asia relative to GDP, according to Credit Suisse Group AG.
“Manila has been the place to be in early 2012,” Edward Teather, a senior economist in Singapore at UBS AG, wrote in an April 26 research note. “The improved growth data supports our call that the BSP is done easing policy rates,” he wrote, referring to the Bangko Sentral ng Pilipinas. UBS analysts last month boosted their projection for the increase in the country’s GDP this year to 4.5 percent, from 3.3 percent previously.
