Asian stocks swung between gains and losses after oil’s longest rally in two years raised concern higher energy costs will weigh on economic growth and as the yen’s decline boosted the outlook for Japanese exporters. Korean Air Lines Co., the nation’s biggest carrier by market value, sank 3.2 percent in Seoul. Newcrest Mining Ltd. (NCM), dropped 3 percent in Sydney after JPMorgan Chase & Co. cut its rating on the Australia’s largest gold explorer. Sony Corp. (6758) gained 3.3 percent as the yen fell to a nine-month low against the dollar. The MSCI Asia Pacific Index (MXAP) rose less than 0.1 percent to 127.99 as of 10:49 a.m. in Tokyo after falling as much as 0.5 percent. The index advanced for a 10th week last week, its longest run of gains since data started being collected in 1988. Shares rose amid confidence China will ease monetary policy and signs the U.S. economy is improving.
Japan’s Nikkei 225 Stock Average (NKY) rose 0.5 percent after the yen touched 81.67 per dollar today, the lowest level since May 31. A weaker yen boosts exporters’ overseas earnings when repatriated. Australia’s S&P/ASX 200 Index slid 0.7 percent. Australian Prime Minister Julia Gillard defeated former leader Kevin Rudd in a leadership ballot, leaving her to unite the ruling Labor party and revive poll ratings before elections due in 2013.
Japan Stocks Advance as U.S. Economic Data Raises Confidence in Recovery (Source: Bloomberg)
Feb. 24 (Bloomberg) -- Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average advancing for a third week, after U.S. jobs and housing data beat estimates, boosting confidence in the global economic recovery. Sony Corp. (6758), Japan’s leading exporter of consumer electronics, rose 3 percent. Inpex Corp. (1605), the nation’s biggest energy explorer, led stocks in the sector higher after crude prices advanced for a seventh day. Yaskawa Electric Corp. (6506) slipped after a report that AIJ Investment Co., a company that manages some of its money, could not account for 200 billion yen ($2.5 billion) in client funds. The benchmark Nikkei 225 gained 0.5 percent to 9,647.38 as of the 3 p.m. trading close in Tokyo, rising 2.8 percent this week. The broader Topix Index climbed 0.6 to 834.29, its highest close since Aug. 2.
“Investors will be comfortable the recovery in the U.S. this time around has a better chance of surviving and thriving,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Improved risk appetite economic fundamentals will create a catalyst that’s been lacking despite attractive valuations.”
S&P 500 Advances to Highest Level Since June 2008 After Economic Reports (Source: Bloomberg)
U.S. stocks rose this week, driving the Standard & Poor’s 500 Index to the highest level since 2008, after Greece got a bailout and better-than-expected data boosted confidence in the world’s largest economy. Energy companies surged 1.9 percent, the most among 10 S&P 500 (SPXL1) industries, as crude oil futures exceeded $109 a barrel. Sears Holdings Corp. (SHLD) rallied 25 percent, the most in the S&P 500, after announcing real estate sales and a rights offering. Technology companies in the stock index advanced an eighth straight week even as Hewlett-Packard Co. (HPQ) tumbled 10 percent. Procter & Gamble Co. added 2.8 percent after saying it will cut 5,700 jobs. The S&P 500 added 0.3 percent to 1,365.74, the seventh gain in the past eight weeks. It exceeded last year’s high of 1,363.61 as a 24 percent rally since October restored $3.2 trillion to American equity values. The Dow Jones Industrial Average (INDU) climbed 33.08 points, or 0.3 percent, to 12,982.95.
The measure exceeded 13,000 for the first time since 2008. “You’re seeing a whiz of optimism mainly because of a lack of negative news out of Europe and moderate growth in the U.S.,” Matt McCormick, who helps oversee about $5.1 billion at Bahl & Gaynor Inc. in Cincinnati, said in a phone interview. “This trend will continue until either of these two variables change.”
European Stocks Post Loss on Greece Austerity Measures, Euro-Area Growth (Source: Bloomberg)
European stocks fell this week on investor concern about Greece’s ability to implement austerity measures needed for a second rescue package, and as the European Commission said the euro area’s economy will shrink this year. National Bank of Greece SA paced declines in banks, sliding 18 percent. Commerzbank AG, the second-biggest German lender, dropped more than 6.6 percent after asking investors to swap hybrid capital instruments for new shares. TNT Express NV, the Dutch express-delivery service, rose 48 percent after rejecting a takeover offer from United Parcel Service Inc. The Stoxx 600 (SXXP) slipped 0.4 percent to 264.77 this week after reaching 268.16 on Feb. 20, the gauge’s highest level since July 26. The benchmark measure has rallied 23 percent from its low on Sept. 22 and 8.3 percent this year as investors speculated euro- area policy makers will contain the sovereign-debt crisis.
“Investors have been hesitant as European politicians face parliamentary votes to pass the bailout for Greece which also faces another general election in April,” said Hans Peterson, the Global Head of Investment Strategy at SEB Private Banking in Stockholm. “Markets are in a waiting position.”
Frontier Stocks Lose in Best Rally Since ‘91 (Source: Bloomberg)
The best start to a year for stocks in two decades is leaving the smallest markets behind, a sign of reduced investor confidence in the least-developed economies. All nine of the world’s worst-performing equity indexes this year are in frontier countries, where the average stock- market value of $30 billion is about 95 percent less than in emerging nations. While the MSCI All-Country World Index (MXWD) jumped 11 percent, gauges in Bangladesh (DHAKA) and Sri Lanka (CSEALL) sank at least 8 percent as interest rates increased. Nigeria’s stock index fell 1.1 percent after union strikes and attacks by Islamic militants. Frontier-nation stocks trade at the lowest valuations since at least 2008 versus emerging-market shares. Falling valuations reflect concern that growth in the smallest economies, which expanded about 20 percent slower than larger developing nations on average during the past three years, won’t accelerate in 2012.
Bank Julius Baer & Co. says the losses create buying opportunities for long-term inves tors. Ashmore EMM LLC has been cutting frontier-market holdings and Oversea-Chinese Banking Corp. (OCBC) is avoiding the stocks.
Consumer Sentiment in U.S. Reaches One-Year High on Jobs Outlook: Economy (Source: Bloomberg)
Confidence among U.S. consumers rose more than forecast in February, reaching a one-year high as Americans grew more upbeat about the outlook for the economy. The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 75.3 this month from 75 in January. The median estimate in a Bloomberg News survey called for 73, after a preliminary reading of 72.5. New-home sales last month were stronger than projected, another report showed. Three straight months of faster job growth along with a stock market rally since late 2011 are helping keep Americans optimistic in the face of rising gasoline prices. Further gains in confidence may sustain the household spending that accounts for about 70 percent of the economy.
“The overwhelming fact is that the job market has gotten better,” said Bill Cheney, chief economist for John Hancock Financial Services Inc. in Boston, who projected a gain. “People are back to spending most of the additional income that they get, so as employment increases and you get some meager increases in wages, they do feed through to more spending.”
Treasury Gain Slows on Speculation Report to Show Pending Home Sales Rose (Source: Bloomberg)
Gains in 10-year Treasuries slowed before an industry report forecast to show pending home sales rebounded in January after sliding in December. U.S. government securities have fallen 0.8 percent in February as the economy shows signs of improvement, heading for their first monthly loss since October, based on Bank of America Merrill Lynch data. Pending home sales rose 1 percent, recovering from December’s 3.5 percent slide, according to the median forecast in a Bloomberg News survey of economists before the National Association of Realtors reports the figure today. Ten-year yields were little changed at 1.97 percent as of 10:31 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security maturing in February 2022 changed hands at 100 1/4. The rate declined three basis points, or 0.03 percentage point, last week.
“Housing is bottoming out and starting to recover,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “Yields around 2 percent are too low given inflation pressure and the economic recovery.” Manufacturing probably accelerated for a fourth month in February, consumer confidence improved and Americans picked up the pace of spending in January, economists forecast separate reports this week will show.
U.S. Treasuries Halt Three-Week Downturn on European Debt Crisis Concerns (Source: Bloomberg)
Treasuries rose, with 30-year bonds halting a three-week slide, amid concern Europe’s rescue package for Greece won’t fully resolve the region’s sovereign-debt crisis. U.S. 10-year yields reached the lowest in a week yesterday as Fitch Ratings lowered Greece’s credit rating and said a default is highly likely, fueling refuge demand. The U.S. sold $99 billion in notes while the Federal Reserve bought $3.8 billion in longer-term Treasuries. The difference between the yields on 10-year notes and inflation-indexed securities was close to the highest since August before a report that is forecast to show U.S. manufacturing output expanded in February.
“We started the week with optimism that an agreement was in place in Greece that would take some pressure off that European crisis, but any selloff was met with buyers as it turns out nothing has really changed,” said Larry Milstein, managing director in New York of government trading at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors. “There is still a lot of uncertainty, and the Fed is still buying, which is giving support to Treasuries.” Yields on 30-year bonds fell five basis points, or 0.05 percentage point, this week to 3.10 percent, according to Bloomberg Bond Trader prices. The 3.125 percent securities maturing in February 2042 increased 30/32, or $9.38 per $1,000 face amount, to 100 1/2.
Manufacturing, Spending Probably Gained in February: U.S. Economy Preview (Source: Bloomberg)
Manufacturing probably accelerated for a fourth straight month in February, consumer confidence improved and Americans picked up the pace of spending a month earlier, economists said reports this week will show. The Institute for Supply Management’s factory index rose to an eight-month high of 54.5 from 54.1 in January, according to the median estimate of 62 economists surveyed by Bloomberg News. Readings above 50 signal growth. Consumer purchases in January rose 0.4 percent, the most in four months, another report may show. Manufacturers remain at the forefront of the more than two- year-old expansion, aided by corporate investment in equipment, inventory rebuilding and a pickup in the auto industry. Risks to the industry that accounts for about 12 percent of the economy include higher fuel costs and a slowdown in Europe linked to its debt crisis.
China’s Congress Make U.S. Peers Look Poor (Source: Bloomberg)
The richest 70 members of China’s legislature added more to their wealth last year than the combined net worth of all 535 members of the U.S. Congress, the president and his Cabinet, and the nine Supreme Court justices. The net worth of the 70 richest delegates in China’s National People’s Congress, which opens its annual session on March 5, rose to 565.8 billion yuan ($89.8 billion) in 2011, a gain of $11.5 billion from 2010, according to figures from the Hurun Report, which tracks the country’s wealthy. That compares to the $7.5 billion net worth of all 660 top officials in the three branches of the U.S. government. The income gain by NPC members reflects the imbalances in economic growth in China, where per capita annual income in 2010 was $2,425, less than in Belarus and a fraction of the $37,527 in the U.S. The disparity points to the challenges that China’s new generation of leaders, to be named this year, faces in countering a rise in social unrest fueled by illegal land grabs and corruption.
Yen Shows BOJ Stimulus Beating Intervention (Source: Bloomberg)
Bank of Japan Governor Masaaki Shirakawa’s inflation goal is succeeding where record intervention failed, as the yen heads for its steepest monthly drop in two years. The currency plunged to a seven-month low after the BOJ, which has struggled for more than a decade against deflation, said on Feb. 14 it aimed for 1 percent annual gains in consumer prices and would add 10 trillion yen ($123 billion) to the economy. Traders are paying record premiums for options to buy the dollar against the yen for three, six and 12 months. Bullish bets on Japan’s currency have fallen 70 percent from Jan 31. Shirakawa needs a weaker yen to help Japan export its way out of a recession made deeper by last year’s earthquake and the worst nuclear crisis in a generation. Oil and gas imports to replace lost capacity have reversed trade surpluses that made the currency a refuge in a slowing global economy. Prospects of higher inflation are driving it down, at least for now.
South Korea’s Bahk Says Oil Price Surge May Push Inflation Above Target (Source: Bloomberg)
South Korean inflation may accelerate above the government’s target on higher oil prices, just as the nation’s economic growth is about to start improving, Finance Minister Bahk Jae Wan said. While inflation is “likely” to dip this month below the 3.4 percent rate in January and be “even lower” in March, instability in the oil market threatens to push overall consumer prices above the government’s 3.2 percent target for the year, Bahk said in an interview in Mexico City over the weekend. He said that a 10 percent increase in the cost of crude pushes inflation up by 0.12 percentage point. Oil capped its longest rally since January 2010 last week as escalating tension with Iran threatens supplies, with a barrel for April delivery reaching $109.77 on the New York Mercantile Exchange. South Korea’s economy, Asia’s fourth- largest, grew the least in two years last quarter as a faltering global expansion and Europe’s debt crisis hurt exports.
European Leaders Focus on Boosting $672 Billion Firewall After G-20 Rebuff (Source: Bloomberg)
European leaders will shift their focus this week from a Greek bailout to the prospect of bolstering the region’s firewall against debt-crisis contagion as they ready for their latest summit. After lawmakers in Germany and Finland vote on approving the second Greek rescue package today and Feb. 29, European Union heads of government will turn to their March 1-2 summit in Brussels. Leaders of the 17-member monetary union have said they’ll decide in March whether to lift a 500 billion-euro ($672 billion) limit to bailout funding. As the European Central Bank prepares a second round of cash lending to help shore up the region’s banks, policy makers are focused on preventing a Greek collapse in order to take advantage of signs of an improved global economy.
The latest Greek bailout “gives the opportunity of euro- zone leaders to put a better, more organized and larger firewall in place,” William Rhodes, chief executive officer of William R. Rhodes Global Advisors and a former Citigroup Inc. executive, said in a Feb. 24 Bloomberg Radio interview.
U.K. Hometrack Home Prices Underpinned by Rush to Beat Tax-Holiday Expiry (Source: Bloomberg)
U.K. house prices held their value for a second month in February, boosted by a seasonal increase in demand and a rush to beat the expiration of a property-tax exemption, Hometrack Ltd. said. The average cost of a home in England and Wales was unchanged from January and 1.4 percent lower than a year earlier, the London-based property research company said in a report today. The number of potential buyers registering with estate agents rose 18 percent over the month, the largest gain for five years. The figures partly reflect people looking to take advantage of a two-year stamp-duty exemption for first-time buyers purchasing a home for less than 250,000 pounds ($396,000) before it ends next month. Hometrack said the supply-demand balance suggests property prices will resume their decline in the coming months as banks restrict lending and Britons are squeezed by government budget cuts and rising unemployment.
No Silver Bullet to Resolve Europe Debt Crisis, World Bank’s Zoellick Says (Source: Bloomberg)
World Bank President Robert Zoellick said there is no “silver bullet” to resolve Europe’s sovereign-debt crisis and every country has a common interest in seeing the region succeed as they debate chipping in more cash to bailout funds. “The real big issue going forward here will be the success of Spain and Italy,” he said in a Bloomberg television interview in Singapore yesterday. “The good news is we’ve got some very reformist governments in both countries. They are not only undertaking fiscal discipline but they have started undertaking structural reforms.” Officials from the Group of 20 and central bank governors are meeting this weekend in Mexico City, where U.S., Chinese and Japanese officials say they will press euro-area countries to do more to merit outside help to end the region’s sovereign debt crisis. The International Monetary Fund has warned concerns about debt sustainability could drag the world into another recession.
The focus on Spain and Italy comes after euro-area governments sanctioned a 130 billion euro ($174.8 billion) aid package for Greece to avert a March bankruptcy. While China, Japan, Brazil and Mexico said they are willing to help, Europe “must make more efforts to create a bigger firewall,” according to Japan’s Finance Minister Jun Azumi.
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