Economy in U.S. Grew at 3% Annual Rate in Fourth Quarter (Source: Bloomberg)
The economy in the U.S. grew at a 3 percent annual rate in the last three months of 2011, the same as previously estimated, while corporate profits climbed at the slowest pace in three years, raising the risk that business investment and hiring will cool. The increase in gross domestic product was the biggest in more than a year and followed a 1.8 percent gain in the prior period, revised figures from the Commerce Department showed today in Washington. Company earnings were up 0.9 percent from the third quarter, the smallest advance since the last three months of 2008. While the report showed business spending on new equipment and software climbed more the previously estimated, figures this month indicate outlays are slowing following the expiration of a government tax credit. Consumers may be poised to take a leading role in the expansion as the biggest increase in employment since 2006 gives households the confidence and means to spend.
“Businesses are going to remain very cautious about hiring permanent staff and investing in new equipment,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who accurately forecast the gain in GDP. “It probably raises a caution flag that growth has not ratcheted up as many people hoped it had.”
Jobless Claims in U.S. Decline to Lowest Since April 2008 (Source: Bloomberg)
The number of Americans seeking unemployment benefits dropped last week to the lowest level in almost four years, adding to evidence of an improving U.S. labor market. Initial jobless claims fell 5,000 in the week ended March 24 to 359,000, the lowest since April 2008, the Labor Department reported today in Washington. The median forecast of economists in a Bloomberg News survey called for 350,000 claims. With the report, the government data also contain revisions dating back to 2007. Companies are retaining workers and hiring as sales pick up along with confidence in the expansion. The pace of employment has gained momentum in the past three months, helping drive income growth that may ease the strain of higher gasoline prices. “The labor market is still improving at a modest pace,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “Across almost all sectors, companies have shed as many workers as they possibly can. Now, they’re responding to the modest improvements in demand.”
The number of people on unemployment benefit rolls dropped to the lowest level since August 2008, while those getting extended payments also decreased.
Unemployment Claims in U.S. Fall to Four-Year Low: Economy (Source: Bloomberg)
Claims for unemployment benefits fell to the lowest since April 2008 and consumer confidence reached the second-highest level in four years, indicating the labor-market recovery is helping sustain demand. Applications for jobless insurance dropped by 5,000 last week to 359,000, the Labor Department said today in Washington. The Bloomberg Consumer Comfort Index was little changed at minus 34.7 in the period to March 25, close to the minus 33.7 reading two weeks earlier that was the strongest since March 2008. “The labor-market improvement is unambiguous,” said Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston, the third-best forecaster for gross domestic product in the two years through February, according to data compiled by Bloomberg News. “We are going to see consumer spending improving. The big drivers -- jobs and wealth -- are moving more favorably, and confidence is as well.”
Six months of the strongest job growth since 2006 are underpinning the sentiment of consumers, whose spending accounts for about 70 percent of the world’s largest economy. At the same time, gasoline near $4 a gallon leaves Americans with less to spend on other goods, posing a risk to sales at retailers like Family Dollar Stores Inc. (FDO) The Standard & Poor’s 500 Index declined 0.2 percent to 1,403.28 at 4 p.m. in New York. The index earlier fell as much as 1 percent as S&P said Greece may have to restructure its debt again.
S&P 500 Trims Loss on Speculation Selloff Was Overdone (Source: Bloomberg)
The Standard & Poor’s 500 Index (SPX) trimmed losses in the final two hours of trading ahead of data forecast to show growth in consumer confidence and spending tomorrow, the final day of the best first quarter since 1998. The S&P 500 retreated 0.2 percent to 1,403.28 at 4 p.m. New York time, paring a loss of as much as 1 percent. The Dow Jones Industrial Average (INDU) rose 19.61 points, or 0.2 percent, to 13,145.82 after reversing a drop of as much as 94 points to halt a two-day decline. “It’s buying on weakness,” Tim Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York, said in a phone interview. “The corrections seem to be very short lived because money just seems to be flowing right in. The end of the quarter is imminent. Given that it’s been a positive quarter for stocks, many managers don’t want to show any cash in their client portfolios.”
The S&P 500 has risen 12 percent since the beginning of 2012 amid better-than-estimated economic data and expectations Europe would tame its crisis. The index has gained 2.8 percent in March, rallying for a fourth straight month and poised for the longest streak of monthly gains since September 2009. Alcoa Inc. (AA), Caterpillar Inc. (CAT) and Coca-Cola Co. climbed more than 1.5 percent for the biggest gains in the Dow today. Red Hat Inc. (RHT) surged 20 percent after profit and sales topped projections. Bank of America Corp. and Citigroup Inc. fell more than 1.4 percent to pace losses in financial companies. Best Buy (BBY) Co., the largest consumer-electronics retailer, slumped 7 percent on plans to close 50 stores as sales missed forecasts.
Treasuries Have Worst Quarter Since 2010 on Growth Signs (Source: Bloomberg)
Treasuries headed for their steepest quarterly decline since the last three months of 2010, while corporate bonds surged, as the U.S. economy shows signs of improvement. Government securities handed investors a 1 percent loss as of yesterday, according to Bank of America Merrill Lynch indexes, reflecting declining demand for the relative safety of U.S. debt during the period. An index of the nation’s investment-grade and high-yield corporate bonds returned 3.2 percent, the most since the July-to-September period of 2010, the figures showed. “Corporate and emerging-market bonds might be a better choice than Treasuries for the second quarter,” said Will Tseng, who trades U.S. bonds at Taipei-based Shin Kong Life Insurance Co., which has the equivalent of $52.1 billion in assets and is Taiwan’s third-largest life insurer. “I wouldn’t say the U.S. economy is good, but it’s more stable than a couple of months ago.”
Ten-year notes yielded 2.17 percent as of 11:36 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The price of the 2 percent security due in February 2022 was 98 17/32. The rate climbed to 2.40 percent on March 20, the highest level since Oct. 28. The average over the past decade is 3.86 percent.
Asian Stocks Swing Between Gain, Loss; Sun Hung Kai Drops (Source: Bloomberg)
Asian stocks swung between gains and losses as the region’s benchmark equity index headed toward its biggest quarterly gain since 2010. Japanese manufacturers slid after the nation’s industrial production unexpectedly fell and investors waited for U.S. data on income and spending. Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, climbed 1.6 percent after posting earnings that exceeded estimates. Quanta Computer Inc., the world’s largest laptop maker by shipments, rose 5.1 percent in Taipei after reporting better-than-expected net income. Fanuc Corp. (6954), Japan’s biggest maker of factory robots, fell 2.3 percent. Sun Hung Kai Properties Ltd. (16), the world No. 2 real estate company, plunged 11 percent in Hong Kong after the firm’s co-chairmen were arrested in a corruption probe. The MSCI Asia Pacific Index climbed 0.1 percent to 126.69 as of 11:12 a.m. in Tokyo, with about the same number of stocks rising as falling.
The gauge is headed for its first monthly drop since November, paring the biggest quarterly gain since the period through September 2010. The measure has risen 11 percent this year, gaining 0.3 percent on the week. “You just don’t have sustainability for the markets to reweight higher like they did three or four months ago,”Andrew Pease, Sydney-based chief investment strategist for the Asia- Pacific region at Russell Investment Group, which manages about $150 billion. “You are not going to see any acceleration from here and you may actually feel a bit of moderation” in the U.S.
China’s Stocks Rise, Poised for Best Quarterly Gain in a Year (Source: Bloomberg)
China’s stocks rose, pushing the benchmark index to its best quarterly performance in a year, on better-than-estimated earnings from banks and speculation the government will accelerate measures to boost economic growth. Anhui Conch Cement Co. led gains among cement producers after the Shanghai Securities News reported the government will “strictly” control new investment in cement capacity. Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. advanced after posting better-than-estimated profit growth in the fourth quarter. “The market’s recent losses are quite big and we expect some bargain hunting at this level to support a rebound,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “We are still in a poor earnings season and the market may need to further digest more bad earnings.”
The Shanghai Composite Index (SHCOMP) rose 9.82 points, or 0.4 percent, to 2,261.98 as of 9:47 a.m. local time. The 14-day relative strength measure for the gauge, measuring how rapidly prices have advanced or dropped during a specified time period, was at 29.2 yesterday. Readings below 30 indicate it may be poised to rise. The CSI 300 Index (SHSZ300) gained 0.5 percent to 2,455.43. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, retreated 1.4 percent in New York yesterday. China’s markets will be closed from April 2 to April 4 for public holidays.
Wen’s Growth Plan Draws Korea Investment, HI to Consumer (Source: Bloomberg)
Korea Investment Corp. (KRINVTZ) and HI Asset Management Co., awarded permission to invest in mainland China, expect consumer stocks to benefit from government efforts to reduce the Chinese economy’s reliance on exports. “Consumption-related stocks are likely to outperform, especially durable goods such as autos or home appliances as the government is likely to move to help boost disposable income,” Sohn Je Seong, who helps manage $5.3 billion at Seoul-based HI Asset, said in a March 27 interview. “The Chinese government, which moved in advance to tighten, has enough policy tools and more room to wiggle.” HI Asset became in December one of 147 companies with Chinese government-approved qualified foreign institutional investor status to buy so-called A shares on the mainland and is awaiting its investment quota. Korea Investment, the $45 billion sovereign wealth fund, was awarded a $200 million investment quota on March 9.
A gauge of consumer-staple shares on the CSI 300 Index (SHSZ300) is the best performer of 10 industry groups since March 5 when Premier Wen Jiabao announced a lower economic growth target for China and signaled a shift toward expansion driven more by domestic consumption. The industry measure’s 2.9 percent decline since then compares with an 8.3 percent drop by the CSI 300, which measures stocks traded in Shanghai and Shenzhen.
Yen Touches 3-Week High (Source: Bloomberg)
The yen rose, reaching a three-week high against the dollar, as a global rout in equities supported demand for Japan’s currency as a refuge. The yen gained against most major counterparts after data showed Japan’s consumer prices unexpectedly rose last month, reducing the case for further easing by the central bank. The euro gained toward a one-month high against the dollar as European finance ministers prepare for to meet today amid prospects they will agree increase rescue funds. “Equity markets have been softer globally and that may be stoking some risk aversion,” said Kengo Suzuki, a foreign- exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The yen is being bought in a bid for safety.”
The yen touched 81.83 per dollar, the strongest since March 9, before trading at 82.26 as of 10:13 a.m. in Tokyo, 0.2 percent higher than yesterday’s close. It slid 0.2 percent to 109.86 per euro. Europe’s currency is on pace for a 10 percent surge against the yen this quarter, the most since the final three months of 2000. The euro rose 0.3 percent to $1.3346. The common currency on March 27 touched $1.3386, the highest since Feb. 29.
FOREX-Yen rises broadly but dollar seen resilient
LONDON, March 29 (Reuters) - The yen rose broadly , boosted by demand linked to the end of Japan's financial year, although most market players said the dollar should reassert itself as long as upcoming U.S. data does not bear out a rise in concerns about growth.
"There's definitely a lot of month-end and quarter-end rebalancing but the bigger story we are seeing is some bond buying and equity selling in the last 24 hours," said Geoff Kendrick, currency strategist at Nomura.
Japan Production Decline Undercuts Signs of Recovery: Economy (Source: Bloomberg)
Japan’s industrial production unexpectedly dropped in February, undercutting signs of an economic rebound in the first quarter as policy makers assess whether to apply further stimulus. Factory output slid 1.2 percent from the previous month, the Trade Ministry said in Tokyo today, after a 1.9 percent gain in January. The median estimate in a Bloomberg News survey was for a 1.3 percent increase. The unemployment rate fell to 4.5 percent and consumer prices excluding fresh food unexpectedly rose 0.1 percent, government reports showed. The Bank of Japan (8301) has come under pressure by a group of lawmakers to bolster stimulus efforts, with a board member this week questioned on the idea of adopting a Federal Reserve-style “operation twist,” swapping short-term bonds for longer-dated securities. While the first gain in five months in consumer prices prompted the yen to strengthen, inflation remains distant from the 1 percent goal that the BOJ announced last month.
“They’ll have to maintain their easing stance for a while to prop up the economy,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, referring to BOJ policy makers. “A slight increase in prices won’t make the BOJ optimistic.” The yen traded 0.2 percent higher at 82.24 per dollar as of 10:22 a.m. in Tokyo, after earlier jumping as much as 0.8 percent on the data. The Nikkei 225 Stock Average fell 0.1 percent.
Japan Consumer Prices Unexpectedly Rise 0.1% on Year Earlier (Source: Bloomberg)
Japan’s consumer prices unexpectedly rose in February, a gain that may not be enough to ease pressure on the central bank for bolder action to end deflation. Consumer prices excluding fresh foods climbed 0.1 percent from a year earlier, the statistics bureau said today in Tokyo. The median estimate was for a 0.1 percent decline, in a Bloomberg News survey of 29 economists. Some members of the ruling Democratic Party of Japan say they’re opposing the nomination of BNP Paribas SA economist Ryutaro Kono to the Bank of Japan (8301)’s policy board because they doubt his commitment to ending deflation. Governor Masaaki Shirakawa’s officials may need to enlarge a 30 trillion yen ($364 billion) asset-purchase fund, according to economists including Kyohei Morita. “The bar is high for ending entrenched deflation,’’ Morita, chief economist at Barclays Capital in Tokyo, said before the report was released. ’’The BOJ is likely to introduce more easing measures this year.’’
Japanese Stocks Decline After Industrial Output Retreats (Source: Bloomberg)
Japanese stocks edged lower after a report showed the nation’s industrial production unexpectedly fell in February. The drop was limited ahead of U.S. data today estimated to show growth in consumer confidence and spending. Fanuc Corp. (6954), an industrial robot maker, slumped 2.5 percent. Toyota Motor Corp., Asia’s biggest carmaker by market value, retreated 0.7 percent as the strengthening yen damped the outlook for exporters’ earnings. Inpex Corp., Japan’s No. 1 energy explorer by market value, dropped 1.1 percent after oil prices declined yesterday. Daiichi Sankyo Co. fell 2.3 percent after Citigroup Inc. cut the drugmaker’s rating on the impact of expiring patents. “It’s not a bearish case, but you just don’t have sustainability for the markets to reweight higher like they did three or four months ago,” saidAndrew Pease, Sydney-based chief strategist for the Asia-Pacific region at Russell Investment Group, which oversees about $150 billion.
The Nikkei 225 Stock Average (NKY) slid 0.3 percent to 10,087.76 as of 11:01 a.m. in Tokyo, paring its monthly advance to 3.8 percent. The gauge is headed for its fourth monthly gain, the longest such streak since February 2011, as the yen weakened and U.S. showed signs of economic recovery. The broader Topix Index slid 0.2 percent to 856.24, headed for a 0.4 percent weekly gain. Volume on the gauge was 23 percent below its 30-day average.
Sun Hung Kai Loses $5.8 Billion as Kwoks Arrested (Source: Bloomberg)
Hong Kong anti-graft investigators arrested the billionaire co-chairmen of Sun Hung Kai Properties Ltd. (16), the city’s biggest developer, in one of the former British colony’s highest-profile corruption cases in decades. The stock plunged the most in 14 years. Thomas and Raymond Kwok were detained by the Independent Commission Against Corruption, Sun Hung Kai said late yesterday. Rafael Hui, a former No. 2 official in the government, was also arrested, according to a person with knowledge of the matter who asked not to be identified because of the ongoing probe. The arrests wiped as much as HK$45 billion ($5.8 billion) off the company’s value, mark one of the highest-level investigations in the ICAC’s 38-year history and come four days after a Hong Kong leadership election in which close ties between government and business emerged as a key campaign theme. Current Chief Executive Donald Tsang is being probed separately by the ICAC for taking trips on the yachts and planes of tycoons.
“This will no doubt further strengthen the impression among the public that there is a collusion between business and government,” said Shiu Lik-king, a lecturer of public policy at the Chinese University of Hong Kong. “Politics is all about perception. Once the public think you’ve done it, it won’t matter even if you’re not convicted at the end.”
Hong Kong Stocks Drop as China Earnings Raise Concern (Source: Bloomberg)
Hong Kong stocks dropped, sending the Hang Seng Index (HSI) down for a third day, as the billionaire co- chairmen of Sun Hung Kai Properties Ltd., the city’s biggest developer, were arrested in corruption probe. Sun Hung Kai plunged 11 percent, headed for its biggest drop since 2008. PetroChina Co. (857), the mainland’s biggest energy producer, fell 0.7 percent after profit missed analyst estimates. Industrial & Commercial Bank of China Ltd. gained 2 percent after posting better-than-estimated earning’s growth. The Hang Seng Index fell 0.6 percent to 20,479.44 as of 9:52 a.m. in Hong Kong. The gauge has dropped 5.3 percent this month, headed for its first monthly drop since November and paring gains this year to 11 percent. For the week, the gauge is down about 0.6 percent. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in the city rose 0.3 percent to 10,565.85 today.
“You just don’t have sustainability for the markets to reweight higher like they did three or four months ago,”Andrew Pease, Sydney-based chief investment strategist for the Asia- Pacific region at Russell Investment Group, which manages about $150 billion. “You are not going to see any acceleration from here and you may actually feel a bit of moderation” in the U.S.
S.Korea Output Growth Slows, GDP Expands Less Than Estimated (Source: Bloomberg)
South Korea’s industrial production rose at a slower pace in February and the nation’s economy expanded less than the central bank initially estimated in the fourth quarter. Output rose 0.8 percent in February compared with a revised 3.2 percent gain in January, Statistics Korea said today. The median estimate of 10 economists in a Bloomberg News survey was for a 0.3 percent drop. Gross domestic product grew 0.3 percent in the three months to December from the third quarter, compared with a January estimate of 0.4 percent, the Bank of Korea said. South Korea’s economy, which accelerated the least in two years last quarter, may bottom in the first three months of the year before returning to a recovery path in the second quarter, Finance Minister Bahk Jae Wan said last week. Improvements in global demand may aid the nation, with International Monetary Fund official David Lipton saying this week that he expects modest growth in the U.S., a mild recession in Europe and a soft landing for China.
“We’re apparently going through a trough but the speed and magnitude of an economic recovery highly hinges on global demand,” Yoon Yeo Sam, a fixed-income analyst at Daewoo Securities Co. in Seoul, said before the releases. “The Bank of Korea will likely stay pat for a considerable period of time to support growth amid easing inflation pressures.”
BRICS Bourses Start Futures Venture Aimed at Wealthy Individuals (Source: Bloomberg)
Exchanges in the biggest emerging economies will begin trading futures based on each other’s benchmark stock indexes today as rising wealth spurs demand for new investment products. The five members of the BRICS Exchanges Alliance will cross-list futures on Brazil’s Bovespa Index (IBOV), Russia’s Micex Index (INDEXCF), the BSE India Sensitive Index, Hong Kong’s Hang Seng Index, the Hang Seng China Enterprises Index (HSCEI) and South Africa’s JSE Top40 Index. Traders engaged in arbitrage will be able to buy and sell futures based on the same index on multiple venues, boosting liquidity, according to Mumbai-based BSE Ltd. The products may appeal to the growing number of wealthy individual investors in developing nations who want to access foreign markets, said Bruce Weber, dean of the Lerner College of Business and Economics at the University of Delaware in Newark.
Per-capita gross domestic product in emerging markets has jumped 104 percent during the past decade to about $6,980, according to the Washington-based International Monetary Fund. “The exchanges are doing well in local markets and want to be seen as international for their local investors, who can then go to another BRIC country easily,” Weber, who co-wrote “The Equity Trader Course” in 2006, said in a phone interview. “BRIC countries have generated a lot of growth for investors.”
Myanmar Economy Poised to Take Flight as Voters Head to Polls (Source: Bloomberg)
Myanmar next week holds the most inclusive elections since the military rejected an opposition victory in 1990, as the potential for economic ties with western nations encourages the leadership to relax control. By-elections for 43 of the national legislature’s 664 seats will be held April 1, filling posts vacated by lawmakers who joined President Thein Sein’s government. The main opposition group, led by dissident Aung San Suu Kyi, is contesting seats for the first time since the 1990 turmoil. Prospects of democratic foundations in the nation of 64 million between China and India encouraged the U.S. to consider easing sanctions, with companies from General Electric Co. to Standard Chartered Plc (STAN) awaiting opportunities to invest. At stake for Thein Sein is dismantling a legacy of six decades of isolation that left Myanmar with per capita gross domestic product of just 14 percent of neighbor Thailand’s.
“The economy is like a little plane that’s been denied any repairs for decades and is now about to take off,” said Thant Myint-U, an author of two books on Myanmar whose grandfather, U Thant, was the first Asian head of the United Nations. “Those trade and financial sanctions are like huge headwinds.”
Myanmar Float Helps Exporters Buying Kyat in Black Market (Source: Bloomberg)
Myanmar’s move to a managed float of the kyat may weaken the grip of the black market, where appreciation has been hurting exporters. “The dollar has seen some weakening pressure against the kyat and that is quite a big pain for exporters,” Toshihiro Mizutani, managing director of the Japan External Trade Organization in Yangon, said in an interview on March 28. “If they can manage to keep it from rising fast it would help.” The biggest financial market policy shift since President Thein Sein took power a year ago is an attempt to unify the multiple exchange rates in the Asian nation of 64 million people. The official rate, pegged to the International Monetary Fund’s special drawing rights, is 6.4 kyat per dollar, about 125 times stronger than the black market rate and available only to state-owned companies.
The central bank plans to gradually unify the “various” other rates used by private enterprises and influence the market rate, it said in a statement published in the state-run New Light of Myanmar this week. The bank will publish a reference rate for its currency daily starting April 1, scrapping a 35- year fixed exchange rate, it said.
Spain Vows to Resist Strikers’ Demands to Reverse Labor Law (Source: Bloomberg)
Spain’s government vowed to stick to its labor overhaul, defying union leaders who threatened further unrest after staging the first general strike since Prime Minister Mariano Rajoy took office three months ago. Iberia, the Spanish unit of International Consolidated Airlines Group SA (IAG), canceled 65 percent of its flights, while national power demand was about 17 percent below usual, grid operator Red Electrica Corp. SA data showed. Unions said 77 percent of workers took part, more than during a walkout in 2010, even as the People’s Party government said fewer workers stayed home than last time. Shops, restaurants and banks in central Madrid opened as usual.
While Rajoy’s measures have angered unions and undermined support for the party in a regional election on March 25, the government is still struggling to convince investors it can cut debt and reduce a 23 percent jobless rate. Spain’s extra borrowing costs compared with Germany’s increased to the most in more than three months today, surging 65 basis points from the start of March.
European Stocks Fall as S&P Sees More Greek Restructuring (Source: Bloomberg)
European stocks declined the most in more than three weeks as Standard & Poor’s said Greece may have to restructure its debt again and more Americans than forecast filed claims for jobless benefits. Hennes & Mauritz AB (HMB), Europe’s second-largest clothing retailer, dropped the most in six months as earnings missed estimates. Banca Monte dei Paschi di Siena SpA, Italy’s third- biggest bank, tumbled 11 percent after posting a record loss. FirstGroup Plc (FGP), Britain’s biggest train operator, sank 14 percent amid “challenging trading conditions” at its bus unit. The Stoxx Europe 600 Index (SXXP) dropped 1.3 percent to 260.74 at the close, the biggest decline since March 6. The gauge has still climbed 6.6 percent in 2012, the best start to a year since 2006, as the European Central Bank lent about $1.3 trillion to the region’s financial institutions. The number of shares changing hands was 16 percent more than the average over the last 30 days, data compiled by Bloomberg show.
“After the strong gains through the first quarter, it’s very reasonable that trading is soft as investors consider their positions in the wake of some soft data recently,” said Michael Droescher Joergensen, an equity strategist at Nykredit Bank A/S in Copenhagen.
U.K. House Prices Drop Most in Two Years as Loans Fall: Economy (Source: Bloomberg)
U.K. house prices fell the most in two years and mortgage approvals dropped to an eight-month low as economic uncertainty hurt demand for property and banks tightened lending conditions. Home values dropped 1 percent in March, the biggest decline since February 2010, Nationwide Building Society said in an e- mailed statement today. Lenders granted 48,986 property loans to Britons in February, compared with 57,899 in January, the Bank of England said in a separate report in London. Bank of England Governor Mervyn King said this week that the financial crisis hasn’t gone away as banks continue to shore up balance sheets to protect themselves from the euro-area debt crisis. The housing market may face further pressure as job cuts undermine consumer confidence, and a central bank survey published today showed banks expect mortgage availability to decline “slightly” in the second quarter.
“U.K. data releases this morning were in the round somewhat disappointing,” said David Tinsley, chief U.K. economist at BNP Paribas SA and a former Bank of England official. Today’s data “confirms that the housing market remains depressed by any historical comparison” and signals the economy is going to have “a rougher road in the second quarter.”
German Jobless Fell in March as Economy Showed Resilience (Source: Bloomberg)
German unemployment fell more than forecast in March, adding to evidence that growth in Europe’s biggest economy is gaining traction as the debt crisis recedes. The number of people out of work fell a seasonally adjusted 18,000 to 2.84 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 36 estimates in a Bloomberg News survey showed. The adjusted jobless rate slipped to 6.7 percent, a two-decade low. “Hiring hasn’t halted this quarter after the fourth- quarter contraction,” said Thomas Costerg, an economist at Standard Chartered Bank in London. It “says a lot about the underlying strength of the German economy.” Unemployment will continue to decline in coming months as the pace of economic growth accelerates, he said.
Falling joblessness underscores Germany’s resilience in the face of the debt crisis that Chancellor Angela Merkel says may have peaked. While the 17-member euro-region economy will shrink 0.3 percent in 2012, Germany’s economy will grow 0.6 percent, the European Commission forecast. Investor confidence is at its highest in 21 months and business confidence at an 8-month high.
Bank of Portugal Sees Deeper Economic Contraction in 2012 (Source: Bloomberg)
Portugal’s central bank said the economy will contract more than previously forecast in 2012 and won’t grow next year as consumer spending drops and export growth eases. Gross domestic product will fall 3.4 percent this year after declining 1.6 percent in 2011, the Bank of Portugal said today in its spring economic bulletin. In January, the bank forecast GDP would decrease 3.1 percent in 2012, also a bigger drop than previously estimated, and predicted that the economy would expand 0.3 percent in 2013. “The risks surrounding the current projection point to more unfavorable economic-activity developments,” the Lisbon- based central bank said in a statement. “These risks stem to a large extent from external-driven factors, in particular related to the sovereign-debt crisis in the euro area, which may constrain external-demand developments.”
Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of a 78 billion-euro ($104 billion) aid plan from the European Union and the International Monetary Fund. As the country’s borrowing costs surged, Portugal followed Greece and Ireland last April in seeking a bailout and now plans to return to bond markets in 2013. “If the macroeconomic environment weakens further, the adoption of additional measures that ensure the fulfillment of the fiscal goals may be necessary,” the Bank of Portugal said.
History Forecasts CAC 40 Gain in Month to French Election (Source: Bloomberg)
France’s CAC 40 Index (CAC) may rally in the month leading up to the country’s presidential election in May at a rate three times the average, if history is a guide. The gauge has risen an average of 2.1 percent in the month preceding the final voting in the past eight election years back to 1965, surpassing the 0.7 percent increase in the monthly rolling average, according to data compiled by Bloomberg and NYSE Euronext. The index has dropped 2.8 percent on average in the month following the election, the data show. Investors including Jerome Forneris of Banque Martin Maurel and Arnaud Scarpaci of Agilis Gestion SA, who are both buying French shares with earnings most closely tied to the economy, say they expect stocks to advance regardless of whether incumbent Nicolas Sarkozy or Socialist Francois Hollande is favored to win. Voters will cast ballots on April 22 for the first round and on May 6 for the final vote.
“The candidates have programs with good promises,” said Forneris, who helps manage $11 billion at Banque Martin Maurel in Marseille. “We buy the program and then after the election, we sell on the news. After the election, the market often falls. Promises often aren’t kept or the president says he can’t carry out certain things right away.”
