FOREX-Dollar off 9-month high vs yen on profit-taking
SINGAPORE, March 5 (Reuters) - The dollar pulled away from a nine-month high hit on Friday as traders booked profits after the U.S. currency rose nearly 8 percent in about a month.
"There is perhaps a little more room for dollar/yen to go higher in the next few days, with short-term players now going short yen, but we see the upside limited," said Christopher Gothard, head of FX for Brown Brothers Harriman in Hong Kong.
Asian Stocks Swing on Global Outlook (Source: Bloomberg)
Asian stocks swung between gains and losses after U.S. service industries expanded, while euro-area services output fell, increasing uncertainty about the global economic outlook. Samsung Electronics Co. (005930), South Korea’s biggest exporter of consumer electronics, rose 0.7 percent. BHP Billiton Ltd. (BHP), Australia’s biggest mining company lost 2.1 percent after metal prices slid. The MSCI Asia Pacific Index was little changed at 126.88 as of 9:20 a.m. in Tokyo after losing 1 percent yesterday.
Japanese Equities Advance as Yen Weakens, Boosting Outlook for Exporters (Source: Bloomberg)
Japanese stocks advanced after the yen weakened, bolstering the earnings outlook for exporters. Toyota Motor Corp. (7203), Asian’s biggest carmaker, rose 0.8 percent after being rated “outperform” by Credit Suisse Group AG. Bridgestone Corp., the world’s biggest tiremaker, jumped 1.5 percent after saying it will build a plant in Thailand. Kubota Corp., a tractor maker that gets almost a fifth in sales from Asia, lost 1.1 percent after China cut its economic growth target. “With the yen slightly weaker, exporters may lead share buying, but increases will probably be limited,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “The markets are likely to follow the currency and other Asian stock movements.” The Nikkei 225 Stock Average (NKY) rose 0.3 percent to 9,724.62 as of 9:06 a.m. in Tokyo. The broader Topix Index added 0.2 percent to 834.82, with more than twice as many shares rising as falling.
S&P 500 Has Biggest Two-Day Decline Since January on Global Growth Concern (Source: Bloomberg)
U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest two-day loss since January, as China cut its economic growth target and orders to American factories decreased for the first time in three months. Commodity (S5MATR), technology and industrial shares dropped the most among 10 groups in the S&P 500. Alcoa (AA) Inc. and Caterpillar Inc. (CAT) fell at least 2.1 percent. Apple Inc. (AAPL) slumped 2.2 percent, snapping a seven-day advance. Bank of America Corp. (BAC) and Citigroup Inc. (C) dropped more than 1.2 percent. International Business Machines Corp. closed above $200 (IBM) on a split-adjusted basis for the first time, after rallying 9.1 percent in 2012. The S&P 500 retreated 0.4 percent to 1,364.33 at 4 p.m. New York time, dropping 0.7 percent in two days. The Dow Jones Industrial Average decreased 14.76 points, or 0.1 percent, to 12,962.81. The Nasdaq Composite Index dropped 0.9 percent to 2,950.48.
About 6.1 billion shares changed hands on U.S. exchanges, or 9 percent below the three-month average. “It’s wise to take a little money off the table,” said David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc. His firm oversees $631 billion. “Some of the easy gains have already been made. We’re back to focusing on the economic fundamentals. China saying that they are targeting 7.5 percent growth raises concern of a hard landing.”
Stocks Drop in Europe as China Cuts Forecast for Growth; Rio Tinto Falls (Source: Bloomberg)
European (SXXP) stocks dropped, snapping two days of gains, as China cut its forecast for economic growth this year and data showed manufacturing and services in the euro area shrank more than estimated. Rio Tinto Group led mining shares lower as copper slid. Salzgitter AG (SZG) sank 5.4 percent amid uncertainty over the steelmaker’s outlook. BP Plc (BP/) advanced 1.6 percent after reaching a $7.8 billion settlement with businesses and individuals harmed by the Gulf of Mexico oil spill in 2010. The Stoxx Europe 600 Index retreated 0.6 percent to 265.56 at the close, paring last week’s 0.9 percent advance. The benchmark measure earlier slid as much as 1 percent. The Stoxx 600 has rallied 8.6 percent this year as U.S. economic reports beat estimates and investors speculated that policy makers will contain the euro region’s sovereign-debt crisis.
“The market is really taking more of a pause for breath after the strong rally that we have seen,” said Edmund Shing, an equity strategist at Barclays Capital in London. “People are actually a little bit less pessimistic on the economic front than late last year, but clearly we would like to see more positive macro data going forward. We don’t expect growth in Europe this year.”
Goldman Sachs’s Asia Unit Swings to 2011 Loss (Source: Bloomberg)
Goldman Sachs Group Inc. (GS) lost money in Asia last year for the first time since 2008 as the Wall Street firm’s stock investments in the region, led by a holding in China’s biggest bank, backfired. A 46 percent decline in Asia revenue compared with 2010 was driven by markdowns on the company’s stakes in public equities, the firm disclosed in its annual 10-K filing with the U.S. Securities and Exchange Commission. The bank lost $103 million in the region, compared with a $2.08 billion profit a year earlier, according to the New York-based company. The figures illustrate how losses in Goldman Sachs’s Investing & Lending unit, which makes so-called principal investments with the company’s own money, can surpass the bank’s revenue from working with clients. Goldman Sachs bankers in Asia won first place among equity underwriters and takeover advisers last year, according to data compiled by Bloomberg.
“Last year was the perfect storm for Goldman in Asia as it was a brutal year for equities in the region,” said Sandy Mehta, chief executive officer of Hong Kong-based Value Investment Principals Ltd.
Orders to U.S. Factories Fell in January for First Time in Three Months (Source: Bloomberg)
Orders to U.S. factories decreased in January for the first time in three months, a sign manufacturing is cooling at the beginning of the year. Bookings (TMNOCHNG) fell 1 percent after a revised 1.4 percent gain in December that was larger than previously estimated, figures from the Commerce Department showed today in Washington. The median of 61 economists’ projections in a Bloomberg News survey called for a 1.5 percent decline. Rising oil prices and the expiration of a tax credit at the end of 2011 that supported business investment represent a risk to American manufacturers. At the same time, the need to rebuild inventories and replace outdated equipment may help keep factories at the forefront of the economic expansion.
“Manufacturing has been the strongest link in this recovery and it continues to grow, but maybe the impact of the sharp rise in energy costs is beginning to take a toll on growth,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “The big unknown remains oil prices.”
U.S. Service Industries Unexpectedly Expand to a One-Year High: Economy (Source: Bloomberg)
Service industries in the U.S. unexpectedly grew in February at the fastest pace in a year, showing further strength for the biggest part of economy. The Institute for Supply Management’s non-manufacturing index climbed to 57.3 from 56.8 in January, the Tempe, Arizona- based group’s data showed today. Readings above 50 signal expansion, and the median forecast of economists surveyed by Bloomberg News was 56. A sustained pickup in the industries that make up almost 90 percent of the economy would bolster the expansion, creating employment opportunities that will help sustain household demand. At the same, rising gasoline prices represent a risk to a recovery that Federal Reserve Chairman Ben S. Bernanke last week said was “uneven and modest.”
“The momentum that we’ve been generating in the economy is starting to broaden,” said Robert Dye, chief economist at Comerica Inc. in Dallas. “As we get stronger job growth, we’ll see more lift to the economy in the second half of the year.”
China 4% Inflation Target Gives Scope for Relaxing Energy-Price Controls (Source: Bloomberg)
China set a 2012 target for inflation that’s higher than economists’ forecasts, leaving room for fiscal and monetary stimulus and an easing of government controls on the cost of resources such as energy. Premier Wen Jiabao yesterday unveiled a goal of about a 4 percent increase in the consumer price index, the same target as last year. By comparison, analysts at Bank of America Corp. forecast 3.5 percent and those at Goldman Sachs Group Inc. predict 3.1 percent. The gauge rose 5.4 percent in 2011. China is moving to more market-oriented methods of setting prices to spur energy conservation by letting consumers bear a bigger portion of costs. Wen yesterday pledged pre-emptive fine- tuning of economic policy, a shift from a year ago, when his main warning was on inflation, a “tiger” he said would be tough to recapture if allowed free.
The government “wants to push forward energy price reform and wants the room for that to happen,” said Li Wei, a Shanghai-based economist for Standard Chartered Plc (STAN), the U.K. bank that earns most of its profit in Asia. Li forecast 2 percent inflation this year.
Private Investors With 20% of Greek Debt to Join Swap (Source: Bloomberg)
The private investors that so far declared their participation in Greece’s debt restructuring hold about 20 percent of the bonds involved in a swap required for an international bailout. The 12 members of the creditors’ steering committee that said yesterday they would join in the exchange have debt with a face value of at least 40 billion euros ($53 billion), compared with the 206 billion euros of Greek bonds in private hands, according to data compiled by Bloomberg from company reports. The participating firms include some of Greece’s biggest private creditors, including National Bank of Greece SA, Alpha Bank SA (ALPHA), BNP Paribas SA and Commerzbank AG. (CBK) The goal of the swap, which runs until March 8, is to reduce by 53.5 percent the total of privately held Greek debt, helping the country avert an uncontrolled default that could roil financial markets and spur contagion to states such as Portugal.
Each debt holder “must make their own decision whether or not to participate in those offers based on their own particular interests and on the advice and assistance of their own advisers,” the International Institute of Finance said in a statement yesterday.
Europe’s Junk Borrowers Tap U.S. at Record Pace (Source: Bloomberg)
European high-yield companies are tapping the U.S. bond market at a record pace as investors funnel unprecedented amounts of cash into dollar-denominated junk-debt funds and the sovereign crisis restricts bank lending in the region. Issuers led by Germany’s Fresenius Medical Care AG (FME) have sold $8.8 billion of the debt in dollars this year, following $16.4 billion in all of 2011, according to Morgan Stanley. The portion of European speculative-grade offerings sold in dollars has soared to 44 percent this year, up from 31 percent in 2011 and double the rate in 2010. Borrowers in Europe, where politicians are struggling to contain the fiscal contagion that led to the bailouts of Greece, Portugal and Ireland, are seeking lower financing costs by marketing to investors in the U.S. Relative yields on European junk-rated debt average 222 basis points more than on similarly rated U.S. bonds, compared with 77 in 2011, Bank of America Merrill Lynch index data show.
“It stands to reason if you are a European issuer, you are going to look opportunistically to access the most favorable market,” William Hughes, the head of North American leveraged syndicate at Citigroup Inc., said in a telephone interview. “For many issuers that decision has led them to dollar denominated high-yield bonds and leveraged loans.”
Greek Debt Swap Deadline Will Test Europe Efforts to Close Crisis Chapter (Source: Bloomberg)
The European Union faces a first test in its attempt to turn the page on the two-year debt crisis when Greece’s private creditors decide this week whether to sign off on the biggest sovereign-debt restructuring in history. The success of the 106 billion-euro ($140 billion) debt swap, confirmed on the eve of last week’s European Union summit, depends on how many investors agree to the writedown by the March 8 deadline. Euro-area finance ministers will hold a teleconference on March 9 to review the deal’s outcome. “The European crisis is not quite over yet,” Erik Nielsen, chief global economist at UniCredit SpA in London, wrote in a note to clients yesterday. He said enough creditors will probably participate in the writedown to avoid triggering so-called collective action clauses, which could be used by Greece to compel investors to participate and roil markets by triggering credit-default swap insurance contracts.
The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro- area finance ministers last week authorized the EFSF to issue bonds for the swap.
Leverage Dropping Most Since 2008 Leads Best Emerging Rally: Turkey Credit (Source: Bloomberg)
Turkey is reducing government debt this year by the most since 2008, spurring the best bond rally in the emerging markets. The Treasury plans to lower debt 16.5 percent by stepping up repayments, according to its website. Lira-denominated bond yields have plunged 175 basis points in 2012, the most among emerging markets, data compiled by Bloomberg show. The extra yield on Turkish dollar bonds over similar-maturity U.S. notes fell to a three-month low of 322 basis points on March 1, JPMorgan Chase & Co.’s EMBI Global index shows. The second-fastest growth after China among major economies allowed Prime Minister Recep Tayyip Erdogan to cut debt to 39.8 percent of gross domestic product last year from almost double that when his party came to power a decade ago. While the nation’s $284.9 billion market for government debt is almost double the size of Russia’s, Turkey’s indebtedness relative to its GDP is below that of Brazil, India, Poland and Hungary, according to data compiled by Bloomberg.
“It’s one of Turkey’s strengths, as debt relative to GDP has come down a long way in the last 10 years,” said Kieran Curtis, a London-based fund manager who oversees about $3.5 billion in emerging-market assets at Aviva Investors Ltd. (MORAISS) “Fiscal policy is always going to be an important determinant of bond yields in a country like Turkey.”
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