Asian Stocks Gain on U.S. Retail Sales, Fed U.S. Outlook (Source: Bloomberg)
Asian stocks rose after U.S. retail sales jumped by the most in five months and the Federal Reserve raised its assessment of the world’s biggest economy, boosting the earnings outlook for Asian exporters. Toyota Motor Corp. (7203), Asia’s biggest carmaker by market value, rose 2.3 percent in Tokyo. James Hardie Industries SE (JHX), an Australian supplier of building materials that gets more than half of its sales from the U.S., climbed 4.1 percent in Sydney. Samsung Electronics Co., South Korea’s No. 1 consumer electronics exporter, advanced 1.8 percent in Seoul after iSuppli said the company will supply the touch screen for Apple Inc.’s new iPad. The MSCI Asia Pacific Index rose 0.8 percent to 127.88 as of 9:41 a.m. in Tokyo, with about 14 stocks climbing for each that fell. All 10 industry groups in the gauge rose. The index gained 11 percent this year through yesterday amid signs the U.S. economy is recovering and China is easing its monetary policy.
“The U.S. economy is generating jobs again and that’s helping boost household income, and I think the Fed’s comments recognize the improvement in the U.S. economy,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “To a large degree, Asia takes a short-term lead from the U.S. We should see gains in Asian markets today.”
Japan Stocks Rise on U.S. Retail Data; Fed Lifts Outlook (Source: Bloomberg)
March 14 (Bloomberg) -- Japanese stocks rose, with the Nikkei 225 Stock Average (NKY) set for the highest close since July, after U.S. retail sales jumped and the Federal Reserve raised its economic assessment for the world’s biggest economy. Toyota Motor Corp. (7203), a carmaker that gets 28 percent of its sales in North America, rose 2.2 percent after the yen fell to its lowest against the dollar since April. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest lender, advanced 2.4 percent after the Fed said 15 of the 19 largest U.S. banks have enough capital to weather another recession, boosting confidence in the global financial system. Inpex Corp. (1605), Japan’s No. 1 energy explorer, advanced 1.4 percent after oil prices rose. The Nikkei 225 Stock Average rose 1.9 percent to 10,085.47 as of 9:12 a.m. in Tokyo. The broader Topix Index gained 1.8 percent to 860.52 with all 33 industry groups on the measure gaining.
“The U.S. economy is generating jobs again and that’s helping boost household income, and I think the Fed’s comments recognize the improvement in the U.S. economy,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “Japan has benefited from the perception that the yen has peaked for now and that’s helping the Japanese share market.”
Dow Rises to Highest Level Since 2007 (Source: Bloomberg)
U.S. stocks advanced, sending the Dow Jones Industrial Average to the highest level since 2007, amid data showing that retail sales increased by the most in five months and as JPMorgan Chase & Co. (JPM) boosted its dividend. JPMorgan surged 7 percent after also unveiling a $15 billion buyback. Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS) rose at least 6.2 percent. Citigroup Inc. (C), which rallied 6.3 percent, slumped 3.3 percent after the close of regular trading as it failed to meet the Federal Reserve’s minimum requirements in a stress test. Apple Inc. (AAPL) climbed 2.9 percent as Jefferies Group Inc. raised its share-price estimate to $699.
The Standard & Poor’s 500 Index added 1.8 percent to 1,395.95 at 4 p.m. New York time. The Dow advanced 217.97 points, or 1.7 percent, to 13,177.68, rising a fifth day. The Nasdaq Composite Index gained 1.9 percent to 3,039.88, the highest level since 2000. (CCMP) About 7.5 billion shares changed hands on U.S. exchanges, 13 percent above the three-month average. “You have the sweet spot,” said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.6 billion. “As we come to the end of the quarter, people sit down and say: do we own equities? The answer is no. To the extent that the Fed is not going to get in the way of stronger banks boosting dividends or doing share buybacks, that helps that sector. Yet the real leadership is in some of the more economically sensitive areas.”
European Stocks Advance as U.S. Retail Sales Increase (Source: Bloomberg)
European (SXXP) stocks advanced, with the Stoxx Europe 600 Index climbing to the highest since July 26, as reports showed German investor confidence in March increased more than forecast and American retail sales rose in February. Raiffeisen Bank International AG (RBI) and UniCredit SpA (UCG) led lenders higher. Eramet SA, the operator of the world’s biggest ferro-nickel plant, gained with metal prices. Antofagasta Plc (ANTO) fell after full-year profit missed analysts’ estimates. The Stoxx 600 (SXXP) added 1.8 percent to 269.56 at the close, after euro-area finance ministers signed off on a second bailout for Greece. The benchmark index has rallied 10 percent so far this year.
“The sky is brightening,” said Jerome Forneris, who helps manage $11 billion at Banque Martin Maurel in Marseille. “There have been some very good economic indicators in northern Europe. We hope that Germany will lead other countries higher. The U.S. economy is improving and that is helping the market. The stress from the sovereign-debt crisis that weighed on stocks is disappearing. The appetite for stocks has returned.”
Dollar supported ahead of Fed on brighter economic outlook
TOKYO, March 13 (Reuters) - The U.S. dollar hovered just below a seven-week high against a basket of currencies, bolstered by expectations that a string of encouraging economic news should persuade the U.S. Federal Reserve not to apply fresh stimulus, at least for now. "When you look at recent U.S. economic numbers, it will be difficult to argue for an immediate easing," said Koji Fukaya, chief currency strategist in Credit Suisse in Tokyo.
Dollar Near 4-Week High as Fed Raises Economic Assessment (Source: Bloomberg)
The dollar strengthened against all its major counterparts after Federal Reserve policy makers raised their assessment of the U.S. economy and refrained from additional monetary easing. The yen touched an 11-month low versus the greenback as the two-year yield gap between the U.S. and Japan widened to the most since July after the Bank of Japan (8301) signaled yesterday it will keep using stimulatory tools to tackle deflation. The yen also weakened as Asian stocks extended a global rally, damping demand for the lower-yielding currency. “We should start to see signs of recovery in the U.S. economy being more dollar supportive,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “What is clear after the Fed statement is the fact that Treasury yields are moving higher and the dollar is being supported, and that’s the story we expect to continue over the next few weeks and the next month.”
The dollar rose 0.3 percent to 83.17 yen as of 9:53 a.m. in Tokyo from the close in New York yesterday. It reached 83.18, the strongest level since April 18. The U.S. currency added 0.1 percent against the euro to $1.3068. The yen slid 0.2 percent to 108.69 per euro, extending a 0.3 percent drop yesterday.
Fed Says Labor Market Improves; Policy Unchanged (Source: Bloomberg)
Federal Reserve policy makers raised their assessment of the economy as the labor market gathers strength and refrained from new actions to lower borrowing costs. “The unemployment rate has declined notably in recent months but remains elevated,” the Federal Open Market Committee said in a statement at the conclusion of a meeting today in Washington. It also said “strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook.” Stocks advanced, sending the Dow Jones Industrial Average toward its highest closing level since 2007, after the Fed statement and as JPMorgan Chase & Co. increased its dividend. The best six-month streak of job growth since 2006 prompted Fed Chairman Ben S. Bernanke to acknowledge an improved path for the economy, even as policy makers repeated that unemployment is likely to stay high enough to warrant keeping borrowing costs “exceptionally low” at least through late 2014.
“The Fed still doesn’t know which way the economy will go,” Roberto Perli, a former senior staff economist at the Fed, said in an interview on “The Hays Advantage” on Bloomberg Radio. “Therefore I think they’re more inclined to ease than they are to tighten.”
U.S. Retail Sales Rose in Feb. by Most in 5 Mos. (Source: Bloomberg)
Americans heartened by an improving labor market boosted spending at stores and malls by the most in five months, adding to signs that the world’s largest economy is gaining strength. The 1.1 percent advance followed a 0.6 percent increase in January that was larger than previously estimated, according to Commerce Department data issued today in Washington. Sales rose in 11 of 13 categories, including auto dealers and clothing stores, showing gains in demand were broad based. Stocks and bond yields rose as the report indicated that the best six-month streak of employment growth since 2006 is bolstering spending even as gasoline costs rise. Job gains have not been large enough to satisfy Federal Reserve officials, who today reaffirmed a commitment to keep interest rates low.
Consumers are “unfazed by higher gas prices,” said Jonathan Basile, an economist at Credit Suisse in New York, who correctly forecast the increase in spending. “This is a pleasant surprise on the overall picture for the economy. For the Fed, it’s steady as she goes. They will be encouraged, but there is still a long way to go.”
U.S. Job Openings Were Little Changed From Highest Since 2008 (Source: Bloomberg)
Job openings in the U.S. were little changed in January, capping the strongest two months in more than three years, a signal businesses remain confident about the economic expansion. The number of positions waiting to be filled totaled 3.46 million, down from a revised 3.54 million in December that was higher than previously estimated, the Labor Department said today in a statement posted on its website. The back-to-back reading was the highest since mid-2008. Better job prospects may lure more people into the labor market, helping restore some of the 5.3 million jobs yet to be recovered after the recession. February marked the third consecutive month with payroll growth above 200,000, Labor Department data showed last week.
“Employment begets income, income begets spending and spending begets more employment,” Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “We’re at the point now where a virtuous cycle has begun, and any additional employment gains serve to strengthen that feedback loop.”
Fed Wields Expanded Supervisory Powers With Bank Stress Tests (Source: Bloomberg)
The Federal Reserve, exercising sweeping new authority to ensure financial stability, will show how the capital of the 19 largest U.S. banks might fare through a deep recession and a second housing crisis and use the results to dictate which of them can increase their dividends. The U.S. central bank has conducted increasingly detailed tests of bank capital planning with the goal of assuring banks can survive an economic storm without the taxpayer-funded bailouts that sparked a political backlash following the 2008 financial crisis. The Fed will release the results of the so-called stress tests at 4:30 p.m. on March 15, it said in a statement yesterday in Washington. The tests will show results for revenues, capital ratios and profits or losses at each firm over a nine-quarter period.
“The industry has a record amount of capital and much cleaner balance sheets than two years ago,” said Jason Goldberg, senior analyst at Barclays Capital Inc. in New York. The results “are going to show the banking industry is on solid ground.”
Obama Says China Rare-Earths Case Is Warning for WTO Violators (Source: Bloomberg)
President Barack Obama said his decision to challenge China’s export limits on rare-earth minerals at the World Trade Organization is part of his quest to make the U.S. more competitive in the global economy. “Being able to manufacture advanced batteries and hybrid cars in America is too important for us to stand by and do nothing,” Obama said in the White House Rose Garden this morning. “Our competitors should be on notice: You will not get away with skirting the rules.” The U.S., EU and Japan requested consultations with China, a step that will lead the governments to ask WTO judges to rule should negotiations fail to resolve the issue. China produces at least 90 percent of the world’s rare earths, 17 chemically similar metallic elements used in Boeing Co. (BA) helicopter blades, Nokia Oyj (NOKIA) cell phones, Toyota Motor Corp. hybrid cars and wind turbines. China says it curbed output and exports to conserve resources and protect the environment.
In a similar case, the WTO found in July that Chinese limits on raw-materials exports broke global rules and gave domestic companies an unfair advantage. WTO appellate judges in January upheld the ruling, which supported a complaint by the U.S., the EU and Mexico. U.S. Trade Representative Ron Kirk called that report a “tremendous victory.”
Shirakawa Seeks to Distance Bank of Japan From Political Push (Source: Bloomberg)
Japan’s central bank chief sought to distance monetary policy from political pressure after stimulus implemented last month stoked speculation the government’s sway is increasing. Governor Masaaki Shirakawa and his board yesterday rejected one member’s suggestion to build on the 10 trillion yen ($121 billion) of additional government-bond purchases announced Feb. 14. Officials instead expanded loans designed to boost long-term growth. Shirakawa told reporters after the meeting that bending to politicians would be “suicide.” The unprecedented size of last month’s move proved a success in diminishing risks for Japan’s exporters, by sending the yen tumbling further from the postwar high against the dollar reached in October. At the same time, boosting government-debt purchases risks fueling concern that the BOJ is moving closer to financing the nation’s deficit spending, according to JPMorgan Chase & Co. (JPM)
“The BOJ is eager to secure its independence from the government,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. who has worked for the central bank. After opting for action outside of the main asset-purchase program yesterday, the bank may expand that stimulus “in the near future,” perhaps at a meeting next month, she said.
French Inflation Rate Declines for Second Month as Economy Slows (Source: Bloomberg)
France’s inflation rate fell for a second month in February as a slowing economy outweighed the impact of higher energy prices. Consumer prices rose 2.5 percent from a year earlier based on European Union methodology, compared with a 2.6 percent increase in January and a 2.7 percent gain in November, Paris- based national statistics office Insee said today. Economists had forecast a rate of 2.6 percent, the median of 18 estimates in a Bloomberg News survey showed. Prices rose 0.5 percent in the month after declining 0.4 percent in January. With London crude-oil prices up 16 percent this year and the French government seeking more revenue through sales-tax increases, prices may keep rising in euro area’s second-largest economy. The European Central Bank raised its average 2012 inflation forecast for the region last week to 2.4 percent from 2 percent in December even as it reduced its growth outlook.
“We see upward risks coming from higher-than-expected oil prices,” ECB President Mario Draghi said last week. “Owing to rises in energy prices and indirect taxes, inflation rates are now likely to stay above 2 percent in 2012, with upside risks prevailing,” he added.
German Investor Confidence Surges as Debt Crisis Eases (Source: Bloomberg)
German investor confidence jumped to a 21-month high in March after the European Central Bank flooded financial markets with cash and the sovereign debt crisis showed signs of abating. The ZEW Center for European Economic Research in Mannheim said today its index of investor and analyst expectations, which aims to predict economic developments six months in advance, advanced to 22.3 from 5.4 in February. That’s the fourth straight increase and the highest reading since June 2010. Economists forecast a gain to 10, according to the median of 36 estimates in a Bloomberg News survey.
Germany’s benchmark DAX share index is up 18 percent this year, outperforming its main European counterparts as investors bet the region’s largest economy will return to growth after shrinking in the fourth quarter of 2011. The ECB’s injection of more than 1 trillion euros ($1.3 trillion) of three-year loans into the banking system in an attempt to unlock credit for companies and households is also helping to fuel a rally on European bond markets. “Investors have obviously buried any German recession concerns,” said Carsten Brzeski, an economist at ING Group in Brussels. “The ECB loans, progress on solving the crisis and the latest rally on stock markets have more than offset the negative impact from higher oil prices and the fact that the cold winter may have damped growth in February.”
Weidmann Says ECB Looking at Ways to Exit From Crisis Tools (Source: Bloomberg)
European Central Bank council member Jens Weidmann said policy makers are already discussing ways to withdraw some of the emergency cash they injected into the banking system to fight the sovereign debt crisis. “All council members are aware that non-standard measures create risks and have to be unwound,” Weidmann, who heads Germany’s Bundesbank, said at a press conference in Frankfurt today. “We need this discussion and it is taking place. The timeframe depends on several things, including how the environment develops.” The ECB has loaned banks more than 1 trillion euros ($1.3 trillion) for three years at its benchmark rate, which is currently at a record low of 1 percent, swelling its balance sheet to more than 3 trillion euros in the process. The Bundesbank has set aside an additional 4.1 billion euros to cover risks stemming from the ECB’s crisis-fighting measures, which include 218 billion euros of government bond purchases.
Weidmann wrote a letter to ECB President Mario Draghi about the risks the central bank is taking, fueling speculation of a rift. He said today he has a “good relationship” with Draghi and doesn’t feel “discouraged or isolated” on the ECB’s 23- member council. The “risks and side effects” of the ECB’s three-year loans “are known to colleagues,” he said.
Draghi Says Crisis Lull Must Spur Governments, Banks to Act (Source: Bloomberg)
European Central Bank President Mario Draghi called on banks and governments to make the most of a lull in the sovereign debt crisis as he seeks to get the ECB back to its main job of ensuring price stability. Policy makers “see continued signs of stabilization” in the economy and banks “should use this currently more benign environment to strengthen their resilience further, including by retaining earnings, cutting dividends and bonuses,” Draghi said in a speech in Paris today. “The financial system should serve the economy, not the other way round.” The ECB has shouldered the main burden of fighting the three-year-old crisis by keeping banks afloat, cutting interest rates to a record low and buying distressed governments’ bonds. The unprecedented measures have swelled its balance sheet to more than 3 trillion euros ($3.9 trillion), prompting Bundesbank President Jens Weidmann to write a letter to Draghi warning that the central bank may be taking on too much risk.
Draghi appealed to the governments, saying that the ECB’s contribution “needs to be complemented by the work of national policy makers” and that “countries should use this phase of financial stabilization to make further progress on their program of economic reform.”
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