Asian Stocks Rise for Third Day on Japanese Exporters (Source: Bloomberg)
Asian stocks rose, with the benchmark index set for its longest winning streak since February, after Japan’s exporters gained as the yen’s drop against the dollar buoyed their earnings outlook. Toyota Motor Corp. (7203), Asia’s biggest carmaker by market value, rose 3 percent in Tokyo. The top three contributors to the MSCI Asia Pacific Index’s advance were Japanese exporters. Ricoh Co. (7752), an office-equipment maker, gained 5.1 percent after Citigroup Inc. raised its rating to “buy” from “neutral.” Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, slid 3.1 percent in Sydney after price of the precious metal dropped yesterday. The MSCI Asia Pacific Index gained 0.3 percent to 127.57 as of 9:30 a.m. in Tokyo, with more than three stocks rising for each that fell. All but two of the gauge’s 10 industry groups advanced as the measure headed for its longest winning streak since Feb. 9.
Japan’s Nikkei 225 Stock Average (NKY) advanced 1 percent. South Korea’s Kospi Index climbed 0.2 percent and Australia’s S&P/ASX 200 Index dropped 0.2 percent.
Nikkei 225 Headed for Highest Close in a Year on Weak Yen (Source: Bloomberg)
March 15 (Bloomberg) -- Japanese stocks rose for a third day, with the Nikkei 225 (NKY) Stock Average headed for its highest close in a year, as the yen’s drop to an 11-month low against the dollar buoyed earnings prospects for exporters. Honda Motor Co. (7267), Japan’s second-largest carmaker by market value, rose 0.3 percent. Kyoei Steel Ltd. (5440) paced gains among steel and iron companies. Sharp Corp. (6753) slid 4 percent after the electronic maker forecasting a record loss named a new president. The Nikkei 225 rose 1 percent to 10,150.50 as of 9:34 a.m. in Tokyo, set for its highest close since March 11. The broader Topix Index gained 1 percent to 865.44. The MSCI Asia Pacific Index excluding Japan slid 0.2 percent.
“Perhaps we are seeing a sustained devaluation of the yen, which would improve the outlook for Japanese exporters in particular,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Perhaps what we are seeing is a redirection of asset allocation toward Japan because a lot of fund managers are underweight, and that’s pushed up the market very quickly ahead of fundamentals.”
S&P 500 Falls After Rising to the Highest Since June 2008 (Source: Bloomberg)
The Standard & Poor’s 500 Index (SPX) fell, snapping a five-day advance, after the benchmark gauge for U.S. equities rallied to the highest level since June 2008. A gauge of financial shares in the S&P 500 swung between gains and losses following the Federal Reserve’s stress test results. Citigroup Inc. (C) and MetLife Inc. (MET) lost more than 3.3 percent. Bank of America Corp. (BAC) and Zions Bancorporation rose at least 4.1 percent. The Dow Jones Transportation Average (TRAN) fell 1.4 percent as the Fed’s better economic assessment caused investors to reduce bets on more monetary easing. Apple Inc. (AAPL) added 3.8 percent as Morgan Stanley raised its share-price estimate.
The S&P 500 fell 0.1 percent to 1,394.28 at 4 p.m. New York time, after closing yesterday at 14.4 times reported earnings, the highest valuation level since July. The Dow Jones Industrial Average advanced 16.42 points, or 0.1 percent, to 13,194.10. The Russell 2000 Index (RTY) of small companies dropped 0.9 percent to 823.40. About 7.5 billion shares changed hands on U.S. exchanges, or 13 percent above the three-month average. “It’s an issue of confidence,” Robert Zagunis, co- portfolio manager at Jensen Investment Management Inc., said in a telephone interview from Portland, Oregon. His firm oversees $5.7 billion. “Little by little, things are improving. You have symbolic announcements like the Fed stress tests. Longer-term, the market will be higher, but there may be a scale back. The question is -- are you in for the short term or the long term?”
European Stocks Rise to Eight-Month High; EON Shares Gain (Source: Bloomberg)
European (SXXP) stocks advanced to the highest level since July as the Federal Reserve raised its economic assessment of the world’s largest economy. EON AG, Germany’s biggest utility, gained 7 percent after it reported 2011 earnings that topped analysts’ estimates. Credit Suisse Group AG and Legal & General Group Plc (LGEN) advanced as a gauge of banks and insurers rallied. Arkema SA, the French maker of plastics additives, fell 5 percent as a shareholder is selling as much as 450 million euros ($589 million) of the company’s stock. The Stoxx Europe 600 Index (SXXP) climbed 0.3 percent to 270.27 at the close. The gauge has gained 11 percent so far this year amid optimism that the euro area will contain its sovereign-debt crisis and better-than-expected U.S. economic data.
“The U.S. continues to deliver rather good economic data and the situation in Greece has calmed down for the time being,” said Peter Braendle, who helps manage $60 billion at Swisscanto Asset Management AG in Zurich. “For Southern Europe I hope for further structural reforms, not just saving programs, but it’s certainly a positive impulse for stock markets.”
Dollar stronger across the board, hits 11-mth high vs yen
TOKYO, March 14 (Reuters) - The dollar hit an 11-month high against the yen and 1-month high on the euro, extending its gains after a modest brightening of the Federal Reserve's economic forecasts nudged traders to downplay expectations of further monetary easing.
"The move in the yields was essential for the dollar rally to continue," said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Brighter outlook send shares, U.S. dlr higher
LONDON, March 14 (Reuters) - A brightening economic outlook and news most U.S. banks passed their annual stress tests sent world share markets higher and lent weight to the view that further Fed easing was less likely, pushing up the U.S. dollar across the board.
"The markets do run very much on confidence and at the moment, that's improved greatly," said Grant Williamson, a partner at New Zealand brokerage Hamilton Hindin Greene.
Dollar Touches 11-Month High Against Yen on U.S. Recovery (Source: Bloomberg)
The dollar rose to an 11-month high against the yen before U.S. data today forecast to show regional manufacturing expanded and initial jobless claims decreased, adding to signs the American economy is gathering momentum. The greenback was near the highest level in four weeks against the euro amid reduced bets the Federal Reserve will begin a third round of bond purchases, or quantitative easing, which could debase the world’s reserve currency. The yen declined against most its major counterparts as Asian stocks advanced for a third day, curbing demand for the lower-yielding Japanese currency. “We’re seeing a shift in trend to dollar buying across the board,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “Should U.S. economic data continue to come in firm, it will support the market’s view that the Fed doesn’t need QE3.”
The dollar touched 84.02 yen, the highest level since April 13 before trading at 83.98 yen at 10:04 a.m. in Tokyo, 0.3 percent above yesterday’s close in New York. The U.S. currency rose 0.1 percent to $1.3019 per euro. It yesterday climbed as high as $1.3011, the strongest since Feb. 16. The yen dropped 0.2 percent to 109.32 per euro, after earlier touching 109.40, the weakest since Feb. 27.
Rising oil prices draw first hedge fund shorts: Kemp
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, March 13 (Reuters) - Soaring oil prices have started to draw interest from contrarian hedge funds willing to bet the increase is a spike and not sustainable.
Hedge funds and other money managers raised their short positions in futures and options linked to U.S. crude prices (also known as WTI) by the equivalent of more than 17 million barrels in the week ending March 6, according to the Commodity Futures Trading Commission (CFTC).
Growth in U.S. to Strengthen as Jobs Lift Consumers: Economy (Source: Bloomberg)
The world’s largest economy will strengthen through 2012 as employment gains give Americans the means to withstand rising fuel costs, according to economists surveyed by Bloomberg News. Gross domestic product will climb at a 2.5 percent annual rate in the final three months of the year, up from 2 percent this quarter, according to the median forecast of 71 economists surveyed from March 9 to March 13. For all of 2012, the U.S. may expand 2.2 percent, accelerating from 1.7 percent last year. More jobs, increasing share prices, improving confidence and stability in housing will bolster the expansion. At the same time, unemployment will be slow to retreat, averaging 7.3 percent in 2014, showing why Federal Reserve policy makers yesterday said interest rates will remain low for at least the next two years.
“Some of the conditions for faster growth are falling into place,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. By the end of the year, “we’ll still be a long way from what would make the Fed more comfortable. They will still be missing their full employment objective.” IHS Global Insight was the second most-accurate forecaster of consumer spending over the two years through February, according to Bloomberg calculations.
Bernanke: ‘Frustratingly Slow’ Growth Impedes Lending (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke said the weak U.S. economy impedes efforts by banks to make profitable loans. “Despite some recent signs of improvement, the recovery has been frustratingly slow, constraining opportunities for profitable lending,” Bernanke said today in remarks recorded for delivery at the Independent Community Bankers of America National Convention and Techworld in Nashville, Tennessee. The Federal Open Market Committee said yesterday that economic conditions would still warrant holding the benchmark interest rate near zero at least through late 2014. Community banks are “facing difficult challenges,” Bernanke said. “Their close ties to local economies are, on balance, a source of strength, but a drawback of those ties is that the fortunes of communities and their banks tend to rise and fall together.”
The best six-month streak of job growth since 2006 prompted Bernanke yesterday to acknowledge an improved path for the economy, even as policy makers repeated that unemployment is “elevated” and that strains in global markets “continue to pose significant downside risks to the economic outlook.”
Current-Account Deficit in U.S. Widens to $124.1 Billion (Source: Bloomberg)
The current-account deficit in the U.S. widened more than forecast in the fourth quarter to $124.1 billion, the biggest in three years. The gap, the broadest measure of international trade because it includes income payments and government transfers, grew 15 percent from a revised $107.6 billion shortfall in the prior quarter that was smaller than initially estimated, a Commerce Department report showed today in Washington. The median forecast of economists in a Bloomberg News survey called for a $115 billion fourth-quarter deficit. Imports (USTBIMP) of goods may keep rising as an improving job market underpins consumer spending, and businesses replace outdated equipment. The overall balance of payments deficit is also a reminder of U.S. dependence on foreign investors for funding.
“A widening of the balance just tells you about the relative growth rate of the U.S. compared with other economies,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “There’s a fairly good chance that the deficit will widen again because imports are on track to outpace exports.”
Stress Tests Show How Fed Pushed on Balance Sheets (Source: Bloomberg)
The resilience of the largest U.S. financial firms when tested against a recession more severe than the last one shows regulators have succeeded in pushing banks to build fortress-like balance sheets. The Fed yesterday said 15 of 19 banks would be able to maintain capital levels above a regulatory minimum in an “extremely adverse” economic scenario, even while continuing to pay dividends and repurchasing stock. Those results were due to scrutiny by the Fed on capital payouts over the past three years, the central bank said. Regulators, empowered by the Dodd-Frank Act and goaded by criticism for failing to spot the subprime mortgage debacle, have redesigned their approach to bank supervision. They now place greater emphasis on systemic risk as they seek to avoid a repeat of the crisis that resulted in a $245 billion taxpayer bailout of banks through the Troubled Asset Relief Program.
“Any bank that remains adequately capitalized under these acute stress scenarios is not just strong but also darn-near impregnable,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm, whose clients have included Wells Fargo & Co. (WFC) “What’s a bank for is at the heart of this question: Is it to be Fort Knox?”
Bernanke Keeps Easing Option While Signaling Economy Improving (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke is keeping additional easing on the policy-making table even after upgrading his view on the U.S. expansion. Stocks rose and Treasuries fell after the Federal Open Market Committee yesterday improved its outlook for growth, reducing expectations the central bank will begin a third round of bond buying. At the same time, the FOMC reiterated in a post- meeting statement that the joblessness rate is “elevated” and “significant downside risks” remain. Even after the most robust six-month period of job growth since 2006, unemployment persists at 8.3 percent and Bernanke is holding to his plan to keep the benchmark interest rate close to zero through at least late 2014.
“The way the statement was crafted was to keep their options open,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “What they’re trying to tell us is ‘Hey, don’t change your policy outlook because we’re not ready to say things have changed enough’” that no more stimulus is needed.
Import Prices in U.S. Rise Less Than Forecast, Food Costs Drop (Source: Bloomberg)
Prices of goods imported into the U.S. rose less than forecast in February, reflecting the biggest drop in food costs in three years. The 0.4 percent gain in the import-price index follows little change in January, Labor Department figures showed today in Washington. Economists projected the gauge would increase 0.6 percent, according to the median forecast in a Bloomberg News survey. Prices excluding fuel fell 0.1 percent. A slowing global economy may restrain demand for commodities, limiting inflation pressures in the U.S. even as energy costs rise. Federal Reserve policy makers yesterday projected they’ll keep interest rates low at least until late 2014, predicting the jump in fuel prices will be temporary. “Once you look past the rise in oil, import prices are pretty tame on the back of the dollar strength we’ve been seeing recently,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “This points toward pretty well controlled non-energy costs.”
Treasury 5-Year Notes Fall Before Job Data Amid Recovery (Source: Bloomberg)
Treasury (YCGT0025) five-year notes fell for a seventh day, the longest losing streak in almost a year, before U.S. data today that economists said will show fewer Americans filed claims for jobless benefits. A gauge of investor expectations for inflation was near the highest in seven months before a U.S. government report forecast to show wholesale prices increased the most in five months. Japan’s government bonds dropped, with 10-year futures sliding to an eight-month low. “The U.S. economy is undoubtedly getting better,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $71 billion in Tokyo. “The bond market is likely to remain weak.” Five-year Treasury yields added six basis points to 1.16 percent as of 10:12 a.m. in Tokyo, the highest since Oct. 28. The benchmark 10-year yield rose four basis points to 2.31 percent, the most since Oct. 31. The 2 percent security due February 2022 dipped 3/8, or $3.75 cents per $1,000 face amount, to 97 1/4.
Wen Tells Future Leaders to Embrace Political Change (Source: Bloomberg)
Chinese Premier Wen Jiabao, set to leave office next year after a decade in power, said his nation must adopt political change to support an economic transformation that has produced rapid development at the cost of a widening wealth gap. “Without successful political reform, it’s impossible to carry out economic reform,” Wen, 69, told reporters in Beijing yesterday in a three-hour press conference closing the legislature’s annual gathering. “There’s even the possibility of losing what we’ve achieved.” Wen’s remarks reflect widening protests over illegal land grabs and discontent with declining purchasing power as China (GDPNTTL)’s wealthy drive up housing costs. At stake for China’s next generation of leaders, scheduled to be selected in a process that begins later this year, is maintaining social order in the world’s fastest-growing major economy.
Wen’s remarks echoed comments he’s made in the past, including a speech in 2010 where he said reversing policies of reform and openness would be a “dead end” for development. The comments two years ago were directly refuted by an editorial in the Communist Party’s official newspaper, suggesting that other leaders did not share his views.
Chinese Economy Already in ‘Hard Landing,’ JPMorgan’s Mowat Says (Source: Bloomberg)
China’s economy is already in a so- called “hard landing,” according to Adrian Mowat, JPMorgan Chase & Co.’s chief Asian and emerging-market strategist. “If you look at the Chinese data, you should stop debating about a hard landing,” Mowat, who is based in Hong Kong, said at a conference in Singapore yesterday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.” The Shanghai Composite Index fell 2.6 percent yesterday, the most since Nov. 30, after Premier Wen Jiabao said home prices are still ``far from a reasonable level.'' His comments fueled concern the government will maintain restrictions on the property market for an extended period even as the curbs threaten to slow economic growth.
Wen announced at the beginning of a national lawmakers’ congress on March 5 an economic growth target of 7.5 percent for this year, down from 8 percent over the past seven years. Data last week showed China’s factory output in the first two months of the year rose the least since 2009, while retail sales increased less than economists predicted and inflation eased to the slowest pace in 20 months.
Fitch Puts U.K. Debt on Negative Outlook Days Away From Budget (Source: Bloomberg)
Fitch Ratings said Britain risks losing its top investment grade because of its limited ability to deal with shocks, days before Chancellor of the Exchequer George Osborne will present his annual budget. Fitch changed the outlook on Britain to “negative” from “stable,” indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years, the company said in a statement in London late yesterday, citing the weak economic recovery, high debt levels and threats from Europe’s debt crisis. Osborne will meet coalition partners later this week to agree on a budget he will present on March 21. The decision “reflects the very limited fiscal space to absorb further economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery,” Fitch said.
While the warning is a blow to Osborne’s strategy of implementing the biggest squeeze on government spending since World War II, it may strengthen his hand in negotiations with Liberal Democrat coalition partners, who want him to cut taxes to help the poorest workers.
U.K. Unemployment Jumped More Than Forecast in February (Source: Bloomberg)
U.K. jobless claims rose more than economists forecast in February and a broader measure of unemployment remained at the highest rate in 16 years, underscoring the weakness of the labor market even as the economy shows some signs of recovery. Unemployment-benefit claims climbed by 7,200 from January to 1.612 million, a 12th straight monthly increase, the Office for National Statistics said today in London. The median forecast of 28 economists in a Bloomberg News Survey was for a gain of 5,000. Unemployment (UKUEILOR) measured by International Labour Organization methods held at 8.4 percent in the three months through January, the highest since 1995. The data may fuel arguments from opposition politicians that Prime Minister David Cameron is cutting government spending too fast to tackle the deficit and comes after the economy contracted in the fourth quarter. While some indicators signal the economy returned to growth this quarter, consumer confidence remains weak on concern that job cuts may continue.
The “labor-market figures paint a generally weak picture,” said Samuel Tombs, an economist at Capital Economics in London. “The recent pickup in economic growth seems to be insufficient to bring down unemployment.”
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