20120326 1016 Global Market Related News.

Japan Stocks Gain as Commodities Offset U.S. Homes Data (Source: Bloomberg)
Japanese stocks rose after higher commodity prices offset an unexpected decline in U.S. home sales. Mitsubishi Corp. (8058), Japan’s biggest commodities trader by revenue, added 0.8 percent. Kyocera Corp. (6971), an electronics maker that gets almost 20 percent of its sales in Europe, rose 0.5 percent after the yen weakened against the euro, cutting earnings outlook for the exporter. Nippon Sheet Glass Co. rebounded 2.4 percent after its bond ratings were slashed last week. The Nikkei 225 Stock Average (NKY) rose 0.3 percent to 10,038.49 as of 9:01 a.m. in Tokyo. Volume on the gauge was 31 percent lower than the 30-day average. The broader Topix Index lost 0.3 percent to 854.96, with more than twice as many shares advancing as falling. “Commodity prices including oil have risen, which is a catalyst for stronger commodity-related shares such as trading firms,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo.

U.S. Stocks Fall in S&P 500’s Biggest Weekly Drop in 2012 (Source: Bloomberg)
U.S. stocks retreated this week, with the Standard & Poor’s 500 Index having its biggest decline since December, amid weaker-than-estimated housing data and reports showing manufacturing contracted in Europe and China. Stocks rose on March 23 as a jump in oil prices lifted energy shares. The rally failed to help the industry avoid posting the worst performance for the week among the S&P 500’s 10 groups, falling 3 percent as Baker Hughes Inc. (BHI) slumped 11 percent. The Dow Jones Transportation Average lost 2.5 percent, the most since Nov. 25, as FedEx Corp. tumbled amid a disappointing earnings forecast. Apple Inc. (AAPL) advanced 1.8 percent after announcing its first dividend in 17 years.
The S&P 500 slipped 0.5 percent to 1,397.11 after rallying in 10 out of 11 weeks this year. The benchmark index is still up 2.3 percent for March and has risen for four straight months, poised for its longest string of monthly gains since September 2009. The Dow Jones Industrial Average lost 151.89 points, or 1.2 percent, to 13,080.73 after reaching its highest level since December 2007 on March 15.

European Stocks Post Biggest Weekly Loss of 2012 (Source: Bloomberg)
European stocks posted their biggest weekly decline this year as economic data from China to the U.S. and Europe raised concerns the global economic recovery is faltering. Randgold Resources Ltd. tumbled 13 percent after a coup toppled the government in Mali, where the company mines two- thirds of its gold. Bayerische Motoren Werke AG (BMW) slipped 7 percent after an official at China’s carmakers association said vehicle sales may miss its forecast. Misys Plc (MSY) surged 8.4 percent after Vista Equity Partners said it will acquire the company. The Stoxx Europe 600 Index (SXXP) lost 2.5 percent to 265.65 this week, the biggest decline since December. The benchmark measure has still rallied 8.6 percent this year as the European Central bank provided loans of 1 trillion euros ($1.3 trillion) to the region’s banks and U.S. economic data surpassed estimates.
“Markets are getting too optimistic,” Gerard Lyons, chief economist at Standard Chartered Plc in London, said in an interview on Bloomberg Television. “Overall, the eurozone is in a double-dip recession. The Chinese economy is cooling. The U.S. is not having a double-dip but it’s not having a strong recovery.”

Hedge Funds Make Wrong-Way Bets for a Fourth Week: Commodities (Source: Bloomberg)
Hedge funds wagered the wrong way on commodity prices for a fourth consecutive week, boosting bullish holdings just before reports showing a contraction in manufacturing from China to Europe drove prices lower. Money managers lifted combined net-long positions across 18 U.S. futures and options by 2.9 percent to 1.17 million contracts in the week ended March 20, Commodity Futures Trading Commission data show. The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped 1 percent last week, led by declines in lead and corn. Orange juice tumbled 11 percent, the most since August. The S&P GSCI fell to a three-week low on March 22 after reports showed factory output in Germany and France unexpectedly shrank in March and a measure of China’s manufacturing was the weakest since November. U.S. government data the following day showed purchases of new homes unexpectedly fell last month, increasing investor concerns about the durability of the world’s largest economy.

Pimco’s Gross Says Fed May ‘Hint’ at QE3 at April Meeting (Source: Bloomberg)
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the Federal Reserve will probably signal it plans to arrange a third round of debt purchases when policy makers meet in April. While Fed officials upgraded the outlook for the U.S. economy at their March 13 meeting, they reiterated their intent to keep interest rates near zero until at least late 2014. The central bank under Chairman Ben S. Bernanke has purchased $2.3 trillion of bonds in two rounds of so-called quantitative easing, known as QE1 and QE2. The Fed is “likely to hint” at QE3 at its April 25 gathering, Gross wrote on Twitter. Housing reports last week showed a key part of the U.S. economy remains under pressure. The Commerce Department said March 23 that new home sales fell to a 313,000 annual pace in February, the slowest since October. Earlier in the week, the National Association of Realtors said existing-home sales eased to a 4.59 million rate last month from January’s 4.63 million.

Most Asia Stocks Rose as Commodity Price Offset U.S. Data (Source: Bloomberg)
Most Asian stocks rose after higher oil and commodity prices offset an unexpected decline in U.S. home sales. Aurora Oil & Gas Ltd., an Australian energy explorer, rose 1.4 percent in Sydney. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, added 0.5 percent after the yen dropped against all of its 16 major counterparts. Leighton Holdings Ltd. (LEI) rose 3 percent after Australia’s largest builder announced A$400 million ($419 million) in new work and a new managing director of its Asian, Indian and offshore divisions. The MSCI Asia Pacific Index (CRY) was little changed at 126.34 as of 9:53 a.m. in Tokyo after falling 1.3 percent last week. About three stocks rose for every two that fell. The measure has gained 11 percent in the quarter ending this week, the biggest advance since the three months ended September 2010.
“Commodity prices including oil have risen, which is a catalyst for stronger commodity-related shares such as trading firms,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo.

FOREX-Yen falls after rally, but global risks linger
TOKYO, March 23 (Reuters) - The yen softened after Tokyo importers took advantage of its broad rally the day before, while risk currencies such as the Australian dollar were poised to end the week sharply lower on fresh concern about the health of the global economy.  
"Importers who were late into the dollar rally have been very active since late New York trading, both in dollar/yen and in euro/yen," said Teppei Ino, currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.

GLOBAL MARKETS-World stocks stabilise below recent highs; dlr slips
LONDON, March 23 (Reuters) - World stocks held steady below this week's 8-month peak while the dollar fell broadly as concerns about growth in China and the euro zone and a renewed focus on sovereign debt problems in Italy and Spain kept investors cautious.
"After impressive gains over the last months, the recent losses are not more than a drop in a bucket. Hence investors have enough reason to remain calm," said Roger Peeters, a market strategist at Close Brothers Seydler Bank.

Orders Probably Picked Up With Spending: U.S. Economy Preview (Source: Bloomberg)
Manufacturers in the U.S. probably received more orders for durable goods in February and consumer purchases climbed the most in five months, economists said reports this week will show. Bookings for long-lasting factory goods rose 3 percent last month after decreasing 3.7 percent in January, according to the median estimate of 70 economists surveyed by Bloomberg News. Personal spending increased 0.6 percent last month, boosted in part by stronger auto sales. “It’s employment that’s really driving the bus for spending growth right now,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “As our economy expands, it’s going to allow manufacturing to build right along with it.”
Six months of the strongest job growth since 2006 is helping sustain incomes and spending, just as companies upgrade equipment, keeping the nation’s producers at the forefront of the almost three-year-old expansion. At the same time, higher transportation costs and slowdowns in Europe and China represent hurdles for manufacturing. The Commerce Department’s report on March 28 is projected to show orders for goods meant to last at least three years climbed for the fourth time in five months, helped by a jump in demand for commercial aircraft. Boeing Co. received orders for 237 airplanes in February from 150 a month earlier, data from the Chicago-based company show.

Treasuries Rise for Fourth Day on Global Growth Concern (Source: Bloomberg)
Treasury (YCGT0025) 10-year note yields dropped the most since January as slowing growth in China and Europe and an uneven recovery in the American housing market rekindled the refuge appeal of U.S. government securities. Yields on the benchmark notes declined from the almost five- month high reached after the Federal Reserve upgraded its economic outlook last week, prompting traders to unwind bets for more monetary stimulus. Treasuries rallied even the U.S. prepared to auction $99 billion in two-, five- and seven-year securities next week. “We continue to hear that we have turned the corner and we are starting to get a lot of upbeat data, but with Europe and a possible slowdown in China hanging over our heads, it tempers some of the optimism,” said Paul Montaquila in San Ramon, California, head of fixed-income trading at Bank of the West. “We’ve seen a bit of an overreaction in the sell-off.”
Yields on 10-year notes declined six basis points, or 0.06 percentage point, the most in a week since Jan. 27, to 2.23 percent in New York, according to Bloomberg Bond Trader prices. They gained 27 basis points the previous week. The 2 percent securities due in February 2022 rose 17/32, or $5.31 per $1,000 face amount, to 97 30/32.

Bernanke Sees Need for Higher Household Spending to Fuel Growth
2012-03-23 04:08:12.360 GMT
By Joshua Zumbrun
March 23 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is operating below its level prior to the financial crisis, and that increased household spending is needed to sustain the expansion.
“Consumer spending is not recovered, it’s still quite weak relative to where it was before the crisis,” Bernanke said yesterday in the second of four lectures on the history of the Fed that he plans to deliver at George Washington University. “In terms of debt and consumption and so on we’re still way low relative to the patterns before.”
The Federal Open Market Committee said in a statement after a March 13 meeting that subdued inflation and high unemployment still warrant holding the benchmark interest rate near zero at least through late 2014. Signs the economy is improving don’t dispel risks to growth that include rising gasoline prices, fiscal cutbacks and a weak housing market, New York Fed President William C. Dudley said on March 19.
Bernanke today plans to open a Fed conference in Washington involving policy makers from the U.K. and Japan that will focus on topics including new policy tools for fueling economic growth and challenges for central bankers.
The Fed chairman plans at 1:45 p.m. to give the opening speech at a two-day conference entitled “Central Banking: Before, During and After the Crisis.” Fed Vice Chairman Janet Yellen, Bank of England Governor Mervyn King, Bank of Japan Governor Masaaki Shirakawa and former European Central Bank President Jean-Claude Trichet are scheduled to speak.

Spur Growth
The conference will first consider a research paper by New York University Professor Mark Gertler saying the Fed’s asset purchase programs will help spur growth by reducing interest rates rather than by increasing the amount of reserves in the banking system.
Gertler, an adviser to the Federal Reserve Bank of New York who has co-written research with Bernanke, said in an interview yesterday that the economy may not need such a stimulus program at all.
“Inflation still appears to be contained so that’s good,” Gertler said in a phone interview. “Employment growth is picking up, so that’s good. It seems like the controls are at the right setting now.”
The unemployment rate was 8.3 percent in February, down from 9.1 percent as recently as August. The personal consumption expenditures index rose 2.4 percent in the 12 months through January, above the Fed’s 2 percent goal.
The Fed’s policy is “always subject to change as the news changes,” Gertler said. “But the economy is definitely picking up and inflation is contained and it seems like stimulus, at least from the Fed, is not appropriate now.”

Turning Point
Some policy makers say the Fed should hold off from more accommodation as the economy rebounds.
With policy currently “on pause, it may be a good time to take stock of whether we may be at a turning point,” Federal Reserve Bank of St. Louis President James Bullard said in a speech in Hong Kong. “As the U.S. economy continues to rebound and repair,” further action “may create an overcommitment to ultra-easy monetary policy.”
Economic reports yesterday added to evidence the world’s largest economy is gaining strength.
The number of Americans saying the economy is getting better rose in March to the highest level since 2004. Thirty-four percent of respondents to Bloomberg’s monthly consumer expectations survey said the economy was improving, the largest share since January 2004.

Leading Index
The index of U.S. leading indicators rose in February by the most in 11 months, the Conference Board said. Applications for unemployment benefits dropped last week to the lowest level in four years, a Labor Department report showed.
U.S. stocks retreated, trimming the longest monthly rally since September 2009 for the Standard & Poor’s 500 Index, as manufacturing contracted in China and Europe and FedEx Corp. tumbled amid a disappointing forecast.
The S&P 500 declined 0.7 percent to 1,392.78 at 4 p.m. New York time, slumping 1.2 percent in three days. The gauge has risen 2 percent in March, on pace for a fourth monthly rally.
Bernanke said yesterday the central bank’s interest-rate policies last decade weren’t responsible for the housing price bubble that led to the recession.
“Some have argued that the Fed’s low interest-rate monetary policy in the early 2000s contributed to the housing bubble, which in turn was a trigger of the crisis,” he said.

Overseas Booms
“Most evidence suggests otherwise,” Bernanke said, focusing on history and not on current monetary policy or the economic outlook. In defense of the Fed, Bernanke cited house price booms in foreign countries and said the size of the asset bubble was too large to be explained by changes in mortgage rates. Also, home prices began to rise in the late 1990s, before the Fed lowered rates, he said.
Bernanke, a former economics professor at Princeton University, is returning to the classroom this week and next to explain the central bank’s actions during the financial crisis and the longest recession since the Great Depression. His lesson yesterday is titled “The Federal Reserve after World War II.”
Following a recession in 2001, the central bank lowered interest rates to 1 percent in 2003 and 2004 even as home price gains accelerated. Bernanke’s defense of the Fed actions drew on a January 2010 speech he gave in Atlanta, he said.
Though its interest-rate policies were appropriate, Bernanke said, the Fed “made mistakes in supervision and regulation.”

Bank Supervision
“In our supervision of bank and bank-holding companies we didn’t push hard enough on this issue of measuring your risks,” Bernanke said. “Another area where the Fed performed poorly was I think in consumer protection.”
Bernanke, 58, also said government policies to increase homeownership were not principally to blame for the housing bubble.
“I think to put it all on the government is probably wrong,” Bernanke said in response to student questions. “Most of the worst loans were made by private sector lenders and then sold through private-sector securitizations. They didn’t touch Fannie or Freddie,” he said, referring to government-sponsored entities Fannie Mae and Freddie Mac.
While his lecture focused on historical topics, Bernanke noted that today’s policy benefits from the low inflation brought about as the result of former Fed Chairman Paul Volcker’s battle against price increases.
“After a long period of low inflation most people are pretty comfortable that inflation will stay reasonably low,” Bernanke said. “And that helps a lot” since “with inflation staying low the Fed has more leeway.”
In response to a question about Fed transparency, Bernanke said “most of the time transparency can make monetary policy work better” and promote accountability of the central bank.
Bernanke plans to speak on March 27 and March 29 about the Fed’s response to the financial crisis and the ensuing recession. The lecture series will be streamed live on the Fed’s website and on ustream.tv.


Euro Gains Versus Yen on Prospect of Combined Rescue Fund (Source: Bloomberg)
The euro rose for a second day against the yen on prospects the single-currency region may agree to combine two rescue funds to halt the spread of its sovereign-debt crisis. The 17-nation euro gained before a report forecast to show German business confidence held at the highest level since July. The yen dropped against all its major counterparts before a U.S. report that may suggest the housing sector in the world’s largest economy is improving, boosting demand for higher- yielding assets. “It’s possible to see euro pick up slightly as people work out the implications of the bailout package and better economic statistics,” said Hans Kunnen, Sydney-based chief economist at St. George Bank Ltd. “Sentiment toward Europe is slowly improving.” The euro rose 0.5 percent to 109.82 yen as of 9:31 a.m. in Tokyo from the close last week in New York. It traded at $1.3278 from $1.3270 on March 23, when it touched $1.3294, the most since March 2. The yen fell 0.4 percent to 82.69 per dollar.

China Soft Landing May Be Hard for Commodity Exporters (Source: Bloomberg)
The good news: China’s government will engineer a soft landing. The bad news: Even a soft landing is painful for industries that have become dependent on the world’s fastest-growing major economy as their main profit engine.
Analysts at Deutsche Bank AG, Nomura Holdings Inc. and Daiwa Capital Markets raised forecasts this month for 2012 expansion to as high as 8.6 percent, partly on anticipation of looser monetary policy. The projections, still below last year’s 9.2 percent rate, offer little comfort for Australian mining company BHP Billiton Ltd. (BHP), seeing slower steel production in China, or German automaker Daimler AG (DAI), whose Mercedes dealers in the nation are giving record discounts. “China’s still going to be growing reasonably strongly,” said Nicholas Lardy, senior fellow at the Peterson Institute for International Economics in Washington and author of the 2012 book “Sustaining China’s Economic Growth after the Global Financial Crisis.” Even so, “the super commodity cycle that was driven by China is moderating, and exporters that have ridden the property boom over the last four or five years face a much tougher time.”
Premier Wen Jiabao’s curbs on property sales and his plan to tilt the economy toward consumption and away from a dependence on capital spending have reduced production of steel and cement and helped push iron-ore prices down more than 20 percent from last year’s high. At the same time, policy makers are ready to take any action necessary to avert a steep deceleration in a year when the ruling Communist Party desires a stable leadership transition, said Tim Condon of ING Financial Markets.

Minsheng Bank Seeks $1.46 Billion in Hong Kong Share Sale (Source: Bloomberg)
China Minsheng Banking Corp. (1988), the nation’s first non-state lender, is seeking as much as $1.46 billion in a Hong Kong share sale to shore up capital amid tightened rules for risk buffers. The Beijing-based bank is offering 1.65 billion shares at HK$6.65 to HK$6.86 apiece, according to terms for the deal obtained by Bloomberg News. That represents a discount of as much as 7 percent to the March 23 closing price of HK$7.15. Minsheng joins local rivals Bank of Communications Co. and Industrial Bank Co. (1398) in seeking funds after a two-year, $2.7 trillion lending spree sapped their finances. China’s banking regulator is planning tougher capital requirements for lenders to fend off rising credit risks.
The China Banking Regulatory Commission said in August that it would require the country’s largest, or so-called systemically important, lenders to have a minimum capital adequacy ratio of 11.5 percent by the end of next year. Smaller banks would be required to have at least 10.5 percent under “normal conditions” by the end of 2016, the CBRC had said.

BOJ Crosses Rubicon With Desperate Monetary Policy, Hirano Says (Source: Bloomberg)
The Bank of Japan’s decision to expand bond purchases and set a 1 percent inflation goal was a step too far that leaves the monetary authority likely to finance government deficit spending, a former executive said. “They looked like really desperate measures,” Eiji Hirano, 61, who was a BOJ executive director in charge of international affairs from 2002 to 2006, said in an interview last week in Nagoya, central Japan. The yen weakened and stock prices rose in the world’s third-largest economy after Governor Masaaki Shirakawa and his policy board unexpectedly pledged on Feb. 14 to buy 10 trillion yen ($121 billion) in government debt and set the inflation target. That market reaction creates the “illusion” that monetary policy alone can cure Japan’s economic woes and may compel the BOJ to bolster bond purchases further and monetize public debt, Hirano said.
“It looks like they have crossed the Rubicon,” said Hirano, who is now executive vice president at Toyota Financial Services Corp. That term means passing a point of no return and refers to Julius Caesar leading his army across the river in an act of war. Japan’s benchmark Nikkei 225 Stock Average rose to the highest in a year and the yen fell to an 11-month low against the dollar after the February decision, buoying earnings prospects for exporters who last year faced a currency at a postwar high against the dollar. Easing concerns on Europe’s debt crisis and optimism about the U.S. economy have been factors in yen and stock moves, Hirano said.

Leung Victory in Hong Kong Poll Turns Focus to Democracy Plans (Source: Bloomberg)
Leung Chun-ying, a former property surveyor, pledged to address Hong Kong’s wealth gap and demands for universal suffrage as the city’s next chief executive after winning a poll in which only one in 5,900 people could vote. A 1,193-member panel of Hong Kong billionaires, academics and professionals chose Leung over two other candidates to lead the city for the next five years. Crowds outside the election venue protested the lack of democracy in the former British colony, with one waving the colonial-era flag and others holding signs opposing China’s ruling Communist Party. Leung, 57, will help shape the city’s economy and relationship with China through 2017, when Beijing has pledged to allow Hong Kong to elect its own leaders. He must also address anger over rising living costs spawned by an influx of money from mainland China and surging property prices that have made Hong Kong the world’s most expensive place to buy a home.
“Rule of law, human rights, integrity, lack of corruption and press freedom are all part of our life,” Leung told reporters after his selection. “This election has helped build a foundation for universal suffrage in 2017.” While the city’s 7.1 million people couldn’t vote, public opinion helped shape yesterday’s selection, with some committee members saying they had to heed opinion polls that put Leung 17 percentage points ahead of his main rival, Henry Tang. Tang was seen as the front-runner and Beijing’s favored candidate until an admission of an extra-marital affair and a basement built without proper permits damaged his poll numbers.

Hungarian Market Collapses After Forex Loans Debacle: Mortgages (Source: Bloomberg)
Erzsebet Zolyom counted on a quick sale of the two-bedroom apartment in downtown Budapest she inherited last May to ease her financial troubles. Instead, it’s put her deeper in the hole. After a costly renovation and a parade of viewers, Zolyom still can’t sell the 87-square-meter (936-square-foot) property, even though she has slashed the price by almost a fifth to 23 million forint ($104,000). “I thought it’d be sold in the blink of an eye,” the 47- year-old geography teacher said. “I can see now how naïve I was. It feels like a cruel joke by fate.”
Hungary’s residential real-estate industry ground to a halt after foreign-currency mortgages, which fueled a boom before they were banned in 2010, saddled homeowners with ballooning repayments when the forint sank to a record and prompted buyers to flee the market. The slump in demand forced home construction to fall last year to the lowest level since the government started collecting data in 1930 as Hungarian banks booked hundreds of billions of forint in losses.

EU’s Rehn Expects Debt-Crisis Firewalls to Be Reinforced (Source: Bloomberg)
European Union Economic and Monetary Affairs Commissioner Olli Rehn said the region will toughen debt-crisis defenses to guard against future risks. “The key thing now is to conclude the comprehensive crisis response,” Rehn told reporters today in Saariselkae, Finland. Rehn said he trusts that euro-area finance ministers “will take a convincing decision on the reinforcement of the firewalls” next week. Europe has so far set aside a total of 500 billion euros ($663 billion) for crisis-busting measures in two war chests. The temporary rescue fund, the European Financial Stability Facility, has disbursed 192 billion euros in three bailouts. Under the current rules, the unused funds would be passed on to the permanent fund, the European Stability Mechanism.
Policy makers are discussing how to add to the funds. Under the least-ambitious option, the ESM would be allowed to start afresh with its entire half-trillion euro capacity available for future use, a euro-area official said on March 16. The EFSF would continue to administer the programs in progress while its unused capacity would no longer be available. That would bring the total crisis backstop to 692 billion euros.

Central Bankers Debate Best Criteria for Setting Interest Rates (Source: Bloomberg)
Central bankers at a Federal Reserve conference in Washington rekindled a debate over the best criteria for altering interest rates, pitting simple rules against complex models that estimate growth and inflation. Lars Svensson, a deputy governor for Sweden’s central bank, said policy makers when setting interest rates should learn from an array of models and indicators and monitor an economy’s changing structure, while pursuing specified goals such as inflation. European Central Bank governing council member Athanasios Orphanides argued for using a price rule when setting interest rates because of the inaccuracy of estimating the gap between real and potential economic growth. Orphanides noted large errors in forecasting the euro area’s potential growth rate in recent years. “In the euro area, the whole history” of output gap forecasting “has not been very encouraging,” he said.
While persisting for decades, the debate among policy makers over whether to follow basic rules or more flexible approaches has taken on increased urgency as they try to sustain post-crisis economic growth.

Euro Leaders Need to Step Up Austerity, Finland’s PM Says (Source: Bloomberg)
European policy makers can’t rely on the central bank to manage the region’s crisis and must now follow with measures to cut debt and restore economic confidence, Finland’s Prime Minister Jyrki Katainen said. “Crisis management can’t be outsourced to the central bank,” Katainen said in an interview in Saariselkae, Finland. “Member states have a couple of years to take austerity measures to restore and strengthen credibility for when the operations end.” The European Central Bank’s 1 trillion euros ($1.3 trillion) of three-year loans to lenders since December were “extremely necessary and successful,” helping avoid an acute crisis and buying time for fiscal changes, he said. The Frankfurt-based ECB’s actions have helped ease pressure on bond yields of peripheral countries as the debt crisis has entered its third year following bailouts of Greece, Ireland and Portugal. The central bank kept its benchmark interest rate at a record-low of 1 percent on March 8.

Europe Must Use Calm on Markets to Do Reforms, Asmussen Says (Source: Bloomberg)
European Central Bank council member Joerg Asmussen said the region’s governments must make use of the calm period in the markets created by the central bank’s three-year loans. “All countries of the euro zone have to do their homework,” Asmussen told reporters in Saariselkae, Finland, 1,100 kilometers (684 miles) north of Helsinki. They have to “do structural reforms, create jobs. This is true for all countries.” The Frankfurt-based ECB has lent banks 1 trillion euros ($1.3 trillion) for three years in two operations since December, easing pressure on bond yields of peripheral countries. The bank kept its benchmark interest rate at a record-low of 1 percent on March 8. ECB’s actions buy time for governments to balance budgets, reform economies and create jobs to boost economic growth.
The ECB “has done its part, the governments must do theirs,” Erkki Liikanen, who heads the Bank of Finland and sits on the ECB’s governing council, said in an interview on March 15. The 17-nation euro economy will contract 0.1 percent this year and grow 1.1 percent in 2013, the central bank forecast on March 8.

Monti Signals Spanish Euro Risk as EU to Bolster Firewall (Source: Bloomberg)
Italy’s Prime Minister Mario Monti warned that Spain could reignite the European debt crisis as euro-area ministers this week prepare a deal to strengthen the region’s financial firewall. Monti pointed to Spain’s struggle to control its finances ahead of a finance ministers meeting in Copenhagen starting on March 30, where officials will seek agreement to raise a 500 billion-euro ($664 billion) ceiling on bailout funding. “It doesn’t take much to recreate risks of contagion,” Monti said during the weekend at a conference in Cernobbio, Italy. Days after his Cabinet approved a bill to overhaul Italy’s labor laws, Monti praised Spain’s efforts to loosen work regulations while advising it to focus on cutting the national budget. Spain “hasn’t paid enough attention to its public accounts,” he said.
The euro crisis has eased after the European Central Bank last month boosted liquidity through three-year loans to banks, while European Union leaders this month sealed a second Greek bailout package. Still, signs of a deepening economic recession in the region and struggles to meet austerity goals have kept decision makers on alert, underscored by rising Spanish and Italian yields.

Australian, N.Z. Dollars Maintain Gains on U.S. Outlook (Source: Bloomberg)
The Australian and New Zealand dollars advanced against the yen before U.S. data that may show consumer confidence held near a one-year high, buoying demand for assets linked to growth. Both South Pacific currencies climbed this year as shares and commodities rose on signs of economic improvement in the U.S. and as concern eased that Europe’s debt crisis would damp global growth. New Zealand’s dollar maintained a gain versus the U.S. currency from the end of last week after data showed the smaller nation posted a bigger-than-estimated trade surplus. “U.S. economic indicators are good,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides currency margin-trading services. “What’s supporting the Australian and New Zealand dollars are commodity prices that remain elevated.”
Australia’s dollar, known as the Aussie, climbed 0.4 percent to 86.52 yen as of 12:12 p.m. in Sydney and was little changed at $1.0464. The New Zealand dollar advanced 0.2 percent to 67.52 yen. It bought 81.66 U.S. cents after rising 1.1 percent to 81.82 on March 23. The Aussie has advanced 2.5 percent this year against the greenback, while the New Zealand dollar has gained 5.1 percent. The Standard & Poor’s GSCI Total Return Index for commodities has risen 8.1 percent during the period, while the MSCI All Country World Index (MXWD) of stocks has climbed 11 percent.