Asian Equities Retreat as Spain’s Bad Loans Surge Ahead of Bond Auctions (Source: Bloomberg)
Asian stocks fell, with the regional benchmark index headed for its third day of declines in four, as exporters retreated after bad loans held by Spanish banks surged ahead of bond sales today. Nikon Corp., a camera maker that gets more than a fifth of its sales from Europe, dropped 2.4 percent. Nippon Sheet Glass Co. (5202), a Japanese glassmaker, slumped 6.9 percent in Tokyo, headed for its lowest close since 1976 after its chief executive officer quit over disagreement with the board. OCI Co., a chemicals maker, fell 1.6 percent in Seoul after its first- quarter operating profit declined. Maanshan Iron & Steel (323) Co. maybe active today in Hong Kong after swinging to a net loss in the three months ended March 31.
The MSCI Asia Pacific Index (MXAP) declined 0.3 percent to 124.67 as of 9:53 a.m. in Tokyo before the open of markets in Hong Kong and China. More than twice as many stocks fell for each that rose on the gauge. Spain’s non-performing loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data published yesterday. “We are seeing the clear need by the authorities to address funding concerns for a number of sovereign issues,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Today we will see prices consolidate.”
Japan Stocks Fall on Surge in Bad Spanish Loans, U.S. Earnings (Source: Bloomberg)
Japanese shares fell, with the Nikkei 225 Stock Average (NKY) paring gains after rising the most in three weeks yesterday, after bad loans held by Spanish banks surged and earnings reports by Intel Corp. disappointed investors, cutting the earnings outlook for exporters. Sony Corp. (6758), a consumer electronics maker that gets about 40 percent of its revenue in Europe and the U.S., fell 1.5 percent. Honda Motor Co. (7267), Japan’s second-biggest carmaker, fell 0.6 percent. Nippon Sheet Glass Co. slid to its lowest since 1976 after saying its chief executive officer quit after clashing with the board over the company’s strategy.
The Nikkei 225 Stock Average dropped 0.8 percent to 9,593.50 as of 9:23 a.m. in Tokyo with more than five stocks declining for each that rose, paring yesterday’s 2.1 percent advance. The broader Topix Index declined 0.5 percent to 815.05 with all but two of its 33 industry groups falling. Shares fell even after Japan reported the fastest export growth in a year and a smaller-than-expected trade deficit. “We are seeing the clear need by the authorities to address funding concerns for a number of sovereign issues,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Today we will see prices consolidate.”
U.S. Stocks Decline as Intel, IBM Tumble After Results (Source: Bloomberg)
U.S. stocks fell, after the biggest advance in more than a month for the Standard & Poor’s 500 Index, as Intel (INTC) Corp. and International Business Machines Corp. drove a slump in technology shares after reporting results. Intel and IBM (IBM) dropped at least 1.8 percent amid the slowest sales growth since 2009. Berkshire Hathaway Inc. (BRK/A) Class A shares slid 1.3 percent as Warren Buffett was diagnosed with stage 1 prostate cancer. Genworth Financial Inc. tumbled 24 percent after delaying plans for a public offering of its Australian unit backing home loans after “elevated” losses in the nation. Qualcomm Inc. (QCOM), the largest maker of mobile-phone chips, sank 3.5 percent at 5:03 p.m. New York time on disappointing forecasts.
The S&P 500 fell 0.4 percent to 1,385.14 at 4 p.m. New York time. The Dow Jones Industrial Average slid 82.79 points, or 0.6 percent, to 13,032.75. The Russell 2000 Index (RTY) dropped 0.9 percent to 803.32. About 5.9 billion shares changed hands on U.S. exchanges, or 12 percent below the three-month average. “Profits are lukewarm,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees about $40 billion. “You get disappointments from some bellwether technology companies at a time when the market has had such a good run. We’re not bearish, but if we’re going to add to positions, we need a pullback.”
European Stocks Decline; Repsol, Santander Retreat (Source: Bloomberg)
European stocks declined as Bank of England policy maker Adam Posen ended his support for more stimulus, falling house prices signaled slowing growth in China and bad loans surged in Spain. Banco Santander SA (SAN) led banks lower. Repsol YPF SA (REP) retreated after Argentina rejected a demand for $10.5 billion in compensation for its YPF SA unit. Iberdrola SA (IBE) dropped to an eight-year low after Actividades de Construccion & Servicios SA sold a stake in Spain’s biggest power company. Statoil Fuel & Retail ASA (SFR) soared 51 percent after Alimentation Couche-Tard Inc. (ATD/B) offered to buy the company. The Stoxx Europe 600 Index (SXXP) dropped 0.7 percent to 257.71 in London. The benchmark gauge has lost 2.1 percent so far in April on renewed concern that the region’s sovereign-debt crisis will worsen. The Stoxx 600 has still advanced 5.4 percent so far this year.
“The debt crisis is far from over still and I think Spain will be worse before it gets better,” Henrik Drusebjerg, a senior equity strategist at Nordea Bank AB in Copenhagen, said in a Bloomberg Television interview with Maryam Nemazee. “European leaders need to address the key issues to move Europe out of this crisis and that is how to create growth under this environment and that has been almost unaddressed so far during this crisis.”
Emerging-Market Stocks Rise on Global Growth Outlook (Source: Bloomberg)
Emerging-market stocks rallied for a second day after the International Monetary Fund raised its global growth forecast and on speculation China and Brazil will act to boost growth. The MSCI Emerging Markets Index gained 0.2 percent to 1,022.35 at 10:33 a.m. in New York. Samsung Electronics Co. (005930) climbed 3.5 percent in Seoul, as technology companies led gains. Steelmaker Usinas Siderurgicas de Minas Gerais headed for a two- week high and the Bovespa (IBOV) advanced for a second day. Turkish stocks fell the most in a week. The IMF raised its 2012 estimate for global economic growth to 3.5 percent from a January projection of 3.3 percent, the first increase in more than a year. China’s economy faces no risks of a hard landing this year, though the government should be vigilant against the chance of growth decelerating too quickly, an economic researcher said today. China’s home prices fell in a record 37 of 70 cities tracked by the government in March.
Brazil will cut its benchmark lending rate by 0.75 p ercentage point, according to economists surveyed by Bloomberg. “Speculation of easing measures in China and a positive outlook in the latest IMF report have boosted buying interest in equities, brushing aside the accelerated downside housing data in China,” Benoit Anne, chief emerging-markets strategist at Societe Generale SA in London, wrote in an e-mailed note to clients.
GLOBAL MARKETS-Euro zone debt fears ease, German bond sale eyed
LONDON, April 18 (Reuters) - European shares and the single currency held within narrow ranges on Wednesday as investors' fears over Spain eased and growth hopes rose, with the focus on a two-year German bond sale, which some fear could struggle, given ultra-low yields.
"Markets are undergoing a consolidation phase after a strong rally earlier in the year, and if Spain's bond auctions on Thursday pass without a problem, investors will likely become more committed to risk-taking," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
GLOBAL MARKET-Euro zone debt fears pressure euro, shares
LONDON, April 18 (Reuters) - European shares eased and the single currency softened as the region's sovereign debt worries and its weaker economic outlook weighed on investors ahead of a German bond sale that will test demand for ultra-low yielding debt.
"There is a lot of uncertainty in the market," said Lutz Karpowitz, currency strategist at Commerzbank.
FOREX-Yen falls broadly as risk currencies stage bounce
TOKYO/SYDNEY, April 18 (Reuters) - The yen fell broadly on Wednesday, extending its slip from a seven-week high against the dollar earlier this week, as a revival in risk appetite saw Wall Street score its biggest gains in a month.
"Firmness in the U.S. economic data appears to be reducing the need for easing for now. So unless global shares fall sharply, the yen is likely to come under pressure for the time being," said a trader at a Japanese bank.
Euro Holds Losses on Spain Debt Concern; Yen Lower (Source: Bloomberg)
The euro held losses against the dollar as signs that Spain is struggling to keep its borrowing costs down heightened concerns that the European sovereign-debt crisis is worsening. Spain, Europe’s fourth-biggest economy, is scheduled to sell bonds today. The yen slid against most major counterparts after a report showed Japan had a trade deficit last month after an unexpected surplus in February. New Zealand’s dollar climbed against all of its 16 major counterparts. “I remain bearish on the euro,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Spain’s debt auctions today are important, and a poor result would lead to euro sell-off.” The euro was at $1.3120 at 9:24 a.m. in Tokyo after dropping 0.1 percent in the past two days. The shared currency added 0.2 percent to 106.79 yen. The yen slid 0.2 percent to 81.41 after reaching 81.57 yesterday, the weakest level since April 10. New Zealand’s dollar added 0.2 percent to 81.72 U.S. cents.
Spain will issue as much as 2.5 billion euros ($3.3 billion) in two- and 10-year bonds today. The nation’s borrowing costs rose at a sale of one-year and 18-month bills for the first time since November on April 17. It sold 12-month bills at 2.623 percent, up from 1.418 percent at the last auction on March 20.
Korean Won Climbs, Bonds Fall on IMF Forecast, Spain (Source: Bloomberg)
South Korea’s won weakened as bad loans surged in Spain, re-igniting concerns the European debt crisis is deepening. Government bonds were little changed. Spain’s non-performing loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, the central bank said yesterday. Bank of Korea Governor Kim Choong Soo said that while an improving global outlook may provide a boost to his nation’s export-driven economy in the second half, downside risks will probably persist due to volatile oil prices and problems in Europe, according to today’s statement. “Spain’s bad-loan issue and Italy cutting its growth forecast are renewing concerns over Europe’s periphery states,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Co. “Still, with events including Spain’s debt auction and U.S. data coming up today, investors will refrain from betting aggressively on a stronger dollar.”
The won slid 0.3 percent to 1,140.20 per dollar as of 9:27 a.m. in Seoul, according to data compiled by Bloomberg. One- month implied volatility for the won, a measure of exchange-rate swings used to price options, slid 20 basis points, or 0.20 percentage point, to 8.23 percent. Sales at major South Korean department stores rose 1.6 percent in March from a year earlier, after a 2.9 percent gain the previous month, government figures showed today. Spain will issue as much as 2.5 billion euros ($3.3 billion) in two- and 10-year bonds at today’s auction. Italy’s economy will shrink 1.2 percent this year compared with the previous forecast for a contraction of between 0.4 percent and 0.5 percent, the government said yesterday. U.S. releases its jobless claims and existing home sales data today.
Geithner Calls China’s Changes on Yuan Very Significant (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner said China’s decision to widen the yuan’s trading band against the dollar reflects changes that are “very significant and very promising.” China is showing a commitment “to this broad change in growth strategy, towards a growth strategy less dependent on external demand,” Geithner said yesterday during an appearance at the Brookings Institution in Washington. “Obviously, they’ve got a long way to go in that process, including on the exchange rate.” China said April 14 it will increase the yuan’s band to 1 percent from 0.5 percent, the first widening since 2007. Regulators had raised the quotas for foreigners to buy stocks and bonds to $80 billion from $30 billion on April 3. The yuan declined 0.02 percent yesterday to close at 6.3028 per dollar in Shanghai, according to the China Foreign Exchange Trade System. It fell as much as 0.12 percent earlier. The yuan is almost unchanged since the People’s Bank of China widened the band.
Jobs Data Simultaneous Release Jeopardized Under Curbs (Source: Bloomberg)
The U.S. Department of Labor said it can’t promise journalists they will be able to transmit market-sensitive economic releases at exactly the same time under changes resulting from the first review of procedures in a decade. The agency ordered media organizations to remove computer software, hardware and communications lines they have installed at the department to transmit news on data such as the unemployment rate and consumer prices. Instead, reporters will have to use government equipment, software and Internet connections. “I’m not going to guarantee anything,” Carl A. Fillichio, the department’s senior adviser for communications and public affairs in Washington, said on a conference call when asked if every news organization will be assured a connection to the Internet “at exactly the same millisecond.”
Under the current system, credentialed journalists in so- called lockups are given data in advance of their release to the public, allowing time to prepare stories, headlines and tables. Communication by phone or computer is cut off for the half hour that reporters are typically given to write their stories. A Department of Labor employee then flips a switch that opens telephone and data lines, allowing journalists to transmit their stories using their own equipment.
China Home Prices Fall in More Than Half Cities Tracked (Source: Bloomberg)
China’s home prices fell in a record 37 of 70 cities tracked by the government in March as officials pledged to keep restrictions on property purchases that have sapped buyer demand. The eastern city of Wenzhou led declines with a 9 percent slump in values from a year earlier, while Beijing and Shanghai recorded drops of 0.8 percent, according to data released by the statistics bureau today. Today’s release underscores forecasts for China’s economic growth to slow further this quarter after the rate reached the lowest level in almost three years in the three months through March. Momentum in the real-estate industry is “too strong to reverse” for now, according to Li Daokui, a former adviser to the nation’s central bank.
“Alternative drivers of GDP growth will have to take some time to come in, to fill in the vacuum,” Li said today in an interview with Bloomberg Television from Sydney, citing water, rail and public-housing projects as future contributors to the expansion. Policy makers are aiming to balance reining in property speculation without hobbling growth, he said.
Japan’s Fastest Export Growth in a Year Boosts Outlook (Source: Bloomberg)
Japan reported the fastest export growth in a year and a smaller-than-expected trade deficit, boosting prospects that the recovery in the world’s third- biggest economy will be sustained. Outbound shipments rose 5.9 percent in March from a year earlier, exceeding the median estimate in a Bloomberg News survey for a gain of 0.2 percent. The deficit was 82.6 billion yen ($1 billion), less than the median forecast for a 223.2 billion yen shortfall. Comparisons are distorted by the earthquake in March, 2011. The International Monetary Fund estimated this week that Japan’s economy may expand as much as 2 percent this year, boosted by reconstruction spending. The yen’s decline against the dollar after the Bank of Japan boosted monetary stimulus in February aided exporters after the currency rose to a post World War II record last year.
“A weaker yen against the dollar and euro is helping trade competitiveness,” Matthew Circosta, an economist at Moody’s Analytics in Sydney, said before the report. “A synchronized upswing in reconstruction and exports should drive a better second half.”
Bank of Canada Sees Firmer Growth as Global Strains Ease (Source: Bloomberg)
The Bank of Canada said the economy will be stronger this year than it earlier forecast as companies become more confident in U.S. growth and as risks from Europe’s debt crisis diminish. The world’s 10th largest economy will expand 2.4 percent in 2012, up from a January projection of 2 percent, the central bank said today. It raised its outlook for the contribution from corporate investment to 0.9 percentage point from 0.6 percentage point, and boosted the consumption estimate to 1.3 points from 1.1 points. The brighter forecast underscores signs of optimism for the world economy after the International Monetary Fund raised its global growth outlook and as officials gather in Washington to consider boosting the IMF’s crisis-fighting war chest. The Bank of Canada yesterday decided to keep the benchmark lending rate at 1 percent for a 13th meeting, while adding that a policy-rate increase “may become appropriate.”
“Recent indicators suggest better growth in the U.S.,” said Charles St-Arnaud, an economist with Nomura Securities International Inc. in New York. “In Europe, we have avoided the worst, but we are still not out of the woods in terms of sovereign tensions.”
Spain Joins France to Seek $18 Billion in Bonds (Source: Bloomberg)
Spain and France plan to raise as much as 13.5 billion euros ($17.6 billion) in debt today as Prime Minister Mariano Rajoy’s struggles to meet deficit targets and the French presidential elections drive up yields. Spain is issuing as much as 2.5 billion euros in two- and 10-year bonds, while France has set a maximum target of 11 billion euros for securities including 2017 notes and 2018 inflation-linked debt. Scrutiny of both countries is increasing amid the fading effect of the European Central Bank’s longer-term refinancing operation, which injected about 1 trillion euros of liquidity into the region’s financial system. The yield on Spain’s benchmark 10-year bond has jumped about 1 percentage point since the beginning of March to above 6 percent, while the yield on the equivalent French security has gained about 10 basis points with Socialist Francois Hollande leading in election polls.
“It’s a difficult time for both countries to sell bonds,” said Marc Chandler, head of global currency strategy at Brown Brothers Harriman & Co. in New York. “The first quarter was really about the absorption of the LTROs. The second quarter is going to be more about politics.”
Spain’s Surging Bad Loans Cast New Doubts on Bank Cleanup (Source: Bloomberg)
Spain’s surging bad loans are spurring doubt on whether the government can persuade investors that it can clean up the country’s banks without further damaging public finances. Non-performing loans as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994, from less than 1 percent in 2007, according to Bank of Spain data published today. The ratio rose from 7.91 percent in January as 3.8 billion euros of loans soured in February, a 110 percent increase from the same month a year ago. That takes the total credit in the economy that the regulator lists as “doubtful” to 143.8 billion euros.
Defaults are rising and credit is shrinking at a record pace as 24 percent unemployment corrodes the quality of loans built up in the country’s credit boom and saps the appetite of banks to make new ones. Doubts about the extent of Spain’s non- performing loans problem is hurting bank stocks and driving up the government’s borrowing costs on investor concern that the expense of propping up ailing lenders may add to the debt burden. “One of our concerns in Spain is to what extent contingent liabilities could pass to the central government,” said Andrew Bosomworth, Pacific Investment Management Co.’s Munich-based head of portfolio management. Non-performing loans “will have to rise when you take into account the unemployment rate and what’s happening with the economy,” he said.
Posen Switches Vote as BOE Concerned on Inflation Risks (Source: Bloomberg)
Adam Posen ended his push for further Bank of England stimulus this month and David Miles described his view on the need for more as “finely balanced” as officials said inflation may turn out faster than forecast. The pound rose after minutes of the central bank’s April 4- 5 meeting showed that Posen joined the majority of the nine- member Monetary Policy Committee in seeking no change to the 325 billion-pound ($517 billion) asset-purchase target. U.K. jobless claims rose less than economists forecast and the official unemployment rate fell, a separate report showed. While Bank of England officials noted that the U.K. may face a recession in the first half of this year, they said inflation may turn out faster than forecast. They endorsed a final month of bond purchases to aid growth while setting the stage for a possible pause in May, when they will consider new quarterly forecasts and debate whether to halt the so-called quantitative-easing program.
“The probability of QE in May -- which already looked relatively low -- has diminished significantly,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “It is too soon to rule out further QE in the second half of 2012, but the probability of this is diminishing in response to short-term inflation ‘stickiness’ and firmer underlying activity data.”
U.K. Unemployment Unexpectedly Falls as Growth Resumes (Source: Bloomberg)
U.K. jobless claims rose less than economists forecast in March and a broader measure of unemployment fell for the first time for almost a year, signs that the labor market is stabilizing as the economy recovers. Jobless-benefit claims rose by 3,600 from February to 1.61 million, the Office for National Statistics said today in London. The median forecast of 29 economists in a Bloomberg News survey was for a gain of 6,000. Unemployment as measured by International Labour Organization methods fell to 8.3 percent in the quarter through February from a 16-year high of 8.4 percent. No change was forecast. The figures provide a boost for Prime Minister David Cameron, who faces criticism from the opposition Labour Party that he is damaging the recovery by trying to cut the budget deficit too quickly. Employment rose in latest period, suggesting hiring by private companies is making up for the loss of tens of thousands of public-sector jobs.
“These figures look pretty good and are suggestive of some reasonable underlying momentum in growth,” said David Tinsley, chief U.K. economist at BNP Paribas SA in London and a former Bank of England official. “The fact that unemployment is stabilizing is very good news for the government.”
Sweden’s Riksbank Keeps Key Interest Rate at 1.5% (Source: Bloomberg)
Sweden’s Riksbank kept its main interest rate unchanged amid signs the largest Nordic economy will avoid a recession after policy makers across Europe stepped in to ease debt crisis concerns. The repo rate was kept at 1.5 percent, after two cuts since December, the Stockholm-based bank said today. The move was predicted by 14 of 18 economists surveyed by Bloomberg. Four forecast a quarter point cut. The central bank repeated its intention to keep rates unchanged over the next year. “Following the sharp slowdown in the Swedish economy towards the end of last year, it is now possible to discern some positive signs,” the bank said. “At the same time, inflation is low and expected to remain so over the coming year. Monetary policy needs to remain expansionary to support the recovery.”
A rebound in Swedish exports, rising retail sales and improving consumer confidence has brought the economy back from the “abyss,” Finance Minister Anders Borg said this week. The economy may avoid a recession as growth slows to 0.4 percent this year from 3.9 percent in 2011, sending the budget into a deficit, according to the finance minister.
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