Asian Stocks Fall for Second Day on Greece Impasse (Source: Bloomberg)
Asian stocks fell for a second day as concern grew that Greece will be forced out of the euro, weakening the outlook for Asian exporters to Europe. LG Display Co. (034220), the world’s second-largest maker of liquid- crystal displays that depends on Europe for about 18 percent of sales, slipped 2.4 percent in Seoul. Inpex Corp., Japan’s No. 1 energy explorer, lost 1 percent in Tokyo as crude oil headed for its seventh day of decline, the longest losing streak since December 2009. Toyota Motor Corp., Asia’s biggest carmaker, gained 1.3 percent after saying net income this fiscal year may more than double to a five-year high. “The European crisis is going to be with us for some time,”said Cameron Peacock, a Melbourne-based analyst at IG Markets, a provider of trading services for stocks, bonds and currencies. “There’s the chance of further elections in Greece and the whole stability of Europe has been put into doubt.”
The MSCI Asia Pacific Index (MXAP) dropped 0.2 percent to 119.67 as of 9:40 a.m. in Tokyo, with about three shares declining for every two that rose. The measure is heading for its worst week in almost six months as political changes in France and growing instability in Greece threatened to derail austerity plans and worsen Europe’s debt crisis.
Japan’s Nikkei Falls Below 9,000 on Greece (Source: Bloomberg)
May 10 (Bloomberg) -- Japanese stocks fell for a second day, with the Nikkei 225 Stock Average (NKY) dipping below 9,000 for the first time in three months, as concern Greece may be forced to exit the euro outweighed improved earnings outlooks. Toyota Motor Corp. rose after forecasting profit will more than double. Mitsubishi Motors Corp. (7211), an automaker that gets 27 percent of its sales from Europe, slid 2.4 percent. Nippon Yusen K.K., Japan’s biggest shipping company by sales, fell 3.2 percent after a gauge of cargo rates declined. Toyota advanced 1.6 percent. Tokyo Electric Power Co. (9501) rose 6 percent after the government took control of the utility. The Nikkei 225 Stock Average lost 0.5 percent to 9,002.10 as of 9:20 a.m. in Tokyo, headed for its lowest close since Feb. 10. The broader Topix Index fell 0.2 percent to 764.11, with more than three stocks declining for each that rose.
“The European crisis is going to be with us for some time,” said Cameron Peacock, a Melbourne-based analyst at IG Markets, a provider of trading services for stocks, bonds and currencies. “There’s the chance of further elections in Greece and the whole stability of Europe has been put into doubt.”
Dow Falls 6th Day in Longest Slump Since August on Greece (Source: Bloomberg)
The Dow Jones Industrial Average (INDU) declined for a sixth straight day, the longest losing streak since August, amid concern Greece’s debt crisis is worsening as the nation struggles to form a coalition government. Equities trimmed losses as Europe’s bailout fund said it will pay the next installment of aid to Greece. General Electric Co. (GE) and JPMorgan Chase & Co. (JPM) slid more than 1.7 percent to pace declines among the largest companies. Macy’s Inc. (M), the owner of its namesake department stores, slumped 3.7 percent as its profit forecast for this year trailed projections. Walt Disney Co. (DIS) advanced 1.6 percent, to an all-time high, after the world’s largest entertainment company said earnings surged 21 percent.
The Standard & Poor’s 500 Index fell 0.7 percent to 1,354.58 at 4 p.m. New York time, a two-month low. The Dow slid 97.03 points, or 0.8 percent, to 12,835.06. It had the longest slump since Aug. 2, three days before S&P stripped the U.S. of its AAA credit rating. About 7.8 billion shares changed hands on U.S. exchanges, or 18 percent above the three-month average. “It’s a tense situation in Greece,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “The elections in Europe opened up the possibility of a new look at bailout packages. That’s tough to analyze and uncertainty as always troubles investors.”
European Stocks Drop on Greek Impasse; Spanish Banks Fall (Source: Bloomberg)
European stocks dropped for a second day, to the lowest level in almost four months, as investors awaited a resolution to the political impasse in Greece and as Spanish credit risk surged. Bankia SA led a selloff in Spanish banks. Kloeckner & Co. and Mediaset SpA (MS) both plunged more than 8 percent after reporting first-quarter results. ING (INGA) Groep NV and Carlsberg A/S (CARLA) paced advancing shares. The Stoxx Europe 600 Index (SXXP) lost 0.3 percent to 249.73 at the close of trading, the lowest since Jan. 13, as the euro weakened for an eighth day. The Stoxx 600 has tumbled 8.3 percent from this year’s high on March 16, trimming this year’s advance to 2.1 percent.
“The real concern isn’t about Greece, it’s about the euro and whether it breaks up -- that is key,” Mark Tinker, a fund manager at AXA Framlington Investment Management said on Bloomberg Television in London. “We don’t make a big economic scenario after a couple of days of moves, but I think there is a lot of anxious market repositioning going on right now.”
Emerging Stocks Fall to 4-Month Low on Europe Concerns (Source: Bloomberg)
Emerging-market stocks slid, pushing the benchmark index to a four-month low, as industrial equities tumbled on concern political gridlock will derail Europe’s debt crisis recovery, crimping demand for riskier assets. The MSCI Emerging Markets Index (MXEF) lost 1.5 percent to 977.90 at the end of trading in New York, the lowest close since Jan. 17. Brazilian crude producer OGX Petroleo & Gas Participacoes SA dropped the most in two weeks, as oil declined for a sixth day. China Shipping Container Lines Co. (2866), the nation’s second-biggest cargo-box carrier, plunged the most in seven months on concerns Europe’s economic recovery may wane.
Leaders in debt-stricken Greece are struggling to form a new government after May 6 elections where voters flocked to anti-bailout parties. China’s Shanghai Composite Index (SHCOMP) sank the most in six weeks today, while Brazil’s Bovespa (IBOV) Index dropped for a second day to the weakest level since Jan. 13, based on closing prices. The Standard & Poor’s GSCI Spot Index of commodities slipped to the lowest this year. “Whether we like it or not, emerging markets remain a play on risk appetite,” Jose Morales, who oversees $1.6 billion in emerging market equities at Mirae Asset Global Investment in New York, said in a phone interview. “At the moment, risk appetite is declining because of the concerns coming out of Europe.”
Stocks Decline With Commodities, Euro on Greece Concern (Source: Bloomberg)
Stocks fell, sending the Standard & Poor’s 500 Index to a two-month low, while the euro extended its longest slump since 2008 as Greece struggled to form a government and concern grew that Spanish banks are underfunded. The S&P 500 slipped 0.7 percent to 1,354.58 at 4 p.m. in New York, trimming an earlier tumble of as much as 1.5 percent as developments in Europe whipsawed markets. The euro depreciated 0.5 percent to $1.2940, weakening for an eighth day and reaching the lowest level since January. Spain (IBEX)’s benchmark IBEX 35 Index sank 2.8 percent to an eight-year low and costs to protect the nation’s government debt rose to a record. The S&P GSCI Index of 24 commodities lost 0.1 percent as wheat and corn led declines and oil fell for a sixth consecutive day. Concern that Greece will be forced out of the euro zone grew after weekend elections resulted in a parliament divided over whether to implement austerity measures needed to qualify for rescue funds.
The nation’s political turmoil was set to enter a fourth day with coalition talks deadlocked, raising the possibility that another election will have to be held. “There’s something to worry about here,” said James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management. “We expected there would be flare-ups again in Europe. People were scratching their heads why they didn’t show up a little sooner. Certainly as a result of the elections in Greece, the odds of a default and an exit from the euro have increased.”
Korean Won Climbs, Bonds Fall on IMF Forecast, Spain (Source: Bloomberg)
South Korea’s won slid to a one-month low as a political impasse in Greece heightened concern Europe’s debt crisis will worsen, possibly leading to a breakup of the euro. Government bonds were steady before the central bank’s policy meeting today. Political leaders in Greece are struggling to form a coalition government following a May 6 election, reigniting concern about the country’s willingness to comply with the terms of its bailouts. The Kospi Index (KOSPI) fell as overseas investors sold more Korean shares than they bought for a seventh day, exchange data show. The Bank of Korea will leave the benchmark rate at 3.25 percent, according to all 17 economists in a Bloomberg News survey. The result is due around 10 a.m. local time. “With concerns over Greece and overseas investors selling Korean stocks, the won is facing downward pressure, but investors are on alert for possible government intervention,” said Kim Seong Soo, a Seoul-based currency dealer at Kyongnam Bank.
“The central bank meeting will have little effect on currencies as it’s clear the rate will be on hold.” The won dropped 0.4 percent to 1,145.20 per dollar as of 9:22 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,145.33, the weakest level since April 11. One-month implied volatility for the won, a measure of exchange-rate swings used to price options, jumped 58 basis points, or 0.58 percentage point, to 8.51 percent.
Euro Holds Near 3-Month Low on Greece Stalemate (Source: Bloomberg)
The euro traded 0.2 percent from a more-than three month low as Greece remained divided on forming a new government, stoking concern that another election could set the stage for the country’s exit from the trading bloc. The 17-nation currency remained lower, extending its longest losing streak since 2008, before French data that may show industrial production declined in March as the region’s debt crisis weighed on growth. Demand for the yen was supported after Japan posted a second monthly current-account surplus. The Australian dollar fell for a third day before the statistics bureau releases jobs data for April. “The market has started anticipating Greece’s exit from the euro,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “Investors are also concerned that the Greek shock will spread to other periphery nations like Spain. Selling pressure for the euro remains intact.”
The euro was at $1.2936 as of 8:53 a.m. in Tokyo from $1.2929 yesterday, when it touched $1.2912, the lowest since Jan. 23. The shared currency added 0.1 percent to 103.03 yen from yesterday, when it fell to 102.76, the lowest since Feb. 16. The yen traded at 79.67 per dollar from 76.64 yesterday when it strengthened 0.3 percent.
FOREX-Euro on the edge as political risk mounts
LONDON, May 9 (Reuters) - The euro fell close to a recent three-month low on Wednesday and was set for further falls on worries that Greek political uncertainty and a French leadership change may undermine the euro zone's austerity measures.
"We still think the euro will head lower with $1.2950 the level to break in the near-term," said Lauren Rosborough, Senior FX strategist at Societe Generale, who have a medium-term target of $1.2500.
Moody’s Bank Downgrades Risk Choking European Recovery (Source: Bloomberg)
Moody’s Investors Service will this month start cutting the credit ratings of more than 100 banks, a move that risks pushing up their funding costs and forcing them to curb lending in a threat to economic growth. BNP Paribas SA (BNP), France’s biggest lender, Deutsche Bank AG, Germany’s largest, and New York-based Morgan Stanley are among firms that face having their short- and long-term debt downgraded to their lowest-ever levels by Moody’s, the ratings company said in February. The cuts, which would follow downgrades by Standard & Poor’s and Fitch Ratings last year, could erode profits, trigger margin calls and leave some firms unable to borrow from money- market funds that have strict rules on who they can lend to. Without access to funding from private sources, banks have had to sell assets and reduce lending.
“I’d like to say the views of the rating agencies don’t matter anymore but, unfortunately, they do,” said Philippe Bodereau, London-based head of European credit research at Pacific Investment Management Co., the world’s largest bond investor. “This is a setback for the banks, particularly when you consider how much progress they have made in making themselves safer and more transparent.”
Wages Bolster Spending as Americans Extend Hours: Economy (Source: Bloomberg)
Consumer spending in the U.S. is rising even though hourly pay isn’t. The reason: More Americans are finding jobs and putting in longer hours in the office and on the factory floor. Wages and salaries -- the total paycheck for all Americans -- climbed 2.2 percent in the 12 months through March after adjusting for inflation, according to calculations by RBS Securities Inc. economist Omair Sharif. Earnings per hour on average dropped 0.7 percent in real terms over the same period, according to Labor Department data. Incomes are getting a boost from job growth and gains in hours, which will give Americans the means to increase spending at the fastest pace in six years, say Sharif and Pierpont Securities LLC economist Stephen Stanley. That’s allaying concern that hourly earnings, a widely watched measure of consumer buying power, are stagnating.
“If you were just to look at the average hourly earnings number, it would suggest pretty dire consequences for consumption,” Sharif said. “If you look at wages and salaries, consumption should be able to grow.” Sharif predicts consumer spending, which accounts for about 70 percent of the economy, will rise 2.5 percent this year, the most since a 2.9 percent increase in 2006. Stanley, the most accurate forecaster of personal spending in the two years through March, according to data compiled by Bloomberg News, is even more bullish, seeing a gain of 2.5 percent to 3 percent.
Home Prices Rise in Half of U.S. Cities as Markets Stabilize (Source: Bloomberg)
Prices for single-family homes climbed in half of U.S. cities in the first quarter as real estate markets stabilized. The median sales price increased from a year earlier in 74 of 146 metropolitan areas measured, the National Association of Realtors said in a report today. In the fourth quarter, only 29 areas had gains. The U.S. housing market is showing signs of bottoming as improving employment and record-low mortgage rates boost demand while inventories of available properties tighten. At the end of March, 2.37 million previously owned homes were available for sale, 22 percent fewer than a year earlier, the Realtors said. “The housing market is still depressed but it had a good quarter,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview today. “We’re on the mend but it’s still something that will take two or three years before we’re back to normal.”
U.S. March Wholesale Inventories Rise 0.3%, Sales Climb 0.5% (Source: Bloomberg)
Inventories at U.S. wholesalers rose in March at the slowest pace in four months as companies kept their stockpiles in line with demand. The 0.3 percent gain in stockpiles, which was less than the median forecast in a Bloomberg News survey, followed a 0.9 percent increase in February, the Commerce Department reported today in Washington. Sales climbed 0.5 percent in March after rising 1.1 percent a month earlier. As the U.S. expansion cools, inventory accumulation may slow with it after stockpiles helped boost fourth-quarter economic growth to the fastest pace in more than a year. Wholesalers had enough goods on hand to last 1.17 months at the current sales pace, the same as in February, the report showed.
“Firms are in a pretty decent shape on their inventories,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, said before the report. “Firms are just being very cautious. I don’t think there’s a lot of visibility on demand going forward, so firms are not willing to assume strong demand six or nine or twelve months out. The median estimate in a Bloomberg News survey of 28 economists called for a 0.6 percent gain. Forecasts ranged from increases of 0.4 percent to 0.9 percent. Wholesalers make up about 30 percent of all business stockpiles.
CIC Stops Buying Europe Government Debt on Crisis Concern (Source: Bloomberg)
China Investment Corp. has stopped buying European government debt because of an economic crisis on the continent, though it continues to look for new investments there, said CIC President Gao Xiqing. “What is happening in Europe right now is of course of concern,” Gao said yesterday in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.” European leaders are struggling to contain a debt crisis that has entered its third year and led to bailouts of Greece, Portugal and Ireland. Officials have pledged to tighten fiscal frameworks amid concern the situation would envelop Italy and Spain, the euro region’s third- and fourth-biggest economies.
“China has a significant interest in Europe being a strong economic region; that’s clearly not the case at the moment,” said Stephen Halmarick, Sydney-based head of investment market research at Colonial First State Global Asset Management, which oversees about $150 billion. “It’s probably not surprising that the Chinese authorities are looking elsewhere for investment. Other investors in other parts of the world will be very cautious about European debt at this moment.” The euro posted its longest slump since 2008 and European shares fell to the lowest in almost four months as concern that Greece will be forced out of the euro zone grew. Spain said yesterday it would take over Bankia SA (BKIA), the banking group with the most Spanish real estate, as part of efforts to bolster confidence in the country’s lenders.
Japan Reports Current-Account Surplus for Second Month (Source: Bloomberg)
Japan posted a current-account surplus for a second month in March on an increase in overseas investment income, even as higher energy demand boosted imports. The excess in the widest measure of the nation’s trade was 1.59 trillion yen ($20 billion), the Ministry of Finance said in Tokyo today. The median estimate of 22 economists surveyed by Bloomberg News was for a surplus of 1.43 trillion yen. Evidence of a sustained surplus may ease concern that Japan is at immediate risk of needing overseas funding to service the world’s biggest public debt burden. Income from investment abroad is aiding the nation even as the import bill swells because of increased energy imports after nuclear reactors were shut down because of last year’s crisis at the Fukushima plant.
“The surplus has been shrinking at a slower pace than I expected because gains in the income surplus have been quite strong,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo and a former central bank official. “But in the late 2010s when a current-account deficit will be in sight, the problem of funding government debt will become an issue.”
Elderly at Record Spurs Japan Stores Chase $1.4 Trillion (Source: Bloomberg)
Unicharm Corp. (8113)’s sales of adult diapers in Japan exceeded those for babies for the first time last year. At Daiei Inc. (8263) supermarkets, customers can feel Japan aging -- literally: It has made shopping carts lighter. Companies are rushing to grab a bigger chunk of the estimated 109 trillion yen ($1.4 trillion) that consumers over 60 spent in the year ended March 31 in Japan. The number of Japanese over 65 hit a record 23.3 percent of the population in October. “We perceive this change as a golden opportunity for growth,” Shohei Murai, executive vice president of supermarket operator Aeon Co. (8267), told reporters in March. “In the ‘80s and ’90s, Aeon set families that were the massive majority in terms of population as its main target. Now the elderly are going to be the engine of consumption.” Aeon, Asia’s largest retailer, is putting medical clinics in some of its locations.
Biggest Brazil Price Jump in Year Undermines Rate Cut Goal (Source: Bloomberg)
Brazilian consumer prices rose more than economists expected in April, jumping the most in a year, reinforcing bets the central bank will have to unwind interest rate cuts after lowering borrowing costs to a record low in coming months. Prices, as measured by the benchmark IPCA index, rose 0.64 percent in April, the national statistics agency said in Rio de Janeiro today. The increase was more than all but three of 47 analysts surveyed by Bloomberg whose median estimate was for a 0.59 percent increase. Annual inflation slowed to 5.10 percent from 5.24 percent. A 12.3 percent decline in the real over the past three months is pushing up the cost of imports, adding to price pressures in Latin America’s biggest economy fueled by near- record low unemployment. Today’s report reinforces bets that the central bank will miss its 4.5 percent inflation target this year as the economy recovers, prompting yields on most interest rate futures to rise.
“The perception in the market is that the interest rates will continue to fall, but will go up next year,” Jose Francisco de Lima Goncalves, chief economist at Banco Fator SA, said in a phone interview from Sao Paulo.
Brazil Bulls Capitulate as State Intervention Spurs Outflows (Source: Bloomberg)
Brazil’s efforts to boost economic growth with the most aggressive interest rate cuts are driving away investors, reducing equity valuations to five-year lows and fueling the world’s biggest currency tumble. MSCI Inc.’s Brazil Index has dropped to the cheapest level since 2006 versus global shares as investors pulled $869 million from the nation’s mutual funds this year, the only country among the four largest emerging markets to post outflows, according to data compiled by Bloomberg and EPFR Global. Brazil’s debt handed foreign investors the worst losses since September last month. Three months after saying Brazil was in a “sweet spot,” JPMorgan Chase & Co. is advising clients to reduce stock holdings as President Dilma Rousseff, 64, orders state banks to slash lending rates, threatening profits. The real is the world’s most overvalued major currency even after posting the worst slump in the past month, Morgan Stanley says.
Stone Harbor Investment Partners began buying debt tied to consumer prices as six interest-rate cuts since August spur economists to predict inflation will top the central bank’s target for a third year. “We would share market concerns that the central bank may move too far and cause an inflation problem down the line,” said Phillipe Langham, who helps oversee about $40 billion as a London-based senior emerging-market fund manager at RBC Global Asset Management and holds fewer Brazilian shares than are represented in benchmark indexes. Government interference in the economy may be “accelerating with pressure on bank margins,” he said.
Greece Euro-Exit Debate Goes Public (Source: Bloomberg)
From the monetary fortress of the European Central Bank to the pro-European duchy of Luxembourg, policy makers are beginning to air their doubts that Greece can stay in the euro. Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes. “If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels yesterday. “They will decide whether to stay in the euro zone or not.” After 386 billion euros ($499 billion) in aid pledges for Greece, Ireland and Portugal, 214 billion euros in ECB bond purchases and another trillion euros in low-interest loans for banks, plus 17 high-level crisis summits, Greece’s political chaos thrust Europe into a perilous new phase.
The world is witnessing an “important moment in European Union history, a moment of crisis,” EU President Herman Van Rompuy said in Brussels on the 62nd anniversary of the declaration by Robert Schuman, then France’s foreign minister, that launched postwar European integration.
U.K. Retail Sales Drop Most in More Than a Year, BRC Says (Source: Bloomberg)
U.K. retail sales fell the most in more than a year last month as poor weather and consumer caution on spending curbed demand at stores. Sales at stores open at least 12 months, measured by value, declined 3.3 percent from a year earlier, the London-based British Retail Consortium said today. That’s the biggest monthly drop since March 2011. Including stores open less than 12 months, sales decreased 1 percent. With Britain suffering its first double-dip recession since 1975, the Bank of England’s Monetary Policy Committee will decide tomorrow whether to add more stimulus to its existing 325 billion pounds ($524 billion) of bond purchases. Officials have to balance the need to bolster the economy with the threat of inflation, which has been above their 2 percent target for more than two years.
“If the MPC wants to expand quantitative easing, it has no shortage of justifications,” said Simon Hayes, an economist at Barclays Plc (BARC) in London. Still, inflation pressures and doubts about the effect of stimulus means the MPC may “prefer to hold fire unless a fresh crisis, or more prolonged weakness in demand, makes the case for QE irresistible.”
German Exports Unexpectedly Rose for Third Month in March (Source: Bloomberg)
German exports unexpectedly increased for a third month in March as demand from outside the euro region offset weaker sales in Europe. Exports, adjusted for work days and seasonal changes, rose 0.9 percent from February, when they gained 1.5 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a drop of 0.5 percent, according to the median of 11 estimates in a Bloomberg News survey. Imports climbed 1.2 percent. Today’s report is the third in as many days to suggest Germany may have returned to growth in the first quarter after the economy shrank in the final three months of 2011. Factory orders and industrial production both rose more than economists forecast in March. “The indicators clearly confirm our view that the German economy did not slide into a technical recession at the turn of the year,” said Alexander Koch, an economist at UniCredit Group in Munich. “Net exports should have made a sizeable positive contribution to growth at the beginning of this year.”
Euro Global Poll Shows More Than 50% Predicting an Exit (Source: Bloomberg)
The 17-nation euro area is on the verge of losing one of its members, with more than 50 percent of investors predicting an exit this year as Greece’s election impasse threatens to push the debt crisis to new depths, according to the Bloomberg Global Poll. As Greece faces political paralysis and voters balk at austerity, 57 percent of the 1,253 investors, analysts and traders who are Bloomberg subscribers said at least one country will abandon the euro by year-end and 80 percent expected more pain for Europe’s bond markets. With a majority identifying a deterioration in Europe as a large threat to the world economy, respondents to the May 8 survey were increasingly worried Spain will default and less willing to buy French debt as Francois Hollande takes power.
Europe’s financial turmoil is reigniting on the second anniversary of policy makers’ first attempt to prevent Greece’s fiscal woes from turning toxic. That raises fresh doubt over the crisis-fighting strategy just as Greece’s inconclusive election spurs concern that the country may not meet the terms of its international rescues and will seek a solution outside the euro. “Certainly from a financial perspective the crisis can only intensify,” said Michael Derks, a poll respondent and chief strategist at FXPro Financial Services Ltd in London. “We’re likely to get more debt restructurings and it would be remarkable if Greece didn’t leave the euro within a year.”
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