Asia FX By Cornelius Luca - Mon 06 Aug 2012 16:19:15 CT (Source:CME/www.lucafxta.com)
The appetite for risk was limited on Monday following relief buying on Friday triggered by a stronger-than-expected NFP report. The foreign currencies made little progress after the European and commodity currencies soared on Friday. The US stock indexes accumulated small gains. The short-term outlook for the foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the yen. Good luck!
Asian Stocks Gain on Europe Central Bank Bond-Buying Plan (Source:Bloomberg)
Asian stocks rose, with the regional benchmark index headed for its highest close in three months, after Germany backed the European Central Bank’s bond-buying plan, boosting the outlook for Asia-Pacific exporters. Esprit Holdings Ltd. (330), a clothier that counts Europe as its largest market, gained 25 percent in Hong Kong after it named a new chief executive officer. BHP Billiton Ltd., the world’s biggest miner, rose 0.5 percent in Sydney after metal prices increased. Toshiba Corp., which makes semi-conductors and parts for nuclear reactors, advanced 3.5 percent in Tokyo as it was raised to outperform at CLSA Asia Pacific Markets. Japanese utilities gained as they rebounded from last month’s plunge. The MSCI Asia Pacific Index (MXAP) rose 0.6 percent to 119.78 as of 3:30 p.m. in Tokyo, with about five stocks rising for every two that that fell in the measure, which is headed for its highest close since May 9.
“Investors are hoping that Spain won’t request a full bailout,” said Stan Shamu, a market strategist at IG Markets Ltd. in Melbourne, a provider of trading services in stocks, bonds and commodities. “That would clear the way for the ECB to buy bonds in the secondary market. That’s still the main issue.” Japan’s Nikkei 225 Stock Average (NKY) rose 0.9 percent, while South Korea’s Kospi Index added 0.1 percent. Australia’s S&P/ASX 200 Index advanced 0.5 percent as the nation’s central bank kept interest rates unchanged today. New Zealand’s NZX 50 Index gained 0.6 percent.
Japan’s Nikkei 225 Reaches Month High on ECB Bond Plan (Source:Bloomberg)
Japanese stocks gained for a second day, with the Nikkei 225 Stock Average (NKY) closing at a four-week high, amid optimism Germany will support the European Central Bank’s bond-buying plan to ease the region’s debt crisis. Brother Industries Ltd. (6448), a maker of office equipment that relies on Europe for almost 30 percent of its sales, jumped 4.3 percent. Nippon Paint Co. soared 4.9 percent after boosting its earnings forecast. Sharp Corp. rebounded from a 37-year low yesterday on speculation Foxconn Technology Group would follow through with its investment in the electronics maker. Kansai Electric Power Co., which has plunged 29 percent in the past 30 days, gained 10 percent. The Nikkei 225 Stock Average rose 0.9 percent to 8,803.31 at 3 p.m. in Tokyo, the highest close since July 11, with volume 7.6 percent below the 30-day average ahead of the Bank of Japan’s meeting tomorrow. The broader Topix Index gained 1.1 percent to 743.70. More than two shares rose for each that fell.
“There are expectations that the ECB’s bond-purchasing plan will ease debt crisis tensions, bolstering markets,” said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co., which oversees about $70 billion. “Earnings are just so-so on the whole. Some technology companies have been hurt by the stronger yen but I don’t have an impression that their earnings are very bad.”
China’s Stocks Swing Between Gains, Losses on Profit Concern (Source:Bloomberg)
China’s stocks swung between gains and losses as concern the slowing economy will hurt profit growth overshadowed support by German Chancellor Angela Merkel’s government for the European Central Bank’s bond-buying plan. China Life Insurance Co. slid to a one-week low after estimating first-half net income fell by a “relatively large degree.” Southwest Securities Co. declined 2.6 percent after ending a plan to acquire a rival brokerage because of falling stock prices and lower earnings. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. led gains among rare earth stocks after China National Radio reported the country plans to shut down about a fifth of existing industry production capacity.
The Shanghai Composite Index slid less than 0.1 percent to 2,154.39 at 1:02 p.m. local time. The CSI 300 Index (SHSZ300) was little changed at 2,385.31. The Hang Seng China Enterprises Index of Chinese companies traded in Hong Kong advanced 0.4 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 3.1 percent. “There are still expectations company earnings will fall,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “However, sentiment towards Europe has improved. Previously, investors expected the worst for Europe. With a little progress now, people are getting a tad more optimistic.”
U.S. Stocks Rise on Europe as Earnings Beat Estimates (Source:Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a three-month high, as German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan and earnings beat forecasts. Bank of America Corp. (BAC), Caterpillar Inc. (CAT) and Alcoa Inc. (AA) jumped at least 1.8 percent to pace advances among the largest U.S. companies. Best Buy Co. (BBY) surged 12 percent as founder Richard Schulze offered to take the electronics retailer private. Regions Financial Corp. (RF) added 1.9 percent after Bank of America Corp. raised its recommendation on the shares. Knight Capital Group Inc. (KCG), the firm driven to the brink of bankruptcy by trading losses last week, tumbled 21 percent.
About five stocks advanced for every two falling on U.S. exchanges at 12:41 p.m. New York time. The S&P 500 (SPX) rose 0.5 percent to 1,398.38. The Dow Jones Industrial Average added 76.48 points, or 0.6 percent, to 13,172.65. Trading in S&P 500 companies was down 15 percent from the 30-day average at this time of day. “There’s better general feeling,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “We’ve had a good earnings season and better than estimated data last week. The weekend didn’t bring any painful news out of Europe and there are expectations the ECB will buy bonds.”
European Stock Futures Little Changed; Asian Stocks Rise (Source:Bloomberg)
European (SXXP) stock-index futures were little changed before reports on factory orders in Germany and Italian economic growth. U.S. index futures were also little changed, while Asian stocks advanced. Standard Chartered (STAN) Plc may drop in London, following losses in Asia, after a U.S. regulator said the lender faces suspension of business activities because of transactions with Iranian banks. Deutsche Telekom AG (DTE) may be active after people familiar with the matter said it may bid for PrimaCom Berlin GmbH. Xstrata Plc (XTA), target of a $27 billion takeover bid by Glencore International Plc, may be active after reporting first-half profit that beat analyst estimates. Futures on the Euro Stoxx 50 Index, a benchmark for the euro region, fell 0.2 percent to 2,393 at 7:05 a.m. in London. Futures on the U.K.’s FTSE 100 Index (UKX) also lost 0.2 percent to 5,760. Futures on the Standard & Poor’s 500 Index dropped less than 0.1 percent, while the MSCI Asia Pacific Index increased 0.6 percent.
The Stoxx 600 Index climbed yesterday, extending a four- month high, as Greece and its creditors agreed on the need to strengthen policy efforts to meet bailout conditions and support economic growth. The benchmark measure has climbed 13 percent over the past nine weeks as policy makers eased repayment terms for Spanish banks and optimism grew that central banks will announce stimulus measures.
Most Emerging Stocks Rise After Germany Backs ECB Plan (Source:Bloomberg)
Most emerging-market stocks advanced as Germany’s support for the European Central Bank’s bond-buying plan overshadowed concerns slowing economies will hurt company earnings. China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the country’s biggest shipbuilder outside state control, surged 12 percent in Hong Kong on speculation orders will increase as concerns ease about Europe’s debt crisis, according to UOB-Kay Hian Holdings Ltd. China ZhengTong Auto Services Holdings Ltd. (1728) rose the most in almost two months after Value Partners Group Ltd. raised its stake in the auto retailer. HTC Corp. (2498) tumbled 7 percent in Taipei, extending yesterday’s 6.9 percent slump, after forecasting revenue that missed analysts’ estimates.
The MSCI Emerging Markets Index rose less than 0.1 percent to 967.54 at 1:07 p.m. in Hong Kong with 297 stocks gaining and 188 falling. German Chancellor Angela Merkel backed a bond- buying plan announced last week by the ECB, a spokesman said yesterday, fanning speculation the monetary authority will act to cut borrowing costs for Spain and Italy. The 21 nations in the MSCI emerging market gauge send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show. “Germany’s support is very crucial as it’s the biggest economy in Europe,” said Akbar Syarief, a fund manager overseeing about $359 million at PT MNC Asset Management in Jakarta. Meanwhile, “a lot of companies have earnings that don’t meet expectations. Overseas demand is low.”
Treasuries Snap Loss After Bernanke Notes ‘Struggle’ (Source:Bloomberg)
Treasuries snapped a two-day decline after Federal Reserve Chairman Ben S. Bernanke said people are struggling economically, fueling speculation he is open to increasing bond purchases to spur growth. Treasuries returned 6.8 percent in the 12 months to yesterday, based on Bank of America Merrill Lynch data, reflecting demand for U.S. debt as a haven from slowing economic growth and Europe’s debt crisis. The rally was interrupted this month after a U.S. report Aug. 3 showed the nation added more jobs than economists projected. The government is scheduled to sell $32 billion of three-year notes today, $24 billion of 10- year debt tomorrow and $16 billion of 30-year bonds on Aug. 9. “If Bernanke thinks they should do something to support the economy, it will put downward pressure on yields,” said Kei Katayama, who buys U.S. government debt in Tokyo for Daiwa SB Investments Ltd., which manages the equivalent of $63.6 billion. “That makes it very difficult to sell.”
Benchmark 10-year yields were little changed at 1.57 percent as of 6:50 a.m. in London, according to Bloomberg Bond Trader prices. The record low was 1.38 percent July 25. The price of the 1.75 percent security due in May 2022 was 101 21/32 today.
Treasury Bears Submit to Fed as Bond Optimism at High (Source:Bloomberg)
Jay Mueller, who manages $3 billion of bonds for Wells Capital Management in Milwaukee, resisted buying Treasuries for four months, anticipating the Federal Reserve would drop its pledge to keep interest rates at a record low through late 2014. No more. With the economy growing at a 1.5 percent annual pace, the odds of a recession have risen to 60 percent, making 1 percent yields on 10-year notes a possibility, he said. Wells Capital’s parent, Wells Fargo & Co., boosted its Treasury holdings 32 percent to $11.5 billion in May alone, according to the latest data compiled by Bloomberg. “We’re in a low-rate environment for a long time, longer than I had thought,” Mueller said in a July 26 interview at Bloomberg headquarters in New York. “I’m finally throwing in the towel.”
So are Pioneer Investment Management Inc., Pacific Investment Management Co., Federated Investors Inc., Northern Trust Global Investments and Columbia Management Investment Advisers LLC. They are adding to holdings of Treasuries as economic growth cools. Of the 20 firms that own the most Treasuries, 16 bought more U.S. government debt during their most-recent reporting periods, Bloomberg data show.
FOREX-Euro dips on caution over debt crisis response
LONDON, Aug 6 (Reuters) - The euro fell as investors remained cautious about how effective European policymakers latest pledges of action to resolve the euro zone debt crisis would be.
"There hasn't been anything that has improved the situation in Europe ... we haven't had any concrete improvement in the situation in the euro zone," said Niels Christensen, currency strategist at Nordea in Copenhagen.
FOREX-Euro touches 1-month high on stop-loss buying
The euro hit a one-month high against the dollar as traders unwound bearish bets on the single currency after stronger-than-expected U.S. jobs data last week improved investors' appetite for risk.
"When you think about the fact that something positive will probably materialise even if it takes some time, the euro could see a bit of a rebound," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo, referring to possible ECB measures.
Yen Stays Stronger Before BOJ Meeting; Aussie Near 4-Mont (Source:Bloomberg)
The yen remained stronger versus the dollar as a rally in equities worldwide spurred speculation the Bank of Japan (8301) will refrain from additional monetary easing at a policy meeting that starts tomorrow. Demand for the euro was supported after German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan as Italian Prime Minister Mario Monti called for more urgency in efforts to lower borrowing costs. The Australian dollar rose to the highest in more than four months after the nation’s Reserve Bank kept interest rates unchanged at 3.5 percent at a policy meeting today. “The Bank of Japan looks set to keep policy unchanged,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Without any impediment from the Bank of Japan, we’ll see more of the same, that gradual grind lower in the next few sessions and coming months for dollar-yen.”
The yen was little changed at 78.28 per dollar at 6:45 a.m. in London from yesterday, when it rose 0.3 percent. The Japanese currency was at 96.99 per euro from 97.03. The 17-nation euro bought $1.2390 from $1.2401 yesterday, when it touched $1.2444, the most since July 5. Australia’s dollar reached $1.0603, the highest since March 20, before trading at $1.0581, 0.1 percent above yesterday’s close.
Aussie Dollar Touches 4-Month High as RBA Holds Rates (Source:Bloomberg)
Australia’s dollar touched its highest level in more than four months after the Reserve Bank kept interest rates unchanged and said current policy settings are “appropriate.” The so-called Aussie rose against most major peers after RBA Governor Glenn Stevens and his board said in a statement from Sydney the nation’s growth is close to trend. New Zealand’s currency maintained a three-day gain as Asian stocks extended a global rally, supporting demand for riskier assets. “I think the RBA hasn’t really set out a case for lowering interest rates, so I suspect that’s probably maybe a surprise to the markets,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. The overall statement “seemed to be quite bullish for the Aussie dollar.” Australia’s dollar touched $1.0603, the strongest level since March 20, before trading little changed at $1.0570 as of 4:09 p.m. in Sydney. It traded at 82.73 yen from 82.70 yesterday.
New Zealand’s dollar, nicknamed the kiwi, was also little changed at 81.97 U.S. cents, after rising 1.5 percent over the previous three trading sessions. It bought 64.17 yen from 64.16. The MSCI Asia Pacific Index of shares rose 0.6 percent, after climbing 1.8 percent yesterday.
Bank Loans at Post-Recession Peak Support U.S. Growth (Source:Bloomberg)
Banks in the U.S. are lending the most since the recession ended in June 2009, supporting an economy weighed down by 8.3 percent unemployment. Borrowing by consumers and businesses rose in the week ended July 25 to $7.1 trillion, within 2.9 percent of its October 2008 peak, according to Federal Reserve data. New lending for autos jumped to $134.3 billion in the first four months of the year, up 56 percent from the same period in 2009, according to credit bureau Equifax Inc. (EFX) The increase in lending may prevent the economy from slowing further after growth cooled to a 1.5 percent annual pace of growth in the second quarter. While the Fed last week moved closer to expanding its record stimulus, the figures on credit indicate that 43 months of near-zero interest rates may finally be giving the economy the jolt it needs, said Jim Paulsen, who helps oversee $320 billion as chief investment strategist at Wells Capital Management in Minneapolis.
“Many pieces of the credit-creation process are starting to work again,” Paulsen said. “Banks are lending, people are borrowing, housing prices are going up and a sense of normality is returning.”
Bernanke Says Economic Data May Mask Individual Suffering (Source:Bloomberg)
Federal Reserve Chairman Ben S. Bernanke said gauges of the U.S. economy’s strength may fail to measure the suffering of individual citizens. “Even though some key aggregate metrics -- including consumer spending, disposable income, household net worth, and debt service payments -- have moved in the direction of recovery, it is clear that many individuals and households continue to struggle with difficult economic and financial conditions,” Bernanke said today in remarks prepared for a conference in Cambridge, Massachusetts. The Federal Open Market Committee said on Aug. 1 it will pump fresh stimulus if necessary into the weakening economic expansion to boost growth and reduce an unemployment rate that’s been stuck at 8 percent or higher for more than three years. Bernanke didn’t address the outlook for monetary policy or the economy, or expand on the Fed’s Aug. 1 statement. His remarks, focused on economic measurement, will be delivered via prerecorded video.
The 58-year-old Fed chief, a former Princeton professor, said economists should “increase the attention paid to microeconomic data, which better capture the diversity of experience across households and firms.” Also, researchers should “seek better and more-direct measurements of economic well-being, the ultimate objective of our policy decisions.”
Fed Says Banks Ease Standards on Business, Consumer Loans (Source:Bloomberg)
U.S. banks are relaxing their terms on credit cards and lending for autos and commercial real estate, according to a Federal Reserve survey. “Domestic banks, on balance, continued to report having eased their lending standards across most loan types over the past three months,” the Fed said today in Washington in its quarterly survey of senior loan officers. While lending standards are tightening at branches of foreign banks, “domestic banks reported that their business had increased due to decreased competition from European banks and that they remain willing to accommodate additional such business,” the Fed said. Banks in the U.S. are lending the most since the recession ended in June 2009, supporting an economy burdened by 8.3 percent unemployment. Fed policy makers including Chairman Ben S. Bernanke weighed the results of the survey at their July 31- Aug. 1 meeting at which they said they “will provide additional accommodation as needed” to support the economy.
Monti Calls for More Crisis Urgency in ECB Crisis Standoff (Source:Bloomberg)
Italy’s Prime Minister Mario Monti warned of a potential breakup of Europe without greater urgency in efforts to lower government borrowing costs, as a standoff over European Central Bank help for Italy and Spain hardened. Monti, in an interview with Germany’s Der Spiegel magazine published yesterday, said that disagreements within the 17- nation euro area are detracting from the policy response to the debt crisis and undermining the future of the European Union. “The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” Monti told Der Spiegel. While he backed the ECB’s willingness to address “severe malfunctioning” in the government bond market, Monti said the problems “have to be solved quickly now so that there’s no further uncertainty about the euro zone’s ability to overcome the crisis.”
Spain and Italy, whose surging borrowing costs have shunted them to the heart of the turmoil in the euro area, are resisting pressure from ECB President Mario Draghi to formally request aid in return for strict conditions before the central bank will buy their bonds. Monti and Spanish Prime Minister Mariano Rajoy have both said they will await further details as the ECB works up its plan. The German government said for the first time today that Chancellor Angela Merkel supports Draghi’s proposals. French President Francois Hollande is pushing Monti and Rajoy to request aid from Europe’s bailout fund to help ease markets and protect France from speculation, Italian newspaper la Corriere della Sera reported, without citing anyone. Monti may speak with Draghi today, the newspaper said.
Rice Hoard Offers World Respite as Food Costs Surge: Commodities (Source:Bloomberg)
At a time when droughts are driving corn and soybeans to all-time highs, farmers are set to reap a record rice crop and Thailand is building the biggest stockpile in at least five decades, helping avoid a global food crisis. The largest exporting nation bought 11 million metric tons as of July, enough to supply the six biggest importers, Commerce Ministry data show. As corn farmers from the U.S. to Ukraine endure drought, paddy fields will yield 1.1 million tons more milled grain, the U.S. Department of Agriculture predicts. Benchmark 5-percent Thai white rice will drop 14 percent to $480 a ton by Dec. 31, according to the median of 10 estimates from traders and analysts surveyed by Bloomberg.
Shipments of the staple for half the world will expand 2.6 percent to a record in 2012-2013, the USDA predicts. Those exports combined with Thailand’s stockpiles, which may be cut to clear space for the next harvest, are a buffer against grain reserves seen at the lowest in at least five years. Cheaper rice may contain global food costs the United Nations predicts will rebound, ending a retreat to a 21-month low in June. “Rice is the only bright spot which is keeping us away from a global food crisis,” said Abdolreza Abbassian, a senior economist at the UN’s Food & Agriculture Organization in Rome. “The corn situation is very worrisome, while with wheat, the overall supply situation is still adequate.”
Monti Calls for More Crisis Urgency in ECB Standoff (Source:Bloomberg)
Italy’s Prime Minister Mario Monti warned of a potential breakup of Europe without greater urgency in efforts to lower government borrowing costs, as a standoff over European Central Bank help for Italy and Spain hardened. Monti, in an interview with Germany’s Der Spiegel magazine published yesterday, said that disagreements within the 17- nation euro area are detracting from the policy response to the debt crisis and undermining the future of the European Union. “The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” Monti told Der Spiegel. While he backed the ECB’s willingness to address “severe malfunctioning” in the government bond market, Monti said the problems “have to be solved quickly now so that there’s no further uncertainty about the euro zone’s ability to overcome the crisis.”
Spain and Italy, whose surging borrowing costs have shunted them to the heart of the turmoil in the euro area, are resisting pressure from ECB President Mario Draghi to formally request aid in return for strict conditions before the central bank will buy their bonds. Monti and Spanish Prime Minister Mariano Rajoy have both said they will await further details as the ECB works up its plan. The German government said for the first time today that Chancellor Angela Merkel supports Draghi’s proposals.
Draghi Echoing Merkel Has Trader Raise Bets Against Euro (Source:Bloomberg)
When European Central Bank President Mario Draghi vowed July 26 to do “whatever it takes” to defend the euro, he succeeded in stemming a slide that pushed the 17- nation currency down about 6 percent since late March against its major counterparts. Traders in the options market responded by raising bets against the currency of the developed world’s worst-performing economy by the most in 11 weeks. Options to protect against further weakness climbed in the past two weeks by the biggest amount since May. Between Jan. 12, 2011, when German Chancellor Angela Merkel vowed to do “whatever is needed to support the euro” and Draghi’s almost-identical pledge, Portugal, Spain and Cyprus sought bailouts and the region’s $13 trillion economy teetered on recession. Growth will trail its Group-of-10 peers through at least 2014, according to Bloomberg surveys, as companies from Siemens AG, Europe’s largest engineering company, to sporting- goods maker Puma SE cut their outlooks.
“Whatever the ECB does, it can’t conjure growth out of nowhere,” Frances Hudson, a global strategist at Standard Life Investments in Edinburgh, said in a telephone interview on Aug. 2. “The euro could go down further. The markets are not really willing to give them the benefit of the doubt anymore.”
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