Asian Stocks, Australian Dollar Drop on Fed; Won Falls (Source: Bloomberg)
Asian stocks fell for the first time in four days and the Australian dollar dropped after Federal Reserve minutes showed central bankers saw no need for more U.S. stimulus unless the economy weakened and the Australian services industry contracted. The MSCI Asia Pacific Index (MXAP) declined 0.4 percent as of 9:41 a.m. in Tokyo. Standard & Poor’s 500 Index futures lost 0.2 percent and South Korea’s Kospi Index retreated 0.3 percent. The Australian dollar weakened 0.2 percent and the won slid against all 16 major counterparts. Minutes released yesterday from the March 13 Fed policy meeting showed it was holding off on increasing monetary accommodation unless the economic expansion faltered or prices rose at a rate slower than its 2 percent target. Australia’s services industry shrank in March, the fifth contraction in the six months, as the sustained strength of the currency cut sales and curbed new orders, a private survey showed.
In the U.S. “it seems that policy easing is not being considered,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest bank. “The U.S. dollar is likely to keep rising, and the Aussie and the kiwi are likely to keep falling.”
Asian Stocks Drop as Fed Damps Expectations for Stimulus (Source: Bloomberg)
Asian stocks slid, snapping a three- day rally on the regional benchmark index, after the Federal Reserve damped expectations for more monetary stimulus. Newcrest Mining Ltd. (NCM), Australia’s third-largest miner, led resource companies lower after metal and oil prices fell. Toyota Motor Corp. (7203), Asia’s biggest carmaker by market value, rose 1 percent after the dollar gained against yen, boosting the earnings outlook for Japanese exporters. SK Telecom Co. slid 2.8 percent in Seoul after Posco sold its shares in the mobile-phone carrier at a discount. The MSCI Asia Pacific Index fell 0.5 percent to 126.73 as of 9:35 a.m. in Tokyo after rising 0.2 percent yesterday. Markets in China and Hong Kong are closed today for a holiday.
“There were pretty divided opinions about whether there’s going to be additional easing,” said Matt Riordan, a portfolio manager who helps oversee about $6.9 billion in Sydney at Paradice Investment Management Pty. “I don’t think it was widely expected there would be additional easing coming. The market had a pretty good run and could be consolidating.”
Japanese Stock Futures Gain on U.S. Confidence, Spending (Source: Bloomberg)
Japanese stocks swung between gains and losses after the yen weakened, boosting the earnings outlook for exporters, while the Federal Reserve signaled it may not extend monetary stimulus. Toyota Motor Corp. (7203), a carmaker that gets more than 70 percent of its revenue overseas, rose 1.1 percent. Daikin Industries Ltd. gained 1.8 percent on a Nikkei newspaper report that the air-conditioner maker’s profit may rise. Izumiya Co. (8266), a supermarket operator, sank 2.5 percent after full-year net- income fell. “The yen is weakening below the rates that companies had assumed and that’s boosting expectations earnings will improve,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “Investors are in a wait-and-see stance” before a report on U.S. jobs this week.
U.S. Stocks Fall as Fed Minutes Damp Stimulus Expectation (Source: Bloomberg)
U.S. stocks fell, a day after the Standard & Poor’s 500 Index rose to the highest level since 2008, as minutes from the Federal Reserve’s latest policy meeting damped expectations for more monetary stimulus. Companies whose earnings are most tied to economic swings led the retreat, with S&P 500 indexes tracking energy, financial and raw-materials stocks falling at least 0.7 percent. Transocean Ltd. and Newmont Mining Corp. (NEM) declined more than 2.8 percent as oil and gold prices slid. General Motors Co. sank 4.6 percent after posting vehicle sales that trailed estimates. Apple (AAPL) Inc. advanced 1.7 percent to a record after two analysts said the stock could surge to $1,000. The S&P 500 dropped 0.4 percent to 1,413.38 today. The Dow Jones Industrial Average lost 64.94 points, or 0.5 percent, to 13,199.55 after reaching the highest level since December 2007 yesterday. About 6.8 billion shares changed hands on U.S. exchanges, compared to the one-year average of 7.5 billion.
“Everybody would like a little more stimulus,” James Dunigan, who helps oversee $107 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “It reiterates what the chairman’s been saying that they saw continuously moderate economic growth and they stand ready to do something but at the moment, there’s no immediate need to do any additional stimulus.”
S&P 500’s Rally May Last as Strategists Turn Sour (Source: Bloomberg)
Wall Street strategists cut their recommended holdings in U.S. equities to almost the lowest level since 1998, a sign that the six-month stock rally may have more room to go, according to Bank of America Corp. Strategists advised investors to reduce equity allocations in six out of the past eight months, with money earmarked to stocks falling to 55.8 percent in March. The level was the lowest since January 1998, except for the seven months ended July 2009, and compared with a 15-year average of 60.7 percent, according to data compiled by Bloomberg and Bank of America. Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America, said the decline in recommended stock holdings signaled rising pessimism that she considers as a contrarian indicator because investors who have sold shares now have more money to purchase stocks.
“We take some comfort in Wall Street’s lack of optimism,” Subramanian wrote in a note yesterday. “It has historically been a bullish signal when Wall Street was extremely bearish.”
European Stocks Fall; Banks Lead Losses, Cairn Advances (Source: Bloomberg)
European (SXXP) stocks dropped, paring the benchmark Stoxx Europe 600 Index’s biggest two-day rally since February, as Spanish bond yields rose and U.S. factory orders rebounded less than economists had estimated. Banca Popolare di Milano Scarl (PMI) led a gauge of European (SXXP) banking shares lower. Ferrovial SA (FER) tumbled 6.4 percent as Spain’s government published its budget for 2012. Cairn Energy Plc gained 4 percent after agreeing to buy Agora Oil & Gas AS, which is owned by RIT Capital Partners Plc and Jacob Rothschild. Lonza Group AG (LONN) advanced 1.6 percent after it named Richard Ridinger as chief executive officer. The Stoxx 600 (SXXP)fell 1.1 percent to 264.29 at the close in London, extending losses in the final hour of trading. The benchmark measure jumped 1.5 percent yesterday, completing its biggest two-day advance in two months, as reports showed manufacturing expanded more than forecast in the U.S. and China.
The volume of shares changing hands in Stoxx 600-listed companies today was 3.4 percent lower than the average over the past 30 days, according to data compiled by Bloomberg. “We could see some sideways trading, or even a bit of position squaring, before markets head into Easter holidays,” said Alessandro Fezzi, a senior market analyst at LGT Capital Management AG in Pfaeffikon, Switzerland. “Though investors have become slightly more cautious, sentiment remains quite robust. Let’s not forget that the scenario for the world economy, especially Europe, is still far from being brilliant or sustainable.”
Dollar Near Week-High Versus Euro as Easing Bets Damped (Source: Bloomberg)
The dollar was 0.1 percent from a one-week high versus the euro as signs of improving U.S. employment support the Federal Reserve’s decision to hold off from increasing monetary accommodation. The U.S. currency rose against most of its 16 major peers ahead of a private report forecast to show gains in employment in March held near the most in two months. The euro was 0.9 percent from its lowest level in a week versus the yen before European Central Bank officials meet on policy amid signs of slowing growth. The Australian and New Zealand dollars fell as Asian shares opened lower. “U.S. monetary policy will stay status quo for the foreseeable future,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk- management company. “The U.S. dollar, particularly against the euro, is a bit of a buy at these levels in the short term.”
The dollar was at $1.3225 per euro at 10:14 a.m. in Tokyo from $1.3233 yesterday when it reached $1.3214, the strongest since March 26. It added 0.1 percent to 82.87 yen. Europe’s shared currency bought 109.60 yen after sliding as much as 0.6 percent to 108.70 yesterday, the lowest since March 23.
FOREX-Yen hits 3-wk high on stop-loss buying, short-covering
TOKYO, April 3 (Reuters) - The yen hit a three-week high on a flurry of stop-loss buying that kicked in after investors reduced massive short positions built in recent weeks, though the broad trend for a weakening Japanese currency remained intact.
"The yen has strengthened technically after this move, and while its long-term weakening trend remains intact we may see further correction on the dollar rally over the next few weeks," said Teppei Ino, a currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Stocks, Treasuries, Gold Fall on Fed; Dollar Strengthens (Source: Bloomberg)
U.S. stocks slid, while Treasuries and gold tumbled and the dollar rallied, as Federal Reserve minutes showed central bankers saw no need for more monetary stimulus unless economic growth slows. The Standard & Poor’s 500 Index lost 0.4 percent to close at 1,413.38 at 4 p.m. in New York, retreating from an almost four-year high. The Dow Jones Industrial Average decreased 64.94 points to 13,199.55. Yields on 10-year Treasury notes surged 11 basis points to 2.30 percent after falling as much as three basis points. The Dollar Index, a gauge of the currency against six major peers, climbed 0.7 percent. Gold, silver and oil lost more than 1 percent to lead the S&P GSCI Index (SPGSCI) of commodities down 0.3 percent.
Minutes from the March 13 Fed policy meeting showed the Fed is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target. The S&P 500 surged 1.4 percent on March 26, its second-biggest gain of the year, after Fed Chairman Ben S. Bernanke said that stimulative monetary policy is still need to spur job growth. “Bernanke’s been clear that he stands ready to support the economy if needed and he’s certainly not in favor of removing the stimulus that we have, but there hasn’t been any indication from him that he’s planning to go another round,” Peter Jankovskis, who helps manage about $3 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview.
Treasuries Yield Holds at Highest Since March 22 (Source: Bloomberg)
Treasury yields were at the highest level in almost two weeks before an industry report economists forecast will show service industries in the U.S. expanded in March, adding to signs the economic recovery is widening. Government securities slid yesterday after minutes from the Federal Reserve’s last meeting showed policy makers are holding off increasing monetary stimulus unless growth falters. The Institute for Supply Management’s non-manufacturing index was probably 56.8 from 57.3 in February, according to the median estimate in a Bloomberg News survey of 68 economists. The figure would match January’s as the second-strongest level in a year. Readings greater than 50 indicate growth. “There is a risk that Treasury yields will rise because the economy is improving,” said Tsutomu Komiya, who helps oversee the equivalent of $111 billion as an investor in Tokyo at Daiwa Asset Management Co., a unit of Japan’s second-biggest brokerage. “It doesn’t require additional monetary easing.”
Ten-year notes yielded 2.30 percent as of 9:57 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent note due in February 2022 changed hands at 97 10/32. The yield matched the highest level reached yesterday, which was the most since March 22.
JPMorgan Dealmaker Hannam in Eye of Storm Again With FSA Fine (Source: Bloomberg)
Ian Hannam’s dealmaking has landed him the center of a storm before. This time the soldier-turned- JPMorgan Chase & Co. (JPM) executive known for his Rolodex will be defending himself from outside the most profitable U.S. bank. Hannam, 56, JPMorgan’s global chairman of equity capital markets and a top adviser to mining companies such as Xstrata Plc (XTA), resigned yesterday after the U.K.’s market regulator fined him 450,000 pounds ($720,000) for disclosing inside information. He said in a statement he will appeal and plans to continue his financial career after the dispute is over.
His exit will deal at least a temporary blow to JPMorgan’s mining advisory business, which ranks second behind Morgan Stanley, bolstered by its close relationship with Zug, Switzerland-based Xstrata. Hannam, who became a focal point of an aborted deal to sell Dow Chemical Co. (DOW) in 2007, will be fighting to keep his reputation intact as the Financial Services Authority clamps down on market abuse after it was criticized for failing to prevent the U.K.’s worst financial crisis since World War II.
Fed Signals No Need for More Easing Unless Growth Falters (Source: Bloomberg)
The Federal Reserve is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target. “A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below” 2 percent, according to minutes of their March 13 meeting released today in Washington. That contrasts with the assessment at the FOMC’s January meeting in which some Fed officials saw current conditions warranting additional action “before long.” Stocks slumped while the dollar and Treasury yields rose. The Standard & Poor’s 500 Index lost 0.4 percent to 1,413.31 as of 4:12 p.m. in New York, retreating from yesterday’s highest close since May 2008. Yields on 10-year Treasury notes increased 11 basis points to 2.3 percent. The Dollar Index, a gauge of the currency against six major peers, rallied 0.7 percent.
The March minutes show decreased urgency to add stimulus with no sentiment expressed for additional easing without a deterioration in economic conditions. The central bank also affirmed its plan, first announced in January, to hold interest rates near zero through late 2014 as the economy’s improvement may not be sufficient to lower the outlook for coming years.
American Men Dominate Job Gains Taking 88% of Spots: Economy (Source: Bloomberg)
It took David Jeffrey more than a year to get back on his feet after losing his job at Sallie Mae. As of February, he is witness to the factory rebound that has boosted confidence among American men. “If you’re not in manufacturing, jobs are hard to find,” said Jeffrey, 33, now a floor worker at a Panama City, Florida, plant for Arizona Chemical Ltd. (ARZ), a producer of biodegradable materials. “I have a lot of friends who are still out of work,” he said, thinking of some of the almost 700 people let go at the same time in late 2010 by the student-loan provider in the coastal resort town on Florida’s panhandle. Men, who lost more than twice as many jobs as women during the worst economic slump since the Great Depression, have landed 88 percent of the non-farm jobs created since the recession ended in June 2009. The share of men saying the economy was improving jumped to 41 percent in March, compared with 26 percent of women, according to the Bloomberg Consumer Comfort Index’s monthly expectations gauge.
“The recovery is a mancovery,” said Heather Boushey, a senior economist at the Washington-based Center for American Progress. “I don’t see improvement for women in the past year, whereas for men this is the best year in years.”
Fed’s Lockhart Says Sustained Job Gains Reduce Need for Easing (Source: Bloomberg)
Federal Reserve Bank of Atlanta President Dennis Lockhart said the biggest U.S. employment gains in six years will probably be sustained, reducing the need for additional central bank easing. “I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing,” Lockhart said today on Bloomberg Radio’s “Hays Advantage” with Kathleen Hays. “The outlook is positive enough that I am not sure I see the need for it.” The Federal Open Market Committee is holding off on increasing monetary accommodation unless the expansion falters or prices rise at a rate slower than its 2 percent target. Minutes of the March 13 meeting by policy makers show decreased urgency to add stimulus. At a January meeting, a few members said that economic conditions “could warrant the initiation of additional securities purchases before long.” In March, no sentiment was voiced for more easing without worsening economic conditions.
Chairman Ben S. Bernanke said last week that while a recent decline in the jobless rate is encouraging, continued accommodative policy will be needed to make further progress. The FOMC this year has said subdued inflation and economic slack will probably warrant exceptionally low rates through at least late 2014. Policy makers upgraded their economic outlook at the March meeting after improvements in the job market.
Fed’s Williams Says ‘Strong’ Stimulus Needed for Recovery (Source: Bloomberg)
Federal Reserve Bank of San Francisco President John Williams said the central bank must continue to act “vigorously” to boost the economy and sustain labor market gains. “We are far below maximum employment and are likely to remain there for some time,” Williams said today in San Diego. “Under these circumstances, it’s essential that we keep strong monetary stimulus in place. The recovery has been sluggish.” The policy-setting Federal Open Market Committee on March 13 maintained its pledge to keep interest rates low through at least late 2014, noting improvements in employment while also saying “significant downside risks” remain. Still, policy makers saw no need to roll out new easing measures unless growth faltered, minutes of last month’s meeting showed today. Recent data signal a strengthening U.S. recovery, with an improving labor market encouraging consumers to spend more in the world’s largest economy. The unemployment rate has fallen to 8.3 percent, its lowest in three years.
“Unfortunately, the kind of moderate economic growth I expect won’t sustain such rapid progress” in the job market, Williams told students at the University of San Diego.
U.S. Factory Orders Rose 1.3% in February on Capital Goods (Source: Bloomberg)
Orders to U.S. factories climbed in February for the third month in the last four, boosted by demand for business equipment. Bookings rose 1.3 percent after a revised 1.1 percent decline in January, figures from the Commerce Department showed today in Washington. The median of 60 economists’ projections in a Bloomberg News survey called for a 1.5 percent advance. Orders excluding transportation equipment increased by the most in five months. Demand for new vehicles and business investment are sustaining production gains at American factories, which account for about 12 percent of the world’s largest economy. At the same time, slower growth in Europe and China show that sales overseas remain a risk.
“The manufacturing sector is the rock on which the recovery is being built and the base is as stable as it gets,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “The economy has leaned on the manufacturing sector for much of the growth during the entire recovery. There appears to be no reason to believe that will change anytime soon.”
U.S. Economy Enters Sweet Spot as China Slows (Source: Bloomberg)
The U.S. once again may be emerging as a main engine for global growth -- and at an opportune time, as Europe slides into recession and China’s economy decelerates. An improving job market, rising stock prices and easier credit are combining to lift U.S. consumer confidence and spending, with optimism measured by the Bloomberg Comfort Index near a four-year high. Personal-consumption expenditures increased by the most in seven months in February, rising 0.8 percent, the Commerce Department said last week. “We’re entering a sweet spot for the economy,” said Allen Sinai, president of Decision Economics Inc. in New York. “We’re in a self-reinforcing cycle,” where faster employment growth leads to higher household income and increased consumer spending.
International companies, including Milan-based Gianni Versace SpA (GIAN), already are benefiting. Revenue for the Italian designer will rise at a “really strong double-digit” pace this year in the U.S., compared with “a significant single-digit” amount in Europe, according to Chief Executive Officer Gian Giacomo Ferraris.
Home Prices Seen Dropping 10% in U.S. on Foreclosures: Mortgages (Source: Bloomberg)
As many as 1.25 million of America’s least cared for homes are headed for auction after a year-long probe into foreclosure practices kept them off the market. Sales of repossessed properties probably will rise 25 percent this year from 1 million in 2011, according to Moody’s Analytics Inc. Prices for the homes could drop as much as 10 percent because they deteriorated as they were held in reserve during investigations by state officials resolved in February, according to RealtyTrac Inc. That month, 43 percent of foreclosures were delinquent for two or more years, from a 21 percent share in 2010, according to Lender Processing Services Inc. in Jacksonville, Florida. “The longer a foreclosed home is in the mill, the bigger the losses,” said Todd Sherer, who manages distressed mortgage investments for Dalton Investments LLC, a Los Angeles-based hedge fund that oversees $1.5 billion. “We have a bulge of these properties coming through the system.”
Homes stockpiled less than a year sell for about 35 percent below the value set by lenders, according to a March 15 report by the Federal Reserve Bank of Cleveland. At two years, the loss is close to 60 percent. A surge of cheap foreclosures may erode prices in the broader real estate market, even as the economy expands and residential building increases, said Karl Case, one of the creators of the S&P/Case-Shiller home-price index.
‘Apple Fever’ to Push Stock to $1,001 Within Year, Analyst Says (Source: Bloomberg)
Apple Inc. (AAPL), already the world’s most valuable company, will see its stock price reach $1,001 within 12 months, lifted by growth in China and the debut of a new television product, according to Topeka Capital Markets. The new target, issued today by Topeka’s Brian White, is the highest among the 45 analysts tracked by Bloomberg and represents a 62 percent increase over the current price. The gains will be fueled by demand for the next iPhone, in addition to the expansion into China and the TV market, he said. “Apple fever is spreading like a wildfire around the world,” White said in a report, which initiated coverage of the company with a buy recommendation. Apple will get to $1,001 by introducing a TV within a year, as well as an upgraded iPhone that works with speedier wireless networks, he said. China Mobile Ltd. (941), the Asian country’s largest wireless network, will start carrying the iPhone within a year, White said, adding millions of new potential customers.
Apple’s stock also is getting a boost because of a relatively seamless transition since the death of co-founder Steve Jobs, he said. The stock has risen more than 60 percent since he died in October. Tim Cook had assumed the role of chief executive officer from Jobs the previous August.
China Accelerates Markets Opening as QFII Quota Doubles (Source: Bloomberg)
China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits as the government shifts its growth model to domestic consumption from exports. The China Securities Regulatory Commission increased the quotas for qualified foreign institutional investors to $80 billion from $30 billion, according to a statement on its website yesterday. Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.95 billion) of local currency into the country, up from 20 billion yuan. China, the world’s second-biggest economy, has pledged this year to free up control of the yuan and liberalize interest rates as the government deepens reforms to revive growth and offset slowing exports and a cooling housing market. China needs to rely more on markets and the private sector as its export- oriented model isn’t sustainable, World Bank President Robert Zoellick said in February.
“More action on opening up their markets to outside investment is definitely a positive,” Jeff Papp, a senior analyst in Lisle, Illinois at Oberweis Asset Management Inc., which oversees about $700 million, said in a phone interview. “It’s not a huge amount. They’re taking a small-steps approach to see how markets will react with more participants.”
China Grows 8.4% in Estimate Cited by NDRC Vice Chairman (Source: Bloomberg)
China’s economy may have expanded about 8.4 percent in the first quarter, the least since the first half of 2009, according to an estimate given by an official 10 days before the data are due. Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission (NDRZ), cited “relevant China research institutes’ initial figures” for the estimate and predicted a gain of about 3.5 percent in consumer prices. He spoke today during a panel discussion at the Boao Forum for Asia, a gathering of government and business leaders on China’s tropical island of Hainan. The growth figure compares with the 8.3 percent median estimate of 28 economists surveyed by Bloomberg News. The fifth straight slowdown in quarterly growth will underscore concerns that weakness in the Chinese economy is set to limit a global expansion already capped by Europe’s austerity measures.
“The final number will be very close to 8.4 percent,” Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong, said in an interview in Boao. “They can get a relatively accurate forecast or estimate of first-quarter GDP.” Premier Wen Jiabao pared this year’s expansion target to 7.5 percent from an 8 percent goal in place since 2005 on March 5, part of government plans to tilt growth toward consumption and away from exports. In the fourth quarter of last year, growth was 8.9 percent.
PBOC’s Zhou Urges Fed to Consider Global Effect of Policy Easing (Source: Bloomberg)
China’s central bank Governor Zhou Xiaochuan said the U.S. Federal Reserve has a responsibility to consider the global effects of its actions after emerging-market economies suffered from capital inflows. Because the U.S. dollar is the world’s main reserve currency, the Fed “may have more responsibility not only to consider the U.S. economy but also the global economy,” Zhou said today during a panel discussion at the Boao Forum for Asia on the southern Chinese island of Hainan. Zhou’s comments reprise criticism of the U.S. from emerging nations who complained that so-called quantitative easing was sending unwanted cash into their economies, adding to inflation risks. Fed Chairman Ben S. Bernanke said last week the central bank will consider further stimulus, even after upgrading its economic outlook March 13.
For China and some other emerging economies, the policy goal is to “gradually bring inflation down” to help achieve a so-called soft landing, and China is using interest rates combined with additional tools to achieve that, Zhou said. He declined to comment when asked if the central bank is planning any adjustments to monetary policy. Expanding domestic demand and reducing the trade surplus have also been part of China’s strategic plan since the global financial crisis, Zhou said today.
Japan’s Monetary Base Slides for First Time Since 2008: Economy (Source: Bloomberg)
Japan’s liquidity supply dropped in March for the first time in more than three years, fueling politicians’ complaints that the central bank should be doing more to end deflation. The monetary base fell 0.2 percent from a year earlier after climbing 11.3 percent in the previous month, a Bank of Japan (8301) report showed today. The average amount outstanding was 112.46 trillion yen ($1.37 trillion). Opposition to the nomination of BNP Paribas SA economist Ryutaro Kono to the central bank’s board has highlighted some lawmakers’ concern that the BOJ isn’t doing enough to spur growth in the world’s third-biggest economy. Governor Masaaki Shirakawa and his officials have pledged “powerful easing” until 1 percent inflation is in sight. “This raises the question of how serious the BOJ is about monetary easing,” said Yasuhide Yajima, chief economist at NLI Research Institute Ltd. in Tokyo. “This may give a reason for politicians to put more pressure on the BOJ.”
The yen traded at 81.93 per dollar as of 3:13 p.m. after earlier touching 81.56, the highest since March 9.
Australia Holds Key Rate at 4.25% as Domestic Growth Weakens (Source: Bloomberg)
Australia’s central bank signaled today it may resume cutting interest rates as soon as next month if weaker-than-forecast growth slows inflation, sending the local currency and bond yields lower. “The board judged the pace of output growth to be somewhat lower than earlier estimated, but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy,” Governor Glenn Stevens said in a statement after leaving the overnight cash-rate target at 4.25 percent. The communique indicates the next rate reduction hinges on an April 24 report on first-quarter inflation, as recent data showed the economy is probably growing slower than the central bank had predicted. The Reserve Bank of Australia has decided against lower borrowing costs at its three meetings this year as the global recovery stabilizes and a mining boom sustains domestic growth.
“A clear easing bias was introduced,” said Annette Beacher, the Singapore-based head of Asia-Pacific research at TD Securities Inc., referring to the comment on inflation. “This statement could easily have supported a rate cut today.” A gauge of Australia’s annual inflation rate slowed in March below the central bank’s 2 percent to 3 percent target range as housing, clothing and footwear costs declined.
Thai Inflation Quickens First Time in Five Months on Oil (Source: Bloomberg)
Thai inflation accelerated for the first time in five months in March on rising oil prices, posing a risk to the nation’s recovery after last year’s flood crisis, and limiting the scope for further interest-rate cuts. An index of consumer prices climbed 3.45 percent from a year earlier, the Ministry of Commerce said in Nonthaburi province outside Bangkok today. That compared with a 3.35 percent increase reported for February. The median of seven estimates in a Bloomberg News survey was for a 3.2 percent pace. Retail fuel prices in Thailand have risen more than 20 percent since the start of the year on costlier crude and lower state subsidies, Energy Policy and Planning Office data show. Central bank Governor Prasarn Trairatvorakul, who kept interest rates unchanged last month after two previous cuts, has said inflation may accelerate later on oil and higher minimum wages.
“Despite higher oil prices, we think overall inflation will remain manageable,” Julia Goh, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur, said before the release. Wage rises and strengthening demand may pose risks to inflation later this year, “but the probability of a rate hike remains low at this point,” she said, adding they expect the policy rate to stay at 3 percent until year-end.
England Challenges China by Reviving Strategic Mine: Commodities (Source: Bloomberg)
An English mine last used to make armaments to defeat Hitler’s forces will be revived to challenge China’s grip on tungsten, among strategic metals at the heart of a deepening trade dispute with Europe and the U.S. Wolf Minerals Ltd. (WLF) is developing a tungsten mine in Devon, southwest England, 70 years after it was last extracted there. The Hemerdon site is the world’s fourth-largest deposit and can produce about 3.5 percent of global demand for the metal, used to harden steel in ballistic missiles and in drill bits. China provides about 85 percent of worldwide supplies. Tungsten was one of the metals cited when U.S. President Barack Obama filed a complaint to the World Trade Organization on March 13 against Chinese supply curbs. Tungsten is a “critical” raw material, according to the European Union, and the British Geological Survey places it at the top of its supply-risk list of materials needed to maintain the U.K.’s economy and lifestyle.
“A big element of what we are doing is providing a strategic supply to companies outside of China,” Wolf Managing Director Humphrey Hale said in an interview in London. “We’re answering a requirement from the market, which is strategic supply, and prices are at a position where we can make money from that.”
U.K. Construction Growth Accelerates to Fastest in 21 Months (Source: Bloomberg)
U.K. construction expanded at the fastest pace in 21 months in March, adding to signs the economy returned to growth in the first quarter. A gauge of building activity rose to 56.7 from 54.3 in February, Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply said in a report today in London. The median forecast in a Bloomberg News survey of nine economists was 53.4. A reading above 50 indicates expansion. Markit said confidence at companies increased to a 22-month high. The construction report follows a survey yesterday showing manufacturing grew at the fastest pace in 10 months in March. The British Chambers of Commerce said today Britain has probably avoided a second recession, though the government needs to do more to stoke a “weak” recovery.
“The good weather appears to have led to a surge in demand for construction projects in March, adding to the recent flow of good news which suggests the economy will have skirted a recession,” said Chris Williamson, chief economist at Markit. “The particularly encouraging news is that the improvement in confidence is generating more jobs.”
Draghi Tested as German Pay Deals Add to Euro Divergence Threat (Source: Bloomberg)
Wage moderation in Germany may be coming to an end at precisely the wrong time for European Central Bank President Mario Draghi. As nations from Greece to Spain battle recessions and record unemployment, workers in Germany are winning some of the biggest pay increases in two decades, with public service staff set to gain 6.3 percent more by the end of next year. That’s widening the gaps between Europe’s largest economy and its euro- area peers, making the ECB’s one-size-fits-all monetary policy less effective. While the German wage deals are good news for workers, Draghi is unlikely to be popping the champagne corks,” said Carsten Brzeski, an economist at ING Group in Brussels. “ECB policy is inappropriate for each individual country in the euro area; it’s too loose for Germany and too restrictive for the periphery. It could end up making the divergences even bigger.”
Draghi is facing the possibility of price pressures building in Germany just as they wane in nations that have been pushed into austerity drives by the sovereign debt crisis. Only months after the ECB cut its benchmark interest rate to a record low and pumped more than 1 trillion euros ($1.3 trillion) of cheap cash into Europe’s banking system to stem the crisis, Draghi warned of “upside risks” to inflation and started talking about how to withdraw the emergency measures.
Suu Kyi Win Risks Myanmar Backlash Without Economic Gains (Source: Bloomberg)
Myanmar dissident Aung San Suu Kyi’s sweeping by-election win risks invigorating hardliners opposed to change if she fails to join reformers in implementing policies that boost incomes in one of Asia’s poorest countries. Suu Kyi yesterday called for a “new era” after her National League for Democracy rejoined the political system and claimed victory in 43 of 44 seats it contested in April 1 by- elections. It boycotted a 2010 election won by President Thein Sein’s army-backed party, which along with the military still controls more than 80 percent of parliamentary seats. The victory “will definitely scare a number of people who were expecting the government party would do better than this,” said Hans Vriens, managing partner of Vriens & Partners, a Singapore-based political risk firm. “I don’t think the army is in a position to roll back reforms now, but the reformers have to point to successes, which ultimately means jobs.”
Myanmar lawmakers are pushing to revamp the financial system and attract investment to revive an economy hindered by decades of military rule and sanctions from the U.S. and European Union. The central bank implemented a managed float of its currency yesterday to improve the business climate in the country of 64 million people that borders China and India.
Uruguay’s Credit Ratings Returned to Investment Grade by S&P (Source: Bloomberg)
Uruguay’s credit rating was raised one level by Standard & Poor’s, returning the Latin American country to investment grade for the first time in a decade. S&P lifted Uruguay’s rating to BBB-, the lowest investment grade and in line with Colombia. The outlook is stable. Fitch Ratings and Moody’s Investors Service rate the country one level below investment grade. “The upgrade is based on Uruguay’s sound economic growth prospects and improving external and fiscal indicators, as foreign direct investment strengthens and improves economic diversification,” Buenos Aires-based analyst Sebastian Briozzo said in a statement. “Prudent economic policies in recent years, backed by a broad political consensus, have allowed Uruguay to grow rapidly and reduce its main credit vulnerabilities.”
The country lost its investment grade rating in 2002 after neighboring Argentina defaulted on $95 billion of debt, sparking a run on bank deposits and a currency devaluation in Uruguay. S&P rates Argentina B, five levels below investment grade. Economy Minister Fernando Lorenzo said the investment grade rating “will allow the country to better manage our liabilities.”
