Asia Stocks Drop as U.S. Jobs Data Dims Recovery Outlook
Asian stocks fell for a fourth day, the longest losing streak on the regional benchmark since November, after a weaker-than-expected U.S. jobs report cast doubt on the strength of the recovery in the world’s biggest economy, denting the earnings prospects for exporters. Samsung Electronics Co. (005930), which gets a fifth of its revenue in America, slid 1.8 percent after U.S. payrolls grew in March at the slowest pace in five months. Inpex Corp. (1662), Japan’s No. 1 energy explorer, lost 1.7 percent after oil prices fell. Nachi- Fujikoshi Corp. declined 4.3 percent after the bearing maker posted lower profit. The MSCI Asia Pacific Index dropped 0.4 percent to 124.36 as of 10 a.m. in Tokyo, with 10 stocks falling for each that rose.
The measure lost 1.3 percent last week, the biggest weekly decline since the period ended Dec. 16. Volume on Japan’s Nikkei 225 Stock Average was a third below the 30-day intraday average, as markets were shut for public holidays in Hong Kong, Australia, New Zealand, Thailand and Philippines. “We’re seeing markets correct pretty quickly,” said Shintaro Takeuchi, a Tokyo-based portfolio manager at Tokio Marine & Nichido Fire Insurance Co., which oversees about $106 billion. “Companies aren’t willing to boost capital investment, leading to a sluggish rebound in employment. That means companies aren’t confident in a full-scale recovery.”
China’s Stock-Index Futures Drop Before Inflation Report
China’s stock-index futures fell, signaling declines for the benchmark index, after the U.S. added fewer jobs than estimated and economists forecast Chinese inflation quickened last month. Futures on the CSI 300 Index (SHSZ300) expiring in April, the most active contract, lost 0.3 percent to 2,508.20 as of 9:21 a.m. local time. China Merchants Bank Co. (600036) may drop after its plan to raise 35 billion yuan ($5.6 billion) in a rights offer was approved. China Vanke Co. and Poly Real Estate Group Co., the biggest developers, may advance after the Xinhua News Agency reported banks are offering discounts on first-time mortgages. “Inflation may rebound a bit and that’ll prevent the government from using more monetary stimulus to boost the economy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.
The Shanghai Composite Index (SHCOMP) climbed 4.31 points, or 0.2 percent, to 2,306.55 on April 6. The CSI 300 Index rose 0.3 percent to 2,519.83. About 7.3 billion shares changed hands in the Shanghai Composite on April 6, or 17 percent lower than the daily average this year. Thirty-day volatility in the gauge was at 17.9, near the highest in a month. The Shanghai index gained 1.9 percent last week after the China Securities Regulatory Commission increased quotas for qualified foreign institutional investors to $80 billion from $30 billion. For the year, it’s up 4.9 percent on expectations the central bank will lower lenders’ reserve requirements and reduce borrowing costs as economic growth and inflation slow.
Japanese Stock Drop as Europe Debt Crisis Concern Flares
Japanese shares fell a fifth day, with the Nikkei 225 (NKY) Stock Average heading for its longest losing streak since November, as U.S. employers added fewer jobs than expected, damping the outlook for recovery in the world’s biggest economy and hurting the earnings prospects for exporters. Sony Corp. (6758), Japan’s biggest consumer-electronics exporter, lost 2.8 percent as the yen strengthened against the dollar. Inpex Corp. (1605), the nation’s top oil explorer by market value, slid 2 percent after crude prices retreated. Takashimaya Co. declined 2.9 percent after a report the retailer’s president said the department store market will contract. “The job data reduced investors’ optimism,” said Naoki Fujiwara, who helps oversee $6.4 billion at Shinkin Asset Management Co. in Tokyo. “People in the markets are getting more cautious and the mood is growing that the U.S. economy won’t recover so easily.”
The Nikkei 225 fell 1.3 percent to 9,560.84 as of 10:46 a.m. in Tokyo. Volume on the gauge was more than a third lower than the 30-day average. The broader Topix Index lost 1.3 percent to 815.42, with more than seven times as many shares declining as advancing. All of its 33 industry groups on the gauge declined.
U.S. Stock Futures, Dollar Fall While Treasuries Rise on Jobs
U.S. stock futures fell, signaling more Standard & Poor’s 500 Index losses following the biggest weekly retreat of the year, as the dollar declined while Treasuries and gold rose after American employers added fewer jobs than forecast in March. S&P 500 futures slumped 1.1 percent to 1,374.90 following the benchmark index’s 0.7 percent weekly loss. All stock exchanges in the U.S., western Europe, Canada and Brazil were closed for Good Friday. Russia’s Micex Index retreated 1.7 percent. The dollar lost as much as 1.3 percent to 81.31 yen, the lowest in a month. Yields on 10-year Treasuries (USGG10YR) fell 13 basis points to 2.05 percent. Gold for immediate delivery rose 0.6 percent to $1,640.35 an ounce. ields on 10-year Treasuries dropped the most this year after the U.S. Labor Department said employers added 120,000 jobs, the fewest in five months and less than the median economist forecast of 205,000 in a Bloomberg survey. The amount had exceeded 200,000 for three straight months.
“This is a real shock,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion, said in a telephone interview. “Everybody is so hung up on the 200,000 increase.” Equity traders had 45 minutes to react to the jobs report in the U.S. Futures linked to the S&P 500 and Dow Jones Industrial Average stopped at 9:15 a.m. New York time on CME Group Inc.’s Chicago Mercantile Exchange.
U.K. Stocks Climb as Mining Rally Reverses FTSE 100 Drop
U.K. stocks rose, with the FTSE 100 Index rebounding from its largest decline since November, as a rally in basic-resource shares reversed earlier losses. BHP Billiton Ltd. (BHP) and Rio Tinto Group, the biggest London- listed mining companies, advanced more than 1 percent as copper climbed. British Sky Broadcasting Group Plc (BSY) sank to a seven- month low as the pay-TV broadcaster in which Rupert Murdoch’s News Corp. owns a 39 percent stake said its Sky News channel approved the hacking of e-mails on two occasions. The FTSE 100 gained 19.9 points, or 0.4 percent, to 5,723.67 at the close in London. The gauge declined as much as 0.7 percent earlier as British manufacturing output unexpectedly contracted and concern about the euro-area debt crisis resurfaced. The FTSE All-Share Index rose 0.3 percent today, while Ireland’s ISEQ slipped less than 0.1 percent. Western European markets are closed tomorrow and April 9 for Easter.
“Investors will be pleased to see that we’re going into the Easter break without adding to yesterday’s big declines,” said Angus Campbell, the head of market analysis at Capital Spreads in London. “Negative sentiment turned positive as Spanish bond yields retreated following an earlier spike, allowing investors to dip back into beaten-up equities.”
U.S. Employment Growth Seen Rebounding From Slump
The March setback in hiring will prove temporary as the U.S. economy, in its third year of expansion, now is better equipped to overcome a slowdown in Europe and rising fuel costs, economists said. Growing sales and profits may give business leaders the confidence to take on staff at a faster clip than last month’s 120,000 gain in payrolls, according to analysts at JPMorgan Chase & Co. and Deutsche Bank Securities Inc. They say the data don’t signal a repeat of 2010 and 2011 -- when hiring was derailed after promising starts by concern about government debt, energy costs and natural disasters -- even though the total was weaker than all the estimates from 80 economists surveyed by Bloomberg News.
That sentiment isn’t universal, with economists at Bank of America Corp. among those projecting employment will slump in the second half of the year as the government prepares to put the brakes on spending to tame the budget deficit. Joseph LaVorgna and Carl Riccadonna at Deutsche Bank counter that income gains will unleash increases in household spending and hiring that will boost job creation by an average of at least 200,000 a month for all of 2012. “While the economy is going to do OK, we think jobs are going to be doing better than OK,” Bruce Kasman, chief economist at JPMorgan in New York, said in an April 6 conference call following the Labor Department’s employment report. “We don’t think today’s number represents the trend,” he said, affirming a forecast that payrolls will rise by 200,000 workers on average for the rest of the year.
Prices Probably Rose at a Slower Pace: U.S. Economy Preview
The cost of living in the U.S. probably rose at a slower pace in March as increases in energy expenses subsided, economists said before a report this week. Consumer prices advanced 0.3 percent after climbing 0.4 percent in February, according to the median of 58 estimates in a Bloomberg News survey ahead of the Labor Department’s April 13 release. Other figures may show prices paid by producers also grew more slowly and that the nation’s trade deficit was little changed from the widest gap since October 2008. An economic expansion that probably slowed at the beginning of the year may be encouraging companies to hold the line on prices. Limited pricing power would enable Federal Reserve policy makers to keep interest rates near zero to spur the pace of the economic recovery and boost employment.
“With growth barely managing to keep pace with trend, underlying inflation should remain modest this year,” Michael Hanson, an economist at Bank of America Corp. in New York, said in an April 5 research note to clients. “The main risk to the inflation forecast remains a sharp increase in oil prices.”
Bernanke Warning on Jobs Vindicated by March Payrolls Report
The Labor Department’s March jobs report may have proved Federal Reserve Chairman Ben S. Bernanke right after he warned that payroll gains might slow as companies adjust staffing for a period of moderate growth. Employers in the U.S. added 120,000 jobs in March, the fewest in five months, the report showed yesterday. The unemployment rate fell to 8.2 percent from 8.3 percent the month before as people stopped looking for work. The March report followed the best six-month streak of job growth since 2006. “Chairman Bernanke should be putting out the world’s biggest ‘I told you so,’” said Phillip Swagel, an economist at the University of Maryland and former assistant Treasury secretary in George W. Bush’s administration. “It must give the Fed some comfort that they continue to have this accommodative stance.”
The data probably won’t trigger a decision to buy more assets when Fed policy makers next meet April 24-25, nor will it alter their commitment to keep the benchmark lending rate around zero until late 2014, said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
Consumer Credit in U.S. Rose Less Than Forecast in February
U.S. consumer borrowing rose less than forecast in February, restrained by a drop in credit-card debt, according to a Federal Reserve report. Credit increased $8.7 billion, the least in four months, after a revised $18.6 billion gain in January that was more than initially estimated, Federal Reserve figures showed today in Washington. Economists projected a $12 billion rise in the measure of revolving and non-revolving loans for February, according to the median forecast in a Bloomberg News survey. Smaller gains in borrowing indicate American households are continuing to pay down debt or are less optimistic about their finances. Another report today showed the economy created fewer jobs than forecast in March, a sign it may take time before consumers become more comfortable taking on debt.
“Credit card borrowing has slowed down a bit,” Aneta Markowska, a senior U.S. economist at Societe Generale in New York, said before the report. “Clearly there was a run up in the past few months related to the holidays, and we’ve seen a pretty meaningful slowdown. The process of repairing consumers’ balance sheets still has farther to go.”
Employment Increase in U.S. Trails Most-Pessimistic Forecasts
Hiring by American employers trailed the most pessimistic forecasts in March, casting doubt on the strength of the expansion now in its third year. The 120,000 increase in payrolls reported by the Labor Department in Washington yesterday was the smallest in five months. The data also showed the unemployment rate fell to 8.2 percent as people left the labor force, while workers put in fewer hours. The figures, which followed an average 246,000 increase in payrolls in the previous three months, underscored Federal Reserve Chairman Ben S. Bernanke’s concern that stronger economic growth is required to keep powering the labor market. Yesterday’s report showed a drop in weekly earnings that bodes ill for consumer spending at a time when Americans are paying more at the filling station.
“Not welcome news,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The economy needs a lot of momentum to get through the latest headwind of the return of $4 gasoline, and this report is distinctly on the slow side.”
Treasuries Gain After Jobs Increase Falls Below Forecasts
Treasuries rose, with 10-year note yields falling the most since December, as less-than-forecast job growth renewed speculation the Federal Reserve will provide more monetary stimulus to support the economic recovery. The benchmark note gained for a third consecutive week after the Labor Department said yesterday that employers added 120,000 jobs in March and the jobless rate fell to 8.2 percent. Treasuries rallied on concern the European debt crisis is worsening as rising borrowing costs make it more difficult to finance deficits in nations such as Spain. The U.S. will sell $66 billion in three-, 10-, and 30-year debt next week. “Things were not quite as rosy as previous numbers led us to believe, and we are seeing some payback for that,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee. “One number won’t determine the Fed’s action, but it does give them more cover to remain dovish.”
The benchmark 10-year note yield fell this week 15 basis points, or 0.15 percentage point, to 2.05 percent in New York, according to Bloomberg Bond Trader prices. Thirty-year bond yields fell 12 basis points, the most since December, to 3.22 percent.
China Consumer Prices Rise Faster-Than-Estimated 3.6%
China’s inflation accelerated more than forecast in March amid rising wages and a fuel-price increase, signaling that policy makers may exercise caution in adding stimulus to boost growth. Consumer prices rose 3.6 percent from a year earlier after gaining 3.2 percent in February, the National Bureau of Statistics said on its website today. That was more than the median 3.4 percent estimate in a Bloomberg News survey of 33 economists. Today’s data show Premier Wen Jiabao’s officials may need to remain alert to the risk of inflation bouncing back even after price increases stayed below the government’s 4 percent target for a second month. Authorities will seek to “prevent a rebound” in consumer prices and manage inflationary expectations, Wen said during a visit to southern China from April 1 to 3.
“Inflation will pick up further as China’s economy warms up again,” Liu Li-Gang, Hong Kong-based head of Greater China Economics at Australia & New Zealand Banking Group Ltd., said before the release. Rising wage costs and the government’s policies to boost consumption will add upward pressure on prices, he said.
China’s Stock-Index Futures Drop Before Inflation Report
China’s stock-index futures fell, signaling declines for the benchmark index, after the U.S. added fewer jobs than estimated and economists forecast Chinese inflation quickened last month. Futures on the CSI 300 Index (SHSZ300) expiring in April, the most active contract, lost 0.3 percent to 2,508.20 as of 9:21 a.m. local time. China Merchants Bank Co. (600036) may drop after its plan to raise 35 billion yuan ($5.6 billion) in a rights offer was approved. China Vanke Co. and Poly Real Estate Group Co., the biggest developers, may advance after the Xinhua News Agency reported banks are offering discounts on first-time mortgages. “Inflation may rebound a bit and that’ll prevent the government from using more monetary stimulus to boost the economy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.
The Shanghai Composite Index (SHCOMP) climbed 4.31 points, or 0.2 percent, to 2,306.55 on April 6. The CSI 300 Index rose 0.3 percent to 2,519.83. About 7.3 billion shares changed hands in the Shanghai Composite on April 6, or 17 percent lower than the daily average this year. Thirty-day volatility in the gauge was at 17.9, near the highest in a month. The Shanghai index gained 1.9 percent last week after the China Securities Regulatory Commission increased quotas for qualified foreign institutional investors to $80 billion from $30 billion. For the year, it’s up 4.9 percent on expectations the central bank will lower lenders’ reserve requirements and reduce borrowing costs as economic growth and inflation slow.
Japan, China to ‘Consult Closely’ on Support for IMF, Azumi Says
Japan and China will seek to coordinate on supporting the International Monetary Fund’s effort to contain Europe’s debt crisis, Japanese Finance Minister Jun Azumi said. “Rather than make decisions independently, we’ve agreed to consult each other very closely” on financial contributions to the IMF, Azumi told reporters today after meeting with Chinese Finance Minister Xie Xuren in Tokyo. The finance ministers of Asia’s two largest economies met before the Group of 20 countries gathering later this month in Washington. One topic at the G-20 meeting will be increasing cooperation with the IMF. The Fund needs more resources to shield the global economy from threats of strains on Europe’s financial system, rising oil prices and high unemployment, Managing Director Christine Lagarde said this week.
“It won’t probably be smooth for G-20 nations to hammer out details for their contributions to the IMF,” Tomoko Fujii, a senior foreign-exchange strategist at Bank of America Merrill Lynch in Tokyo, said before Azumi and Xie met. “It’s important for Japan to check China’s intention on this, while China probably wants to increase its political influence if it puts up money.”
Japan Current Account Moving to Surplus Adds Support for Yen
Japan swung to a current-account surplus in February after a record deficit in January, lending support to a currency that officials have sought to weaken to spur the recovery of the world’s third-biggest economy. The excess in the widest measure of trade was 1.18 trillion yen ($14.5 billion) the Ministry of Finance said in Tokyo today. The median estimate of 25 economists surveyed by Bloomberg News was for a surplus of 1.12 trillion yen. The yen is rebounding even after interventions by the finance ministry and monetary easing by the Bank of Japan helped to bring the currency down from October’s post World War II high against the dollar. Strength in the yen cuts exporters’ profits, dragging on the recovery from last year’s tsunami, earthquake and nuclear crisis. The yen traded at 81.49 per dollar, up 0.2 percent as of 9:47 a.m. in Tokyo, strengthening for a fourth straight day.
“I hope the BOJ will strengthen monetary easing to leave the yen somewhere between 85 and 90,” Masayuki Kichikawa, Tokyo-based chief economist at Merrill Lynch Japan, said before today’s data was released. The bank’s officials are holding a monetary policy meeting today and tomorrow.
Korea Says No Plan to Curb Record Foreigner Bond Buying
South Korea, which suffered a sudden outflow of capital in 2008, has no plans to curb record purchases of its debt by foreign funds and will sell 30-year bonds aimed at such investors, a finance ministry official said. The level of foreign investment is “manageable” and no curbs are planned, Shin Hyung Chul, director general of the treasury bureau at the Ministry of Strategy and Finance, said in an April 5 interview in Gwacheon, south of Seoul. The government will “gradually increase” issuance of securities maturing in a decade or more to stabilize fundraising, he said. “Foreign investors, especially insurers, have shown keen interest in the 30-year notes, and we expect the sale to be done smoothly,” Shin said. “Overseas central banks including Norway and Switzerland have entered the South Korean debt market recently, and these moves reflect their positive views on the Korean economy.”
Overseas funds raised holdings of the nation’s bonds to a record 88.5 trillion won ($78.2 billion) last month, the Financial Supervisory Service said on April 4. The ministry plans to sell 30-year debt from September, raising 400 billion won each month, the government said in January. The won fell 26 percent in 2008 when the subprime mortgage crisis shook financial markets, the worst performer among Asian currencies. Overseas funds sold a net 43.2 trillion won of South Korean stocks in 2008, while cutting holdings of the nation’s debt by 991 billion won, government data shows. The won will gain 4.8 percent by year-end to 1,080 per dollar, according to the median forecast in a Bloomberg News survey.
South Korean Producer Prices Rise at Slowest Pace in Two Years
South Korean producer inflation rose at the slowest pace in two years in March on a decline in agricultural product prices. Prices (KOPPIYOY) climbed 2.8 percent from a year earlier, the smallest gain since March 2010, after a 3.5 percent increase in February, the Bank of Korea said in a statement in Seoul today. They rose 0.6 percent from February. The Bank of Korea will keep its benchmark rate at 3.25 percent for a 10th straight month on April 13, according to all of nine economists surveyed by Bloomberg News. Consumer prices rose 2.6 percent in March from a year earlier, the slowest pace in 20 months, a government report showed on April 2.
U.K. Home Prices to Reach Pre-Recession Levels in ’16, CEBR Says
House prices in the U.K. will rise to levels in late 2007 before the country’s economy sank into a recession, the Centre for Economics and Business Research said. Shortage of housing relative to demand, improved affordability and mortgage availability will probably support house prices in the U.K., the London-based research group said in a report today. It sees unemployment as a negative factor. “House prices have been pretty stable over the past two years,” said Shehan Mohamed, an author of the report. “Lending for housing was 74.5 billion pounds ($118 billion) in 2011 and we forecast that this will rise to 109.9 billion pounds by 2016.” It forecast house prices will rise 0.8 percent this year, compared with a contraction of 1.3 percent in 2011. That’s a downward revision from 1.6 percent growth projected in November.
