Asian Stocks Rise After N. Korea Rocket May Have Failed (Source: Bloomberg)
Asian stocks rose for a second day after South Korea and Japan said a rocket launch by North Korea today may have failed and Federal Reserve policy makers signaled interest rates will remain low. Toyota Motor Corp., Asia’s biggest carmaker, advanced 0.9 percent in Tokyo. Fanuc Corp., which supplies automation equipment to mainland factories, climbed 4 percent ahead of a report due today on China’s economic growth. BHP Billiton Ltd., Australia’s No. 1 oil producer and the world’s largest miner, rose 2.1 percent after crude prices advanced. The MSCI Asia Pacific Index gained 0.8 percent to 124.92 as of 9:40 a.m. in Tokyo, with almost five shares rising for each that fell. For the week, the measure was little changed after gains in the last sessions made up for earlier losses that came amid concern that Europe’s debt crisis has spread to Spain.
“North Korea is a pest we’ve gotten used to,” said Prasad Patkar, who helps oversee about $1 billion at Platypus Asset Management Ltd. in Sydney. “Markets see this as posturing rather than as a genuine threat.”
South Korean Won, Stocks Gain as North’s Launch Failed (Source: Bloomberg)
South Korea’s won rebounded from a three-month low and stocks rallied as the government said a rocket launch by North Korea probably failed. The won gained 0.6 percent to 1,133.45 per dollar as of 9:24 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,131.25 earlier, a one-week high. The Kospi stock index gained 0.9 percent to 2,004.51. North Korea fired the rocket from its Sohae Satellite Launching Station at about 7:39 a.m. today, South Korean Defense Ministry spokesman Kim Min Seok said at a televised press briefing in Seoul. The launch appears to have failed, South Korea and Japan said. “Investors are just shrugging off this launch,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion. “The news came out before the market opened that the rocket launch failed, so investors didn’t have to worry about it.”
The Standard & Poor’s 500 Index added 1.4 percent in New York yesterday as the U.S. policy makers signaled borrowing costs will stay low. Government bonds were little changed before the central bank’s monetary policy review today. The Bank of Korea will keep borrowing costs unchanged at 3.25 percent for a 10th month, according to all 13 economists surveyed by Bloomberg News. Results will be announced around 10 a.m. local time.
Japan Stocks Rise After Reports N. Korean Rocket Launch Failed (Source: Bloomberg)
April 13 (Bloomberg) -- Japanese stocks rose for a second day, paring weekly losses, after Japan and South Korea said North Korea’s rocket launch today may have failed. Shares also rose after the U.S. Federal Reserve signaled interest rates will remain low. Fast Retailing Co. (9983), Asia’s biggest clothier, jumped 6.9 percent after forecasting record profit. Toyota Corp., a carmaker that counts North America as its biggest market, rose 0.9 percent. Fanuc Corp., which provides robotics for Chinese factories, surged 3.9 percent added 1.1 percent ahead of a report due today on mainland economic growth. The Nikkei 225 Stock Average (NKY) rose 1.2 percent to 9,643.22 as of 9:24 a.m. in Tokyo, heading for a 0.5 percent drop this week. The broader Topix Index gained 0.8 percent to 816.10 with three stocks rising for each that fell.
S.Korean Stocks Rise as North’s Launch May Have Failed (Source: Bloomberg)
South Korea’s stocks rose for the first time in four days after the nation and Japan said North Korea’s rocket launch this morning may have failed. South Korea’s benchmark Kospi index gained 0.7 percent to 2,000.10 as of 9:30 a.m. Seoul time. North Korea fired the rocket from its Sohae Satellite Launching Station at about 7:39 a.m. today, South Korean Defense Ministry spokesman Kim Min Seok said at a televised press briefing in Seoul. The launch appears to have failed, South Korea and Japan said. “Investors are just shrugging off this launch,” Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $28 billion. “The news came out before the market opened that the rocket launch failed, so investors didn’t have to worry about it.” The North has said the projectile was to carry a satellite into orbit as part of celebrations marking the centennial of state founder Kim Il Sung, and was not a long-range missile test in violation of United Nations sanctions.
U.S. Stocks Post Biggest Two-Day Advance in 2012 on Fed (Source: Bloomberg)
U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest two-day rally in 2012, on policymakers’ signals that interest rates will remain low. Commodity shares gained the most among 10 S&P 500 (SPXL1) groups. The Dow Jones Transportation Average, a proxy for the economy, added 2.2 percent. Hewlett-Packard Co. (HPQ) surged 7.2 percent, the biggest advance since 2009, after Gartner Inc. said the global personal-computer industry grew in the first quarter as the company remained a market leader. Google Inc. (GOOG) added 1.8 percent at 4:54 p.m. New York time as profit beat estimates. The S&P 500 advanced 1.4 percent to 1,387.57 at 4 p.m. New York time, rising 2.1 percent in two days. The Dow Jones Industrial Average climbed 181.19 points, or 1.4 percent, to 12,986.58. About 6.3 billion shares changed hands on U.S. exchanges today, or 8 percent below the three-month average.
“We have the ingredients for a better tone to the market,” said Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “The bar was set low, we might have a good earnings season and a couple of Fed officials are providing some rhetoric. If there’s an erosion of economic conditions, it’s likely that we’re going to see action by the Fed.”
European Stocks Gain as Fed Signals Low Interest Rates (Source: Bloomberg)
European stocks climbed the most in more than a week, led by a rally in mining companies, after the Federal Reserve signaled U.S. interest rates will remain low to support economic growth. Rio Tinto Group and BHP Billiton Ltd. (BHP) climbed with copper amid speculation China may release a stronger-than-forecast gross domestic product figure tomorrow. Hays Plc (HAS) surged 8.9 percent after the recruitment company forecast profit will be near the top end of analysts’ estimates. Banco Espirito Santo SA (BES) lost 11 percent after saying it will sell shares. The Stoxx Europe 600 Index (SXXP) rallied 1.2 percent to 257.36 at the close of trading, the biggest gain since April 2. The gauge has retreated for three straight weeks amid mounting concern about the region’s debt crisis and as a U.S. report showed employers added fewer jobs in March than forecast.
“What we saw last week was just a correction,” said Morten Kongshaug, chief equity strategist at Danske Bank A/S in Copenhagen, who has an overweight rating on European equities. “The debt crisis remains my biggest worry, but first-quarter earnings have a lot of potential to calm investors, especially if they show European lenders are doing alright.”
Asia Shares May Be Volatile on North Korea Rocket Launch (Source: Bloomberg)
Asian share trading may be volatile today after North Korea fired a rocket in defiance of international pressure. Japanese and Australian stock futures rose ahead of the report of the rocket launch after Federal Reserve policy makers signaled interest rates will remain low. South Korea’s government “will closely watch financial markets and other developments,” Kim Yi Tae, director of the international finance bureau at the Ministry of Strategy and Finance in Seoul, said by telephone today. American depositary receipts of Toyota Corp., Asia’s biggest carmaker that counts North America as its No. 1 market, rose 0.8 percent from the closing share price in Tokyo. Those of Komatsu Ltd. (6301), Japan’s largest construction machinery maker that gets 23 percent of its sales in China, added 1.7 percent ahead of a report due today on China’s economic growth. ADRs of Woodside Petroleum Ltd. (WPL), Australia’s second-biggest oil and gas producer, climbed 0.9 percent as crude prices advanced.
Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in June closed at 9,600 in Chicago yesterday, up from 9,540 in Osaka, Japan. They were bid in the pre-market at 9,600 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index added 0.6 percent today. New Zealand’s NZX 50 Index rose 0.6 percent in Wellington.
GLOBAL MARKETS-Euro, shares nervous ahead of Italian debt sale
LONDON, April 12 (Reuters) - The euro dipped against the dollar and European shares inched higher as nervousness grew ahead of an Italian debt sale that will gauge whether concerns over Spain are spreading to other debt-laden euro zone nations.
"Should the Italian auction disappoint, we could see the euro reverse some of its gains," said Ankita Dudani, G-10 currency strategist at RBS Global Banking, who expects the bond sale to go through without much of a hitch.
North Korea Launches Rocket in Defiance of Warnings (Source: Bloomberg)
North Korea defied international condemnation and launched a rocket today that may have failed minutes after liftoff, South Korea and Japan said. “North Korea’s missile appears to have fallen after breaking up into multiple pieces,” South Korean Defense Ministry spokesman Kim Min Seok said at a televised briefing in Seoul. He said the rocket was fired at about 7:39 a.m. local time today and flew for “several minutes.” South Korean President Lee Myung Bak called an emergency Cabinet meeting. The benchmark Kospi index rose as much as 0.8 percent, while the won gained 0.7 percent. North Korea’s government has said the projectile would carry a satellite into orbit to mark the April 15 centennial of state founder Kim Il Sung, and was not a long-range missile test in violation of United Nations sanctions. A botched launch may put pressure on new leader Kim Jong Un to repair the country’s image by conducting a nuclear test, which South Korea warned this week was likely.
“I’m not surprised the North Koreans launched and I’m not surprised it failed,” said James Acton, a senior associate in the nuclear policy program at the Carnegie Endowment for International Peace in Washington. “I will also not be surprised if, in the next few months, they test a nuclear weapon.”
FOREX-U.S. stock index futures signal early gains
U.S. stock index futures pointed to a higher open on Wall Street with futures for the S&P 500 up 0.55 percent, Dow Jones futures up 0.42 percent and Nasdaq 100 futures up 0.59 percent at 0734 GMT.European stocks inched higher in morning trade, although the gains were limited by simmering worries over the region's debt crisis ahead of a key bond auction by Italy, at which 3-year borrowing costs are set to rise by a full percentage point from a month ago.
Dollar Set for Weekly Loss Versus Peers Before Inflation Report (Source: Bloomberg)
The dollar headed for a weekly loss versus most of its major peers before data today forecast to show gains in U.S. consumer prices slowed, feeding speculation the Federal Reserve will keep an accommodative policy. The greenback traded 0.4 percent from a six-week low against the yen on prospects Fed Bank of New York President William C. Dudley may reiterate that he supports the central bank’s pledge to hold interest rates low through late 2014. The yen erased earlier gains after South Korea said the North attempted to launch a rocket today. Singapore’s dollar touched a one-month high after a rebound in economic growth prompted the central bank to tighten monetary policy to curb inflation. “Expectations for further easing are a factor that weighs on the dollar,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “Easing expectations have emerged in part because the U.S. recovery is slower than the Fed thinks it should be.”
The dollar was little changed at 80.90 yen at 9:31 a.m. in Tokyo, after sliding to 80.57 on April 11, the weakest since Feb. 29. It is set for a 0.9 percent drop this week. The U.S. currency fetched $1.3191 per euro from $1.3188, and has dropped 0.7 percent since April 6. Singapore’s currency climbed to S$1.2469 per dollar, the most since March 2, before trading at S$1.2477, or 0.5 percent higher than the close yesterday.
Unemployment Claims in U.S. Rises to Two-Month High (Source: Bloomberg)
More Americans than forecast filed applications for jobless benefits last week, reinforcing concern among Federal Reserve policy makers that the labor-market recovery will be slow to develop. Unemployment claims increased 13,000 in the week ended April 7 to 380,000, the highest since Jan. 28, the Labor Department reported today in Washington. The median forecast in a Bloomberg News survey called for 355,000 claims. Other reports showed consumer confidence held near a four-year high and the trade gap narrowed more than projected. The claims data, coming on the heels of last week’s weaker- than-forecast payroll number, raise the possibility that the job gains that drove unemployment down to a three-year low last month will moderate. Fed Vice Chairman Janet Yellen and Fed Bank of New York President William C. Dudley said over the past 24 hours that they support keeping the central bank’s main interest rate low through late 2014 to help reduce joblessness.
“There’s a modest recovery in the labor market, but still a ways to go,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York.
Yellen Says Jobs Outlook Warrants Accommodative Policy (Source: Bloomberg)
Two of the Federal Reserve’s top policy makers endorsed the central bank’s view that borrowing costs are likely to stay low through late 2014 as the Fed misses its goal for full employment and inflation remains in check. “I consider a highly accommodative policy stance to be appropriate in present circumstances,” Vice Chairman Janet Yellen said yesterday in a speech in New York. “I haven’t seen any set of information that should suggest to me we should change that view,” William C. Dudley, president of the Federal Reserve Bank of New York, said today in Syracuse, New York. Central bankers next meet in two weeks to debate policy for an economy that Dudley and Yellen said may be sapped by government spending cuts and the European debt crisis. An unexpected increase in claims for jobless benefits highlighted Fed concerns that the labor market is weakening after payroll growth in March was the slowest in five months.
At the same time, policy makers gave no sign that a third round of large-scale assets purchases, known as quantitative easing, is imminent, said John Ryding, a former Fed researcher who is chief economist at RDQ Economics LLC in New York.
U.S. Producer Costs Minus Food, Fuel Rise More Than Forecast (Source: Bloomberg)
Wholesale prices in the U.S. excluding food and fuel rose more than forecast in March, led by a pickup in the costs of light trucks and soaps. The so-called core producer price index climbed 0.3 percent after a 0.2 percent rise, Labor Department figures showed today in Washington. Economists projected a 0.2 percent gain, according to the median estimate in a Bloomberg News survey. The overall gauge was little changed after a 0.4 percent rise. Fuel costs advanced more slowly last month, supporting the Federal Reserve’s view that the recent surge in energy prices will be temporary. With diminished inflationary pressure from energy, producers will probably find less reason to pass expenses to consumers, who are facing slow income growth.
“Energy prices typically rise quicker than they did this particular month,” Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “Looking at the overall trend for producers, there doesn’t seem to be any sign of a major pickup in finished good prices.”
Trade Gap in U.S. Narrows More Than Forecast as Imports Drop (Source: Bloomberg)
The trade deficit in the U.S. narrowed more than forecast in February as imports fell by the most in three years, reflecting the smallest amount of crude oil purchases in 15 years and a drop-off in demand for Chinese goods. The gap shrank 12 percent to $46 billion, the smallest since October, from a revised $52.5 billion in January, the Commerce Department in Washington said today. The median estimate of 73 economists surveyed by Bloomberg News called for a deficit of $51.8 billion in February. Purchases of foreign goods decreased by 2.7 percent, the biggest decline since February 2009. Exports barely rose to reach a record.
The Chinese Lunar New Year holiday may have contributed to the slump in imports, indicating demand will probably rebound as a strengthening U.S. labor market bolsters consumer spending. At the same time, sales overseas by American companies may moderate as parts of Europe stagnate and China slows, a sign international commerce will be less of a source of strength for the world’s largest economy. “As domestic demand begins to gain some momentum you should start to see imports pick up,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut. “It appears that the drop in imports was reflective of the Chinese New Year. We’ve assumed slower export growth based on global growth slowing in 2012.” At the same time, he said, “it doesn’t appear that exports are likely to be a significant drag on the U.S. economy.”
Fed’s Dudley Says Jobs Report Damps Upbeat Economic Data (Source: Bloomberg)
Federal Reserve Bank of New York President William C. Dudley said the economy may be gaining strength even as the weakest job growth in five months highlights risks to growth. “The incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established,” Dudley said, speaking to business leaders at the Syracuse Technology Garden in Syracuse, New York and repeated in an identical speech at Syracuse University later this morning. Yet “it is still too soon to conclude that we are out of the woods, as underlined by the March labor-market release,” he said, adding he still supports holding the Fed’s main interest rate close to zero through late 2014. The Federal Open Market Committee plans to meet April 24-25 to debate policy for an economy described as growing at a “modest to moderate” pace in the Fed’s Beige Book survey released yesterday.
Fed officials, mandated by Congress to achieve maximum employment, confront an 8.2 percent jobless rate that Dudle y, FOMC vice chairman, said is “unacceptably high.” Dudley said in response to an audience question that he agrees with the Fed’s March 13 statement backing low rates through at least late 2014. “I haven’t seen any set of information that would suggest to me we should change that view,” he said.
Treasuries Snap Loss on Speculation Price Gains Slowed (Source: Bloomberg)
Treasuries snapped a two-day loss before a government report that economists said will show the cost of living in the U.S. rose at a slower pace in March. Thirty-year Treasuries, among the most sensitive to inflation because of their long maturity, returned 2.7 percent this month as of yesterday, according to Bank of America Merrill Lynch indexes. The broad market returned 0.9 percent, the figures show. Treasuries didn’t respond to a rocket launch in North Korea. “The rally has further to go,” said Hiromasa Nakamura, who invests in Treasuries at Mizuho Asset Management Co. in Tokyo, which has the equivalent of $40.7 billion in assets. Consumer prices “will be subdued.” Benchmark 10-year notes yielded 2.04 percent as of 9:30 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due in February 2022 changed hands at 99 5/8. Thirty-year bonds yielded 3.2 percent.
China’s New Yuan Loans Surge Ahead of Today’s GDP Report (Source: Bloomberg)
China’s new yuan loans were the most in a year and money-supply growth unexpectedly accelerated after Premier Wen Jiabao moved to bolster the economy by cutting banks’ required reserves and helping small companies get funding. Local-currency-denominated loans were 1.01 trillion yuan ($160.1 billion) in March, the People’s Bank of China said yesterday, the biggest surprise above forecasts in more than a year. M2, the broadest measure of money supply, grew 13.4 percent from a year earlier. China’s foreign-exchange reserves, the world’s largest, rose to a record $3.31 trillion as of March 31 after dropping for the first time in more than a decade in the fourth quarter. The report may reassure investors that the nation will avoid a deeper slowdown in economic growth. Government data due today are set to show gross domestic product probably expanded 8.4 percent in the three months ended March 31, the least in 11 quarters.
“Policy makers have taken preemptive measures to ensure the growth slowdown doesn’t become excessive,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “The message for the rest of the world is China will not have a hard landing and will generate demand for your exports.”
New Loan Surge Bolsters Stocks as Renren Climbs: China Overnight (Source: Bloomberg)
Chinese equities listed in New York posted their biggest daily jump in three months, buoyed by social media stocks, on signs looser monetary policy is already bolstering lending in the world’s second-largest economy. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 2.5 percent to 103.76 yesterday in New York, the steepest gain since Jan. 10. Social network operator Renren Inc. (RENN) surged a five-month high while Sina Corp. (SINA), which runs a Chinese Twitter-like service, gained the most in a month as the prospect of an initial public offering by Facebook Inc. draws investors to companies in the same sector.
Chinese lenders added 1.01 trillion yuan ($160.1 billion) of new loans in March, the most since January 2011 and more than all 28 analysts surveyed by Bloomberg estimated, central bank data yesterday showed. The People’s Bank of China has lowered the amount major banks must set aside as reserves twice since November to spur lending as a global slowdown looms. Policy makers also doubled the amount foreigners are allowed to invest in China’s capital markets on April 4 to lure more investment. “There seems to be more liquidity coming into the system from things like more Chinese bank lending, and other measures they took recently,” Dave Lutz, head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, said by phone yesterday. The increase in lending “is a piece of the puzzle, and the puzzle right now is acting like they’re easing. That’s typically very good for the stocks.”
Shirakawa Pledges Japan Easing Amid Political Pressure (Source: Bloomberg)
Bank of Japan Governor Masaaki Shirakawa pledged to continue to add monetary stimulus amid growing calls from politicians for the central bank to do more to end deflation. “The BOJ will pursue powerful easing” to help overcome deflation and put the economy on a sustainable growth path, Shirakawa said at a branch manager meeting in Tokyo today, reaffirming the stance. Stimulus measures announced Feb. 14 drove down the yen, aiding exporters. Ruling party lawmaker Tsutomu Okubo said yesterday further stimulus by the BOJ would weaken the yen more effectively than currency intervention, an indication politicians will continue to press the central bank to expand its asset purchases. The BOJ refrained from easing policy at the meeting on April 10, fueling calls from DPJ lawmakers including Takeshi Miyazaki for them to take “bold and large-scale” action later this month.
“It’s obvious that the central bank’s policies have more influence over the currency than intervention,” Okubo, a Democratic Party of Japan lawmaker, said in an interview in Tokyo yesterday, citing the yen’s depreciation of more than 4 percent against the dollar since the BOJ’s February decision.
India’s Industrial Output Rises Less Than Estimated (Source: Bloomberg)
Indian industrial production rose less than predicted in February as weaker overseas demand and the highest interest rates since 2008 curbed output, with January’s figure revised lower because of a data error. Production (INPIINDY) at factories, utilities and mines advanced 4.1 percent from a year earlier, the Central Statistical Office said in a statement in New Delhi today. The median of 36 estimates in a Bloomberg News survey was for a 6.7 percent gain. January’s reading was cut to 1.1 percent from 6.8 percent after an error was found in sugar output calculations, the office said. The Reserve Bank of India, which reviews policy on April 17, has signaled readiness to reduce borrowing costs to bolster domestic spending and counter export threats from easing Chinese expansion, slower U.S. jobs growth and Europe’s debt crisis. At the same time, the monetary authority has flagged inflation risks from oil prices, a weaker rupee and government spending.
“The central bank will cut interest rates next week, even though volatility takes away the efficacy of basing policy decisions on just this data,” said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd. in Mumbai.
Indonesia Extends Pause in Rate Cuts as Price Risk Persists (Source: Bloomberg)
Indonesia’s central bank left its benchmark interest rate unchanged for a second month as inflation risks persist even after the government was forced to postpone an increase in subsidized fuel prices. Bank Indonesia kept the reference rate at 5.75 percent, Governor Darmin Nasution said at a press conference in Jakarta today. The decision was predicted by all 21 economists in a Bloomberg News survey. Policy makers cut the rate in February. Inflation in Southeast Asia’s largest economy accelerated in March for the first time in seven months, and lawmakers have rejected an immediate fuel-cost increase while giving the government power to act if Indonesian crude exceeds the budget assumption of $105 a barrel by 15 percent over six months. The central bank said today it will take steps to counter any temporary impact on price pressures.
“We expect Bank Indonesia to hold the policy rate at 5.75 percent for the time being, given the uncertainty over the fuel price hike and inflation,” Chua Hak Bin, an economist at Bank of America Merrill Lynch in Singapore, said in a note. “Monetary tightening via reserve requirement hikes and narrowing of the interest-rate corridor, rather than via the BI policy rate, is likely the preferred first course of action.”
Singapore GDP Rebounding Prompts Faster Currency Gains (Source: Bloomberg)
Singapore’s economic growth rebounded last quarter, prompting the central bank to unexpectedly tighten monetary policy by allowing faster gains in its currency to damp inflationary pressures. Gross domestic product rose an annualized 9.9 percent in the three months through March 31 from the previous quarter, when it dropped 2.5 percent, the Trade Ministry said in a statement today. The median of 12 estimates in a Bloomberg News survey was for a 6.8 percent gain. The Monetary Authority of Singapore, which uses the island’s dollar to manage inflation, said it will increase “slightly” the slope of the currency trading band and raised the inflation forecast for this year.
Singapore’s stance contrasts with Asian central banks from Indonesia to Thailand which have avoided raising borrowing costs in recent weeks even as the threat of inflation prompted them to end interest-rate cuts. The Singapore dollar is the region’s best-performing currency this year as investors bet the central bank will tolerate a stronger exchange rate to curb price pressures that it said was more persistent than expected. “The balance of risks has tilted firmly to inflation,” Wai Ho Leong, a senior regional economist at Barclays Capital in Singapore, said before the report. “Meanwhile, growth risks have lessened.”
ECB Seen Favoring Bond Buying Over Bank Loans as Crisis Deepens (Source: Bloomberg)
The European Central Bank will restart its controversial government bond purchases rather than offer banks another round of unlimited three-year loans as the sovereign debt crisis worsens, a survey of economists shows. Of 22 economists polled this week, 17 predicted the ECB will be forced to resume the Securities Markets Program (ECBCSMP), while only one forecast it will offer another batch of three-year cash. Nine said the central bank may consider shorter maturity loans of one or two years. “Market stresses will eventually force the ECB to restart the bond program, but it’s not imminent,” said Ken Wattret, chief euro-area economist at BNP Paribas in London, who participated in the survey conducted April 11-12. “Trying to get consensus on the council for it will be difficult.”
The bond purchases have split the ECB’s Governing Council, with German policy makers in particular arguing they blur the line between monetary and fiscal policy. The program was mothballed a month ago after the ECB’s 1 trillion euros ($1.3 trillion) of three-year loans reversed a sell-off in Italian and Spanish bonds that threatened to splinter the 17-nation euro region.
Lagarde Cuts IMF Funding Request as Economic Risks Abate (Source: Bloomberg)
International Monetary Fund Managing Director Christine Lagarde said she will scale down her request for $600 billion of additional resources as threats to the global economy diminish. “Some of the dramas that were envisaged at the end of 2011 or very beginning of 2012 not only have not materialized,” but some “good news” has “restored a little bit of confidence,” Lagarde said in Washington today. The IMF is reassessing risks, “which will bring me to probably reassess a lower number of additional resources needed.” Europe’s handling of its debt crisis has slowed Lagarde’s attempt to increase the fund’s lending power as countries including Brazil, China and Canada awaited more efforts to stem the turmoil before pitching in. While euro nations have pledged to pitch in 150 billion euros ($231 billion), the U.S., the fund’s largest shareholder, has refused to join in.
With European governments’ recent move to increase their crisis defenses, Lagarde said she hopes to make “real progress” on getting additional funding when the IMF’s 187 member nations meet in Washington next week. While data indicate economic improvement in economies such as the U.S., she singled out a worsening of the European debt turmoil as the largest risk to global growth.
U.K. Trade Gap Widened as Car Exports Dropped to U.S., China (Source: Bloomberg)
The U.K. trade deficit widened to the most in three months in February as exports of cars and heavy machinery fell, especially to the U.S., China and Russia. The goods-trade gap widened to 8.77 billion pounds ($14 billion) from a revised 7.88 billion pounds in January, the Office for National Statistics said today in London. The median of 18 forecasts in a Bloomberg News survey was for a deficit of 7.65 billion pounds. Exports fell 3.4 percent while imports were unchanged. Prime Minister David Cameron is in Asia this week, leading a trade and diplomatic mission seeking to boost commercial ties with the region. The government hopes exports can bolster the British economy as manufacturers cope with rising unemployment and inflation that’s reducing demand at home.
“Concern persists that U.K. exports will be limited in the near term at least by muted global growth,” Howard Archer, an economist at IHS Global Insight in London, said before the report. “Meanwhile, moderate domestic demand is likely to limit U.K. imports over the coming months.” Britain’s trade deficit with countries outside the European Union widened to 5.02 billion pounds in February from 3.72 billion pounds in January. Exports to those countries fell by 8.8 percent to 11.7 billion pounds.
Australian Employers Added More Workers Than Forecast (Source: Bloomberg)
Australian payrolls rose more than economists forecast in March, capping the best quarter since 2010, led by financial and manufacturing states Victoria and New South Wales. The local currency reached a one-week high. Payrolls rose by 44,000, a statistics bureau report showed in Sydney today, almost seven times the median estimate for a 6,500 increase in a Bloomberg News survey of 24 economists. The jobless rate stayed at 5.2 percent, compared with expectations for a rise to 5.3 percent. Reserve Bank Governor Glenn Stevens signaled last week he may end a three-month pause and resume lowering rates next month if weaker-than-forecast growth slows inflation, even as a pipeline of resource projects spurs hiring by companies including BHP Billiton Ltd. (BHP) to meet Chinese demand. Traders priced in 88 basis points of rate reductions in the next year after today’s data, down from 94 percent yesterday, a Credit Suisse Group AG index showed.
“Numbers like today are a bit of a reality check” on market expectations for the scale of rate cuts this year, said Su-Lin Ong, head of Australian economic and fixed-income strategy at RBC Capital Markets in Sydney. “I don’t think it changes the much bigger picture that the labor market is soft.”
