Asia Stocks Swing Between Gain, Loss on U.S. Data, Europe (Source: Bloomberg)
Asian stocks swung between gains and losses after a bigger-than-expected increase in U.S. retail sales countered concern that Europe’s sovereign-debt crisis is spreading after the cost to insure Spanish and Portuguese debt advanced. The MSCI Asia Pacific Index (MXAP) rose 0.05 point, or less than 0.1 percent, to 124.23 as of 9:18 a.m. in Tokyo, after rising as much as 0.1 percent. About the same number of stocks rose as fell prior to the Hong Kong market open. Japan’s Nikkei 225 Stock Average swung between a gain of 0.1 percent and a loss of 0.2 percent, while Australia’s S&P/ASX 200 Index increased 0.2 percent. South Korea’s Kospi Index slid 0.1 percent.
Most Japan Stocks Rise as U.S. Retail Sales Top Estimates (Source: Bloomberg)
April 17 (Bloomberg) -- Most Japanese stocks rose after a bigger-than-expected increase in U.S. retail sales countered lingering concern that Europe’s sovereign-debt crisis is spreading. The Nikkei 225 Stock Average (NKY) gained less than 0.1 percent to 9,474.27 as of 9:05 a.m. in Tokyo, with about 10 stocks rising for every nine that fell. The gauge dropped 1.7 percent yesterday, the most since April 4. The broader Topix index added 0.1 percent to 804.95 today after closing at the lowest level in two months yesterday.
Most U.S. Stocks Rise on Better-Than-Forecast Sales Data (Source: Bloomberg)
Most U.S. stocks advanced, following the biggest weekly loss for the Standard & Poor’s 500 Index in 2012, as a stronger-than-forecast increase in retail sales bolstered optimism about the world’s largest economy. Citigroup Inc. (C) climbed 1.8 percent after fixed-income trading revenue more than doubled. Procter & Gamble Co. (PG) gained 1.5 percent as the world’s largest consumer-products company lifted its quarterly dividend. Apple Inc. (AAPL) slumped 4.2 percent, the most since October, on concern mobile-phone carriers may cut subsidies for the iPhone. Mattel Inc. (MAT), the largest toymaker, dropped 9.1 percent as sales trailed analysts’ estimates.
About six stocks rose for every five that fell on U.S. exchanges at 4 p.m. New York time, as 6.4 billion shares changed hands, or 6 percent below the three-month average. The S&P 500 decreased 0.1 percent to 1,369.57. The Dow Jones Industrial Average gained 71.82 points, or 0.6 percent, to 12,921.41. The Nasdaq Composite Index (CCMP), which has advanced 15 percent in 2012, retreated 0.8 percent to 2,988.40 today. “The U.S. economic recovery looks intact,” Eric Teal, Raleigh, North Carolina-based chief investment officer at First Citizens Bancshares Inc., which oversees $4.5 billion, said in a telephone interview. “Earnings will continue to grind higher. That explains the market resilience.”
Apple Falls for Fifth Day on Concern of Carrier Subsidy Cut (Source: Bloomberg)
Apple Inc. (AAPL) shares fell for a fifth day amid speculation that demand for the iPad may wane and that mobile-phone carriers will cut subsidies for the iPhone, eroding the profitability of Apple’s best-selling products. Verizon Wireless, a U.S. partner of Apple, said last week that it will begin charging customers $30 to upgrade to a new phone. The move suggests mobile-phone service providers may take other steps, including trimming subsidies, to keep sales of the iPhone from eating into their margins, said Walter Piecyk, an analyst at BTIG LLC in New York. “Operators are trying to fight back against the impact that Apple is having on their business,” Piecyk, who last week reduced his rating on Apple to neutral from buy, said in an interview on Bloomberg TV’s “InBusiness With Margaret Brennan.” Apple fell 4.2 percent, the largest decline since Oct. 19, after rising 49 percent this year before today. The shares closed at $580.13, the lowest price since March 13.
Goldman Likes Stocks as Morgan Stanley Sees Danger (Source: Bloomberg)
Treasury yields below zero on an inflation-adjusted basis for only the second time since Dwight D. Eisenhower’s presidency have split Wall Street’s biggest firms, underscoring the relative-value dilemma equity investors face following the biggest first-quarter rally in 14 years. For Goldman Sachs Group Inc. (GS)’s Peter Oppenheimer, U.S. stocks offer a once-in-a-generation buying opportunity after yields on 10-year Treasuries fell to about minus 0.3 percent when the rate of inflation is deducted. Morgan Stanley’s Adam Parker advises caution, saying Federal Reserve stimulus that has led the fixed-income rally can’t last forever. Last month’s jobs growth, which was lower than estimated by any economist in a Bloomberg survey, underscored the economy’s reliance on the Fed’s help since the financial crisis began in 2007. At the same time, record-low yields on Treasuries are driving investors to riskier assets such as stocks, said Howard Ward at Gamco Investors Inc. in Rye, New York.
“Capital will chase returns,” Ward, who helps oversee $35 billion, said in an April 11 phone interview. “There’s a tremendous shortage of investment income and there are fewer places to go to generate that,” he said. “Stocks are to a large extent the only game in town for earning a respectable return.”
European Stocks Rise; International Power Shares Advance (Source: Bloomberg)
European stocks rebounded from their longest stretch of weekly losses since August as companies from International Power Plc (IPR) to Royal KPN NV rallied amid an increase in takeover activity. International Power jumped 3.2 percent after GDF Suez SA agreed to pay 6.4 billion pounds ($10 billion) for the stake in the U.K. utility that it doesn’t already own. KPN climbed after saying it’s reviewing its Belgian mobile-phone unit. French banks paced declining shares. The Stoxx Europe 600 Index rose 0.3 percent to 254.26 at the close in London, paring an earlier rally of as much as 1.2 percent. The gauge fell last week, for a fourth week of losses, amid renewed concern the euro area’s debt crisis is worsening and as China’s economic growth slowed.
“There is volatility out there at the moment,” said Kevin Gardiner, head of global investment strategy at Barclays Wealth in an interview on Bloomberg Television. “When the dust settles, the underlying profitability of average large quoted companies is actually pretty resilient. Investors will eventually come back in and capitalize on that opportunity.”
GLOBAL MARKETS-Spanish debt fears send euro lower
LONDON, April 16 (Reuters) - The euro slumped to a two-month low against the dollar and safe-haven German bond prices hit a record high on Monday as concerns about Spain stirred fears the euro zone debt crisis could get worse.
"Europe will be the focal point for the market this week, especially the results of Spanish bond auctions that may provide clues on how deep this latest crisis is running," said Choi Chang-ho, an analyst at Shinhan Investment & Securities.
FOREX-Euro weak around $1.30 as Spanish debt costs mount
LONDON, April 16 (Reuters) - The euro fell broadly on Monday, dropping to a two-month low against the dollar and the safe-haven yen and reaching a 1-1/2 year trough against the British pound, as Spain rekindled worries about the fragile state of the euro zone economy.
"Pressure is building up on the euro with concerns over Spain dominant," said Jane Foley, senior currency strategist at Rabobank. "The focus will be on Spanish bond issuances this week and while the euro is holding around $1.30, the question is how long more can it be supported around these levels."
Euro Declines Before Spanish Sales, German Confidence (Source: Bloomberg)
The euro fell versus most of its 16 major counterparts before Spain sells securities after borrowing costs climbed to the highest level this year, boosting concern Europe’s debt crisis is spreading. The 17-nation currency weakened against the dollar before reports that may show confidence among investors in Germany, Europe’s biggest economy, fell this month after climbing to a 21-month high in March. Australia’s dollar remained lower after a two-day decline versus its U.S. counterpart before the Reserve Bank releases minutes of this month’s meeting today. “My feeling is that it’s still overall a bearish mood with regard to the euro,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. The debt sale “will give us a first indication as to how currently people view Spain.”
The euro lost 0.2 percent to $1.3117 at 9:51 a.m. in Tokyo after reaching $1.2995 yesterday, the lowest level since Feb. 16. The shared currency fell 0.1 percent to 105.62 yen after dropping 0.2 percent to 105.67 yesterday. The U.S. dollar was little changed at 80.52 yen after declining yesterday to 80.30, the weakest since Feb. 29.
U.S. Retail Sales Climb More Than Forecast on Jobs: Economy (Source: Bloomberg)
Retail sales in the U.S. rose more than forecast in March as Americans snapped up everything from cars and furniture to clothes and electronics. The 0.8 percent gain was almost three times as large as projected and followed a 1 percent advance in February, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for an increase of 0.3 percent. An improving job market is giving households confidence to sustain spending in the face of higher gasoline costs, boosting sales at chains such as Gap Inc. (GPS) and Target Corp. (TGT) Strengthening consumer demand raises the odds that the world’s largest economy will weather a recession in Europe and slower growth in China.
Households “have the income to propel their purchases now that we’re seeing job growth,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit and the third- best forecaster of retail sales for the 24 months ended in March, according to data compiled by Bloomberg. “They have adjusted to the higher price of fuel. The economy now needs to build on its own momentum.”
U.S. Homebuilder Confidence Fell in April to Three-Month Low (Source: Bloomberg)
Confidence among U.S. homebuilders fell in April to a three-month low, a sign the industry is still trying to gain its footing. The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 25 this month from 28 in March, the Washington-based group said today. Economists projected no change in the index, according to the median forecast in a Bloomberg News survey. Readings below 50 mean more respondents said conditions were poor. Borrowing costs close to all-time lows, population growth that may spur more demand for homes and cheaper properties are helping stabilize residential real estate. At the same time, the recovery may take time as the prospect of more foreclosed homes returning to the market competes with new construction.
“Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase,” Barry Rutenberg, chairman of the National Association of Home Builders and a builder from Gainesville, Florida, said in a statement. “Our members are realigning their expectations somewhat until they see more actual signed sales contracts.”
No Double-Dip Deja Vu Seen for U.S. Economy (Source: Bloomberg)
Deja vu it ain’t. The U.S. looks unlikely to suffer the same sort of swoon this year as the one in 2011: Household, bank and company balance sheets are stronger, and the shocks hitting the economy so far are weaker, with retail sales rising more than forecast as gasoline prices show signs of slipping from an early-year increase. Consumer-loan delinquencies fell across the board in the fourth quarter, the first time that’s happened in eight years, according to the American Bankers Association in Washington. Banks have reduced leverage, with financial-institution debt as share of the economy at its lowest level in a decade. And corporations are flush with cash: The ratio of liquid assets to short-term liabilities is the highest since 1954, based on data compiled by the Federal Reserve.
“It feels eerily similar to last year, but fundamentally it’s quite different,” said Joseph LaVorgna, chief U.S. economist for Deutsche Bank Securities in New York. He sees the economy growing 3 percent in the fourth quarter from a year earlier, compared with 1.6 percent in 2011. That’s good news for the stock market and for companies such as Discover Financial Services. (DFS) Net income for the three months ended Feb. 29 rose 36 percent to a record $631 million, or $1.18 a share, the Riverwoods, Illinois-based credit-card issuer said March 22.
Banks Seen Dangerous Defying Obama’s Too-Big-to-Fail Move (Source: Bloomberg)
Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government. Five banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. -- held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve.
Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did in 2008 with the Fed-assisted rescue of Bear Stearns Cos. by JPMorgan and with Citigroup and Bank of America after the Lehman Brothers bankruptcy, the largest in U.S. history. “Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.
Fed’s Bullard Says U.S. Growth May Reach 3% This Year (Source: Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard estimated U.S. economic growth will quicken from a range of 2.5 percent to 2.7 percent during the first quarter to 3 percent for the entire year. The economy is “on track” and Fed “policy can stay on hold for now,” Bullard said today to reporters after a speech in Logan, Utah. The central bank will probably need to tighten policy during the “last part of 2013,” he said. Central bankers are holding off on increasing monetary accommodation unless the economic expansion falters or prices rise at a rate slower than their 2 percent target, according to minutes of their March 13 meeting. Bullard is the last scheduled Fed official to speak before Chairman Ben S. Bernanke and other policy makers meet April 24-25.
The Fed’s expansion of its balance sheet to $2.87 trillion through purchases of securities known as quantitative easing risks eventually spurring inflation, Bullard said in response to audience questions at the Jon M. Huntsman School of Business at Utah State University. “The Fed is taking a lot of risk with its very large balance sheet,” he said. “It could turn into a lot of inflation if we don’t play our cards right.”
U.S. Minimum Wage Lower Than in LBJ Era Needs A Raise (Source: Bloomberg)
Here’s an unhappy observation about the minimum wage: Congress last increased the rate in stages in 2006, topping it out at $7.25 an hour in 2009, or $15,080 a year. That amount, when adjusted for inflation, is actually lower than what a minimum-wage worker earned in 1968 and is too meager to offer anyone the chance to climb out of poverty, let alone afford basic goods and services. About 10 states are now considering raising the rate, and Senator Tom Harkin, an Iowa Democrat, is proposing to increase the federal rate in three increments to $9.80 an hour in 2014. Many of the initiatives under consideration would smartly tie the minimum wage to the cost of living, meaning that those workers’ wages would finally keep up with inflation.
The past recession was brutal on jobs, household wealth and economic growth. But wages were hit hard, too. Real average hourly earnings have fallen below the level of 2009. Although wages often lag job growth after a recession, the pace of income gains this time around is far slower than in previous recoveries.
Most Stocks Rise as Banks Gain; Treasuries Trim Advance (Source: Bloomberg)
Most U.S. stocks rose, following the biggest weekly decline of the year, as Citigroup Inc. led banks higher and stronger-than-forecast growth in retail sales bolstered optimism in the economy. Treasuries trimmed earlier gains and the Dollar Index retreated. The Standard & Poor’s 500 Index (SPX) fell less than 0.1 percent to 1,369.57 at 4 p.m. in New York while the Dow Jones Industrial Average increased 71.82 points to 12,921.41. About six stocks rose for every five that fell on U.S. exchanges. Ten-year Treasury yields lost less than one basis point to 1.98 percent and the dollar weakened against 10 of 16 major peers as the euro rose 0.5 percent to $1.3142, reversing a 0.6 percent earlier loss. Spanish 10-year bond yields increased nine basis points to 6.07 percent and jumped as much as 18 basis points.
Citigroup led U.S. banks higher after reporting fixed- income trading revenue more than doubled from the fourth quarter. Commerce Department data showed retail sales increased 0.8 percent in March, almost triple the median forecast of economists in a Bloomberg survey. Equities recovered after most stocks fell earlier as gains in Spanish and Italian bond yields fueled concern Europe’s debt crisis was worsening. “The U.S. is a better economic story,” said Madelynn Matlock, who helps oversee about $14.6 billion at Huntington Asset Advisors in Cincinnati. “Retail sales showed that consumers are not being overwhelmed by gas prices. On top of that, corporate earnings should be at least respectable.”
Companies in U.S. Boosted Inventories in February as Sales Rose (Source: Bloomberg)
Companies in the U.S. increased inventories in February as sales picked up, indicating factories will probably keep receiving orders as businesses rebuild stocks. The 0.6 percent rise followed a revised 0.8 percent advance the prior month, the Commerce Department reported today in Washington. The median projection in a Bloomberg News survey called for a 0.6 percent gain. Sales climbed 0.7 percent after a 0.4 percent gain in January. Inventory swings may diminish in the first half of 2012 after helping the economy grow in the fourth quarter at the fastest pace in more than a year. Another report today showed retail sales rose almost three times more than projected, showing consumers are weathering the jump in gasoline prices heading into the second quarter.
“As domestic demand holds up, then we could possibly see inventories build as suppliers try to meet the rising demand, so that will certainly add to activity,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said before the report. “Inventories are not going to be the big factor that they were a year or two ago, but they still remain an important factor.” The median forecast for business inventories was based on a Bloomberg survey of 46 economists. Projections ranged from gains 0.4 percent to 1 percent. January’s figure was revised from the 0.7 percent increase originally reported.
World Bank Chooses U.S. Nominee Kim as its New President (Source: Bloomberg)
Jim Yong Kim was chosen to be president of the World Bank, becoming the first physician and Asian-American to head the lender after emerging markets failed to rally around a challenger to the U.S. monopoly on the job. The World Bank board of directors said today it chose Dartmouth College President Kim to succeed Robert Zoellick, whose term ends June 30. A specialist in HIV/AIDS with a Ph.D. in anthropology, Kim, 52, faced rival bids from Nigeria and Colombia. The candidacies “enriched the discussion of the role of the president and of the World Bank Group’s future direction,” the board said in an e-mailed statement. “The final nominees received support from different member countries, which reflected the high caliber of the candidates.” Kim, a graduate of Harvard Medical School, breaks the mold of World Bank presidents, who have been drawn from government and finance.
Kim, who was born in Korea and grew up in the U.S., has pledged to be a bridge between developed and advanced economies at the poverty-fighting institution, which committed $57 billion last year on everything from building roads to taking stakes in companies in emerging economies.
China Adds Treasuries for Second Month on Reserve Growth (Source: Bloomberg)
China, the largest foreign U.S. creditor, increased its holdings of U.S. government securities in February for a second month as the country’s foreign-currency reserves resumed rising. Holdings rose by 1.1 percent to $1.18 trillion in China’s first months of consecutive gains in Treasury debt since July, U.S. Treasury Department data released yesterday show. Net foreign purchases of Treasuries (HOLDTOT) rose $41.2 billion, or 0.8 percent, to a record $5.1 trillion, the data show. China’s currency reserves rose 3.9 percent in the first three months of 2012, reversing the first quarterly decline since 1998, according to China’s National Bureau of Statistics. China doubled the trading band of the yuan versus the dollar on April 14, a move that Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, said signals official confidence in the strength of the economy’s expansion.
“If their reserves continue to grow we should see a channel into Treasuries,” said Shyam Rajan, an interest-rates strategist at Bank of America Merrill Lynch in New York, one of the 21 primary dealers that trade with the Federal Reserve. “Foreign demand should continue to be strong given the indications we have had in the first quarter.”
Bank of Korea Urges ‘Orderly’ Exit From Global Monetary Easing (Source: Bloomberg)
Bank of Korea Governor Kim Choong Soo urged major central banks to plan an orderly withdrawal of excess liquidity and said that further easing may hurt emerging economies and the global economic recovery. Extra loosening “could do more harm than good when the financial markets are already flooded with cheap liquidity but remain nonetheless timid in their lending to the private sector,” Kim said in a speech prepared for a lecture at Goethe University in Frankfurt, Germany. Monetary easing by the U.S. Federal Reserve and the European Central Bank has been “highly correlated” with capital inflows and exchange-rate volatility for emerging economies, Kim said. Financial “spillovers” from advanced economies pose risks to investment and growth for nations including South Korea, he said.
Some investors, including Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., are betting that the Fed will embark on a third round of large- scale asset purchases as the U.S. struggles with elevated unemployment. In its first two rounds, the Fed bought $2.3 trillion of bonds from December 2008 to June to avert deflation and spur growth.
RBI Signals Fastest BRIC Inflation Constrains Rate Cuts (Source: Bloomberg)
India's central bank said price pressures must be restrained even as policy needs to shift to help growth, signaling that elevated inflation will limit the magnitude of interest-rate cuts forecast to begin today. “Monetary policy has to recognize the need for keeping inflation expectations anchored in an environment of significant upside risks to inflation, while shifting the balance of policy to arrest the deceleration in growth momentum,” the Reserve Bank of India said yesterday in a review of the economy ahead of its rate decision in Mumbai due at 11 a.m. today. Costlier credit, policy gridlock and a weaker global recovery have sapped India’s expansion, spurring predictions of reductions in borrowing costs. At the same time, an oil-price climb, rupee weakness and government spending may fan price increases, with inflation slowing less than estimated in March to 6.89 percent.
“They are still concerned about inflation,” said Prasanna Ananthasubramanian, an economist at ICICI Securities Primary Dealership Ltd. in Mumbai. “It kind of reinforces that the room for big cuts is not there,” while not ruling out a rate cut today, he said.
Spain’s Austerity Threatens Economy, HSBC Says: Tom Keene (Source: Bloomberg)
Spain’s efforts to cut its debt burden and calm the fears of lenders are increasing the country’s risk of a deeper recession and financial crisis, HSBC Holdings Plc’s Madhur Jha said. Spain needs more external financial help to “buy time” for its government to implement reforms to its housing market, pension system and labor market, Jha said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. Credit-default swaps insuring Spanish government debt rose today to a record in London, according to CMA, signaling deterioration in investor perceptions of credit quality. “People are beginning to realize the more and more austerity you impose on an economy, the worse it becomes in terms of growth and also in terms of debt sustainability,” said Jha, an HSBC Bank global economist based in London. “There needs to be more in terms of actual financial support.”
Yields on Spain’s 10-year bonds climbed to 6.16 percent today, the highest level since Dec. 1, before trading at 6.07 percent. Credit-default swaps jumped to 521, CMA prices showed. They have jumped from 431 at the start of the month and 380 at the end of 2011. Prime Minister Mariano Rajoy said today Spain must cut its budget deficit to maintain access to financing.
