Asian Stocks Fall on U.S. Data Prior to Hong Kong Open (Source: Bloomberg)
Asian stocks fell, pushing the regional benchmark equity index toward a weekly drop, as U.S. economic data signaled the recovery is slowing in the world’s largest economy. James Hardie Industries SE (JHX), an Australian supplier of building materials that gets more than half of its sales from the U.S., slid 1.4 percent in Sydney. LG Chem Ltd. (051910), South Korea’s biggest chemicals maker, sank 6.6 percent in Seoul after its profit dropped 42 percent in the first quarter. JFE Holdings, Inc., the second-largest Japanese steelmaker, slid 3 percent in Tokyo after a report it may increase borrowing to invest in building mills. AIA Group Ltd. may be active today in Hong Kong after the insurer said its value of new business rose.
The MSCI Asia Pacific Index (MXAP) declined 0.3 percent to 124.38 as of 9:34 a.m. in Tokyo before markets open in Hong Kong and China. About five stocks fell for every three that rose and the gauge, which is headed for a 0.5 percent decline this week. In the U.S., reports showed sales of previously owned homes in March unexpectedly fell, while more Americans than forecast filed applications for unemployment benefits last week. “Investors may see poor U.S. economic data as a reason to sell shares in the short term,” said Makoto Sengoku, a Tokyo- based market analyst at Tokai Tokyo Securities Co.
European Stocks Fall as U.S. Home Sales Unexpectedly Drop (Source: Bloomberg)
European stocks fell for a second day as reports showed that sales of previously owned houses dropped and more Americans than forecast filed claims for unemployment benefits. Publicis Groupe SA (PUB) dropped as France’s largest advertising company said growth will slow this quarter. Nokia Oyj tumbled to a 15-year low after reporting an operating loss of 1.34 billion euros ($1.8 billion). SKF AB (SKFA), the world’s biggest maker of ball bearings, rose 4.9 percent after forecasting higher sales in the U.S. and Asia. The Stoxx Europe 600 Index (SXXP) retreated 0.5 percent to 256.51 at the close, after earlier rallying as much as 1 percent. The gauge has lost 2.6 percent so far in April on renewed concern that the euro area’s sovereign-debt crisis will worsen. The Stoxx 600 has still advanced 4.9 percent this year.
“U.S. data continued to disappoint today,” said Craig Erlam, a London-based market analyst at Alpari U.K. “The data wiped out any gains made in the morning from the successful Spanish bond auction. Sentiment is low and it won’t take much to restart the down trend.”
U.S. Stocks Decline as Economic Reports Offset Earnings (Source: Bloomberg)
U.S. stocks retreated for a second day as disappointing economic data and concern over Europe’s debt crisis overshadowed better-than-forecast earnings from companies including EBay Inc. (EBAY) and Morgan Stanley. Alcoa Inc. (AA) and DuPont Co. slid at least 1.2 percent, as investors sold shares of companies most tied to economic growth. Qualcomm Inc. (QCOM) declined 6.6 percent after projecting sales and profit that fell short of estimates. EBay Inc. rallied 13 percent, the most since 2005, as earnings were helped by growth in its PayPal payments business. Microsoft Corp. (MSFT) rose 2.9 percent after regular trading as it reported third-quarter profit that topped analysts’ estimates. The Standard & Poor’s 500 Index lost 0.6 percent to 1,376.92 at 4 p.m. New York time, after yesterday’s 0.4 percent decline. The Dow Jones Industrial Average slipped 68.65 points, or 0.5 percent, to 12,964.10. About 7.4 billion shares changed hands on U.S. exchanges, 9.7 percent above the 30-day average.
“The market is in a data-driven holding pattern,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said in a phone interview. “You’ve got a lot of counter-balancing points. We got some soft economic data, while earnings are beating expectations. Investors are looking at each incremental data point trying to draw conclusions.”
FOREX-Yen pressured by Japan importers; all eyes on Spain
TOKYO, April 19 (Reuters) - The yen inched lower on Thursday after commodity currencies briefly shot up on hopes China will soon ease policy, and as flows from Japanese importers and 'toushin' investment trusts pressured it against the U.S. dollar, traders said.
"The dollar was pushed towards 80 yen this week, but its solid rebound well above 81 yen underscores its underlying strength making it hard for speculators to bet against it," said Bank of Tokyo-Mitsubishi UFJ analyst Teppei Ino.
Yen Drops BOJ Signals Easing; Canada’s Dollar Tumbles (Source: Bloomberg)
The yen fell against most its major counterparts as Bank of Japan (8301) officials signaled they’ll keep acting to stem its strength to spur economic growth. The greenback gained and Canada’s dollar slid after more Americans filed jobless claims last week and a regional manufacturing gauge dropped, increasing demand for the perceived safety of U.S. debt. The pound and Swedish krona climbed as investors bet the Bank of England and the Riksbank will refrain from further monetary easing. “Yen dovishness is here to stay, and they are the only major central bank that is continuing to ease right now,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “Further yen weakness is likely, but probably at a slower pace than we have seen in February and March. U.S. economic prospects were looking extremely strong back then, and now they are looking much more mixed.”
The yen depreciated 0.4 percent to 81.61 per dollar at 5 p.m. New York time and touched 81.74, the weakest level since April 10. The Japanese currency weakened 0.5 percent against the euro to 107.21, after earlier gaining 0.1 percent. The euro rose 0.1 percent to $1.3138 after falling 0.4 percent earlier.
Yen Poised for Weekly Decline on BOJ Easing Prospects (Source: Bloomberg)
The yen was set to decline against most of its 16 major counterparts this week on prospects the Bank of Japan (8301) will add to monetary easing at its next meeting on April 27 to achieve its inflation goal. The currency remained lower following a three-day decline versus the dollar after BOJ Governor Masaaki Shirakawa said in a speech in Washington that Japan still needs monetary stimulus. The euro was 0.3 percent from a 20-month low against the British pound before data today that may show Germany’s business confidence fell this month. Meetings hosted by the International Monetary Fund start today in Washington, where Group of 20 officials are gathering to discuss Europe’s debt crisis. “The indication from BOJ board members over the last week or so has been that they are considering further policy easing,” said Andrew Salter, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The yen has been unambiguously weaker.”
The yen was at 81.65 per dollar as of 10:07 a.m. in Tokyo, little changed from yesterday’s close in New York, having lost 0.9 percent this week. It was at 107.32 per euro from 107.21 and has declined 1.4 percent against the shared European currency since April 13. The 17-nation euro was at 81.90 pence after touching 81.62 pence yesterday, the lowest since August 2010. The euro traded at $1.3143 from $1.3138.
IMF Gets $320 Billion in New Pledges to Raise Resources (Source: Bloomberg)
International Monetary Fund Managing Director Christine Lagarde said she expects more contributions after landing pledges of about $320 billion in her campaign for bigger reserves to combat threats to global growth. “I look at this pot of money as an umbrella,” Lagarde said today on Bloomberg Television’s “InBusiness With Margaret Brennan” in Washington before meetings of the world’s finance chiefs. “There are clouds on the horizon.” Japan, Denmark and Switzerland are among the countries to rally this week to Lagarde’s call for a bigger lending capacity beyond the current $380 billion to shield the world economy against any deepening of Europe’s debt turmoil. Having last month boosted their own defenses beyond $1 trillion, euro-area policy makers are counting on a reinforcing of the IMF to calm financial markets. Spain now sits in the crosshairs with the yield on its 10-year bonds closing in on levels at which Greece, Ireland and Portugal required bailouts.
Hope for Treasury Bailout Profits Rests on Fuzzy Math (Source: Bloomberg)
The U.S. Treasury Department wants the public to believe the government’s bailouts of the financial sector might make money for taxpayers. It’s easy to see why. If the government could show an overall profit, the implication would be that bailouts must be a good thing. Put aside the moral hazard they create, by encouraging reckless behavior. Never mind that the country’s largest too-big-to-fail banks are larger today than when the financial crisis began in 2007. The leaders who pulled off this amazing feat would deserve our praise, and everything will have worked out for the best -- or so goes this line of thought. Whatever logic there is to this reasoning falls apart, however, if the prospect of future gains is false. And sure enough, it probably is.
The Treasury Department a week ago released its latest cost estimates for the government’s numerous crisis-response programs. “Overall, the government is now expected to at least break even on its financial stability programs and may realize a positive return,” the report said. Unfortunately this conclusion rests heavily on wishful thinking and creative accounting, which becomes obvious when you dig into the report’s footnotes.
More Americans Than Forecast Filed Weekly Jobless Claims (Source: Bloomberg)
More Americans than forecast filed claims for jobless benefits and sales of previously owned homes unexpectedly dropped, indicating the almost three-year-old economic expansion may be moderating. Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000. Purchases of homes fell 2.6 percent to a 4.48 million annual rate in March, the National Association of Realtors reported in Washington. Stocks declined as the claims data bolstered Federal Reserve concerns that growth may not be fast enough to sustain improvements in the job market that have helped push unemployment to a three-year low. Other reports today showed that an index of leading indicators rose for a sixth month and consumer confidence improved, while manufacturing in the Philadelphia area grew at a slower pace.
“The economy has slowed a notch,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who is the most accurate forecaster of existing- home sales for the two years through February, according to data compiled by Bloomberg. “We’re just not going to be able to duplicate the growth we saw in the first quarter.”
U.S. Previously Owned Home Sales Unexpectedly Fell in March (Source: Bloomberg)
Sales of previously owned U.S. homes in March unexpectedly fell for the third time in the last four months, showing an uneven recovery in the housing market. Purchases dropped 2.6 percent to a 4.48 million annual rate from 4.6 million in February, the National Association of Realtors reported today in Washington. The median forecast of economists in a Bloomberg News survey called for an increase to 4.61 million. In January, sales at a 4.63 million rate were the strongest since May 2010. Residential real estate remains the economy’s soft spot, challenged by stricter lending standards, lower home values and the threat of more foreclosures. An improved labor market and mortgage rates near historic lows have yet to stoke bigger gains in demand.
“Despite declines in three of the past four months, home resales appear to be on a modest rising trend over the past nine months,” Steven Wood, president of Insight Economics LLC in Danville, California, said in an e-mail to clients. Still, “the large number of distressed properties combined with a substantial shadow inventory of unsold homes has kept downward pressure on home prices, although they may be stabilizing at a low level.”
Index of Leading Economic Indicators in the U.S. Climbed 0.3% (Source: Bloomberg)
The index of U.S. leading indicators rose for a sixth month in March, indicating the world’s largest economy will maintain its expansion. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.3 percent after a 0.7 percent gain in February that was the biggest in 11 months, the New York- based group said today. The median forecast of economists surveyed by Bloomberg News called for a rise of 0.2 percent in March. An improving job market is helping Americans overcome higher fuel expenses and boosting the spending that accounts for about 70 percent of the economy. Strengthening consumer demand will help sustain the more than two-year expansion and make the economy more resilient to a slowdown in Europe. “The momentum is holding up,” Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “Job creation and income growth are positives for economic growth.”
Consumer Confidence in U.S. Rises to Match Four-Year High (Source: Bloomberg)
Household confidence improved last week to match the highest level in four years as more Americans said their finances were in better shape. The Bloomberg Consumer Comfort Index was minus 31.4 in the period ended April 15, compared with minus 32.8 over the previous seven days. The reading equaled that from two weeks earlier as the best since March 2008. Nonetheless, the monthly expectations measure fell from a one-year high, showing concern remains that too many Americans are still unemployed. “The uneven nature of the recovery will likely continue to restrain the type of improvement in consumer sentiment that one would traditionally observe at this point in the expansionary cycle,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
A strengthening job market and leveling off in gasoline prices may keep underpinning confidence, raising the odds that consumer spending will continue to grow and benefit companies like Bed, Bath & Beyond Inc. (BBBY) and Toyota Corp. At the same time, 5 million more Americans are unemployed now than when the recession began in December 2007, showing why cheerier outlooks will be difficult to sustain.
Japan’s Fastest Export Growth in a Year Boosts Outlook (Source: Bloomberg)
Japan reported the fastest export growth in a year and a smaller-than-expected trade deficit, aiding prospects of a sustained recovery in the world’s third- biggest economy. Boosted by car exports to the U.S., outbound shipments rose 5.9 percent in March from a year earlier, exceeding the median estimate in a Bloomberg News survey for a 0.2 percent gain. The deficit was 82.6 billion yen ($1 billion), less than the median forecast for a 223.2 billion yen shortfall. Comparisons are distorted by the earthquake in March 2011. The results support the International Monetary Fund’s estimate earlier this week that Japan’s economy may expand as much as 2 percent this year, boosted by reconstruction spending. Exports have been helped by the yen’s decline after the Bank of Japan boosted monetary stimulus in February, a policy Governor Masaaki Shirakawa said late yesterday in New York he’s “committed” to keeping.
“The key reason for the good result is a solid rebound in exports to the U.S. where cars are selling well,” Yoshimasa Maruyama, chief economist at Itochu Corp. (8001) in Tokyo, said. “Exports to Asia are rebounding, mainly because of the strong recovery in shipping to ASEAN nations.”
Europe Urged to Fix Crisis as G-20 Warns of More Stress (Source: Bloomberg)
Europe’s governments were told the onus for fixing their debt woes still lies with them as the Group of 20 warned the two-year crisis still threatens global growth. With finance chiefs from the G-20 meeting today in Washington, those from Canada and Australia joined the IMF and U.S. in pressing Europe to intensify efforts to quell the turmoil as it spreads to Spain. The G-20 cited “the situation in Europe” first in a list of drags on the world economy, according to a draft statement obtained by Bloomberg News. As she welcomed pledges of about $320 billion for the IMF’s crisis-fighting coffers, IMF Managing Director Christine Lagarde said the lender serves as an emergency backstop and that Europe must protect itself, boost economic growth and cut debt. Italian and Spanish bonds fell yesterday on speculation the crisis is worsening.
“Countries have to take measures,” Lagarde told Bloomberg Television’s “InBusiness With Margaret Brennan” in Washington. “I am in charge of improving the stability and I need to have the umbrella in case the clouds break into a nasty rain.”
Spain, Italy Set for Downgrade Amid Slump, Citigroup Says (Source: Bloomberg)
Spain and Italy will be downgraded by Moody’s Investors Service and Standard & Poor’s this year as the recession and debt crisis worsen, economists and strategists at Citigroup Inc. said. Their credit ratings, along with those of Ireland and Portugal, will be lowered at least one level over the next two to three quarters, Citigroup said in a report published late yesterday. “Deficits will overshoot official forecasts in all the peripheral Economic Monetary Union countries this year and in 2013,” according to the report. “Spain will need to enter some form of a Troika program” this year, Citigroup economists including London-based Juergen Michels wrote, referring to the aid package for Greece monitored by the European Union, the European Central Bank and the International Monetary Fund. Prime Minister Mariano Rajoy has repeatedly said that Spain won’t need a bailout.
The warning comes amid a flare-up of Europe’s debt crisis. Investor confidence in the debt of Europe’s so-called peripheral countries has eroded since Spain’s announcement on March 2 that it won’t meet its deficit target this year, helping to push up bond yields. Yesterday, Italy also delayed its goal to balance the budget by one year to 2014.
Spain, France Bonds Fall Amid Renewed Debt Crisis Concern (Source: Bloomberg)
Italian and Spanish bonds led declines among Europe’s higher-yielding government securities amid concern the regional debt crisis is worsening. Italy’s 10-year yields climbed for a second day after a government report showed industrial orders fell more than economists forecast and the Finance Ministry said debt-servicing costs will increase. French bonds dropped after Citigroup Inc. said it expects the nation’s credit rating to be cut over the next two to three years. German bunds advanced as investors sought the safest assets. Spain and France both raised the amounts they targeted at debt auctions today. “There is a quite significant widening” of Italian and Spanish yields relative to German bunds, said Peter Schaffrik, head of European interest-rate strategy at Royal Bank of Canada in London. “Those two economies have low growth and widening budgets. For euro-investors bunds are the natural safe haven.”
The Italian 10-year bond yield rose 11 basis points, or 0.11 percentage point, to 5.59 percent at 4:18 p.m. London time. The 5 percent bond maturing in March 2022 fell 0.795, or 7.95 euros per 1,000-euro ($1,312) face amount, to 96.10.
German Business Confidence May Drop for First Time in Six Months (Source: Bloomberg)
German business confidence probably declined for the first time in six months in April as the resurgent sovereign debt crisis threatens to curb growth. The Ifo institute’s business climate index, based on a survey of 7,000 executives, will drop to 109.5 from 109.8 in March, according to the median forecast of 40 economists in a Bloomberg News survey. Ifo releases the report at 10 a.m. in Munich today. Europe’s largest economy contracted in the final quarter of last year as spending cuts across the euro region, its largest export market, damped demand for its goods. Germany may have avoided a recession as companies increased sales to faster- growing markets in Asia and unemployment at a two-decade low bolstered consumption at home.
“The German economy stabilized in the first quarter but the sovereign debt crisis is flaring up again and companies are getting reluctant to place orders,” said Aline Schuiling, senior economist at ABN Amro NV in Amsterdam. “Once the euro- area economy starts growing moderately from the middle of the year, domestic demand will pick up quite quickly in Germany.” Ifo’s gauge of the current situation may have slipped to 117 from 117.4 and an index measuring executives’ expectations probably fell to 102.3 from 102.7, the survey of economists shows.
Myanmar Seeks Japan Debt Forgiveness in Tokyo Trip (Source: Bloomberg)
Myanmar President Thein Sein today begins his first visit to Japan as head of state seeking a debt- forgiveness deal that opens the way for his nation’s biggest creditor to resume financing roads, bridges and ports. Thein Sein and Japanese Prime Minister Yoshihiko Noda will discuss a “comprehensive solution” to resolving Myanmar’s debt when they meet in Tokyo tomorrow, said Masaru Sato, assistant press secretary at Japan’s foreign ministry. Japan pledged 403 billion yen ($4.9 billion) in loans to Myanmar between 1967 and 1987, according to foreign ministry data. The nation of 64 million between India and China wants a share of the investment that Japanese exporters have poured into neighbor Thailand, with Honda Motor Co. among companies expressing interest. Thein Sein has overseen a shift toward democracy over the past year that’s boosting the odds of re- engagement with developed nations that limited trade with Myanmar during five decades of military dictatorship.
“This is a first step” for strengthening business ties, said Yoshito Asano, director of the government-affiliated Japan External Trade Organization in Bangkok, referring to Thein Sein’s trip and the debt talks. “Many companies have an interest in Myanmar but so far there are not many concrete plans to establish factories.”
Brazil Signals Rate May Fall to Record on Global Fragility (Source: Bloomberg)
Brazil signaled it may cut its benchmark interest rate to a record low as a still “fragile” global economy eases inflationary pressures in the world’s sixth-biggest economy. The bank, in a statement accompanying its decision last night to lower the Selic rate by 75 basis points to 9 percent, said risks of missing its 4.5 percent inflation target are “limited” as the global outlook remains “disinflationary.” In the minutes to its meeting last month, the bank said borrowing costs would probably stabilize “slightly above” the record low 8.75 percent. “The guidance they so explicitly gave in the minutes was very clear, and now they are disavowing it,” said Alberto Ramos, chief Latin America economist at Goldman Sachs & Co. “It’s a very dovish statement -- there’s no signal whatsoever that this is the end of the cycle.”
While yesterday’s move, the second-straight 75 basis point cut, was anticipated by 67 of 69 analysts in a Bloomberg survey, economists had been forecasting that it would be the bank’s last this year. That’s because inflation, even after slowing to a 17- month low of 5.24 percent in March, is expected to stay above the target this year and in 2013.
