Asian Exporters Fall on New Zealand, U.S., Europe Jobs (Source: Bloomberg)
Asian exporters fell as jobless rates in Europe and New Zealand climbed and U.S. companies added fewer jobs than economists estimated, fueling concern the global economy is slowing. LG Display Co. (034220), the world’s No. 2 maker of liquid-crystal displays, sank 3.2 percent in Seoul. Hyundai Motor Co., South Korea’s biggest carmaker, slid 2.1 percent. Fisher & Paykel Appliances Holdings Ltd., a maker of refrigerators and washing machines that gets about 30 percent of sales from North America and Europe, fell 2.7 percent in Wellington. Westpac Banking Corp. added 0.9 percent after Australia’s second-biggest lender posted higher first-half profit. “Europe will continue to remain the risk for global equity investors,” Diane Lin, a fund manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Sydney. “The next big issue will be the slowing economic growth and how it affects the underlying stability” for earnings growth in Asia.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) dropped less than 0.1 percent to 444.05 as of 8:48 a.m. in Hong Kong, with about the same number of shares rising and falling. Japanese markets are closed today for a holiday. The regional gauge has risen 2.5 percent in the past seven days following moves to stimulate economic growth in Japan and Australia and amid signs manufacturing output in U.S. and China is improving.
Foreigners Sell Indian Equities in April as Tax Concerns Weigh (Source: Bloomberg)
Foreign funds turned net sellers of Indian stocks in April, the first month of withdrawals in 2012, deterred by proposed changes in tax rules in the fourth-largest equity market in Asia outside Japan. Offshore investors sold a net $102.6 million of local equities last month, data compiled by the market regulator yesterday showed. Funds, who were net buyers in each of the previous three months, have invested a net $8.76 billion into Indian shares this year. “Long-term investors into India aren’t increasing their exposure as the horizon isn’t clear,” A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte. in Singapore, which has been investing in India since 1995 and has about $400 million in Indian assets, wrote in an e-mail. “First, there is uncertainty on tax. Second is the continuing depreciation of the rupee given weak economic fundamentals.”
Finance Minister Pranab Mukherjee proposed in March to introduce the General Anti-Avoidance Rule, or GAAR, to curb evasion of taxes by companies through misuse of tax treaties with other countries. Foreign funds are concerned the new rule may apply to their holdings of domestic shares, prompting U.S. trade and lobby groups to raise the matter in an April 17 letter to U.S. Treasury Secretary Timothy F. Geithner, who discussed the plans last month with Mukherjee.
Emerging Stocks Advance to 3-Week High on Manufacturing (Source: Bloomberg)
Emerging-market stocks rose to a three-week high after the pace of manufacturing picked up in China last month, boosting Asian information and technology companies, and Brazil’s Bovespa erased earlier losses. The MSCI Emerging Markets Index (MXEF) climbed 0.4 percent to 1,029.83 as of 4:30 p.m. in New York. Asustek Computer Inc. (2357) rallied to the highest level since May 2008 in Taiwan. OGX Petroleo & Gas Participacoes SA (OGXP3) rose the most in a week in Sao Paulo after its founder, billionaire Eike Batista, said he’s considering selling another stake in his EBX Group. Brazil’s Bovespa (IBOV) added 1 percent, paring earlier losses of as much as 0.4 percent. The final reading of Chinese manufacturing data from HSBC Holdings Plc (HSBA) and Markit Economics rose to 49.3 today from a preliminary 49.1 reported April 23 and a final 48.3 in March, signaling that a rebound in the world’s second-biggest economy may help to offset constraints on global growth from austerity measures in Europe.
In the U.S., the Institute for Supply Management’s factory index climbed to 54.8 in April from 53.4 a month earlier. “There is very little going on right now outside of China,” John-Paul Smith, emerging market strategist at Deutsche Bank AG, said by phone from London today. “The focus is there because of the data about the Chinese economy.”
Dow Average Retreats From Four-Year High on Jobs Data (Source: Bloomberg)
U.S. stocks fell, dragging the Dow Jones Industrial Average down from the highest level since 2007, as data showed companies added fewer jobs than economists projected and euro-region unemployment rose to a 15-year high. Energy and financial shares dropped the most among 10 groups in the Standard & Poor’s 500 Index. Chesapeake Energy Corp. (CHK) tumbled 15 percent after reporting an unexpected loss and saying it may run out of money next year under the weight of the lowest natural-gas prices in a decade. Bank of America Corp. retreated 1.8 percent. Stocks pared their slump as a gauge of homebuilders in S&P indexes advanced to the highest since 2008. The S&P 500 slid 0.3 percent to 1,402.31 at 4 p.m. New York time, after falling 0.9 percent earlier today. The Dow dropped 10.75 points, or 0.1 percent, to 13,268.57. The Nasdaq Composite Index increased 0.3 percent to 3,059.85 as Apple Inc. (AAPL) shares rebounded.
About 6.6 billion shares changed hands on U.S. exchanges, or 1.4 percent below the three-month average. “The labor market is weak at best,” said Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “While we thought that we were gaining some momentum, more recent data suggest that things are sluggish. If we start to see a cascade of negative news, the market is going to be vulnerable.”
European Stocks Drop as U.S. Payrolls Miss Estimates (Source: Bloomberg)
European (SXXP) stocks declined for the second time in three days after reports showed that U.S. employers added fewer payrolls than forecast and euro-area unemployment rose to a 15-year high. Vestas (VWS) Wind Systems A/S slumped to an almost nine-year low after saying it’ll spend more money on turbine maintenance. Banco Santander SA led banks lower as European sovereign-bond yield spreads over German bunds widened. UBS AG (UBSN), the biggest bank in Switzerland, jumped 3.7 percent after first-quarter results beat analysts’ estimates. The Stoxx Europe 600 Index lost 0.4 percent to 257.39 at the close of trading, after earlier climbing as much as 1 percent. The benchmark gauge rose 0.4 yesterday after a report showed U.S. manufacturing expanded in April. All western European markets except the U.K., Ireland and Denmark were closed yesterday for May Day Holiday.
“The employment growth continues, though at a moderate pace,” Ralf Umlauf, head of floor research at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in e-mailed comments. “With regard to the Friday publication of the official jobs report, the indications are mixed. It seems there is a slight potential for disappointment.”
German Stocks Retreat a Second Day as Unemployment Rises (Source: Bloomberg)
German stocks dropped for a second day as an unexpected increase in unemployment in Europe’s largest economy outweighed reports showing manufacturing expanded in the U.S. and China. Deutsche Bank AG and Commerzbank AG (CBK) each fell at least 2.5 percent as southern European bonds dropped. MAN SE (MAN) and BASF SE (BAS) also declined. HeidelbergCement AG (HEI) rose after analysts recommended buying its shares. The benchmark DAX (DAX) Index declined 0.8 percent to 6,710.77 at the close in Frankfurt, erasing an earlier rally of as much as 1.7 percent. The benchmark measure was closed yesterday for the May Day public holiday. The DAX has still gained 14 percent this year as investors speculated that companies in Germany will fare better than those in the euro area’s most indebted nations. The broader HDAX Index slipped 0.6 percent today.
“Some of the recent reports show Germany is now slowing probably in reaction to the slowdown in Europe,” said Neil Dwane, chief investment officer for Europe at RCM Ltd., in a phone interview. German unemployment unexpectedly rose in April. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Nuremberg-based Federal Labor Agency said today. Economists had forecast a decline of 10,000, the median of 34 estimates in a Bloomberg News survey showed. The adjusted jobless rate was 6.8 percent.
U.K. Stocks Drop as Standard Chartered, Home Retail Fall (Source: Bloomberg)
U.K. stocks declined the most in more than a week as a contraction in euro-region manufacturing added to signs that the economic slump in Britain’s largest export market is worsening. Standard Chartered Plc (STAN) led banks lower, retreating 3.9 percent. Home Retail Group Plc (HOME) tumbled 13 percent after reporting a 60 percent slump in profit. British Sky Broadcasting Group Plc (BSY) paced advancing shares after operating earnings jumped 20 percent. The FTSE 100 (UKX) Index lost 54.12, or 0.9 percent, to 5,758.11 at the close in London. The gauge jumped 1.3 percent yesterday, its biggest rally since April 17 as gauge of U.S. manufacturing expanded at the fastest pace in 10 months. The FTSE All-Share Index declined 0.8 percent today and Ireland’s ISEQ Index slipped 0.1 percent.
“We have seen some of yesterday’s enthusiasm wane today, but there is still an appetite for risk out there,” said David Jones, chief market strategist at IG Index in London. “Some of the data coming out of Europe is a concern and raises the question of how long the European economy will take to get on a firmer footing; it can’t just be the U.S. driving growth.”
Spanish Stocks Plunge to Three-Year Low as Banks Tumble (Source: Bloomberg)
Spanish stocks plunged, pushing the IBEX 35 Index (IBEX) to its lowest level in more than three years, as a selloff in banks sent the benchmark measure tumbling. Banco Santander SA (SAN), the country’s largest lender, lost more than 3 percent as Moody’s Investors Service prepared to concluded its review of the euro area’s banks. Sacyr Vallehermoso SA (SYV) dropped 4 percent as a report showed manufacturing in Spain contracted. Red Electrica Corp. slid 2.2 percent as Bolivia seized the company’s local assets. The IBEX 35 dropped 2.6 percent to 6,831.9 at the close in Madrid, its lowest level since March 2009. The gauge has sunk 20 percent this year, the worst performance of 24 developed markets tracked by Bloomberg, as the Spanish economy entered its second recession since 2008.
“The euro-zone debt crisis has become center stage once more with Spain the focus of attention,” said Ted Scott, director of global strategy at F&C Asset Management in London, in a note to clients. Spanish bond yields “reflect the diminishing effect of the European Central Bank’s liquidity program and increasing concerns about the Spanish economy and especially its banking sector.”
Stocks, Euro Fall on Employment Concern; Treasuries Rise (Source: Bloomberg)
Stocks fell, the euro weakened for a third day against the dollar and Germany’s five-year note yield fell to a record amid concern about employment markets in Europe and the U.S. Wheat led commodities lower. The Standard & Poor’s 500 Index lost 0.3 percent to close at 1,402.31 at 4 p.m. in New York, paring an earlier loss of 0.9 percent as homebuilders and retailers rallied. The Dow Jones Industrial Average (INDU) retreated from a four-year high. The euro depreciated 0.6 percent to $1.3160 as the U.S. currency strengthened against most major peers. German five-year note yields sank as low as 0.55 percent and 10-year Treasury rates decreased less than two basis points to 1.93 percent, near a three-month low. Oil fell after a surge in inventories. German unemployment rose in April as euro-area manufacturing shrank for a ninth month and more than initially estimated, according to reports today.
American companies added 119,000 workers in April, according to figures from ADP Employer Services, 51,000 fewer than t he median economist forecast and damping optimism about the economy before government jobs data in two days. U.S. factory orders decreased. “I’ve got a feeling that we might see a downside surprise on the monthly jobs report,” Randy Frederick, managing director of active trading and derivatives at Charles Schwab Corp., said in an interview from Austin, Texas. His firm has $1.83 trillion in client assets. “We’ve got a weak ADP report. There’s a reemergence of concerns in Europe. Given how high the market is right now and this softening in economic data, it’s very likely to see a pullback in the range of 5 percent to 10 percent.”
FOREX-Euro falls on weak euro zone manufacturing data
LONDON, May 2 (Reuters) - The euro fell against the dollar on Wednesday as weak manufacturing data raised concerns about risks facing the euro zone economy, while the yen rebounded from 2-1/2 month highs versus the U.S. currency after strong U.S. numbers on Tuesday.
"It is prudent to watch and wait at the moment. There is so much in the way of information and given the lack of liquidity with it being Golden Week in Japan and the May Day holiday yesterday it will take a while for the market to make an assessment," said Lauren Rosborough, senior currency strategist at Societe Generale.
Payroll Survey Signals U.S. Jobs Slowing as Orders Drop: Economy (Source: Bloomberg)
Companies in the U.S. added fewer workers last month, according to data from a private survey, pointing to a cooling in the job market, as the Commerce Department also reported a decline in factory orders in March. Private employment increased by 119,000, the smallest gain in seven months, after rising by 201,000 in March, Roseland, New Jersey-based ADP Employer Services said. Orders to factories fell 1.5 percent following a 1.1 percent gain in February. Stocks retreated as the smaller-than-projected advance in payrolls raised concerns government data in two days will show the world’s largest economy isn’t growing fast enough to reduce unemployment. A report yesterday showing manufacturing expanded in April at the fastest pace in almost a year helped send the Dow Jones Industrial Average to the highest level since 2007.
“Some slowing of job growth was expected,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Philadelphia. “As of now, the job market continues to expand, and we’re getting close to a self-sustaining recovery” where job growth supports wage gains, he said.
Four Fed Policy Makers See No Need to Ease With Economy (Source: Bloomberg)
The odds of more Federal Reserve stimulus diminished yesterday as four central bankers said it probably won’t be needed and an unexpected acceleration in U.S. manufacturing provided fresh evidence of economic strength. John Williams, president of the San Francisco Fed, joined his counterparts from Richmond, Philadelphia and Atlanta in casting doubt on the need for additional purchases of bonds to push down longer-term interest rates. Three of them are voting members of the rate-setting Federal Open Market Committee. Thresholds for further action “would be if we see economic growth slow to the point where we’re not seeing further progress in bringing the unemployment rate down,” Williams said, or if inflation dropped “significantly” below the Fed’s 2 percent goal. Those aren’t “the circumstances I currently expect,” Williams said at a conference in Beverly Hills, California.
The FOMC left policy unchanged after its April 24-25 meeting, and Chairman Ben S. Bernanke signaled that further easing is unlikely unless the economy unexpectedly deteriorates. Bernanke said it would be “reckless” to pursue policies that would drive up inflation when it’s already near the Fed’s target, while noting he’s “prepared to do more” should conditions worsen.
Factory Orders in U.S. Decrease on Pullback in Aircraft (Source: Bloomberg)
Orders to U.S. factories decreased in March, restrained by a pullback in demand for aircraft that overshadowed gains elsewhere. Bookings fell 1.5 percent after a revised 1.1 percent gain in February, figures from the Commerce Department showed today in Washington. The median projection of 61 economists in a Bloomberg News survey called for a 1.6 percent decline. Turbines and household appliances were among areas showing increases. The report comes a day after purchasing managers said manufacturing expanded in April at the fastest pace in almost a year as orders, production and employment picked up, indicating the slump may be short-lived. Exports and consumer spending on big-ticket items like automobiles may be making up for a cooling in business investment, which means factories will continue to support the expansion.
“Manufacturing is still leading the recovery,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Philadelphia, who correctly projected the drop in orders. “Businesses are going to continue to invest. The manufacturing sector is going to continue to expand.” Economists’ estimates in the Bloomberg survey ranged from a decline of 3 percent to little changed. The Commerce Department revised the February figure from a previously estimated 1.3 percent increase.
China Manufacturing Improvement Signals Growth Rebound (Source: Bloomberg)
A Chinese manufacturing index rose in April, signaling that a rebound in the world’s second-biggest economy may help to offset constraints on global growth from austerity measures in Europe. The 49.3 final reading of a purchasing managers’ index from HSBC Holdings Plc (HSBA) and Markit Economics today compares with a preliminary 49.1 reported April 23 and a final 48.3 in March. A separate index released yesterday by China’s statistics bureau and logistics federation was at 53.3, indicating the fastest growth in a year. Improvements in manufacturing may encourage Premier Wen Jiabao to extend a two-month pause in lowering banks’ reserve requirements as the effect of previous easing kicks in. Wen is seeking to rein in property and consumer prices without sending the economy into a so-called hard landing. Gross domestic product increased 8.1 percent last quarter from a year earlier, the least since 2009.
“Easing measures are starting to work,” said Qu Hongbin, Hong Kong-based chief economist for China at HSBC. China’s growth may “bottom out” this quarter and climb to an annual rate of more than 8.5 percent in the second half, Qu said.
Hong Kong Sells Land Below Estimates on Rising Supply (Source: Bloomberg)
Hong Kong’s government sold land in one of the city’s most exclusive areas for less than analysts estimated, underscoring developers’ concerns that increased housing supply and slowing global growth may stall home prices. The winning bid for the site in Repulse Bay, in the Island South district, was HK$1.67 billion, the government said in a statement yesterday. That’s equal to HK$39,673 ($5,114) a square foot, according to Centaline Property Agency Ltd., the city’s biggest closely held realtor. The site, with a total buildable area of 42,000 square feet, was expected to fetch HK$1.68 billion, or HK$40,000 a square foot, according to the median estimate of five analysts surveyed by Bloomberg News.
Leung Chun-ying, who in July will take over as Hong Kong’s new leader, has vowed to increase housing supply to quell public discontent over a widening wealth gap in the world’s most expensive place to buy a home. Hong Kong’s home prices have gained more than 78 percent since early 2009 on record low mortgage rates and an under-supply of new units.
Temasek Selling $2.4 Billion in BOC, China Construction (Source: Bloomberg)
Temasek Holdings Pte., Singapore’s state-owned investment company, sold $2.48 billion of shares in Bank of China Ltd. and China Construction Bank Corp. (939) less than a month after raising its holdings in their larger rival. Temasek received about $1.24 billion selling 3.1 billion Bank of China shares at HK$3.13 apiece, according to a term sheet obtained by Bloomberg News, a 4 percent discount from the close in Hong Kong yesterday. The firm also got a similar amount divesting 1.6 billion shares in China Construction Bank at HK$5.99 each, another document shows, 2.8 percent lower than the stock’s close yesterday. “Results for these banks have been pretty fair, given the operating environment, slower economy and higher interest rates,” said Jeff Papp, senior analyst at Oberweis Asset Management Inc. in Lisle, Illinois. “Maybe Temasek is taking a longer-term view and saying this is as good as it gets.”
The sales come less than a month after the Singapore firm purchased $2.3 billion of shares in China’s biggest lender Industrial & Commercial Bank of China Ltd. from Goldman Sachs Group Inc. Bank of China and Construction Bank’s Hong Kong- traded shares have risen 14 percent this year, compared with the 12 percent gain in the Bloomberg Asia Pacific Banks Index. (BPRBANK)
Indian Exports Shrank in March for First Time Since 2009 (Source: Bloomberg)
Indian exports fell in March as Europe’s debt crisis and slower Chinese growth hurt demand. Merchandise shipments dropped 5.7 percent from a year earlier to $28.7 billion, the government said in a statement in New Delhi today. Imports rose 24.3 percent to $42.6 billion, leaving a trade deficit of $13.9 billion. India’s trade deficit surged to a record $184.9 billion in the fiscal year ended March 31 as elevated crude oil prices stoked import bills and a struggling global recovery hurt exports. The rupee has slumped about 16 percent in the past year against the dollar as the trade gap widened, according to data compiled by Bloomberg. “The fragile global economy doesn’t augur well for Indian exports,” Rupa Rege Nitsure, an economist at state-owned Bank of Baroda (BOB) in Mumbai, said before the report. “The widening trade deficit and slowing economic growth pose significant risks to India’s macroeconomic stability.”
Euro Remains Lower on Prospects Draghi to Signal Stimulus (Source: Bloomberg)
The euro remained lower following a three-day decline on bets that European Central Bank President Mario Draghi will hint at further stimulus measures to counter the region’s debt crisis after today’s policy meeting. The 17-nation currency was 0.2 percent from a two-week low versus the yen before Spain auctions bonds. New Zealand’s dollar slid to the weakest since January after data showed the nation’s unemployment rate rose to the highest level since 2010. “There’s a very good chance that ECB President Draghi is going to be very dovish,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. (CBA) “There’s potential there that demand for Spanish bonds is quite weak and that would, I expect, push the euro down as well.”
The euro was at $1.3148 as of 7:42 a.m. in Singapore after sliding 0.6 percent to $1.3158 in New York yesterday. It fetched 105.39 yen from 105.46 yesterday when it dropped to as low as 105.13, the least since April 16. The dollar traded at 80.16 yen from 80.14. Japan’s markets are shut today and tomorrow for public holidays.
King Says BOE Will Risk Unpopularity to Prevent Crises (Source: Bloomberg)
Bank of England Governor Mervyn King said central bank officials are prepared to take unpopular measures to prevent banking excesses from undermining financial stability and economic growth. “Our role will be to take away the punch bowl just as the next party is getting going,” King said in a BBC Radio address today in London. “That won’t make us popular among bankers, politicians and even at times some of you, and it’s not supposed to. But it will, I hope, reflect the trust and confidence that the citizens of this country can place in the Old Lady of Threadneedle Street,” a nickname for the central bank. As officials prepare for a decision next week on whether to extend their bond-buying program to lift the economy from its first double-dip recession since 1975, King said the economy isn’t yet “back to health” and needs the support of low interest rates. The governor, who will retire in June 2013, spoke days before the central bank marks 15 years of independence from government in setting monetary policy.
“We have a difficult challenge and our job is to do our best to try to steer the economy back onto a steady growth path,” he said in response to questions. “For the time being that means low interest rates.”
Sarkozy Struggles to Land Knock-Out Blow in Debate With Hollande (Source: Bloomberg)
President Nicolas Sarkozy struggled to make inroads against Socialist challenger Francois Hollande as the only debate in France’s presidential election descended into an exchange of insults and accusations. Behind in the polls with the clock ticking on his re- election bid, the incumbent repeatedly accused his rival of lying, while Hollande said his opponent showed he was being “disagreeable.” “It was a harsh debate,” said Frederic Dabi of the Ifop polling company. “Sarkozy sought to knock out Hollande and Hollande sought to weaken Sarkozy’s legitimacy and provoked him at the start.” The 170-minute encounter late yesterday was Sarkozy’s last chance to turn the tide against Hollande before the May 6 runoff. The challenger led with 53 percent to 47 percent, a survey by Ifop showed yesterday. There was no margin of error published.
Greeks Reveal Euro or No in First Election Since Downturn (Source: Bloomberg)
Alexandra Paschia’s toddler runs among the shoes marked down to 5 euros ($6.63) from 50 euros in their family-run store in Athens. The demise of Greece’s economy has spanned the life of the 2 1/2-year-old girl, and ensures there are no customers to bump into a week before elections. “This crisis has meant a 180-degree turn, a somersault in everyone’s lives, old, young, rich, poor,” says Paschia, 35, who will vote for the anti-immigrant Golden Dawn party instead of the two main parties of Pasok or New Democracy on May 6. “We need new, different voices in parliament.” For the first time since their country became the byword for the European debt crisis, Greeks will have their say at the ballot box rather than in street protests about the economic pain they are enduring for a third successive year in the battle to retain membership of the euro.
Faced with the prospect of more budget cuts to keep international funds flowing, many voters are backing small anti- bailout parties that promise an end to austerity measures. While polls show most people don’t want a return to the drachma, opponents warn that could tilt the balance in favor of rejecting the bailout terms and threaten Greece’s membership in the euro.
French Candidates Clash on How to Emulate Germany to Create Jobs (Source: Bloomberg)
French President Nicolas Sarkozy and Socialist Francois Hollande clashed in their only campaign debate over everything from how to emulate German employment gains and euro bonds to the role of the European Central Bank. In heated exchanges, marked by the candidates calling each other a liar, Sarkozy and Hollande elaborated on differences over how to rekindle growth with joblessness in France at the highest level in 12 years. Germany’s unemployment rate is 6.8 percent, against 9.8 percent in France. “Unemployment has increased,” Hollande said to Sarkozy. “In Germany they make room for social partners, unlike in France.” For his part, Sarkozy said, “after criticizing Germany, it suddenly inspires you.” He said Germany raised sales taxes to help finance lower social charges and unions backed a balanced budget rule that Hollande opposes.
The war of words between the two candidates came as Sarkozy fought for his last chance to turn the tide against Hollande before the May 6 runoff. The challenger led with 53.5 percent to 46.5 percent, according to a survey of voting intentions published by BVA today. There was no margin of error published.
Hollande Envoys Said to Brief ECB Officials on His Economic Plan (Source: Bloomberg)
Aides to French Socialist presidential candidate Francois Hollande have had contacts with top European Central Bank officials to brief monetary policy makers on his economic plans, four advisers to Hollande said. Hollande’s team has spoken to at least two members of the ECB’s executive board, said the advisers, who declined to be named because the discussions were confidential. An ECB spokeswoman denied any such contacts have taken place. She spoke on condition of anonymity, in line with ECB policy. The meetings and telephone conversations, which began last year and have carried on as Hollande’s campaign progressed, underscore concern that a change in government in Europe’s second-largest economy risks upsetting efforts to quell the region’s financial crisis. “Given the complexity of Europe’s problems, I would hate for a new government to come into a political vacuum,” said David Owen, chief European economist at Jefferies Securities International in London. “It’s reassuring.”
Euro-Area Unemployment at 15-Year High as Slump Deepens: Economy (Source: Bloomberg)
Euro-region unemployment rose to a 15- year high and manufacturing contracted for a ninth month, adding to signs the economic slump is deepening. The jobless rate in the 17-nation euro area increased to 10.9 percent in March from 10.8 percent in February, the European Union statistics office in Luxembourg said today. That’s the highest since April 1997, according to Bloomberg News data. Separate reports showed euro-area manufacturing contracted more than initially estimated in April and unemployment in Germany, the region’s largest economy, unexpectedly increased. Rising joblessness will keep pressure on politicians to find ways of boosting growth as austerity measures designed to stem the debt crisis push economies into recession and provoke a backlash among citizens. European Central Bank President Mario Draghi last week called on leaders to create a “growth compact” to complement an agreement on fiscal rules. The ECB will probably keep its benchmark interest rate at a record low of 1 percent tomorrow.
“The grim unemployment figures for March will likely encourage talk about a long overdue ‘growth pact’ for the euro zone,” said Martin van Vliet, an economist at ING Group in Amsterdam. “Survey measures of hiring intentions point to further increases in unemployment over the coming months, so we would expect unemployment to breach the 11 percent threshold.”
German Jobless Unexpectedly Up in April as Crisis Flared (Source: Bloomberg)
German unemployment unexpectedly rose in April as the debt crisis in the euro area constrained growth and hiring in Europe’s biggest economy. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Federal Labor Agency in Nuremberg said today. Economists forecast a decline of 10,000, the median of 34 estimates in a Bloomberg News survey shows. The adjusted jobless rate was unchanged at 6.8 percent, still a two- decade low, after the agency revised up figures for February and March. “The labor market has entered a period of stabilization at a high level,” said Carsten Brzeski, an economist at ING Group in Brussels. While “the economic tailwind from the last two years is clearly fading away,” it is “not yet a cause for concern” and so far underscores that the labor market is an indicator that lags behind economic developments.
German unemployment has been the biggest advertisement for Chancellor Angela Merkel’s prescription to quell the debt crisis with budget cuts and labor-market changes as part of an economic overhaul. Separate European figures published by the Luxembourg- based statistics agency Eurostat today showed euro-region unemployment rose to 10.9 percent in March, the highest in almost 15 years and almost double Germany’s rate of 5.6 percent.
Euro Remains Lower on Prospects Draghi to Signal Stimulus (Source: Bloomberg)
The euro remained lower following a three-day decline on bets that European Central Bank President Mario Draghi will hint at further stimulus measures to counter the region’s debt crisis after today’s policy meeting. The 17-nation currency was 0.2 percent from a two-week low versus the yen before Spain auctions bonds. New Zealand’s dollar slid to the weakest since January after data showed the nation’s unemployment rate rose to the highest level since 2010. “There’s a very good chance that ECB President Draghi is going to be very dovish,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. (CBA) “There’s potential there that demand for Spanish bonds is quite weak and that would, I expect, push the euro down as well.”
The euro was at $1.3148 as of 7:42 a.m. in Singapore after sliding 0.6 percent to $1.3158 in New York yesterday. It fetched 105.39 yen from 105.46 yesterday when it dropped to as low as 105.13, the least since April 16. The dollar traded at 80.16 yen from 80.14. Japan’s markets are shut today and tomorrow for public holidays.
N.Z. Central Bank Rules May Curb Interest Rate, Dollar Pressures (Source: Bloomberg)
New Zealand’s central bank will use new banking rules to help contain interest rate and currency pressures, the Deputy Governor said today. The so-called macro-prudential policy “will have an important influence on monetary policy, in a similar way to fiscal policy,” Grant Spencer said in e-mailed notes of a speech in Auckland today. The Reserve Bank of New Zealand wants to strengthen the nation’s financial system after learning prudential lessons from the global financial crisis, Spencer said. As well as tightening liquidity requirements, the new rules seek to combat credit booms and protect the economy from bank failures. “Such policies will also tend to have the effect of either dampening the credit cycle or dampening international capital flows and hence exchange rate pressures,” Spencer said.
The central bank is to increase the core funding ratio, which determines how much of lending must be funded by retail deposits and long-term borrowing, to 75 percent from Jan. 1, 2013, Spencer said. It originally planned to raise the ratio from 70 percent in June, deferring the increase last year because of global turmoil.
