Asian Stocks Rise as China Easing Outweighs Europe Debt (Source: Bloomberg)
Asian stocks rose after China cut the amount of cash banks must set aside as reserves to boost economic growth, outweighing increasing speculation Greece may exit from the single European currency. Fanuc Corp., a maker of industrial robots that gets almost half its revenue from Asia outside Japan, rose 2.6 percent, while Nippon Sheet Glass Co. (6954), which counts Europe as its biggest market, slid 1 percent in Tokyo. Tencent Holdings Ltd. (700), China’s No. 1 Internet company, may be active in Hong Kong after a report its unit received licenses to sell mutual funds online. Celltrion Inc. (068270), a biopharmaceutical company, climbed 13 percent, extending its gains on May 11, after saying it plans to issue bonus shares to shareholders. The MSCI Asia Pacific Index (MXAP) rose 0.2 percent to 118.78 as of 10:05 a.m. in Tokyo, before the opening of Hong Kong and China markets. More than three stocks gained for every two that fell in the 1004-member gauge.
China’s reserve ratio rate cut is “an efficient means of them pushing liquidity into the market,” Timothy Riddell, head of global markets research in Singapore at Australia & New Zealand Banking Group Ltd., said on Bloomberg television. “We will be looking for more cuts through the reserve ratio rate through the rest of this year.” Japan’s Nikkei 225 Stock Average (NKY) increased 0.7 percent, while Australia’s S&P/ASX 200 Index gained 0.4 percent. South Korea’s Kospi Index (KOSPI) slid 0.1 percent. The Asian regional index rose 4.2 percent this year through May 11, compared with a 7.6 percent gain by the S&P 500 and a 3 percent advance by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.2 times estimated earnings on average, compared with a multiple of 12.9 for the S&P 500 and 10.5 times for the Stoxx 600.
The People’s Bank of China said May 12 that it is cutting the amount of cash that banks must set aside as reserves for the third time in six months, pumping money into the financial system to support lending after data showed a slowdown in economic growth is deepening. Reserve ratios will fall 50 basis points, effective May 18.
Asian Stocks Post Worst Week Since November on Europe, China (Source: Bloomberg)
Asian stocks fell, with a regional index posting its worst week in five months, amid concern Greece will be forced out of the euro and that austerity plans needed to contain the Europe’s debt crisis will be derailed. Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, sank 4.5 percent in Hong Kong this week as the nation’s export growth slowed. Hutchison Whampoa Ltd. (13), which operates ports in Spain and Germany, declined 5.6 percent in Hong Kong. Sony Corp. (6758) fell 11 percent to the lowest in more than 31 years after the maker of Bravia televisions and PlayStation game consoles forecast profit that lagged analyst estimates by half. “Europe remains the biggest issue facing markets,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. “It’s not clear how deep the downturn is going to be and the effect this is going to have elsewhere.”
The MSCI Asia Pacific Japan Index (MXAP) declined 4.4 percent to 118.61 this week. That’s the steepest weekly slide since the last week of November as France’s political changes and instability in Greece threaten to derail austerity plans and worsen Europe’s debt crisis. Stocks extended losses yesterday as JPMorgan Chase & Co. said it had a $2 billion trading loss as positions in credit securities proved riskier than expected.
Japan Stocks Snap Three-Day Loss After China Cuts Reserve Ratios (Source: Bloomberg)
May 14 (Bloomberg) -- Japan stocks rose for the first time in four days after China moved to spur growth by cutting the amount of money banks must keep in reserve, outweighing concerns as policymakers began to weigh a Greek exit from the euro. Fanuc Corp. (6954), a maker of automation controls used in Chinese factories, led machinery manufacturing higher. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, paced gains among banks. Takeda Pharmaceutical Co., Asia’s leading drugmaker, lost 4.1 percent after profit plunged 50 percent, missing estimates. The Nikkei 225 Stock Average (NKY) rose 0.8 percent to 9,022.23 as of 9:59 a.m. in Tokyo after dropping 4.6 percent last week, the biggest weekly loss since August. The broader Topix Index added 0.5 percent to 762.20 with 23 of the gauge’s 33 industry groups rising.
“China’s ratio cut is boosting mainland-related shares,” said Yutaka Miura, a senior technical analyst at Mizuho Securities Co., a unit of Japan’s third-biggest lender by market value. “There’s a risk for shares to be sold in the afternoon because we don’t know what will happen to Greece and the U.S. isn’t in a great situation.” The Nikkei 225 has retreated 12 percent from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis. A Greek backlash against austerity policies has led to speculation the nation will become the first nation to exit the euro.
Dow Drops Most in 2012 as Europe Concern Resurfaces (Source: Bloomberg)
U.S. stocks fell for a second straight week, driving the Dow Jones Industrial Average to the biggest loss of 2012, as political tension in Greece heightened concern about Europe’s debt crisis and JPMorgan Chase & Co. (JPM)’s $2 billion trading loss weighed on shares of banks. Financial and technology companies in the Standard & Poor’s 500 Index slipped at least 1.7 percent for the week as JPMorgan tumbled 11 percent and Cisco Systems Inc. (CSCO)’s forecasts missed analysts’ estimates. Macy’s Inc. (M) lost 7.6 percent and Fossil Inc. sank 39 percent amid disappointing projections. Walt Disney Co. (DIS) rose 6.1 percent to an all-time high after the movie “Marvel’s The Avengers” earned a record $200.3 million in its opening weekend and profit beat analysts’ estimates.
The S&P 500 fell 1.2 percent to 1,353.39, the lowest level in two months. The index dropped 3.6 percent over two weeks, trimming its 2012 gain to 7.6 percent. The Dow slipped 217.67 points, or 1.7 percent, to 12,820.60 for its biggest weekly decline of the year. “Europe is the big overlay,” Bernie Williams, a portfolio manager at USAA Investment, which oversees $52 billion in San Antonio, said in a phone interview. “People are relatively fearful, but the U.S. seems to be weathering this fairly well.”
S&P 500 Falls to 2-Month Low as Banks Tumble on JPMorgan (Source: Bloomberg)
U.S. stocks fell, sending the Standard & Poor’s 500 Index to a two-month low, as a slump in banks driven by JPMorgan (JPM) Chase & Co.’s $2 billion trading loss overshadowed an increase in a gauge of consumer confidence. Financial shares, which comprise 15 percent of the S&P 500, slid 1.2 percent for the biggest drop among 10 groups. JPMorgan sank 9.3 percent as Chief Executive Officer Jamie Dimon said the lender made “egregious” mistakes and trading losses were “self inflicted.” More than 216 million JPMorgan shares traded, breaking the prior one-day record set in 2008. Commodity shares slumped as China’s industrial production grew the least since 2009, spurring concern demand for raw materials will wane. The S&P 500 slid 0.3 percent to 1,353.39 at 4 p.m. New York time. It capped a two-week drop, falling 3.6 percent in the period. The Dow Jones Industrial Average lost 34.44 points, or 0.3 percent, to 12,820.60. About 6.6 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“It’s a black eye for JPMorgan,” said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.9 billion. “It was considered to be one of the better big banks. There’s already a debate about regulation. Jamie Dimon will be in a weaker position to push back against it, JPMorgan will be in a weaker position.”
European Stocks Post Second Weekly Drop on Greek Election (Source: Bloomberg)
European stocks declined for a second week after an inconclusive election in Greece left political parties struggling to form a government, increasing speculation that the nation might fail to implement austerity measures. Mining companies led losses as Chinese industrial output cooled. Bankia SA slid 16 percent as Spain took control of the lender. Vallourec SA, a French producer of steel pipes for the oil and gas industry, tumbled the most since 2008 after cutting its forecasts. Royal KPN NV rose 20 percent after rejecting a 2.6 billion-euro ($3.4 billion) offer from Carlos Slim’s America Movil SAB for a bigger stake in the Dutch phone company.
The Stoxx Europe 600 Index (SXXP) retreated 0.4 percent to 251.97 this past week. The measure slid to the lowest level in almost four months on May 9, before rebounding 0.9 percent over the next two days. The gauge has retreated 7.5 percent since this year’s high on March 16 as concern grew that the euro area might fracture and Chinese economic growth missed forecasts. “Investors are starting to ask what happens after a country leaves the euro area, which was supposed to have been a rock-solid bloc,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, where he helps oversee $230 billion. “The risk is that it will take massive resources to keep interest rates under control in Italy and Spain if Greece leaves the monetary union.”
Euro Falls to 3-Month Low Before Greek Meeting, Output (Source: Bloomberg)
The euro fell to its lowest level in more than three months as European officials begin to weigh the prospect of Greece withdrawing from the currency union. The 17-nation euro weakened versus most of its 16 major counterparts before Greek President Karolos Papoulias is set to continue discussions with political party leaders on forming a national unity government. A report due today may show the euro area’s industrial production growth moderated in March. The U.S. dollar headed toward parity versus its Australian peer as Asian shares extended a global slide in equities, boosting appetite for haven assets. “As Greece emerges from the weekend without a government, we’re seeing some toll taken on the euro,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Politics and debt sentiment aside, the big negative for the euro this year will be economic underperformance.”
The euro lost 0.2 percent to $1.2897 at 9:09 a.m. in Tokyo after earlier touching $1.2882, the weakest since Jan. 23. It fell 0.1 percent to 103.18 yen. The U.S. currency bought 80 yen, 0.1 percent above its close on May 11. The greenback fetched $1.0026 per so-called Aussie and earlier declined to $1.0008, the strongest this year. The MSCI Asia Pacific Index of shares fell 0.1 percent. The Standard & Poor’s 500 Index (SPX) lost 0.3 percent on May 11 when the MSCI World Index of developed-market equities fell 0.2 percent.
FOREX-Euro hits 3-1/2-mth low, Aussie eyes parity
LONDON, May 11 (Reuters) - The euro fell to a 3-1/2-month low while growth-linked currencies like the Australian dollar tumbled on Friday as news of JPMorgan's trading losses from a failed hedging strategy and soft Chinese economic data spooked investors.
"The Greek political situation, the Spanish banks' problems and now the souring risk dynamics are all negative for the euro," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
Retail Sales Probably Cooled in April: U.S. Economy Preview (Source: Bloomberg)
Sales at U.S. retailers probably slowed in April as the weather turned more seasonable and consumers took a breather following a pre-Easter holiday buying spree, economists said before a report this week. The projected 0.2 percent gain in purchases would follow a 0.8 percent advance in March, according to the median forecast of 68 economists surveyed by Bloomberg News ahead of Commerce Department figures on May 15. Other data may show increases in the cost of living eased, home construction stabilized and manufacturing picked up. Demand at building material, clothing and even furniture stores probably suffered last month compared with a weather- induced gain in the first three months of 2012, the warmest on record. Smaller employment gains may also make it more difficult for consumer spending to match last quarter’s advance, the biggest in more than a year.
“Households are still spending at a fairly healthy clip -- not at a spectacular rate,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in London. “Things aren’t too bad at the moment.”
JPMorgan Unit's London Staff May Go as Loss Prompts Exits (Source: Bloomberg)
The entire London staff of JPMorgan Chase & Co. (JPM)’s chief investment office is at risk of dismissal as a $2 billion trading loss prompts the first executive departures as soon as this week, a person familiar with the situation said. The firm is examining whether anyone in the unit, which employs a few dozen people in London, sought to hide risks, said the person, who requested anonymity because the deliberations are private. Ina Drew, who oversees the unit, is among three people set to leave, the Wall Street Journal reported yesterday, citing unidentified people familiar with the situation. Joseph Evangelisti, a bank spokesman, said Drew would have no comment.
Chief Executive Jamie Dimon, 56, announced the loss May 10, assailing his firm’s handling of trading in synthetic credit securities as “flawed, complex, poorly reviewed, poorly executed and poorly monitored.” Initially, he resisted accepting Drew’s resignation, the person said. The incident has given ammunition to proponents of stricter bank regulations. Drew, 55, is one of two women on the operating committee at JPMorgan, the biggest and most profitable U.S. bank. Her office oversees about $360 billion, the difference between money from deposits and what the bank lends. Dimon had encouraged her unit to boost earnings by buying higher-yielding assets, including structured credit, equities and derivatives, in an expansion of risk-taking led by Achilles Macris, ex-employees said in April.
China Plans Talks With Japan, Korea on Free-Trade Area (Source: Bloomberg)
The leaders of China, Japan and South Korea agreed to start negotiations this year on a free-trade accord between three of Asia’s four biggest economies. China’s Premier Wen Jiabao, Japanese Prime Minister Yoshihiko Noda and South Korea President Lee Myung Bak met in Beijing yesterday as their trade ministers signed an investment agreement described as the “first legal document on trilateral cooperation in the economic field.” The establishment of a free-trade pact will unleash the economic vitality of the region and give a strong boost to economic integration in East Asia, Wen said yesterday, according to a pool report. China has proposed coastal Shandong province as its base for a regional economic cooperation zone, Wen said, with Japan and South Korea to nominate appropriate locations of their own.
Cooperation among the three nations is “very important” to ensure that the Asia-Pacific region is the growth center of the world, Japan’s Noda said, according to the pool report. South Korea’s Lee, referring to economic problems facing the U.S. and Europe, added: “In times of crisis, if countries, for their own survival, carry out protectionist ideas, then the recovery of the economy will take a long time.”
China Lowers Banks’ Reserve Requirements to Support Growth (Source: Bloomberg)
China cut the amount of cash that banks must set aside as reserves for the third time in six months, pumping money into the financial system to support lending after data showed a slowdown in growth is deepening. Reserve ratios will fall 50 basis points, effective May 18, the People’s Bank of China said on its website yesterday. The level for the nation’s largest lenders will decline to 20 percent based on previous statements. Premier Wen Jiabao is increasingly shifting to supporting the nation’s expansion from fighting inflation and containing property prices. China’s import gains stalled in April while industrial output rose at the slowest pace since 2009 and new yuan loans were the lowest this year, adding to global growth concerns just as Europe’s debt crisis reignites.
“Growth momentum is still weak and external risk has risen sharply,” Liu Li-Gang, chief China economist at Australia & New Zealand Banking Group (ANZ) Ltd. in Hong Kong, said by e-mail yesterday. “We think another cut could be in mid-June.”
Japan to Experience Power Shortages This Summer, Panel Says (Source: Bloomberg)
Kansai Electric Power Co. (9503) and two other Japanese utilities may have power shortages this summer without supplies from nuclear reactors, a government panel said. Kansai Electric, the utility most dependent on nuclear power, may face the biggest shortage of 14.9 percent, the independent committee said in a draft report published May 12. Kyushu Electric Power Co. and Hokkaido Electric Power Co. may have shortages of 2.2 percent and 1.9 percent, the report said. Japan is reviewing its electricity outlook as it heads toward a nuclear-free summer while debating the first restart of atomic reactors idled for regular safety checks since the Fukushima disaster in March last year. Based on the conclusion of the panel, the government will decide on power-saving measures, which may include rolling blackouts. Kansai Electric’s service area may face a more severe power shortage than the deficit forecast in Tokyo Electric’s region last year, according to the report.
In addition to the Kansai region, power supply and demand are expected to be tight in Hokkaido, Shikoku and Kyushu.
Shirakawa Urges Japan to Cut Deficit for Yen Stability: Asahi (Source: Bloomberg)
Bank of Japan Governor Masaaki Shirakawa urged reduction of the nation’s deficit to stabilize the yen as the bond market may come under pressure if investors lose trust in fiscal policy, the Asahi newspaper said. The yen might become unstable, triggering uncontrollable inflation should the central bank buy government bonds in an attempt to prevent a financial crisis, Shirakawa said in an interview with the newspaper on May 11.
The BOJ is under pressure to add stimulus as a group of lawmakers proposed overhauling the BOJ’s governing law to ensure steps to end deflation afflicting the nation for more than a decade. The BOJ said its 1 percent inflation goal will be achieved before long after it expanded by 10 trillion yen ($125 billion) on April 27 its plan for government-bond purchases as the world’s third-largest economy showed signs of slowing. Prime Minister Yoshihiko Noda’s party sent a bill to parliament to double the sales tax by 2015 to rein in the world’s largest public debt over the objections of opposition lawmakers. “Japanese government bonds would be sold if Japan’s fiscal policy was seen as unsustainable, causing heavy losses to financial institutions holding the bonds,” Shirakawa was quoted as saying.
Billionaire Godrej Sees Growth in India With Real Estate: Retail (Source: Bloomberg)
Indian billionaire Adi Godrej said real estate will deliver his company’s fastest growth over the next five years as foreign rivals such as Unilever Plc (ULVR) and Procter & Gamble Co. (PG) constrain his flagship consumer-goods unit. “The strongest growth potential we see is in our property- development business,” Godrej, chairman of the Godrej Group, said in an interview at his office campus on the outskirts of Mumbai. “No one has any significant market share. It is divided among a large number of players.” Godrej Consumer Products Ltd. (GCPL), in which Temasek Holdings Pte. bought a 5 percent stake in January, has faced “tremendous competition” in recent years from international companies eager to tap India’s booming consumer market, said Godrej, 70. That trend is set to continue, he said.
Unilever, the world’s second-biggest maker of consumer goods, has almost a third of the beauty and personal-care market in India after more than a century operating in the country. In real estate, where investment rules constrain some global operators, Godrej said he mainly contends with smaller, domestic rivals. India’s property market is forecast to grow to $180 billion by the end of this decade from $66.8 billion in 2011, according to the India Brand Equity Foundation.
Euro Officials Begin to Weigh Greek Exit (Source: Bloomberg)
Greece’s possible exit from the euro area moved to the center of Europe’s debt-crisis debate, with officials beginning to weigh the fallout of a withdrawal even as authorities in Athens struggled to form a government. Meetings brokered by Greek President Karolos Papoulias are set to continue today after Syriza, the largest anti-bailout party, rejected a unity government following last week’s inconclusive elections. The country where the 2 1/2-year-old crisis began moved closer to a new vote, and to the possibility of a euro-area exit that was once a taboo among policy makers. Greek withdrawal “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said in Tallinn on May 12. An exit was “technically” possible yet would damage the euro, he said. German Finance Minister Wolfgang Schaeuble reiterated in an interview in Sueddeutsche Zeitung that member states seeking to hold the line on austerity for Greece could not force the country to stay.
The debate between growth and austerity will form the centerpiece of talks tomorrow between the newly installed French President Francois Hollande and German Chancellor Angela Merkel, who has championed an agenda of spending cuts. Euro finance ministers meet today and may discuss the international bailout for Greece, as well as the situation in Spain, where the government last week made a fourth attempt to clean up the country’s banks.
Greek Elections Loom as Key Bailout Opponent Defies Unity (Source: Bloomberg)
Greece’s political deadlock looked set to continue for a second week as President Karolos Papoulias failed to secure agreement on a unity government and avert new elections with the country heading toward a possible exit from the euro area. Greece’s biggest anti-bailout party, Syriza, defied overtures to join the government yesterday, deepening the impasse. Leader Alexis Tsipras won’t attend a new meeting called by Papoulias today for 7:30 p.m., state-run NET TV reported, without saying how it got the information. “Syriza won’t betray the Greek people,” Tsipras said in statements televised on NET TV after the meeting with Papoulias and the leaders of the New Democracy and Pasok parties. “We are being asked to agree to the destruction of Greek society.”
Papoulias spent the day trying to coax the country’s three biggest parties into a coalition after a week of talks failed to deliver on mandates to form a government. If Papoulias’s efforts fail, new elections will need to be called. Today’s meeting will be with the leaders of two of the three biggest parties, and the head of the smaller Democratic Left party, NET said.
Greek President to Meet Four Party Leaders Tomorrow (Source: Bloomberg)
Greek President Karolos Papoulias will meet with political party leaders at 7:30 p.m. tomorrow as discussions on forming a national unity government continue, state-run NET TV said, without citing anyone. New Democracy leader Antonis Samaras, Pasok leader Evangelos Venizelos and the head of the Democratic Left party Fotis Kouvelis will attend the meeting, NET reported. NET initially said that Syriza party head Alexis Tsipras was also expected to attend the meeting, but later reported he would not be taking part. Syriza is the second-largest party in Parliament and the biggest party opposed to the terms of the country’s international bailout. Greece may face new national elections unless a government is formed following the inconclusive voting on May 6. Kouvelis said he regretted that his proposal to form a unity government had failed.
Syriza Says It Won’t Join Greek National Unity Government (Source: Bloomberg)
Greece’s biggest anti-bailout party, Syriza, said for the second time in as many days that it won’t join a unity government, pushing the country closer to new elections that have sparked concerns about a euro-area exit. “Syriza won’t betray the Greek people,” leader Alexis Tsipras said in statements televised on state-run NET TV after a meeting brokered by President Karolos Papoulias between the party and the leaders of the New Democracy and Pasok parties. “We are being asked to agree to the destruction of Greek society.” Papoulias began a final bid to coax the three biggest parties into a coalition today after a week of talks which failed to deliver on mandates to form governments. He will meet later today the leaders of the four other parties to probe the likelihood of forming a national-unity government. If Papoulias’s efforts fail, new elections will need to be called.
Greece’s political impasse since inconclusive general elections May 6 has raised the possibility another vote will have to be held as early as next month, with polls showing that could boost anti-bailout Syriza to the top spot. The standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its two bailouts negotiated since May 2010, and, ultimately, leave the euro area.
ECB’s Honohan Says Greece Euro Exit Can Be Managed (Source: Bloomberg)
A Greek exit from the euro could be “technically” managed yet would damage confidence in the monetary union, said European Central Bank Governing Council member Patrick Honohan. A departure by Greece would be “a rather destabilizing kind of event” for the rest of the euro area and all sides are working to try to avoid it, Honohan told a conference in the Estonian capital, Tallinn, today. “It is not necessarily fatal, but it is not attractive.” The euro fell to a more than three-month low against the dollar yesterday as Greek politicians struggled to form a government following an inconclusive election on May 6 that saw a surge in support for anti-austerity parties. President Karolos Papoulias will meet tomorrow at 12:00 Athens time with the leaders of all parties in an attempt to form a unity government and avoid another vote as soon as next month.
Central bankers across Europe have started discussing the possibility of a Greek exit from the euro area and how to handle the fallout, Swedish Riksbank Deputy Governor Per Jansson said yesterday. ECB officials decided earlier this year to deal with any Greek exit on an ad-hoc basis rather than devising a templated set of responses because the fallout would be so unpredictable, said three euro region central bank officials.
ECB’s Demetriades Says Growth Needed More Than Austerity (Source: Bloomberg)
European Central Bank council member Panicos Demetriades criticized austerity and called for growth- oriented policies in his inaugural speech as the new central bank governor of Cyprus. “Both in Cyprus and in the euro area, it is now becoming understood that an austerity policy alone is not enough to put countries’ budgets back on a sound footing,” Demetriades said, according to a text of his speech in Nicosia today. “Growth is needed above all else.” Voters in Greece and France in May 6 elections challenged austerity as Europe’s sole prescription for the debt crisis, adding pressure on German Chancellor Angela Merkel to broaden her focus from debt reduction. Demetriades has inherited an economy in turmoil, with banks reeling from losses on their exposure to Greece and the government unable to borrow on financial markets. The Cypriot economy, the euro area’s third- smallest, will shrink 0.8 percent this year, the European Commission said yesterday.
Demetriades said he welcomed comments by ECB President Mario Draghi that a growth compact is needed in Europe to complement the fiscal compact.
