Asian Stocks Swing Between Gains, Losses on Japan, Greece (Source: Bloomberg)
Asian stocks swung between gains and losses as faster-than-estimated economic growth in Japan and optimism the Federal Reserve will do more to stimulate the U.S. economy offset concern Greece’s debt crisis is worsening. Canon Inc., a Japanese camera maker that depends on Europe for almost a third of its sales, declined 0.4 percent in Tokyo. James Hardie Industries SE (JHX), an Australian supplier of building materials that gets more than half of its sales from the U.S., advanced 1.1 percent in Sydney. Korea Gas Corp., the world’s biggest buyer of liquefied natural gas, jumped 4.7 percent in Seoul after a report it discovered gas in Mozambique. The MSCI Asia Pacific Index (MXAP) rose 0.2 percent to 114.52 as of 9:43 a.m. in Tokyo, after falling as much as 0.2 percent. Two stocks rose for each that fell on the measure, which yesterday declined to its lowest level this year and dropped more than 10 percent from its Feb. 29 high, a level some traders call a correction.
The Asian gauge advanced before markets in Hong Kong and China open. Japan’s Nikkei 225 Stock Average rose 0.2 percent after the Cabinet Office reported the nation’s economy grew an annualized 4.1 percent in the first quarter, exceeding the 3.5 percent estimate of economists surveyed by Bloomberg.
Most Japan Stocks Fall as Greece Outweighs Economic Data (Source: Bloomberg)
May 17 (Bloomberg) -- Japanese stocks fell, with the Topix Index sliding a seventh day, as concern Greece’s debt crisis is worsening outweighed better-than-expected economic growth in Japan, and U.S. housing and factory data that beat estimates. Canon Inc. (7751), a camera maker that gets 31 percent of its revenue in Europe, lost 1.3 percent. Kansai Electric Power Co. led the sector lower after R&I cut credit ratings on seven utilities, citing delays in restarting nuclear plants. Melco Holdings Inc. rose 5.5 percent after the manufacturer of computer peripherals said it expects a 22 percent rise in profit. The Topix lost 0.3 percent to 737.05 as of 9:20 a.m. in Tokyo, with 21 of its 33 industry groups falling. The Nikkei 225 Stock Average (NKY) declined 0.2 percent to 8,781.92. Trading volume was 0.5 percent below the 30-day average.
The uncertainty in Greece “seems likely to confine equity markets to several weeks of nervous limbo,” said Michael Kurtz, head of global equity strategy at Nomura Holdings Inc., Japan’s largest brokerage. “We will look back on this juncture as an extraordinary buying opportunity even if events ultimately conspire to eject Greece from the euro.”
S&P 500 Caps Longest Slump in 1 Month on Europe Concerns (Source: Bloomberg)
The Standard & Poor’s 500 Index (SPX) dropped a fourth day, the longest decline in a month, as concern Greece’s debt crisis is worsening offset better-than-estimated reports on U.S. housing starts and industrial production. Financial stocks fell the most in the S&P 500 among 10 groups as Bank of America Corp. (BAC) and JPMorgan (JPM) Chase & Co. sank at least 2.1 percent. Alcoa Inc. (AA) slid 2.5 percent as commodities retreated after the Dollar Index rose for a record 13th straight day. J.C. Penney Co. (JCP) tumbled 20 percent, the biggest drop ever, on disappointing results. General Motors Co. (GM) rose 2.3 percent as Berkshire Hathaway Inc. disclosed a stake in the automaker.
The S&P 500 retreated 0.4 percent to 1,324.80 at 4 p.m. New York time, reversing an earlier advance of as much as 0.8 percent. The Dow Jones Industrial Average decreased 33.45 points, or 0.3 percent, to 12,598.55, the lowest level since Jan. 18. About 7.6 billion shares changed hands on U.S. exchanges today, or 15 percent above the three-month average. “The situation in Europe is extremely precarious,” said Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc. “More needs to be done. You can’t have a lot of confidence that assets will stabilize.”
U.K. Stocks Retreat as Greece Plans Election in June (Source: Bloomberg)
U.K. stocks retreated for a third day as Greece set a date for another election amid speculation the country will leave the euro currency. British American Tobacco Plc (BATS) slipped 1.7 percent. Barclays Plc rose 1.6 percent as UBS AG recommended that its clients buy the stock. The benchmark FTSE 100 benchmark index lost 0.6 percent to 5,405.25 at the close in London, after earlier climbing as much as 0.2 percent and dropping as much as 1.5 percent. The gauge has fallen 9.4 percent from its 2012 high on March 16. The FTSE All-Share Index also slid 0.6 percent today, while Ireland’s ISEQ Index increased 0.1 percent.
“People are still very unsure about the ramifications of what’s going on in Greece, so in the absence of anything else investors keep selling on that,” said Edmund Shing, an equity strategist at Barclays Capital in London. “Stocks can’t go down forever. Sooner or later it’ll change and one catalyst will be the French parliament election and the next Greek one.” The FTSE 100 (UKX) fell yesterday as Greece called a new general election after President Karolos Papoulias failed to cajole the country’s political parties into forming a new government.
European Stocks Extend Four-Month Low Amid Greek Concern (Source: Bloomberg)
European stocks dropped for a third day, to their lowest level this year, amid growing concern Greece will be forced to leave the euro area. National Bank of Greece SA tumbled 13 percent as the country’s central bank chief said citizens had withdrawn as much as 700 million euros ($891 million) since the May 6 election. Italy’s Banca Carige SpA (CRG) fell to its lowest since at least 1995. Cie. Financiere Richemont SA rose as earnings topped estimates. The Stoxx Europe 600 Index (SXXP) slipped 0.6 percent to 244.4 at the close of trading, having earlier advanced as much as 0.3 percent and lost 1.4 percent. The gauge has tumbled 10 percent from this year’s peak on March 16 amid continued political uncertainty in Greece, entering a so-called correction.
“I have felt for quite a long time that Greece’s exit from the euro was a matter of when, not if,” Michael Spencer, chief executive officer of ICAP Plc, said in an interview on Bloomberg Television. “I think it is better for Greece in the long run and certainly better for the euro zone.”
Emerging Market Stocks Drop on Concern Over China, Greece (Source: Bloomberg)
Emerging-market stocks dropped to the lowest in four months as commodities declined and concern deepened Europe’s debt crisis will spread and China’s economic growth will slow. The MSCI Emerging Markets Index (MXEF) fell 2.2 percent to 925.41 as of 1:30 p.m. in London, the lowest since Jan. 2. The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks in Hong Kong slumped 3.4 percent, with benchmarks gauges in Russia and India losing at least 1.4 percent. Samsung Electronics Co. (005930), with the biggest weighting in the emerging market index, fell the most since October 2008 after Digitimes reported that Apple Inc. increased its purchases of semiconductors from a competitor.
Greece will hold new elections after President Karolos Papoulias failed to form a ruling coalition, threatening spending cuts required to secure 240 billion euros ($306 billion) in bailouts. Chinese banks and property developers fell in Hong Kong after the Shanghai Securities News said combined net lending for the nation’s four biggest banks was almost zero in the first two weeks of this month. The S&P GSCI index of 24 commodities fell to the lowest level this year.
GLOBAL MARKETS-Greek political turmoil heightens euro exit fears
LONDON, May 16 (Reuters) - Fears of a Greek exit from the euro zone worsening the debt crisis facing other European nations gripped financial markets , sending shares and other riskier assets lower as investors shifted funds into safe havens like the U.S. dollar.
"The idea that you can contain the spillover, the contagion, into the likes of Portugal, the likes of Spain, I just don't see that as being feasible," said James Ashley, senior European economist at RBC Capital Markets.
FOREX-Greek worries push euro to 4-mth low; more losses eyed
TOKYO, May 16 (Reuters) - The euro hit another four-month low against the dollar and was likely to extend hefty losses sustained so far this month after Greece said it would hold new elections, boosting the risk Athens could exit the euro.
"An entry to the euro zone was supposed to be irrevocable. They tore down the bridge so people wouldn't be able to go back to the other side of river. But the Greeks seem to be starting to try to swim across," said a Japanese bank trader.
Dollar Falls From 4-Month High Versus Euro: Yen Declines (Source: Bloomberg)
The dollar retreated from a four- month high against the euro after minutes from the last Federal Reserve meeting showed some policy makers said further easing may be needed should the economy lose momentum. The yen weakened against the majority of its 16 major peers amid speculation the Bank of Japan (8301) may ease policy next week. Demand for the euro was limited as Greece’s leaders prepare for a second election, with the nation’s future in the currency bloc and an international bailout at stake. “There’s a sign from the FOMC that they can see the possibility of more policy combination if certain conditions are met,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia (CBA), referring to the Federal Open Market Committee. “That means the U.S. dollar may start to stabilize rather than continue to rocket higher. It’s going to give people a bit more of a reason to pause before they pile into U.S. dollars.”
The dollar fell 0.2 percent to 1.2745 per euro as of 10:20 a.m. in Tokyo from yesterday, when it climbed to 1.2681 per euro, the strongest since Jan. 17. The yen slid 0.2 percent to 102.32 per euro from yesterday when it touched 101.91, the strongest since Feb. 14. The Japanese currency was little changed at 80.28 per dollar from 80.33 yesterday.
Treasuries Fall Before TIPS Sale, Auction Announcement (Source: Bloomberg)
Treasuries fell, snapping a rally that sent yields to within eight basis points of a record low, before the U.S. sells $13 billion of inflation-protected notes today and gives the size of three auctions for next week. The 10-year Treasury Inflation Protected Securities are poised to draw a record low negative yield. The U.S. will probably sell $35 billion of two-year securities on May 22, the same amount of five-year debt on the following day and $29 billion of seven-year notes on May 24, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance. Ten-year yields increased two basis points to 1.78 percent as of 10:05 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.75 percent security due in May 2022 fell 7/32, or $2.19 per $1,000 face amount, to 99 22/32. The rate slid to 1.75 percent yesterday, approaching the all-time low of 1.67 percent.
“Everybody thinks it’s expensive,” said Masazumi Fukuoka, a senior dealer at the Singapore branch of Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest publicly traded lender, referring to the level of bonds.
Several on FOMC Said Easing May Be Needed on Faltering (Source: Bloomberg)
Several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going, minutes of their last meeting showed. The members of the rate-setting Federal Open Market Committee “indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough,” according to minutes of the panel’s April 24-25 meeting released today in Washington. Central bankers saw Europe’s debt crisis and a fiscal tightening caused by a failure of U.S. lawmakers to agree on a budget as risks to the recovery, the minutes showed. A discussion of such risks may give central bankers greater scope to ease policy than a focus on indicators such as growth or inflation, said Roberto Perli, a former member of the Fed’s Division of Monetary Affairs staff.
“It is easy to see how downside risks to the forecasts could become large because you have Europe which could hit in the near term, and you have a U.S. fiscal cliff as we approach the end of the year,” said Perli, a managing director at International Strategy & Investment Group in Washington.
Housing Starts Join U.S. Factories Topping Forecasts (Source: Bloomberg)
Housing starts and industrial production exceeded forecasts in April, pointing to strength in the U.S. economy at the start of the second quarter. Starts rose 2.6 percent to a 717,000 annual rate from March’s revised 699,000 pace that was stronger than previously reported, Commerce Department figures showed today in Washington. Industrial production climbed 1.1 percent, the most since December 2010, the Federal Reserve said. The reports indicate the world’s largest economy is withstanding the fallout from the European debt crisis. Borrowing costs kept low by the Fed and labor-market gains are spurring consumer demand for autos and housing, lifting sales at companies from PulteGroup Inc. (PHM) to Chrysler Group LLC.
“The improvement in housing is more noticeable now, and manufacturing is pretty solid,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “It makes the expansion more resilient. Europe is affecting U.S. business sentiment more than it is impacting U.S. economic data.”
Mortgage Delinquency Rate in U.S. Fall to 2008 Levels (Source: Bloomberg)
The U.S. mortgage delinquency rate declined in the first quarter to the lowest level since 2008 as an improving job market helped more borrowers pay their bills and tighter lending standards resulted in fewer defaults. The share of home loans at least 30 days late dropped to 7.4 percent from 7.58 percent in the previous three months, according to a report today from the Mortgage Bankers Association. The rate peaked at 10.1 percent in the first quarter of 2010 and was last lower in the third quarter of 2008, when it was 6.99 percent. “Delinquencies are clearly continuing to improve,” Michael Fratantoni, the group’s vice president of research and economics, said in a statement. “Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future.”
Falling delinquencies may help limit foreclosures and solidify a recovery in the housing market as low interest rates combine with decreased prices to stimulate demand. Housing affordability reached a new high in the first quarter and sales of previously owned homes rose 5.3 percent from a year earlier, data from the National Association of Realtors show.
Industrial Production in U.S. Climbs More Than Forecast (Source: Bloomberg)
Industrial production in the U.S. climbed more than forecast in April, propelled by gains in auto manufacturing and utility use. Output at factories, mines and utilities increased 1.1 percent last month, the most since December 2010, after a 0.6 percent decline in March that was revised from no change, the Federal Reserve reported today in Washington. Economists forecast a 0.6 percent gain, according to the Bloomberg News survey median. Manufacturing, which makes up about 75 percent of total production, rose 0.6 percent. Utility output climbed the most in two years. Motor vehicles sales in the first quarter that were the strongest in four years have buoyed manufacturing, helping make up for a slowdown in corporate equipment purchases. While U.S. exports accelerated during the first three months of 2012, weaker economies in Europe and parts of Asia remain a hurdle for American factories.
“Things are looking brighter than they were a few months ago,” said Millan Mulraine, senior U.S. strategist at TD Securities Inc. in New York. “Auto production is doing well because consumers are buying vehicles, and consumers are buying vehicles because they feel more positive about their job prospects.”
China Slowdown to End in Third Quarter, Survey Shows (Source: Bloomberg)
China’s economic growth is likely to accelerate for the first time in seven quarters after banks’ reserve requirements were cut, buoying global expansion threatened by Greece’s possible exit from the euro. Third-quarter growth will rebound to 8.3 percent from 7.9 percent this quarter, according to the median estimate of 21 economists surveyed by Bloomberg News. Analysts forecast a further reduction of 100 basis points in reserve ratios this year, while a majority of respondents expect benchmark lending and deposit rates to be unchanged. The forecasts reflect optimism that the ruling Communist Party has enough monetary and fiscal firepower to support the world’s second-biggest economy as leaders prepare for a once-a- decade power handover later this year. Even with the pickup next quarter, annual growth is forecast at a 13-year low after reports showed April industrial production and trade grew less than forecast and renewed European debt turmoil roiled markets.
“The recent spate of poor data should convince the authorities to take additional measures to prevent a further slowdown in the run-up to the Party Congress later this year,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong, who previously worked for the International Monetary Fund and China’s central bank.
China Likely to Approve Nuclear Plan by End June, Official Says (Source: Bloomberg)
China’s state council, or cabinet, will probably hold a meeting before the end of June to approve a safety and development plan for the nuclear industry, according to Xu Yuming, the vice secretary general of the China Nuclear Energy Association. The government can resume approval of new nuclear plants after the plan is passed, Xu said before a conference in Beijing today. The plan was rejected earlier and amendments are being made to some “minor” details, he said. China has four nuclear reactors that were approved prior to the Fukushima disaster in Japan and had suspended construction, he said. The country will start two new reactors by the end of the year, he said. The facilities, at Hongyanhe and Ningde, resumed construction after a nationwide safety inspection that started in April 2011, he said.
Japan’s Economy Grows More-Than-Estimated 4.1% on Quake Work (Source: Bloomberg)
Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand. Gross domestic product rose an annualized 4.1 percent, the Cabinet Office said today in Tokyo. The median estimate of 27 economists surveyed by Bloomberg News was 3.5 percent. In the fourth quarter, growth was 0.1 percent, revised data showed. The yen’s more than 4 percent gain against the dollar since mid-March may encourage politicians to keep pressing the Bank of Japan to add stimulus, with the first-quarter expansion likely to mark the peak for the year. Europe’s debt turmoil threatens to disrupt exports and financial markets as Greece teeters on the edge of exiting from the euro. “Japan is on a steady recovery path but this high growth probably won’t continue,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “We can’t be optimistic about the outlook.”
Economic growth may be 2.2 percent in the second and third quarters, and 1.7 percent in the final three months of the year, according to the average forecast of 40 economists in a Japan Center for Economic Research survey released May 15.
Singapore Warns of Europe Default Risk as Economy Expands 10% (Source: Bloomberg)
Singapore’s government said the risk of a “disorderly” debt default in Europe can’t be ruled out, clouding the outlook for its economy even as growth rebounded last quarter. Gross domestic product rose an annualized 10 percent in the three months through March 31 from the previous quarter, more than an initial estimate of 9.9 percent growth, the Trade Ministry said today. The median of 14 estimates in a Bloomberg News survey was for a 10.6 percent gain. Greece’s inability to form a new government after an inconclusive election could reverse progress made in resolving Europe’s debt turmoil, compounding risks stemming from a China growth slowdown and an uneven U.S. recovery. While Singapore tightened policy in April through faster currency gains to curb persistent price pressures, most Asian policy makers are holding or cutting interest rates to bolster their economies.
“While it all appears good and rosy, downside risks in the global environment have once again re-emerged,” Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. “A pullback in Singapore’s GDP growth in the second quarter should not be a surprise.”
ECB Stops Loans to Some Greek Banks as Draghi Talks Exit (Source: Bloomberg)
The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area. The Frankfurt-based ECB said yesterday it will push the responsibility for lending to some Greek financial institutions onto the Greek central bank until they have sufficiently boosted their capital. “Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations,” the ECB said in an emailed statement. The move comes after Draghi acknowledged for the first time that Greece could leave the monetary union. While the bank’s “strong preference” is that Greece stays in the 17-nation euro area, the ECB will continue to preserve “the integrity of our balance sheet,” he said in a speech in Frankfurt yesterday.
“A Greek exit was seen as an absurdity up to now,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “It is gradually becoming the main scenario. The ECB is prioritizing its balance sheet over monetary-union geography.”
Greece Heads to Elections With Euro, Bailout at Stake (Source: Bloomberg)
Greece is heading toward national elections six weeks after the last vote, with its future in the 17-nation euro area and the international bailout at stake. Panagiotis Pikrammenos, head of Greece’s Council of State, the highest administrative court, was sworn in as head of the caretaker administration yesterday. The formal announcement of the election date, probably June 17, will be made after the new parliament is sworn in today and then dissolved. “I have read that due to my name I am the most appropriate prime minister,” Pikrammenos, whose name means “bitter” in Greek, told the country’s president. “It is a great joy and also a great burden.” The new vote will follow inconclusive May 6 elections that pushed a political party opposed to Greece’s international bailout into second place, raising the specter of Greece leaving the euro. Public opinion polls say that the party, Syriza, may come in first next time, complicating Greece’s efforts to avoid running out of cash by early July.
ECB Said to Stick to Current Crisis Stance as Tools Reviewed (Source: Bloomberg)
The European Central Bank is conducting a comprehensive review of all its policy tools and has no immediate plans to increase stimulus even as market tensions mount, two euro-area officials said. The review, mandated by the central bank’s six-member Executive Board, intends to assess the effectiveness of its measures, including the bond-buying program and long-term refinancing operations, and is scheduled to be completed in June or July, said the officials, who spoke on condition of anonymity because the deliberations are private. A third official said the ECB may not consider taking any further policy action until July, and that the bank sees current market tensions as a way of focusing politicians’ minds on reform efforts. An ECB spokesman, who asked not to be named in line with the bank’s practice, declined to comment.
Bond yields in Spain and Italy have reached levels that last year pushed the ECB to restart its bond-purchase program, while the prospect of new elections in Greece has fueled concerns that the country may leave the 17-nation euro region. The third official said the ECB won’t do anything until after the next Greek election and that Governing Council members have been warned not to comment on the nation at all.
Greece Plans for June 17 Vote Under Caretake Government (Source: Bloomberg)
A Greek caretaker government will prepare new elections probably on June 17 that are shaping up as a ballot on whether the country should remain a euro member. “Greeks are faced with two choices in this election,” Antonis Samaras, leader of the New Democracy party, said in a statement on state-run NET TV. “We can change everything in Greece, together with a Europe that is changing. Or we can live through the horror and isolation of a euro exit and the collapse of all that we have built.” The new vote follows inconclusive May 6 elections that pushed a political party opposed to Greece’s international bailout into second place, raising the specter of Greece leaving the euro. Public opinion polls say that the party, Syriza, may come in first next time, complicating Greece’s efforts to avoid running out of cash by early July. Samaras’s New Democracy party came first in the May 6 election, short of an outright majority.
President Karolos Papoulias failed in a bid to broker a governing coalition in meetings yesterday with party leaders in Athens.
King Says BOE Braced for Euro Debt Crisis Risks: Economy (Source: Bloomberg)
Bank of England Governor Mervyn King said officials have prepared for dangers posed by Europe’s debt crisis, after the bank lowered growth forecasts and raised predictions for inflation this year. “Contingency plans have been discussed and have been for a considerable time,” King said at a press conference to present the bank’s quarterly Inflation Report today in London. “We are navigating through turbulent waters with the risk of a storm heading our way from the continent.” Greece is heading for new elections after a political stalemate that’s sent stocks lower, pushed up bond yields and raised concern the nation may leave the euro area. King said the currency region is facing a prolonged period of “sluggish” growth that will affect the U.K. and that the bank hasn’t ruled out responding with more stimulus if needed.
Policy makers voted to stop increasing bond purchases last week after some officials stepped up their rhetoric on inflation, which has been above their goal for more than two years. King said today that there’s a case both to expand bond purchases or to hold fewer securities and that the risks to inflation in two years are “broadly, evenly balanced.”
