Asian Stocks Snap Six-Day Gain on German Data Before ECB (Source: Bloomberg)
Asian stocks fell, with the benchmark index heading for its first decline in seven days, after service-industry reports in Germany and the U.K. missed estimates, supporting the case for an interest-rate cut by the European Central Bank today. Samsung Electronics Co. (005930), the world’s biggest maker of mobile phones by sales that gets 19 percent of sales from Europe, slipped 0.7 percent in Seoul. Aquarius Platinum Ltd. tumbled 8.2 percent in Sydney after saying output will decline. Sun Hung Kai Properties Ltd. and other Hong Kong developers may be active after a government report showed home sales fell last month . The MSCI Asia Pacific Index (MXAP) lost 0.2 percent to 119.05 as of 9:52 a.m. in Tokyo, before markets open in Hong Kong and China. The gauge climbed yesterday to its highest level since May 10 after euro-zone leaders last week agreed to relax conditions for rescuing lenders, easing concern about the region’s debt crisis.
“I would still be cautious to suggest that there’s going to be a sustained move upwards,” said Tim Schroeders, a portfolio manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The market remains skeptical that policy measures in Europe will be in place in a timely fashion. Significant details still need to be addressed but for the time being the initiatives to tackle the debt crisis have broadened.”
Japan, Australia Stocks May Be Little Changed Before ECB (Source: Bloomberg)
Japanese and Australian stocks may open little changed after service-industry reports in Germany and the U.K. missed estimates amid speculation the European Central Bank and the Bank of England will ease monetary policy. Shares of Canon Inc. (7751), the world’s biggest camera maker that gets 31 percent of its revenue in Europe, may be active in Tokyo. Inpex Corp. (1662), Japan’s No. 1 energy explorer, may be active after oil slid from the highest price in a month. Aquarius Platinum Ltd., the fourth-largest producer of the metal, may be active in Sydney after saying output will decline as it conserves cash amid falling prices. Futures on Japan’s Nikkei 225 Stock Average (NKY) weren’t traded in Chicago yesterday with U.S. equity markets closed for a holiday. New Zealand’s NZX 50 Index was little changed today in Wellington. Futures on the Standard & Poor’s 500 Index (SPXL1) were little changed today as investors await a U.S. jobs report tomorrow.
“The market is likely to be in a gridlock,” said Mitsushige Akino, Tokyo-based executive officer at Ichiyoshi Investment Management Co., which oversees about 40 billion yen ($501 million). “You want to wait and see how the ECB meeting and the U.S. jobs data will come out. It’s not easy to buy or sell.”
China Stocks Drop for First Time in Four Days on Profit Concern (Source: Bloomberg)
Chinese stocks fell for the first time in four days as concern that construction activity is faltering dragged industrial companies lower, overshadowing a rally by energy producers. Taiyuan Heavy Industry Co. (600169) fell to the lowest level in 3 1/2 years after saying it will post a first-half loss. Sichuan Hongda Co. plunged 9.2 percent after the government ordered it to halt building a plant that drew protests. China Shenhua Energy Co. advanced 1.3 percent after oil jumped more than 4 percent in New York yesterday. The Shanghai Composite Index (SHCOMP) fell 1.88 points, or 0.1 percent, to 2,227.31 at the close. The CSI 300 Index slipped 0.2 percent to 2,464.92. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.3 percent at the close in New York.
“There’s a lack of liquidity in the market on concerns about the economy,” said Cao Xuefeng, an analyst at Huaxi Securities Co. in Chengdu. “In the near term, any gains will be limited and trading is likely to be range-bound.”
Bovespa Climbs for Fourth Day as OGX, Usiminas Lead Gains (Source: Bloomberg)
The Bovespa (IBOV) index advanced for a fourth day as raw-materials producers gained amid speculation central bankers in China and Europe will ease monetary policy, helping shore up global growth. Steelmakers Usinas Siderurgicas de Minas Gerais SA and Cia. Siderurgica Nacional SA helped lead gains on the benchmark index. Eletropaulo Metropolitana SA, the Brazilian unit of AES Corp. (AES), rebounded after plunging 10 percent yesterday. The Bovespa climbed 0.5 percent to 56,076.82 at the close in Sao Paulo. Forty-three stocks gained on the gauge while 17 declined. The real weakened 0.6 percent to 2.0279 per U.S. dollar. The European Central Bank will cut interest rates tomorrow, according to a Bloomberg survey of economists. In China, a state-run newspaper said yesterday policy makers may lower lenders’ reserve requirements three more times this year.
Stocks Pessimism Posts Longest Streak Since 2011 Market Bottom (Source: Bloomberg)
Bearish sentiment in a survey of individual investors has surpassed the historical average for the longest stretch since October, when stocks began a rally that lifted the Standard & Poor’s 500 Index (SPX) 24 percent. A poll by the American Association of Individual Investors showed 44.4 percent of respondents say American stocks will fall over the next six months. That’s the eighth consecutive week that pessimism stayed above the 25-year average of 30 percent. Concern Europe’s debt crisis will deepen and the recovery weaken have erased as much as $1.8 trillion from U.S. equities since March. The last time the proportion of bears topped the average for this long was in the 14 weeks through Oct. 20, 2011, just after the S&P 500 bottomed at 1,099.23. The benchmark measure for U.S. stocks went on to surge as much as 29 percent, reaching a four-year high of 1,419.04 on April 2.
“Individual investors tend to get in when the markets are red hot and they tend to get out when the markets are at the bottom,” Robert Carey, who helps oversee $53 billion as chief investment officer of Wheaton, Illinois-based First Trust Portfolios, said in a telephone interview. “It’s been one series of issues after another, but, ultimately, fundamentals will weigh out and overwhelm any sentiment that people have.”
European Stocks Are Little Changed; Iberdrola Shares Fall (Source: Bloomberg)
European stocks were little changed as speculation that central banks will ease monetary policy offset service-industry measures in the U.K. and Germany that missed economists’ forecasts. Iberdrola (IBE) SA tumbled 5.6 percent as utilities dropped. Chr. Hansen A/S, the maker of natural food colors and cheese cultures, climbed 12 percent after reporting earnings that exceeded estimates. Societe Television Francaise 1 (TFI) advanced after UBS AG (UBSN) advised buying the shares. The Stoxx Europe 600 Index slipped less than 0.1 percent to 257.33 in London, after rallying 5.2 percent over the previous three days. The gauge is still on course for a fifth straight week of gains, the longest stretch since January, as European leaders agreed to address flaws in their bailout programs to ease the sovereign-debt crisis and speculation grew that central banks will take steps to boost the economy.
“Seeing equities fall back after a 7 percent rise as a result of the summit meeting last week suggests that common sense is returning to the market,” said Henrik Drusebjerg, a strategist at Nordea Bank AB in Copenhagen. “If investors are hoping that tomorrow’s central bank meetings will see initiatives on top of lowering interest rates, they will be disappointed.”
Most Emerging Stocks Gain on Stimulus Hope, Vehicle Sales (Source: Bloomberg)
Most emerging-market stocks rose, led by consumer companies, after automakers beat estimates for U.S. sales and on speculation that Chinese and European central banks will ease monetary policy. The MSCI Emerging Markets Index (MXEF) was little changed at 956.26 at the close in New York, with 442 stocks advancing and 308 declining. Brazil’s Bovespa (IBOV) index rose 0.5 percent, led by raw-materials producers such as Usinas Siderurgicas de Minas Gerais SA (USIM5) and Cia. Hyundai Motor Co. (005380), South Korea’s biggest carmaker, climbed the most in two weeks as it sold more cars in the U.S. The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong fell 0.3 percent. The Micex Index (INDEXCF) gained 0.5 percent in Moscow.
The European Central Bank will cut interest rates tomorrow, according to a Bloomberg survey of economists. The 21 countries in the developing-nation gauge send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show. A government-linked newspaper in China said policy makers may lower lenders’ reserve requirements three more times this year.
U.K. Stocks Are Little Changed Before ECB, BOE Meetings (Source: Bloomberg)
U.K. stocks closed little changed, after the benchmark FTSE 100 Index rallied to a two-month high yesterday, as investors awaited the outcome of tomorrow’s central-bank policy meetings. Barclays paced banks lower as former Chief Executive Officer Bob Diamond attended a Treasury Select Committee hearing. Man Group (EMG) Plc slid 4.7 percent after the hedge-fund manager reported a decrease in assets last week at its flagship fund. Tullow Oil Plc (TLW) fell 1.9 percent after the oil producer suspended drilling at a well in Kenya. The FTSE 100 slid 3.26, less than 0.1 percent, to 5,684.47 at the close in London. The volume of shares changing hands on the gauge was 50 percent below the 30-day average with the U.S. closed for the Independence Day holiday. The broader FTSE All- Share Index also slid less than 0.1 percent today, while Ireland’s ISEQ Index rallied 0.8 percent.
“The recent risk rally across global markets appears to be alluring clients into booking some profits,” said Ishaq Siddiqi, a market strategist at ETX Capital in London. “Today’s price-action is likely to continue until the European Central Bank and Bank of England policy decisions tomorrow.”
German Stocks Fall From Highest in Two Months; Banks Drop (Source: Bloomberg)
German stocks fell for the first day in four, pulling the DAX Index (DAX) down from the highest level in almost two months. EON AG dropped 1.6 percent after JPMorgan Chase & Co. and Citigroup Inc. cut their recommendations on the shares. Linde AG (LIN) fell 1.3 percent after Credit Suisse Group AG lowered its rating on the stock. Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, retreated at least 1 percent each. The DAX Index fell 0.2 percent to 6,564.80 at the close in Frankfurt, as investors await an interest-rate decision by the European Central Bank and a U.S. report on payrolls later this week. The gauge has gained 10 percent from its 2012 low on June 5 as Greece formed a new government and European leaders agreed to address flaws in their bailout programs. The broader HDAX Index lost 0.1 percent today. U.S. equity markets are closed for the Independence Day holiday.
“Investors have spent the first half of this week eagerly looking forward to the final two days, when central bank meetings and non-farm payrolls will provide plenty of excitement,” said Rupert Osborne, a futures trader at IG Index in London. “Caution predominates over the U.S. Independence Day holiday.”
Treasuries Rise Before U.S. Employment Data (Source: Bloomberg)
Treasuries advanced before reports today and tomorrow that economists said will show the U.S. is struggling to add jobs. The economy is “slowing markedly,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote on Twitter July 3. Yields slid to a record following the prior employment report on June 1, when the Labor Department said payrolls grew by 69,000, the smallest gain in a year. “There’s a lot of support for Treasuries,” said Tomohisa Fujiki, an interest-rate strategist at BNP Paribas Securities Japan Ltd. in Tokyo. “Jobs growth is sluggish. The pace of recovery seems to be slowing.” BNP is one of the 21 primary dealers that trade directly with the Fed. Benchmark 10-year yields declined two basis points to 1.61 percent as of 9:33 a.m. in Tokyo, according to Bloomberg Bond Trader data. The record low yield was 1.44 percent. The 1.75 percent note due in May 2022 rose 6/32, or $1.88 per $1,000 face amount, to 101 9/32.
The U.S. added 90,000 jobs in June and the jobless rate held at 8.2 percent, based on Bloomberg News surveys of economists before the Labor Department reports the figures tomorrow. It would be the third month that the economy created fewer than 100,000 positions.
Korean Won Retreats From Two-Month High on Europe Slowdown Signs (Source: Bloomberg)
South Korea’s won retreated from a two-month high after data indicated an economic slump is deepening in Europe, bosltering demand for the relative safety of the dollar. Government bonds were little changed. Services and manufacturing output shrank in June for a fifth month in the euro area and services unexpectedly contracted in Germany, reports showed yesterday. The European Central Bank will cut its benchmark interest rate by at least a quarter of a percentage point today, according to 52 of 63 economists in a Bloomberg survey. South Korea’s finance ministry releases its monthly economic assessment report at 10 a.m. local time. The Kospi Index (KOSPI) of shares fell. “The won will move within a range as investors wait for today’s ECB meeting,” said Han Sung Min, a Seoul-based currency dealer at Busan Bank. “Europe’s weakening data will put downward pressure on the won and demand to buy the dollar cheap may rise after the won’s recent gains.”
The won slid 0.1 percent to 1,137.00 per dollar as of 9:29 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,132.79 yesterday, the strongest since May 4. The currency’s one-month implied volatility, a measure of exchange- rate swings used to price options, increased five basis points, or 0.05 percentage point, to 7.23 percent.
Aussue Is Near Recrod Versus Euro Before ECB, BOE Meet (Source: Bloomberg)
Australia’s dollar was 0.5 percent from a record against the euro before European Central Bank and Bank of England meetings to discuss ways to provide economic stimulus, boosting demand for currencies tied to growth. New Zealand’s dollar, known as the kiwi, was near its strongest level versus the greenback in two months before U.S. data tomorrow forecast to show payrolls in June probably concluded the smallest quarterly advance in more than two years. Australia’s government is scheduled to report on the trade balance for May today. Australian Treasurer Wayne Swan said he will discuss trading between the Chinese yuan and the so-called Aussie next week in Hong Kong. “You might see the Aussie and kiwi supported a little bit if the BOE and ECB do more stimulus,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia. (CBA) “There’s a good chance that the Aussie-euro will soon hit a record high.”
The Australian dollar was little changed at 82 euro cents as of 10:55 a.m. in Sydney, compared with a record high of 82.42 set on Feb. 7. The currency slid 0.1 percent to $1.0271, and fetched 82.10 yen from 82.08. New Zealand’s dollar was little changed at 80.36 U.S. cents after yesterday touching 80.65, the strongest level since May 3. It was at 64.24 yen from 64.19.
Euro Stays Lower Before German Factory Data, ECB Meeting (Source: Bloomberg)
The euro remained lower against most of its 16 major peers before German data forecast to show factory orders dropped, adding to signs Europe’s debt crisis curbed demand from the region. The European Central Bank will probably reduce borrowing costs at a policy meeting today to stimulate the euro-area’s flagging economy, according to a Bloomberg News poll. The pound maintained a three-day slide on speculation the Bank of England will extend its so-called quantitative easing program today. “The euro is under pressure and will stay under pressure,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk management company. “Germany is a huge market and if that market does slow down, it can only undermine global growth and confidence going forward.”
The euro traded at 100.11 yen as of 9:22 a.m. in Tokyo after falling 0.5 percent to 100.07 yesterday. It was little changed at $1.2528 following a 0.6 percent decline. The dollar bought 79.91 yen from 79.88. The pound was at $1.5591 after retreating 0.8 percent in the past three days to $1.5589.
China Needs to Ease One-Child Policy, State Researchers Say (Source: Bloomberg)
Chinese government researchers called on the nation to ease its one-child policy as soon as possible to cope with an aging population and labor shortage. One option is allowing all people to have a second child, three researchers including Yu Dong from the State Council’s Development Research Center wrote in an article in yesterday’s China Economic Times, a newspaper affiliated with the center. “The longer time we take to adjust the policy, the more vulnerable we become,” the piece said. The commentary adds to debate on the policy, adopted in the late 1970s, during the deepest economic slowdown since the global financial crisis and ahead of a once-in-a-decade power handover. Last month, the alleged forced abortion of a seven- month-old fetus sparked a public outcry and resulted in the suspension of three officials in a western city.
“It is suggested that the birth control policy be adjusted as soon as possible” against the backdrop of a vanishing demographic dividend, accelerating aging and a potential future labor shortage that are set to become major challenges, the researchers wrote. The recommendation came in a paragraph within a broader piece about social policies.
Japan Should Boost JGBs to Spur Growth, Sakakibara Says (Source: Bloomberg)
Far from tightening its fiscal belt, Japan should expand the world’s largest debt pile to rekindle economic growth, said Eisuke Sakakibara, a former Ministry of Finance official. Prime Minister Yoshihiko Noda’s push to double the sales tax to lessen the government’s reliance on Japanese government bonds could further damage an economy already struggling amid a slowdown in exports, Sakakibara, known as “Mr. Yen” and now a professor at Aoyama Gakuin University in Tokyo, said in an interview yesterday. “We should be selling large amounts of JGBs to fund an economic stimulus,” he said. “We could also consider a cut to the corporate tax rate as a stimulus step. The big problem for the Noda administration is there’s no one in an important office who understands the economy.”
Japan’s bond market is signaling no immediate concern about a public debt burden that’s now double the nation’s annual economic output. The benchmark 10-year note yield closed yesterday at two basis points from a nine-year low, and central bank data showed last month that overseas investors owned 8.3 percent of JGBs at the end of March, the most on record.
S&P Raises Philippines’ Credit Rating to Nine-Year High (Source: Bloomberg)
The Philippines’ debt rating was raised to the highest level since 2003 by Standard & Poor’s, taking President Benigno Aquino nearer his goal of attaining investment grade. The nation’s long-term foreign currency-denominated debt was raised one level to BB+ from BB, S&P said in a statement yesterday. That’s one step below investment grade and on a par with neighboring Indonesia. The outlook on the rating is stable. “The foreign currency rating upgrade reflects our assessment of gradually easing fiscal vulnerability,” Agost Benard, a Singapore-based analyst at Standard & Poor’s, said in the statement. “The rating action also reflects the country’s strengthening external position, with remittances and an expanding service export sector continuing to drive current- account surpluses.”
Emerging nations from Brazil to Indonesia have won credit- rating upgrades in the past year as governments contained budget deficits. A higher assessment for the Philippines will help Aquino as he moves to boost spending to a record this year and seeks $16 billion of investment in roads, bridges and airports to shield the economy from Europe’s sovereign-debt crisis.
Draghi, King May Delve Deeper Into Zero-Rate World Today (Source: Bloomberg)
The European Central Bank and the Bank of England may drive global monetary policy deeper into the world of zero interest rates and unorthodox methods today as they seek to stimulate their flagging economies. The ECB will take its benchmark interest rate below 1 percent for the first time, cutting it by a quarter percentage point to a record low of 0.75 percent, and reduce its deposit rate to zero, according to a Bloomberg News survey of economists. The Bank of England will raise its target for bond purchases by 50 billion pounds ($78 billion) to 375 billion pounds, another survey shows. The moves would push JPMorgan Chase & Co.’s average interest rate for developed economies to a crisis-era low of about 0.5 percent and add to the balance sheets of major central banks, which have already swelled 40 percent in five years of global financial turmoil. The jury is out on whether the monetary medicine will work or whether policy makers will be forced to deploy further measures.
“A big part of the world economy has become fairly stagnant and so central banks are in easing mode again,” said Joseph Lupton, a global economist at JPMorgan in New York. “We’re probably at the point of diminishing returns, but it can still be argued that it helps somewhat.”
King Succession Race for BOE Roiled as Libor Furor Rages (Source: Bloomberg)
Chancellor of the Exchequer George Osborne’s hunt for the next Bank of England governor got tougher as the Libor-rigging scandal cast a shadow over potential contenders for the job, including the top internal candidate. With Bob Diamond resigning as chief executive officer of Barclays Plc (BARC), the lender’s acknowledged falsifying of global interest rates means greater scrutiny of bankers and regulators hoping to succeed Mervyn King atop the U.K. central bank. Paul Tucker, one of King’s deputies and a front-runner to replace him, is being drawn into the Libor furor over his 2008 communications with Diamond. Other possible contenders whose prospects may be affected include John Varley, Diamond’s predecessor, and former HSBC Holdings Plc (HSBA) Chairman Stephen Green, who chaired the British Bankers Association at the time.
“It would make it very difficult to select somebody if they have been implicated in what amounts to wholesale Libor- fixing,” said Mark Garnier, a Conservative Party lawmaker who sits on Parliament’s Treasury Committee, the panel that Diamond testified to today in London.
Lagarde Consumed by Crisis Steers IMF Tough Love to EU (Source: Bloomberg)
Discussing climate change was a welcome break for Christine Lagarde from the European debt crisis that has consumed her first year as director of the International Monetary Fund. “I’m very pleased to be here today, not only because we’re not going to talk at all about the euro zone, not at all about Greece, not at all about Spain,” she said in a June 12 talk to the Center for Global Development in Washington, drawing laughs from her audience. Then Europe caught up with her, again. Four days after the event, Lagarde, 56, canceled plans to join leaders at a summit on sustainable development in Rio de Janeiro. Instead, she flew to Luxembourg to urge finance ministers of the 17 euro countries to take further steps to save their monetary union, which has already required almost 500 billion euros ($629 billion) in funds for indebted nations and their banks.
So it’s gone for the former French finance minister. Over the year, she has signed off on a second Greek bailout, called for European banks to be recapitalized and traveled from Brasilia to Beijing to obtain more lending resources as Europe’s turmoil threatens global growth.
Brazil Said to Plan Further Half-Point Rate Reductions (Source: Bloomberg)
Brazil plans to maintain the pace of interest rate reductions at half-point intervals as the economy recovers more slowly than expected and Europe’s debt crisis remains a concern, a government official familiar with the bank’s deliberations said. While the situation in Europe has stabilized in recent days, it and the U.S.’s fiscal situation are hurting the confidence of investors and consumers in Brazil, said the official, who spoke on condition of anonymity because he’s not authorized to discuss monetary policy. Brazilian industrial output fell for a third straight month in May, a report showed yesterday. Brazil’s central bank, which next decides rates on July 11, cut its benchmark Selic rate to a record low 8.5 percent in May. It was the fifth time in seven meetings that the central bank reduced borrowing costs by 50 basis points.
Policy makers said in a quarterly inflation report last week that any future monetary easing would be carried out with “parsimony,” repeating language used in previous statements that analysts said signals rate reductions of a half point. The yield on interest rate future contracts maturing in January 2014 rose four basis points to 7.86 percent at 2:44 p.m. local time. The real extended declines, falling as much as 0.9 percent to 2.0345 reais per dollar.
Euro Stays Lower Before German Factory Data, ECB Meeting (Source: Bloomberg)
The euro remained lower against most of its 16 major peers before German data forecast to show factory orders dropped, adding to signs Europe’s debt crisis curbed demand from the region. The European Central Bank will probably reduce borrowing costs at a policy meeting today to stimulate the euro-area’s flagging economy, according to a Bloomberg News poll. The pound maintained a three-day slide on speculation the Bank of England will extend its so-called quantitative easing program today. “The euro is under pressure and will stay under pressure,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk management company. “Germany is a huge market and if that market does slow down, it can only undermine global growth and confidence going forward.”
The euro traded at 100.11 yen as of 9:22 a.m. in Tokyo after falling 0.5 percent to 100.07 yesterday. It was little changed at $1.2528 following a 0.6 percent decline. The dollar bought 79.91 yen from 79.88. The pound was at $1.5591 after retreating 0.8 percent in the past three days to $1.5589
Diamond Says Rivals Lowballed Libor, Blames Regulators (Source: Bloomberg)
Robert Diamond, who quit this week as chief executive officer of Barclays Plc (BARC), sought to blame other banks for misleading markets about their ability to borrow, and regulators for turning a blind eye. Ordered to testify to British lawmakers after Barclays agreed to pay a record 290-million pound ($455 million) fine for rigging the London interbank offered rate, Diamond said yesterday he was “disappointed” regulators failed to act on repeated warnings from Barclays that competitors had lowballed their submissions. Legislators challenged him on why he took so long to uncover his own firm’s attempts to manipulate the rate.
“This isn’t just Barclays,” Diamond, 60, told lawmakers at a three-hour hearing of Parliament’s Treasury Select Committee. “Throughout 2007 and 2008, no institution of the 16 banks reporting three-month dollar Libor was at the higher end more consistently than Barclays. Barclays was getting questions about why it was always high and we were saying, ‘We are high because we were reporting at where we were borrowing money.’” Diamond’s comments underscore concern that Libor, the benchmark for more than $360 trillion of global securities, has stopped being an accurate reflection of banks’ borrowing costs. Last week, regulators found Barclays had tried to manipulate the benchmark for profit and to mask its difficulty borrowing money during the credit crisis.
Australia Retail Sales Rise More Than Forecast; Dollar Jumps (Source: Bloomberg)
Australian retail sales advanced more than economists forecast in May on stronger spending at restaurants and department stores, sending the local dollar to a two-month high as traders pared bets on an interest-rate cut. Sales climbed 0.5 percent to A$21.3 billion ($22 billion) from a month earlier, when they rose a revised 0.1 percent, the fifth straight monthly gain, the Bureau of Statistics said in Sydney today. Sales in April were previously reported to have dropped 0.2 percent. The May result compares with economists’ forecast in a Bloomberg survey for a 0.2 percent gain. The longest stretch of retail sales increases since 2010 may encourage Reserve Bank of Australia Governor Glenn Stevens to extend this week’s rate pause after 75 basis points in reductions in May and June. Policy makers are trying to support confidence that has weakened among consumers who are saving, even as Australia recorded its best January-to-May period of hiring in five years.
Spending “was concentrated in the discretionary segment, adding to the overall strength of the report,” said Celeste Tay, a Singapore-based economist at 4cast Ltd. Excluding food retailing, which accounts for 40 percent of the total and fell for the first time this year, retail sales rose by “a more robust 0.9 percent month-on-month,” she said.
Fonterra Sales to China Threatened by New Zealand Ports: Freight (Source: Bloomberg)
New Zealand’s ports, the gateway for a quarter of the nation’s economy, have a potential threat to their future: Most container ships under construction are so big they’d run aground on arrival. Aging terminals from Auckland on the North Island to Otago in the south are struggling to keep pace with rivals along Australia’s east coast. Of New Zealand’s four busiest export hubs, only Port of Tauranga Ltd. is in the advanced stages of expanding for larger vessels, while others encounter regulatory delays and public opposition to their development. New Zealand needs to ensure that companies such as Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, can tap the growing demand for protein-rich diets in China and beyond. Already handicapped by the three weeks it takes a ship to get to Hong Kong, New Zealand’s shippers say a failure to act could cause the nation of 4.4 million people to cede ground to its larger neighbor in the race to supply Asian markets.
“We either keep getting small vessels and get less and less competitive as the fuel price eats away at the profit margins for the New Zealand exporter, or worse, we lose deep-sea vessels coming to New Zealand in favor of the carriers trans- shipping over to Australia,” said Chris Greenough, chief executive officer of Kotahi Logistics LP Ltd., Fonterra’s freight handler, in an interview.
