Asia FX By Cornelius Luca - Thu 19 Jul 2012 17:10:38 CT(Source:CME/www.lucafxta.com)
The appetite for risk remained relatively firm on Thursday on news that German Chancellor Angela Merkel easily won a parliamentary vote on a Eurozone rescue package for Spanish banks despite unease in her centre-right coalition about the rising cost of Europe's debt crisis for German taxpayers. The foreign currencies extended Wednesday's pattern, so some European currencies consolidated and the commodity currencies and yen marched higher. The US stock indexes advanced. Gold, oil and silver closed up. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is bearish. The LGR short-term model is short on the European currencies and yen. Good luck!
Overnight
US: The weekly jobless claims jumped to 386,000 from the previous week's revised figure of 352,000 (350,000 originally).
US: The Conference Board's leading economic index fell by 0.3% in June following a revised 0.4% increase in May.
US: The Philly Fed's diffusion index of current activity rose to -12.9 in July from -16.6 in June.
US: Existing home sales fell 5.4% to an annual rate of 4.37 million in June from an upwardly revised 4.62 million in May. The national median existing-home price rose 5% to $189,400 in June from $180,300 in May.
Asia Stocks Fall, Paring Weekly Gain, on U.S. Data, China (Source:Bloomberg)
Asian stocks fell, paring a weekly gain in the benchmark regional index, amid speculation China will keep property curbs in place and as U.S. economic reports missed estimates. Billabong International Ltd., a surfwear company that counts the Americas as its biggest market, fell 1.8 percent in Sydney. Fanuc Corp. (6954), a maker of industrial robots that gets almost half its sales from Asia outside Japan, declined 0.7 percent in Tokyo. Chinese cement makers may be active today in Hong Kong after Jefferies Group Inc. said growth in demand will slow “drastically” in 2012. The MSCI Asia Pacific Index (MXAP) slid 0.3 percent to 117.19 as of 10:07 a.m. in Tokyo, paring this week’s gains to 1.7 percent. About three shares fell for every two that rose. Markets in Hong Kong and China are yet to open.
“The shape of recovery is still uncertain,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Equity investors need to be patient in any case, but more so at the present time. Valuations are low, which means dividend yields are reasonable.” The MSCI Asia Pacific Index pared its loss from this year’s high on Feb. 29 through yesterday to 8.9 percent amid optimism central banks from China to the U.S. will ease monetary policy. The Asian benchmark, which contains some companies from emerging markets, trades at 11.9 times estimated earnings on average, compared with 13.3 times for the Standard & Poor’s 500 Index and 11 times for the Stoxx Europe 600 Index.
Japan Stocks Drop as U.S. Data Disappoints; Toshiba Gains (Source:Bloomberg)
July 20 (Bloomberg) -- Japanese stocks fell, trimming a weekly gain on the benchmark Nikkei 225 (NKY) Stock Average, after U.S. economic reports missed estimates, damping the earnings outlook for exporters. Toshiba Corp. rose after its chipmaking partner reported better-than-expected profits. Carmaker Toyota Motor Corp. (7203), which depends on North America for a quarter of its sales, dropped 1 percent. Yamato Holdings Co., which provides parcel delivery services, declined 2.9 percent on a report its operating profit slid. Toshiba added 3.2 percent after chipmaking partner SanDisk Corp. posted profits that topped analysts’ estimates. The Nikkei 225 fell 0.3 percent to 8,767.38 as of 9:52 a.m. in Tokyo, trimming weekly gain to 0.5 percent. The broader Topix Index dropped 0.7 percent to 741.90.
“The shape of recovery is still uncertain,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Equity investors need to be patient in any case, but more so at the present time. Valuations are low, which means dividend yields are reasonable.” The Topix rebounded 6.6 percent from a 29-year low reached on June 4 as concern eased about Europe’s debt crisis and central banks around the world cut rates to shore up growth. Shares on the index are valued at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index (SPXL1) and 1.4 for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.
S&P 500 Rises to Two-Month High on Earnings Amid Fed Bets(Source:Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-month high, amid better- than-estimated earnings and bets that disappointing economic data will lead the Federal Reserve to add stimulus. International Business Machines Corp. (IBM), the biggest computer-services provider, and EBay Inc. (EBAY), the largest Internet marketplace, gained at least 3.7 percent as profits beat forecasts. Walgreen Co. (WAG) soared 12 percent after renewing a contract with Express Scripts Inc. (ESRX) Morgan Stanley (MS) slid 5.3 percent after missing estimates as trading revenue plunged. Google Inc. (GOOG), owner of the most popular search engine, rose 3.1 percent at 5:34 p.m. New York time as revenue surged 35 percent.
The S&P 500 (SPX) advanced 0.3 percent to 1,376.51 at 4 p.m. New York time, the highest since May 3. The Dow Jones Industrial Average added 34.66 points, or 0.3 percent, to 12,943.36. The Nasdaq Composite Index gained 0.8 percent to 2,965.90. Volume for exchange-listed stocks in the U.S. was 7 billion shares today, up 4.8 percent from the three-month average. “We’ve been watching very good earnings, but there were too many disappointing economic reports today,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “There’s some comfort based on the idea that if things get worse, the Fed will do something. We’ll have to wait and see.”
European Stocks Rise as Company Earnings Beat Forecasts(Source:Bloomberg)
European stocks rose to the highest level since early April as companies reported quarterly earnings that exceeded analysts’ estimates. Akzo Nobel NV (AKZA) jumped 6.3 percent after posting second- quarter results that beat forecasts. Remy Cointreau SA, France’s second-biggest distiller, increased 6.2 percent on higher revenue. Nokia Oyj (NOK1V) surged 12 percent after sales of its flagship smartphone beat analysts’ estimates. The Stoxx 600 climbed 1.1 percent to 261.86 at the close of trade. The gauge is heading for a seventh straight week of gains, which would be the longest winning streak in more than six years, as central banks cut interest rates and euro-area leaders eased repayment rules for Spanish banks.
“Markets are focusing on the fact that earnings are still strong,” said Theodore Krintas, managing director of Attica Wealth Management in Athens. “What I see is a kind of aversion to bonds generally. It seems that European markets are gaining from the fact that extra liquidity is moving towards equities.” The U.S. economy expanded at a “modest to moderate” pace in June and early July, the Federal Reserve said yesterday in its Beige Book business survey, which is based on reports from its 12 district banks.
Emerging Stocks Rise to Two-Week High on China Stimulus Outlook(Source:Bloomberg)
Emerging-market stocks climbed to a two-week high on prospects policy makers in China and the U.S. will take more steps to bolster economic growth. The MSCI Emerging Markets Index (MXEF) advanced 1.1 percent to 941.13 in New York, the highest close since July 6. Petroleo Brasileiro Sa (PETR4) gained in Sao Paulo after oil rose. Taiwan Semiconductor Manufacturing Co. (2330) gained the most in seven weeks before the company reported its highest profit in six quarters. Bank of Communications Co. led Chinese lenders higher on bets of further cut to the reserve-ratio requirement.
China’s Premier Wen Jiabao will probably decide to cut banks’ reserve requirements and encourage lending as the cabinet meets to discuss efforts to revive growth, the swap market indicates, injecting liquidity into the system as the absence of robust growth in the developed world weights on markets globally. More Americans than forecast filed first-time claims for unemployment last week while sales of previously owned U.S. homes unexpectedly fell in June to an eight-month low. “If there is a greater slowdown in the developed world, you have more room for policy action in the emerging market space,” Tim Hall, who manages about $700 million at Deltec Asset Management, said by phone from New York. “Central banks in these markets have a lot of firepower because of which you have a potential for pick up in the economies in the second half of the year.”
Euro Falls Versus Most Major Peers Before Confidence Data(Source:Bloomberg)
The euro slid versus most of its major peers before data that economists say will show consumer confidence remained weak and manufacturing continued to shrink in the 17-nation region. Europe’s common currency was 0.2 percent from the lowest level in more than three years versus the British pound after Spain’s borrowing costs surged at an auction yesterday, rekindling concern the region’s debt crisis is deepening. The dollar maintained a five-day slide against the Australian currency after stocks rose globally, sapping demand for lower- yielding assets. “There are a number of issues with the European economy. It is pretty clearly in quite an acute contraction,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “The euro is going to remain a weak currency.”
The euro declined 0.2 percent to $1.2255 as of 9:45 a.m. in Tokyo. It was little changed at 96.55 yen and set to complete a fourth weekly drop. The shared currency traded at 78.04 pence after touching 77.92 yesterday, the weakest since October 2008.
Aussie Near 11-Week High on Fed Stimulus Speculation(Source:Bloomberg)
Australia’s dollar traded 0.2 percent from the highest level in 11 weeks before U.S. data next week that may add to the case for more monetary stimulus from the Federal Reserve. The Australian and New Zealand dollars headed for weekly gains as raw material prices rose, boosting demand for the currencies of commodity exporting countries. Investor appetite for the so-called Aussie was limited before data which may show exports stalled last quarter. “The U.S. economy is losing momentum and there’s growing expectation that the Fed will do more stimulus,” said Peter Dragicevich, foreign exchange economist at Commonwealth Bank of Australia (CBA) in Sydney. “You also had a solid increase in commodity prices, and that’s also helping support both the Aussie and the kiwi.”
Australia’s dollar traded at $1.0422 as of 9:14 a.m. in Sydney from $1.0427 yesterday, when it rose as much as 0.8 percent to $1.0444, the highest since April 30. The Aussie is headed for 1.9 percent gain this week, the biggest since the five-day period ended June 8. New Zealand’s dollar was unchanged at 80.33 U.S. cents from yesterday, when it reached 80.55, the strongest since July 5. The so-called kiwi is set for a 0.9 percent weekly advance.
FOREX-Euro, Australian dollar lifted by equity gains
LONDON, July 19 (Reuters) - The euro gained against the dollar while the higher-yielding Australian dollar rose to a 2-1/2 month high, lifted by gains in equities which buoyed demand for riskier and higher-yielding currencies.
"The theme is one of carry plays because there is so much excess money out there that people are looking to get any sort of return on their investment, whether in bonds or in equities," said Ankita Dudani, currency strategist at RBS.
Treasuries Snap Decline on Outlook for Europe Debt Crisis(Source:Bloomberg)
Treasuries snapped a decline from yesterday on speculation Europe’s debt crisis and slowing U.S. economic growth will maintain investor appetite for the relative safety of America’s debt. Demand for Treasuries was supported before European data next week forecast to show consumer confidence remained weak and manufacturing shrank, adding to signs that the region’s debt crisis is hampering growth. U.S. debt has returned 2.5 percent in the three months ended yesterday, according to Bank of America Merrill Lynch data. The MSCI All-Country World Index (MXWD) of stocks handed investors a 2.1 percent loss including reinvested dividends, data compiled by Bloomberg show. “I’m keeping my bullish view on Treasuries,” said Masazumi Fukuoka, a senior dealer at Mitsubishi UFJ Trust & Banking Corp. in Singapore. “There’s ample money that has to find its way into U.S. debt as long as concerns over the European debt crisis and a slowdown in the U.S economy remain.”
Benchmark 10-year Treasury yields were little changed at 1.50 percent as of 10:20 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The price of the 1.75 percent security due in May 2022 was 102 1/4. The record low yield was 1.44 percent set June 1.
Investors Whipsawed by Hourly Price Swings in IBM, Coca-Cola(Source:Bloomberg)
Investors in three of the biggest Dow Jones Industrial Average (INDU) stocks were whipsawed by price swings that repeated every hour yesterday, fueling speculation the moves were a consequence of computerized trading. Shares of International Business Machines Corp. (IBM), McDonald’s Corp. (MCD) and Coca-Cola Co. (KO) swung between successive lows and highs in intervals that began near the top and bottom of each hour, data compiled by Bloomberg show. While only IBM finished more than 1 percent higher, the intraday patterns weren’t accompanied by any breaking news in the three companies where $3.42 billion worth of shares changed hands.
Regulators have increased scrutiny of computerized strategies that have risen to prominence in the U.S. after more than a decade of market structure reform. The Securities and Exchange Commission and Commodity Futures Trading Commission blamed a broker’s trading algorithm for setting into motion the events that caused the May 2010 market crash that briefly erased $862 billion from U.S. equities in less than 20 minutes. “Somebody probably has software that’s running an algorithm that’s either selling in 30-minute intervals or buying,” Bruce W. Weber, dean of the Alfred Lerner College of Business and Economics at the University of Delaware, said in a telephone interview. “For the market value of Coke to be going up and down in this way, oscillating every hour, is a pretty disconcerting observation. This is not going to raise investors’ confidence in the mechanics of our market.”
Home Sales to Factories Point to Second-Half Weakness: Economy(Source:Bloomberg)
Sales of existing U.S. homes unexpectedly dropped and manufacturing in the Philadelphia region contracted for a third month, showing economic weakness is extending into the second half of the year. Home purchases slid 5.4 percent in June to a 4.37 million annual rate, an eight-month low, figures from the National Association of Realtors showed today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index was minus 12.9 in July after minus 16.6 the month before. Readings of less than zero signal contraction. The figures underscore Fed Chairman Ben S. Bernanke’s concerns that growth may be too feeble to reduce unemployment stuck above 8 percent since February 2009. Other reports today showed consumer confidence weakened, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.
“We’ll have very slow growth,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York and the best forecaster of U.S. economic indicators in the two years through May, according to data compiled by Bloomberg News. “The excess supply of homes will weigh on housing for quite some time. Manufacturing is starting to suffer a bit. The labor market remains pretty soggy.”
Jobless Claims in U.S. Rise as Auto Layoff Effects Ease(Source:Bloomberg)
More Americans than forecast filed first-time claims for unemployment insurance payments last week, reflecting volatility induced by the annual auto-plant retooling period. Applications for jobless benefits increased by 34,000 to 386,000 in the week ended July 14, Labor Department figures showed today. Economists forecast 365,000 claims, according to the median estimate in a Bloomberg News survey. The volatility in the numbers was due to a change in the timing of annual automobile plant layoffs, a Labor Department official said as the data were released. Determining whether the labor market is improving or deteriorating has been more difficult in recent weeks because a reduction in the number of auto-plant layoffs typical at this point of the year has thrown the Labor Department’s seasonal adjustment process out of line. It may take weeks to judge the direction the labor market is taking.
“Seeing through the statistical noise, the labor market is pretty soggy, and the claims numbers will reflect that once they settle down,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York and the best forecaster of U.S. economic indicators in the two years through May, according to Bloomberg data. “I don’t think next week is going to be a clean read either, so you might have to wait a little while longer.” Stock futures climbed after the report. The contract on the Standard & Poor’s 500 Index maturing in September rose 0.3 percent to 1,372 at 8:39 a.m. in New York. The yield on the 10- year Treasury note rose to 1.51 percent from 1.5 percent late yesterday.
Americans Hold Dimmest View on Economic Outlook Since January(Source:Bloomberg)
The most Americans in six months said the economy in July was getting worse, indicating the slowdown in hiring is dimming moods as the third quarter begins. The share of households viewing the U.S. as heading in the wrong direction rose to 36 percent, the highest since January, from 33 percent in June. The Bloomberg monthly expectations gauge was minus 11, matching June as the lowest level since January. The weekly Bloomberg Consumer Comfort Index fell to minus 37.9 in the period ended July 15, the lowest in a month. Limited wage gains and unemployment stuck above 8 percent risk further slowing consumer spending and leaving the U.S. more vulnerable to a global slowdown. There is also growing pessimism little is being done in Washington to avoid the so-called fiscal cliff at the end of the year, when higher taxes and automatic spending cuts kick in, raising the risk of recession.
“A soft labor market and political tensions surrounding potential changes in tax policy are weighing on consumer sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Consumers are concerned about their incomes and have become much more cautious about spending. The economy is limping into the third quarter.”
Manufacturing in Philadelphia Area Falls for Third Month(Source:Bloomberg)
Manufacturing in the Philadelphia region shrank for the third consecutive month as new orders and employment declined. The Federal Reserve Bank of Philadelphia’s general economic index rose to minus 12.9 in July from minus 16.6 the month before. Economists forecast the gauge would improve to minus 8, according to the median estimate in a Bloomberg News survey. Readings of less than zero signal contraction in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware. The European debt crisis and slowing growth in China and Brazil are limiting demand for U.S. exports. In the U.S., elevated unemployment is restraining consumer spending, while a drought in the Midwest threatens sales of farm equipment made by companies such as Deere & Co. The report showed manufacturers’ outlook for future orders declined.
“You saw not only a continued contraction of activity, but a lessening of optimism,” said Steven Blitz, chief economist at ITG Investment Research Inc. in New York. “There’s nothing in their order books that’s getting them excited. For the economy, it means more of the same low-level growth.” Other data today showed that sales of existing homes unexpectedly dropped in June to an eight-month low, claims for unemployment benefits rose last week and an index of U.S. leading economic indicators fell more than forecast.
No Inflation With Record-Low Yields Boosting Emerging Bonds(Source:Bloomberg)
Bond yields in emerging markets are falling to record lows as inflation tumbles compared with benchmark interest rates, providing policy makers with more opportunities to lower borrowing costs. The GBI-EM Global Diversified Index on emerging-market bond yields declined 79 basis points, or 0.79 percentage point, this year to 5.79 percent, the lowest since JPMorgan Chase & Co. started to compile the data in 2003. Consumer price increases in 15 developing nations from Brazil to China slowed to an average 4 percent last month, even as central banks cut the mean policy rate to 5.5 percent. The 1.5 percentage-point gap was the widest since December 2009, according to data compiled by Bloomberg.
Slower inflation and weaker economic growth will prompt policy makers to reduce interest rates further, spurring gains in developing-nation bonds, according to GAM Investment and JPMorgan Chase & Co. That’s a turnaround from four years ago, when inflation exceeded benchmark borrowing costs and investors fled emerging markets as the global economy sank into a recession. “Rates are coming down and there are no signs of inflation, which is the classic bond bull market type of territory,” Paul McNamara, who oversees $6.5 billion in emerging-market debt as a money manager at GAM Investment, said in a telephone interview from London. “Emerging-market bonds still offer pretty good value.”
Buyers Bet Wen Can’t Keep Prices Down as Home Sales Gain(Source:Bloomberg)
Sales at Sunac West Chateau, a residential project in Beijing, surged almost 50 percent in June as the developer opened new buildings to attract buyers betting on a recovery even as the government pledges to keep a lid on the housing market. “In the first half of the year, it was like gazing at flowers in a fog,” said Lou Yanqing, deputy sales manager of the project, using a Chinese expression to describe the uncertainty over the government’s policies to curb house price gains. “We’re seeing some sunshine now, and going forward there’s a big chance that the clouds will clear,” she said. Premier Wen Jiabao said July 7 that citizens are worried prices will rise again, reiterating a pledge that his government will “unswervingly” continue property controls. Recent data suggest buyers aren’t listening: property sales and prices have rebounded as local governments relaxed some housing restrictions and the central bank cut interest rates.
“The possibility that history will repeat remains,” Credit Suisse Group AG analyst Vincent Chan said in a phone interview from Hong Kong, referring to past property surges that followed sales increases.
Hong Kong Jobless Rate May Rise on Europe Crisis, Graduates(Source:Bloomberg)
Hong Kong’s jobless rate may rise on weakness in the global economy and more graduates and school leavers seeking work, the government said, even as the latest data showed resilience in the labor market. “The Hong Kong economy can hardly stay unscathed,” the Financial Secretary’s Office said in an e-mailed response to questions from Bloomberg News, citing Europe’s debt crisis and the fragility of major advanced economies. The jobless rate for the three months through June was unchanged at a seasonally adjusted 3.2 percent, the government said on its website today. That was less than the 3.3 percent median forecast of six economists in a Bloomberg News survey and compares with a rate of as much as 5.5 percent during the global financial crisis. “As the economy is slowing this year, it is likely that the job market will follow suit,” said Joanne Yim, an economist at Hang Seng Bank Ltd. (11) in Hong Kong, forecasting an increase to a 4 percent jobless rate by year-end.
Hong Kong stocks rose on speculation China will take more action to boost growth and after U.S. housing starts jumped to the highest since 2008. The Hang Seng Index (HSI) advanced 1.7 percent.
Shipbuilders Lead Tripling in Korea Bond Sales This Week(Source:Bloomberg)
Sales of won-denominated bonds more than tripled this week as South Korean shipbuilders took advantage of record-low yields to raise funds amid slumping new orders and overseas deliveries. Hyundai Heavy Industries Co. (009540) and Daewoo Shipbuilding & Marine Engineering Co., which own two of the world’s three biggest shipyards, led issuance to 1.77 trillion won ($1.55 billion) from 560 billion won last week, according to data compiled by Bloomberg. Benchmark three-year corporate bond yields declined to 3.48 percent on July 18, the lowest since at least 1993, according to the Korea Financial Investment Association. “With a gloomy outlook for the shipbuilding industry, companies are dipping into the bond market to raise cash,” Lee Soo Jung, a credit analyst with SK Securities, said by telephone from Seoul on June 18. “At the same time, the market is conducive to borrowers with yields plummeting.”
Hyundai Heavy sold a record 700 billion won of securities as shipbuilders, which account for about 10 percent of total exports from Asia’s fourth-biggest economy, seek to boost capital through debt sales. South Korea’s central bank last week cut its outlook for 2012 growth, citing a protracted crisis in Europe for reducing the estimate to 3 percent from 3.5 percent. Borrowers are planning at least 720 billion won of sales next week, with Doosan Infracore Co., and Korea South-East Power Corp. poised to price notes, according to preliminary data compiled by Bloomberg.
Spain Struggles to Sell Debt as French Yields Fall to Record(Source:Bloomberg)
Spain’s five-year borrowing costs surged as the government pushed through spending cuts in the face of public protests, while France paid record-low yields of less than 1 percent to sell securities of the same maturity. Spanish five-year notes yielded an average 6.459 percent at auction today, up from 6.072 percent a month ago. French yields fell to 0.86 percent, almost half last month’s level. Prime Minister Mariano Rajoy, who didn’t turn up to defend his cuts in parliament, secured passage of the plan with 180 votes, indicating none of the opposition in the 350-seat chamber supported it. The premier, who asked other euro nations for as much as 100 billion euros ($123 billion) last month to bail out banks, is fighting to maintain access to capital markets. Lawmakers in Germany, where borrowing costs have turned negative as investors opt for the safest assets, are set to vote on the Spanish bailout agreement today.
“The danger to the financial sector in Spain can turn into danger for the financial stability of the euro area,” German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin today as they prepared to vote on aid to Spain.
U.K. Less-Than-Forecast Retail Sales Hit Recovery Hopes: Economy(Source:Bloomberg)
U.K. retail sales rose less than economists forecast last month, reducing expectations that Britain was able to exit a recession in the second quarter. Sales including auto fuel gained 0.1 percent from May, the Office for National Statistics said today in London. The median forecast of 18 economists in a Bloomberg News survey was for a 0.6 percent increase. Excluding fuel, sales were up 0.3 percent. Food sales dropped 0.7 percent. The U.K. had the most rain for a June since 1910 last month, curbing food sales, while an extra public holiday for the queen’s jubilee celebrations didn’t give a major boost to demand. The continued weakness in consumer spending is hindering Britain’s recovery after the economy shrank in the last quarter of 2011 and the first three months of this year.
It’s “another death knell for already low hopes that the economy avoided a third successive quarter of contraction,” said Howard Archer, an economist at IHS Global Insight in London. “Conditions remain tough for consumers with inflation still above earnings growth, the jobs outlook uncertain and tighter fiscal conditions affecting many people.”
South Africa Unexpectedly Cuts Benchmark Lending Rate(Source:Bloomberg)
South Africa’s central bank unexpectedly cut its benchmark interest rate by half a percentage point to help bolster the economy as inflation stayed within the bank’s target range. The repurchase rate was lowered to 5 percent, Governor Gill Marcus told reporters today in Pretoria, the capital. Only two of the 18 economists surveyed by Bloomberg predicted a reduction, with the rest expecting the rate will stay unchanged. The decision was unanimous after a “particularly robust” discussion, she said. Policy makers cut the repurchase rate for the first time since November 2010, joining central banks in India, Brazil, China and Europe in reducing borrowing costs this year to protect their economies from slower global growth. Marcus was provided the room to ease monetary policy after inflation eased to a 10-month low in June, slowing further from the top end of the 3 percent to 6 percent target range.
“They got so bearish so fast on the spill over of the euro zone economy,” Peter Attard Montalto, an economist at Nomura Plc in London, said in a telephone interview after the decision. “They have clearly been surprised by the downside of inflation and with the external growth worries, that has opened the door for cuts now.”
