Asia FX By Cornelius Luca - Wed 15 Aug 2012 16:06:40 CT (Source:CME/www.lucafxta.com)
The appetite for risk was limited on Wednesday amid economic malaise and status quo. The US economic data was sluggish and Eurozone peripherals' debt crisis remains firmly lodged in. Of course, the slowdown in China and Japan doesn't help. The European and commodity currencies ended little changed after the European currencies made little progress on Tuesday. The yen and Aussie dollar remain under pressure after falling this week. The US stock markets ended mixed. Gold, oil and silver closed up. The short-term outlook for most of the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the yen. Good luck!
Overnight
US: The Consumer Price Index remained flat for a second month in July, while the core CPI edged up 0.1%.
US: The NY Empire State Manufacturing Index fell to -5.85 in August from 7.39 in July.
US: Net Long-Term TIC flows fell to $9.3 billion in June from $55.9 billion in May. Total Net TIC flows for June sank to $16.7 billion from $121.3 billion.
US: Industrial production rose 0.6% in July from a downwardly revised +0.1% in June. Capacity utilization ticked up to 79.3% from 78.9%.
US: The NAHB Housing Market Index rose to 37 in August from 35 in July.
Recap Stock Index Market Report (Source:CME)
The September S&P 500 grinded higher throughout the US trading session but remained in close proximity to the 1400.00 level. The September S&P 500 sold off toward its early morning low in the wake of this morning's New York Manufacturing activity that contracted for the first time October 2011. Corporate earnings this morning were mixed, with disappointing results from Deere & Co that lowered their full year outlook. Meanwhile, shares of Target were up around 2.0% after their earnings beat and the company raised their full year forecast. Equity markets recouped early losses following better than expected Industrial Production data, as well as home builder sentiment that surged to a new five year high. Shares of Cisco Systems traded more than 1.0% higher in anticipation of their latest earnings report expected after the close. The market will also get the latest tech-sector earnings from Applied Materials and NetApp.
Asian Stocks Advance as Wen Signals More China Stimulus (Source:Bloomberg)
Asian stocks rose as Chinese Premier Wen Jiabao said easing inflation is allowing room to adjust monetary policy and positive signs are emerging in the world’s second-largest economy. Fanuc Corp. (6954), a maker of industrial robots that gets almost half its sales from Asia outside Japan, gained 2.9 percent in Tokyo. Goodman Fielder Ltd., an Australian baker, fell 1.8 percent after saying it hasn’t received a takeover proposal from Wilmar International Ltd. Lenovo Group Ltd. (992), a Chinese personal- computer maker, may be active today in Hong Kong after its first-quarter profit increased. The MSCI Asia Pacific Index rose 0.3 percent to 120.21 as of 9:51 a.m. in Tokyo. twice as many stocks advanced as declined before the open of markets in Hong Kong and China. “Monetary easing is taking effect in China,” said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co., which oversees about $70 billion. “Wen’s remarks are pushing it, and that’s a positive catalyst for the markets.
The Premier seldom makes such direct remarks, but he might want to emphasize that government wants to support the economy by monetary policies.” The MSCI Asia Pacific Index (MXAP) fell 7 percent from this year’s high on Feb. 29 through yesterday amid concern Europe’s sovereign-debt crisis will worsen and China’s economy is slowing. The regional benchmark index traded at 12.4 times estimated earnings compared with 13.6 times for the S&P 500 Index and a multiple of 11.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Nikkei 225 Heading for Five-Week High on China Stimulus(Source:Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average heading for a six-week high, as Chinese Premier Wen Jiabao said slowing inflation is allowing more room to adjust monetary policy in the world’s second-largest economy. Fanuc Corp. (6954), a manufacturer of robotics used in Chinese factories, climbed 2.7 percent. Dai-Ichi Life Insurance Co. rose 5 percent, leading the sector higher after Moody’s Investors Service said its investment in Janus Capital Group Inc. is positive. Inpex Corp., Japan’s top oil explorer by market value, gained 2 percent after crude traded near a three-month high. “Monetary easing is taking effect in China,” said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co., which oversees about $70 billion. “The premier seldom makes such direct remarks, but he might want to emphasize that government wants to support the economy by monetary policies.”
The Nikkei 225 gained 0.9 percent to 9,002.53 as of 9:46 a.m. in Tokyo, rising to its highest since July 6. Volume on the gauge was 2 percent below the 30-day average even with many investors taking the week off for O-bon holidays. The broader Topix (TPX) Index rose 0.8 percent to 753.42, with more than twice as many shares advancing as declined. Stocks gained on the Chinese premier’s remarks on possible easing. There’s “growing room for monetary policy operation,” Wen said yesterday during an inspection tour of the eastern province of Zhejiang, according to state media. “We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets.” He added that downward pressure on the economy remained “relatively large.”
European Stocks Little Changed; Mining Shares Lead Drop(Source:Bloomberg)
European (SXXP) stocks were little changed, after the Stoxx Europe 600 reached its highest level in almost five months yesterday, as a worse-than-expected manufacturing report for the New York area revived hopes the Federal Reserve will act to stimulate the economy. A gauge of European mining companies slumped, with Rio Tinto Plc dropping 3.4 percent. Eurasian Natural Resources Corp., a Kazakh metal producer, slid the most in 11 months. Standard Chartered Plc (STAN) gained 4.1 percent after the company settled a New York money laundering probe for $340 million. The Stoxx 600 lost 0.1 percent to 270.35 at the close of trading. European stocks rallied for the last 10 weeks amid better-than-expected company earnings and speculation policy makers from will do more to stimulate the economy. The Stoxx 600 climbed yesterday as a report showed German growth slowed less than forecast.
“The surprisingly weak Empire State index is disappointing and shows that the mood in the U.S. industry remains tense,” Ulrich Wortberg, an analyst at Helaba Landesbank Hessen- Thueringen, wrote in an e-mail. “With these numbers, the QE3 topic could get a little bit more life again,” he said, referring to a potential third program of stimulus from the U.S. Federal Reserve. The volume of shares changing hands in companies listed on the Stoxx 600 was 53 percent lower than the average of the last 30 days, according to data compiled by Bloomberg. Markets in Italy, Luxembourg, Austria and Greece were closed today.
Most U.S. Stocks Rise as Investors Weigh Economic Data(Source:Bloomberg)
Most U.S. stocks rose, after a two- day decline in the Standard & Poor’s 500 Index, as investors weighed manufacturing data for clues on whether the Federal Reserve will move to stimulate the economy. Abercrombie & Fitch (ANF) Co. and JDS Uniphase Corp. (JDSU) rallied at least 8.2 percent after earnings topped analysts’ estimates. Deere (DE) & Co. dropped 6.3 percent as profit trailed analysts’ estimates and the largest maker of farm equipment cut its full- year forecast. Staples Inc. (SPLS) tumbled 15 percent after reducing its projections amid slower growth. More than two stocks advanced for each declining on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose 0.1 percent to 1,405.53, after falling as much as 0.2 percent. The Dow Jones Industrial Average slipped 7.36 points, or 0.1 percent, to 13,164.78. Volume for exchange-listed stocks in the U.S. was 4.8 billion shares, 26 percent below the three-month average.
“You’re getting back and forth data that sometimes confirm the potential for QE3, like today, and yesterday brings it into question,” said Andrew Slimmon, Chicago-based managing director of global investment solutions at Morgan Stanley Smith Barney, referring to another round of Fed stimulus known as quantitative easing. His firm has $1.7 trillion in client assets. “There is going to be no other expected major news between now and when the Fed meets on Aug. 31. There will be a lot of conjecture back and forth about what they are going to do.” Industrial production in the U.S. increased in July, Fed data showed today, propelled by a pickup in motor vehicle output and a rebound in utility use during the hottest month on record. A separate report showed manufacturing in the New York area unexpectedly contracted in August for the first time since October.
Dollar Touches Month-High Before U.S. Housing Data(Source:Bloomberg)
The dollar climbed to a one-month high against the yen before U.S. housing data that may reduce prospects for monetary stimulus by the Federal Reserve which tends to debase the greenback. The dollar gained against most major counterparts ahead of reports forecast to show new home construction remained near an almost four-year high and the number of building permits rose. New Zealand’s currency held gains after Auckland-based Fonterra Cooperative Group Ltd. said milk-powder prices rose. “The reason the U.S. dollar has been strengthening is that the data hasn’t been too bad,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The market has started to take out a little bit of pricing for QE3 in the near term,” he said, referring to a third round of Fed asset purchases known as quantitative easing, or QE.
The dollar earlier touched 79.11 yen, the strongest since July 18, before trading at 79.09 as of 9:15 a.m. in Tokyo. It was little changed at $1.2295 per euro. The 17-nation currency rose 0.2 percent to 97.24 yen. The so-called kiwi bought 80.72 U.S. cents after gaining 0.2 percent to 80.71 yesterday, the biggest advance since Aug. 3. The annual pace for U.S. housing starts was probably at 756,000 in July, according to the median estimate of economists surveyed by Bloomberg News before today’s Commerce Department report. That compares with a 760,000 rate in the previous month, the fastest since October 2008. Building permits rose to 769,000 last month from 760,000 in June, a separate poll showed.
Recap Interest Rate Market Report (source:CME)
September 30-Year Bonds traded sharply lower throughout the session, falling to its lowest level since May 17th. Treasury markets came under pressure during the early Asian trade as they reacted to yesterday's favorable US retail sales figures. This pushed September 30-Year Bonds below last week's low of 147-10 and appeared to trigger a round of stop-loss selling. Prices managed to recover heading into the first tier of US economic data, which highlighted benign consumer inflation and weaker than expected manufacturing activity in New York. However, gains were shallow and prices reversed into new low on the session following the second wave of US economic readings. The latest round of upbeat economic data appears to have reduced the prospect of more Fed quantitative easing at their September meeting. Some traders also pointed to a very active flow of corporate issuance as another force pressuring Treasury prices lower. In an interview later in the session, Dallas Fed President Fisher reiterated his stance that providing more monetary stimulus would not lower unemployment levels.
Treasuries Fall for Fourth Day Before Housing Starts Data(Source:Bloomberg)
Treasuries fell for a fourth day before a report economists forecast will show new-home construction in the U.S. was close to the most since 2008 as the housing market stabilizes. Ten-year yields increased two basis points, or 0.02 percentage point, to 1.84 percent as of 9:50 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 slid 6/32, or $1.88 per $1,000 face amount, to 98 2/32. Builders broke ground on homes at an annual rate of 756,000 houses in July, according to the median estimate of economists surveyed by Bloomberg News. June’s 760,000 pace was the highest since October 2008. International Demand for U.S. Assets Declined in June
International demand for U.S. financial assets fell in June from the previous month’s inflows, as investors saw Europe’s leaders moving toward a resolution of their financial crisis. Net buying of long-term equities, notes and bonds totaled $9.3 billion during the month, a drop from net purchases of $55.9 billion in May, the Treasury Department said today in Washington. Economists surveyed by Bloomberg News projected net buying of $40 billion of long-term assets, according to the median estimate. Including short-term securities such as stock swaps, foreigners bought a net $16.7 billion in June, compared with net purchases of $121.3 billion the previous month. Net foreign purchases of U.S. Treasuries fell to $32.4 billion in June from $45.9 billion the previous month.
“The U.S. was not the safe haven it was earlier in the year for global funds as questions over the sustainability of the U.S. recovery cropped up,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in an e-mail after the report was released. “Credit concerns seemed to be paramount as the selling of corporate bonds has been sizeable.”
FOREX-Dollar hits 1-month high against yen on solid data
LONDON, Aug 15 (Reuters) - The dollar rose to a one-month high against the yen after upbeat U.S. retail sales data the previous day dampened talk of monetary stimulus from the Federal Reserve.
"People are finding it hard to get inspired by the newsflow. Knowing that the euro zone debt situation is not OK makes them
wary of buying the euro," said Niels Christensen, currency strategist at Nordea.
Factory Output in U.S. Climbs as Prices Remain Tame: Economy(Source:Bloomberg)
Manufacturers are turning out more cars and computers, homebuilders are gaining confidence and prices are little changed, showing the U.S. economy is expanding with inflation contained. Production at factories, mines and utilities increased 0.6 percent in July following a 0.1 percent gain the prior month, Federal Reserve data showed today in Washington. The cost of living over the past 12 months rose at the slowest pace in almost two years and sentiment among residential construction companies climbed to a five-year high, according to other data. The reports ease concern the debt crisis that has dragged Europe to the brink of a recession and slowing demand in Asia will bring an end to the U.S. recovery that began in June 2009. At the same time, a lack of pricing power makes it possible for Fed policy makers to take whatever additional steps are needed to ensure the expansion is sustained.
“Manufacturing is still moving in the right direction,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York. “Domestic demand has been holding up, and there are some areas that continue to do well, such as autos,” said Carey, who accurately predicted the gain in output. “Inflation is well under control and not something the Fed is worried about.” Most stocks rose as investors weighed what influence the data will have on Fed policy makers when they meet next month. The Standard & Poor’s 500 Index increased 0.1 percent to 1,405.53 at the 4 p.m. close in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 1.82 percent from 1.74 percent late yesterday.
Manufacturing in New York Area Unexpectedly Shrank in August(Source:Bloomberg)
Manufacturing in the New York area unexpectedly contracted in August for the first time in 10 months, indicating U.S. factories are burdened by the global economic slowdown. The Federal Reserve Bank of New York’s general economic index fell to minus 5.9 this month from 7.4 in July. The median estimate in a Bloomberg survey of economists was 7.0. Readings less than zero signal contraction in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. A slowdown in demand from consumers in the first half of the year, limited capital spending and a build-up in inventories gives factories little reason to boost production. Orders for the region’s manufacturers fell to the lowest level in almost a year, showing the industry that spurred the recovery from recession is facing a bigger hurdle from a weaker global economy.
“The outlook is not particularly favorable,” Millan Mulraine, a senior U.S. strategist at TD Securities Inc. in New York, said before the report. “Slowing global growth momentum will certainly eat into the global demand for U.S. exports and manufacturing in particular.” Stock-index futures held losses after the figures, with the contract on the Standard & Poor’s 500 Index falling 0.2 percent to 1,398.4 at 8:32 a.m. in New York. Estimates in the Bloomberg survey of 56 economists ranged from minus 2 to 10. The Empire State gauge of new orders dropped to minus 5.5 in August from minus 2.7 the prior month, while the shipments measure fell to 4.1 from 10.3.
Homebuilder Confidence in U.S. Increases to Five-Year High(Source:Bloomberg)
Confidence among U.S. homebuilders climbed in August to the highest level in more than five years, affirming the improvement in residential construction. The National Association of Home Builders/Wells Fargo builder confidence index rose to 37, higher than projected and the best showing since February 2007, according to figures from the Washington-based group released today. The median forecast in a Bloomberg survey of economists called for no change from July’s 35. Readings below 50 mean more respondents said conditions were poor. Builders such as PulteGroup Inc. (PHM) are benefiting as less- expensive properties and record-low mortgage rates entice buyers. At the same time, faster hiring and fewer foreclosures are needed to bring about bigger gains for the industry that precipitated the worst recession in the post-World War II era.
“The outlook appears to be brightening,” Barry Rutenberg, chairman of the NAHB and a builder from Gainesville, Florida, said in a statement. At the same time, “there is still much room for improvement.” Other reports today showed production at factories, mines and utilities climbed more than forecast in July, and consumer prices were unexpectedly little changed.
July Consumer Prices Unchanged as U.S. Pricing Power Wanes(Source:Bloomberg)
The cost of living in the U.S. was little changed in July for a second month, showing companies lack pricing power. The unexpected reading in the consumer-price index capped a 1.4 percent gain over the past 12 months, the smallest year-to- year increase since November 2010, the Labor Department reported today in Washington. The median forecast of 85 economists surveyed by Bloomberg News called for an increase of 0.2 percent. The core index, which excludes volatile food and fuel costs, rose less than forecast. Companies may find it difficult to charge more while joblessness hovers above 8 percent. Tempered inflation makes it possible for Federal Reserve policy makers to take additional steps if needed to revive the economic expansion when they meet next month. “The fact that the economy was so weak in the first half of the year means there’s probably less pricing power,” said Omair Sharif, U.S. economist at RBS Securities Inc. in Stamford, Connecticut.
“It’s going to be tough to push prices through to the cons umer who’s already very weak and shown an appetite for discount shopping,” said Sharif, who correctly forecast the increase in core prices. “If you’re the Fed, inflation is the least of your concerns right now,” he said. Manufacturing in the New York area unexpectedly contracted in August for the first time since October, indicating factories are cutting back amid the global economic slowdown, another report today showed.
China Can Meet Growth Target on Positive Signs, Wen Says(Source:Bloomberg)
Chinese Premier Wen Jiabao said easing inflation allows more room to adjust monetary policy and positive signs are emerging in the economy, expressing confidence after July data showed a further slowdown in growth. “We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets,” Wen said during a two-day inspection tour to the eastern province of Zhejiang, the official Xinhua News Agency reported yesterday. He said downward pressure on the economy remained “relatively large,” according to state radio, and state television reported him as saying there’s “growing room for monetary policy operation.” The comments may bolster speculation China will cut banks’ reserve requirements or benchmark interest rates again after inflation slowed to a 30-month low in July, export growth collapsed and new yuan loans trailed estimates. Zhejiang, an export base, is among the hardest-hit regions by the economic slowdown.
“Policy makers have made clear in recent weeks that supporting economic growth is their central concern,” Qinwei Wang, an economist at Capital Economics Ltd. in London, said in an e-mail. “We continue to think that more policy support will be announced soon, including a further cut to the required reserve ratio, and that more infrastructure projects proposed by local governments will be given the go-ahead.” Wang is a former employee People’s Bank of China, according to his profile on Capital Economics’ website.
S. Korea Unemployment Falls to 7-Month Low on Service Jobs(Source:Bloomberg)
South Korea’s unemployment rate unexpectedly fell to a seven-month low on increasing numbers of self-employed workers and service-sector jobs even as Europe’s debt crisis dragged down exports. The jobless rate was at 3.1 percent in July, compared with 3.2 percent in June, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 14 economists was for a rate of 3.3 percent. The outlook for the labor market is clouded by signs that Asia’s fourth-largest economy is losing steam. A decline in exports in July was the steepest since 2009 and the central bank said Aug. 9 that domestic demand is also weakening. “Jobs are increasing in the service sector and the self- employed are lifting the total number of workers, but Europe’s fiscal crisis is taking a toll on company hiring,” said Sun Yoo, an economist Woori Investment & Securities Co. in Seoul. “The quality of the job market is deteriorating with more people taking non-salaried work.”
The won weakened 0.3 percent to 1,133.00 per dollar at the 9:00 a.m. open in Seoul and the benchmark Kospi stock index was little changed. The number of employed people increased by 470,000 to 25.1 million in July, with the self-employed and public services providing 318,000 of those new jobs. The seasonally unadjusted jobless rate was also at 3.1 percent in July, compared with 3.2 percent in June, today’s report showed.
Malaysia Growth Withstands Global Risks as Najib Boosts Spending(Source:Bloomberg)
Malaysia’s economic expansion unexpectedly accelerated as construction and consumption climbed, easing pressure on the central bank to join its Asian counterparts in cutting interest rates to shore up growth. Gross domestic product rose 5.4 percent in the three months through June from a year earlier, after expanding a revised 4.9 percent in the previous quarter, Bank Negara Malaysia said in a statement in Kuala Lumpur yesterday. The median of 23 estimates in a Bloomberg News survey was for a 4.6 percent expansion. Prime Minister Najib Razak’s increased spending ahead of a general election that must be called by early 2013 has bolstered Southeast Asia’s third-largest economy, allowing the central bank to keep rates unchanged for more than a year. Growth in 2012 may be at the upper end of the 4 percent-to-5 percent forecast range even as risks from Europe and the U.S. remain, Bank Negara said.
“Malaysia is in a sweet spot at the moment,” said Lim Su Sian, an economist at HSBC Holdings Plc in Singapore. “While it’s inevitable we will see the global weakness start to filter through and investment might lose some of its momentum, there’s a lot of underlying support from the government and economic transformation programs. This strong number cements our view there won’t be a rate change this year.” The ringgit has risen about 1.6 percent this quarter, the biggest gainer among Asia’s 11 most-traded currencies. The benchmark FTSE Bursa Malaysia KLCI Index closed 0.1 percent higher yesterday.
Brazil Will Sell Licenses for $66 Billion of Roads and Rails(Source:Bloomberg)
Brazil’s government will sell licenses to build and operate roads and railways requiring as much as 133 billion reais ($66 billion) in investments over 30 years to help boost growth in the world’s sixth-largest economy. The government will sell licenses for private companies to operate 7,500 kilometers (4,660 miles) of roads and 10,000 kilometers of railways, Transport Minister Paulo Sergio Passos said during a ceremony in Brasilia today. “Brazil is offering an extraordinary investment opportunity in an environment of economic and institutional stability,” President Dilma Rousseff said at the event. Inadequate road and rail infrastructure has limited Brazil’s growth potential as the country prepares to host the 2014 World Cup soccer tournament and the 2016 Olympic Games. Rousseff said the new projects will help solve infrastructure challenges that stem from a decade without investment.
Brazil’s economy will grow 1.8 percent this year, according to the latest central bank survey, down from 2.7 percent last year and marking the second-slowest pace since 2003. The flagging economy caused tax revenue in June to fall from a year earlier for the first time since November 2010.
U.K. Unemployment Unexpectedly Falls on Olympics Boost: Economy(Source:Bloomberg)
U.K. jobless claims unexpectedly fell in July and a wider measure of unemployment dropped to its lowest in a year as the Olympic Games created jobs, showing the labor market’s resilience in the face of deepening recession. Jobless-benefit claims fell 5,900 to 1.59 million, the Office for National Statistics said today in London. The median forecast of 29 economists in a Bloomberg News Survey was for a gain of 6,000. The jobless total measured by International Labor Organization methods fell to 8 percent in the second quarter from 8.1 percent in the three months through May. The willingness of companies to keep hiring workers when the economy is shrinking has provided a boost for Prime Minister David Cameron and perplexed economists. Some say the improvement is unsustainable and unemployment may rise in coming months.
“It might be difficult to sustain these strong trends,” said Nida Ali, an economist at Ernst & Young’s ITEM Club in London. “Activity in the second half of 2012 is expected to remain sluggish, implying that the private sector will find it increasingly difficult to create jobs.” Britain’s economy shrank 0.7 percent in the three months through June, the third straight quarter of contraction. The Bank of England sees the economy contracting about 0.2 percent this year, according to figures published today. Separately, minutes of the Bank of England’s Aug. 1-2 meeting showed policy makers voted unanimously to keep their bond-purchase target unchanged this month. They said they will assess the need for other measures in light of the impact of their new credit-boosting program.
