Asia FX By Cornelius Luca - Mon 27 Aug 2012 16:54:12 CT (Source:CME/www.lucafxta.com)
The financial were adverse to risk on Monday, as the summer vacations are petering out, but losses were timid. Meanwhile, the markets continue to be looking for further bond buying from both the Fed and the ECB. All of the foreign currencies but the Canadian dollar ended lower. The US stock markets slipped and the gold/oil spread closed higher. The short-term outlook for most foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is long across the board. Good luck!
Today's economic calendar
Australia: HIA new home sales for July
Most Asian Stocks Rise Before U.S. Data, Federal Reserve (Bloomberg)
Most Asian stocks rose as investors await a report on U.S. gross domestic product that’s expected to show growth in the world’s biggest economy is improving and indications of policy direction from the Federal Reserve. Toyota Motor Corp. (7203), the world’s largest carmaker by market value, added 0.8 percent in Tokyo. Sharp Corp. climbed 3.6 percent as the company held talks with Foxconn Technology Group, which is seeking to renegotiate its proposed investment in the loss-making Japanese television maker. BHP Billiton Ltd., the world’s biggest mining company, slipped 0.7 percent in Sydney as copper futures fell.
The MSCI Asia Pacific Index (MXAP) was little changed at 119.83 as of 9:34 a.m. in Tokyo, with about three shares rising for every two that fell on the gauge. The measure climbed 10 percent from a June low through yesterday on bets the U.S., Europe and China will take action to propel economic expansion. Investors are awaiting Federal Reserve Chairman Ben S. Bernanke’s speech on Aug. 31 at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming. “The market’s primary focus is on Wednesday’s U.S. GDP report and Friday’s Jackson Hole talk by Bernanke, who might provide some guidance on upcoming Fed monetary policy,” said Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Investments, which manages about $25 billion.
Japan Stocks Rise Ahead Of U.S. Growth Data, Fed Meeting (Bloomberg)
Japanese stocks gained ahead of the release of U.S. economic data tomorrow and as investors wait for hints of stimulus from the Federal Reserve’s symposium at the end of the week. Toyota Motor Corp., a carmaker that gets 25 percent of its revenue in North America, rose 0.8 percent. Aozora Bank Ltd. (8304) surged the most in more than two years after saying it plans to repay public funds. Osaka Titanium Technologies Co. sank 6.9 percent after the metal producer cut its earnings forecast amid slumping demand in Europe and emerging markets. The Nikkei 225 Stock Average (NKY) gained 0.5 percent to 9,134.66 as of 9:20 a.m. in Tokyo, with volume 11 percent below the 30- day average ahead of the Fed meeting in Jackson Hole, Wyoming. The broader Topix Index added 0.2 percent to 757.19, with about eight shares rising for every five that fell.
“The market’s primary focus is on Wednesday’s U.S. GDP report and Friday’s Jackson Hole’s talk by U.S. Fed Chairman Ben S. Bernanke, who might provide some guidance on upcoming Fed monetary policy,” said Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Investments, which manages about $25 billion.
U.S. Stocks Fall As Investors Await Fed Stimulus Signals (Bloomberg)
U.S. stocks fell, following the first weekly decline in about two months for the Standard & Poor’s 500 Index, as investors awaited indications on whether the Federal Reserve will provide further stimulus measures. Hewlett-Packard Co., Alcoa Inc. and Bank of America Corp. dropped at least 1.1 percent to pace losses in the biggest companies. Apple Inc., (AAPL) the most valuable company, climbed 1.9 percent after a jury found Samsung Electronics Co. infringed six of seven patents for its mobile devices. Google Inc. (GOOG), which offers the Android mobile software, declined 1.4 percent. The S&P 500 slid 0.1 percent to 1,410.44 at 4 p.m. New York time. The Dow Jones Industrial Average fell 33.30 points, or 0.3 percent, to 13,124.67. The Nasdaq-100 Index gained 0.2 percent to 2,782.55, after rising to the highest since 2000 during the day. Volume for exchange-listed stocks in the U.S. was 4.5 billion shares, the lowest level since at least 2008 excluding days surrounding holidays, data compiled by Bloomberg show.
“There’s no great conviction in either direction,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. He spoke in a phone interview. “There are a couple of bright spots, such as Apple. People are looking ahead for Fed signals. I believe Bernanke’s speech will probably be more of the same. It’s more likely that it will be a continuation of what we’ve been hearing and less of an event.” Fed Chairman Ben S. Bernanke probably won’t use his Aug. 31 speech at the Fed’s annual symposium in Jackson Hole, Wyoming, to suggest a third round of bond buying is at hand, according to economists such as Michael Feroli at JPMorgan Chase & Co. and James O’Sullivan at High Frequency Economics.
European Stocks Climb Amid Debt-Crisis Talks (Bloomberg)
European stocks rose as Germany’s Finance Minister Wolfgang Schaeuble said the continent’s two largest economies will create a working group to strengthen the euro area’s fiscal and monetary union. Deutsche Bank AG (DBK) and BNP Paribas SA (BNP) both gained more than 2 percent. Nokia Oyj (NOK1V) jumped 7.7 percent after a jury found rival Samsung Electronics Co. had violated Apple Inc. patents. Q-Cells SE (QCE) surged 12 percent after South Korea’s Hanwha Group signed a deal to acquire the insolvent German company. The Stoxx Europe 600 Index added 0.5 percent to 269.2 at the close, after earlier falling as much as 0.2 percent. The volume of shares changing hands on the equity benchmark was 64 percent lower than the average of the last 30 days, according to data compiled by Bloomberg, because the U.K. market was closed for a public holiday.
“Markets are more driven by political headlines than by fundamental news,” said Lex Van Dam, who manages $500 million at Hampstead Capital LLC in London. “It’s a very quiet market which is no surprise for a U.K. bank holiday. Real investors remain on the side lines.” Schaeuble said today that Germany and France will seek to develop common proposals on a fiscal, banking and monetary union. He also told reporters, after meeting with French Finance Minister Pierre Moscovici in Berlin today, that the two countries will look for measures to boost economic growth. Next month, the European Central Bank will formulate a bond-buying plan and representatives of Greece’s international creditors will issue a progress report. A German court will also announce its decision on the legality of the euro area’s proposed permanent bailout fund.
Emerging Stocks Fall To Three-Week Low As Chinese Profits Slump (Bloomberg)
Emerging-market stocks dropped to a three-week low as Chinese industrial companies in July posted their biggest decline this year, heightening concern that global demand for natural resources will continue to ebb. The MSCI Emerging Markets Index (MXEF) fell 0.5 percent to 960.86 at 5:20 p.m. in New York, the lowest close since Aug. 3. Samsung Electronics Co. (005930) declined the most in almost four years in Seoul after a U.S. jury ruled it infringed Apple Inc.’s patents. Samsung Electronics, the heaviest weighted stock on the MSCI Emerging Markets Index, fell the second most of any stock on the gauge. The Shanghai Composite Index (SHCOMP) retreated 1.7 percent, the most in six weeks, while Brazilian iron-ore producer Vale SA (VALE3), whose top export market is China, declined as the Bovespa (IBOV) index fell for a third session, its longest losing streak in a month.
Chinese industrial companies’ profits fell 5.4 percent last month after slipping 1.7 percent in June, the statistics bureau said on its website. Chinese industrial companies including China Petroleum & Chemical Corp. (600028) reported a decline in profits. China Petroleum, Asia’s biggest oil refiner, recorded its lowest half-year profit since 2008. Commodities, including oil, declined.
FOREX-Euro climbs but euro zone events may cap gains
LONDON, Aug 27 (Reuters) - The euro inched up after an influential German business survey was not as bad as expected, although it may struggle to retain gains in coming weeks, which could be decisive in the long-running euro zone crisis.
"The Ifo numbers do not change the outlook for the euro," said Kasper Kirkegaard, FX strategist at Danske Markets, Copenhagen, adding investors had grown used to soft economic data in recent months.
Dollar Remains Higher Versus Yen Before Confidence Report (Bloomberg)
The dollar remained higher following a two-day advance against the yen ahead of U.S. reports that economists say will point to improvement in consumer sentiment and regional manufacturing. The Dollar Index maintained a gain before Federal Reserve Chairman Ben S. Bernanke delivers a speech on Aug. 31 in Jackson Hole, Wyoming as investors are weighing whether the central bank will embark on another round of bond purchases, or quantitative easing. Demand for the euro was limited ahead of German data forecast to show consumer sentiment will fall for the first time in three months. “The market may be open for disappointment” at Jackson Hole, said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk-management company. “Assuming there won’t be significant quantitative easing, then the U.S. dollar could have quite a strong performance in the next couple of months.”
The dollar traded at 78.75 as of 9:21 a.m. in Tokyo after rising 0.3 percent in the past two sessions to 78.74 yesterday. The euro was at $1.2497 after losing 0.5 percent since Aug. 23 to $1.2499. It bought 98.41 yen from 98.43. The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, was little changed at 81.693 following a two- day advance of 0.4 percent.
U.S. Existing-Home Sales Rise From Eight-Month Low: Economy (Bloomberg)
Sales of existing homes climbed in July from an eight-month low, showing the cheapest mortgage rates on record are underpinning a market struggling to join the U.S. economic recovery that began three years ago. Purchases increased 2.3 percent to a 4.47 million annual rate, figures from the National Association of Realtors showed today in Washington. The data were posted on the group’s website ahead of the usual 10 a.m. release. The median forecast of 73 economists surveyed by Bloomberg called for a rise to a 4.51 million rate. “This is a continuation of good news, but we’ve got to continue to build momentum,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who forecast sales would rise to 4.46 million. “We’ve still got a long way to go because the level is so low.”
Restrictive lending rules, a lack of inventory and lingering unemployment may be preventing a rebound to the 5 million to 5.5 million sales pace that the real-estate agents’ group said constitutes a “normal” market. Minutes of the Federal Reserve’s most recent meeting showed today that many policy makers said more stimulus would be needed unless the economy exhibited signs of a durable pickup. Stocks erased earlier losses after the Fed minutes, with the Standard & Poor’s 500 Index rising less than 0.1 percent to 1,413.49 at the 4 p.m. close in New York after falling as much as 0.5 percent. The S&P Supercomposite Homebuilding Index jumped 3.1 percent.
Japan Cuts Economic Assessment As BNP Says Contraction Looms (Bloomberg)
Japan’s government downgraded its assessment of the world’s third-biggest economy for the first time in 10 months as some analysts forecast that gross domestic product will shrink this quarter. Risks include a “further slowing down of overseas economies and sharp fluctuations in the financial and capital markets,” the Cabinet Office said in a monthly report released in Tokyo today. The government cut its view on personal consumption, home- building, exports, imports and industrial production, while raising its assessment of the labor market. It lowered its evaluation of the U.S., Europe, China, the rest of Asia except India, and the global economy, saying Japan’s overseas shipments are “growing weaker.” The Nikkei 225 Stock Average gained 0.5 percent as of 9:25 a.m. in Tokyo as investors await U.S. economic data and an Aug. 31 speech by Federal Reserve Chairman Ben S. Bernanke to gauge the outlook for that nation’s monetary policy.
The Japanese government will work with the central bank to counter deflation, today’s report said. JPMorgan Securities Japan Co. forecasts a 0.3 percent annualized decline in gross domestic product in the three months through September, while BNP Paribas SA estimates a 0.9 percent fall. The median estimate in a Bloomerg News survey compiled this month was for 1 percent growth, partly supported by earthquake reconstruction work.
Japanese Home Purchases Rise Before Corolla-Size Tax: Mortgages (Bloomberg)
Record low mortgage rates and the prospect of a consumption tax increase that will add the price of a new Toyota Corolla to the cost of an average home spurred Sumiko Morigaki into action. “Tax hikes have been looming, so that gave me a push to buy,” said Morigaki, 43, a manager at an apparel retailer in Tokyo, who bought a three-bedroom condominium in Kanagawa prefecture, neighboring Tokyo, earlier this year. New housing loans jumped 14.7 percent in the second quarter this year from a year ago, the most since March 2006, buoying a housing market entering its third decade of deflation. About 1.3 trillion yen ($16.5 billion) of extra home purchases are expected by the end of March 2014, in the year when the sales tax increases to 8 percent from 5 percent, according to estimates by NLI Research Institute, a Tokyo-based research and consulting unit of Nippon Life Insurance Co.
“The housing market has been dead for so long it shouldn’t take much to put a flame under it,” said Nicholas Smith, a strategist at CLSA Asia-Pacific Markets Ltd. in Tokyo. “Banks, particularly regional banks, stand to benefit from the rush of home loans ahead of the tax hike.” Housing investments rose 3.8 percent to 13.1 trillion yen in the fiscal year ended March 31, marking the first increase in five years, according to government data. Japan’s banks offered 2.98 trillion yen worth of new loans for home purchases in the three months ended June 30, bringing loans outstanding to 107.1 trillion yen, according to the Bank of Japan. An index of residential land prices has slid by half from its 1991 peak, Japan Real Estate Institute data show.
Japan Contraction Risk Rises On Faltering Global Demand: Economy (Bloomberg)
Aug. 27 (Bloomberg) -- Japan’s risk of an economic contraction this quarter has increased as faltering demand from Europe to China drags down exports, strengthening the case for more government measures to support growth. JPMorgan Securities Japan Co. forecasts a 0.3 percent annualized decline in gross domestic product in the three months through September after previously seeing 1 percent growth. BNP Paribas SA estimates a 0.9 percent fall after earlier predicting no change. China’s failure to secure an economic rebound is adding to austerity measures in Europe and unemployment in the U.S. in limiting prospects for Japanese trade and growth. Pressure may build for an extra government budget and additional stimulus from the Bank of Japan as subsidies for purchases of fuel- efficient cars wind down, damping consumer spending.
“We’ve revised down our forecast because the global economy is looking weaker than we anticipated,” said Ryutaro Kono, chief Japan economist at BNP and a former government nominee for the central bank board. “We expected a gradual rebound for the emerging economies but the recent data aren’t signaling it. Europe continues to slump and exports to the U.S. also are slowing.” Japan will downgrade its assessment of the domestic economy for the first time in 10 months in a report to the cabinet tomorrow, according to the Nikkei newspaper. The nation had a wider-than-estimated trade deficit in July as shipments to the European Union fell 25 percent from a year earlier and those to China slid 12 percent.
Korea’s Rating Raised By Moody’s On Resilience To Shocks (Bloomberg)
South Korea’s sovereign debt rating was raised by Moody’s Investors Service to a par with Japan’s after Asia’s fourth-largest economy strengthened its resilience to crises. “Korea’s strong fiscal fundamentals enable a relatively large degree of policy space to cope with contingent domestic risks and external shocks,” Moody’s said in a statement today. The company elevated South Korea one step to Aa3, the fourth- highest ranking and one also shared with China. The upgrade is a vote of confidence in President Lee Myung Bak’s efforts to strengthen the nation’s ability to cope with financial turbulence even as his popularity wanes ahead of the end of a five-year term. The move also reflects South Korea’s fiscal discipline, with government debt at 33 percent of gross domestic product, against 108 percent for advanced economies as a whole, according to the International Monetary Fund.
“The fiscal situation is the strongest aspect of Korea’s economy,” said Lim Ji Won, an economist at JPMorgan Chase & Co. in Seoul. “A lot depends on how the government deals with the aging problem in the longer term, but in the next few years the fiscal situation will be relatively strong.” Like Japan, South Korea’s population is aging after its birth-rate declined, potentially imposing a higher pension-cost burden on the economy as fewer workers support greater numbers of retirees.
Spain Deficit Pain Bites Consumers As Rajoy Steps Up Cuts (Bloomberg)
Spanish Prime Minister Mariano Rajoy’s austerity drive will intensify this week as a sales-tax increase tightens the squeeze on consumers whose spending is already plummeting. The move to raise the value-added tax on Sept. 1 will follow a flurry of data showing pressure building on household finances in the euro area’s fourth-biggest economy, home to a third of its unemployed. A report today showed mortgages fell 25.2 percent from a year ago in June after a 30.5 percent drop in May. Meanwhile, the Health Ministry today said spending on prescription drugs fell 23.9 percent from a year ago in July, the steepest drop since the series started in 1999, after the government last month increased the share patients pay for pharmaceuticals. A breakdown of second-quarter gross domestic product is due tomorrow and inflation on Aug. 30. Retail and current-account data are due Aug. 31 as well as public finance figures.
The data will illustrate the extent of Rajoy’s challenge as he tries to curb the euro region’s third-largest budget deficit and considers whether to seek further international aid. Consumers have already endured a recession lasting three quarters as a prelude to his tax increase due this week and an annual cut in public wages for the month of December.
Germany, France Reconnect In A Push For Crisis Solutions (Bloomberg)
Germany and France agreed to drive ahead measures on closer European integration in a renewed show of unity by the region’s two biggest economies to fix the crisis in the euro zone. German Finance Minister Wolfgang Schaeuble, speaking after talks in Berlin today with his French counterpart, Pierre Moscovici, said the two countries will create a working group to advance European Union cooperation on banking union, fiscal union and the strengthening of monetary union. “We’re having to deal with a phase of weakening growth in the global economy but also in Europe,” Schaeuble told reporters. “We want to take joint decisions” to counter that. French President Francois Hollande said later in Paris that Franco-German ties are key to Europe’s reorientation.
The common French-German action signals a turnaround in relations after Hollande led a revolt at a June summit against Chancellor Angela Merkel’s austerity-first doctrine for combating the financial crisis. It builds on a visit to Berlin by Hollande last week when he and Merkel agreed to stand behind the Greek government as it strives to overhaul its economy.
Hungary To Refrain From Rate Cut On Inflation, Bailout Concern (Bloomberg)
Hungary’s central bank will probably refrain from cutting the European Union’s highest benchmark interest rate because of accelerating inflation and possible delays in obtaining a bailout. The Magyar Nemzeti Bank will leave the two-week deposit rate at 7 percent for an eighth month, according to 15 of 16 economists in a Bloomberg survey. One expects a cut to 6.75 percent. The central bank will announce the decision at 2 p.m. in Budapest. Policy makers last month voted five to two to keep rates unchanged, rejecting arguments that easing policy would prop up the economy that entered its second recession in four years, minutes of the July 24 meeting show. The majority argued that the central bank should wait for the outcome of bailout talks with the International Monetary Fund and the European Union before lowering borrowing costs.
“We think the National Bank of Hungary will resist pressures and keep its 7 percent base rate on hold, however, this is a close call,” Daniel Hewitt, an economist at Barclays Plc (BARC) in London, said in an e-mailed note. Forward-rate agreements used to wager on interest rates in one month fell 7 basis points to 6.87 percent yesterday, the lowest since November. The FRAs traded 28 basis points below the Budapest Interbank Offered Rate, the biggest spread in more than two years and signaling expectations for a quarter-point rate cut. A basis point is 0.01 percentage point.
German Business Confidence Falls For A Fourth Month (Bloomberg)
German business confidence fell for a fourth straight month in August as the sovereign debt crisis curbed growth in Europe’s largest economy. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 102.3 from 103.2 in July. That’s the lowest reading since March 2010. Economists predicted a decline to 102.7, according to the median of 37 forecasts in a Bloomberg News survey. German economic growth slowed to 0.3 percent in the second quarter from 0.5 percent in the first as the debt crisis damped demand for exports and prompted companies to postpone investments. While sales to faster-growing markets outside Europe and domestic spending are helping to insulate Germany from the turmoil, the Bundesbank said last week that the prevailing uncertainty may cause the economy to cool further.
“Recent economic data are not encouraging,” said Jens- Oliver Niklasch, an economist at Landesbank Baden-Wuerttemberg in Stuttgart. “The construction industry as well as the export industry will see a slowdown in the months to come.” Ifo’s gauge of the current situation eased to 111.2 from 111.5 in July, while a measure of executives’ expectations fell to 94.2, the lowest since June 2009, from 95.5. The euro rose after the report before easing to trade little changed at $1.2521 at 11:45 a.m. in Frankfurt, up 0.1 percent today. European stocks were flat, with the Stoxx 600 Index (SXXP) down 0.1 percent at 267.69.
Merkel tries to calm storms over Greece, ECB policy (Reuters)
Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year.
