Asian Stocks Rise as Exporters Gain on U.S. Retail Sales (Bloomberg)
Asian stocks rose, with the regional benchmark index headed for a second-day of gains, as exporters advanced after the U.S. reported better-than-expected retail sales. Samsung Electronics Co. (005930), which gets a fifth of its sales in America, rose 2.2 percent in Seoul. Commonwealth Bank of Australia advanced 1.1 percent, pacing gains among lenders after Citigroup Inc. reported results that beat estimates. Softbank Corp. (9984) gained 9.7 percent after Japan’s third-largest mobile- phone company agreed to acquire 70 percent of Sprint Nextel Corp.’s stake. The MSCI Asia Pacific Index gained 0.6 percent to 121.52 as of 9:46 a.m. in Tokyo before markets in Hong Kong and China opened. About three stocks rose for each that fell on the measure.
“It does feel like there’s some momentum there in the economy,” said Matt Riordan, a portfolio manager who helps manage about $6.5 billion in Sydney at Paradice Investment Management Pty. “We’ve got a reasonable rebound. But the problem is whether we will start seeing a recovery, particularly out of China.” The MSCI Asia Pacific Index rebounded 11 percent through yesterday from this year’s low reached on June 4 as stimulus measures from Europe to the U.S. and China boosted market sentiment amid a global economic slowdown and Europe’s debt crisis. The Asian benchmark traded at 12.8 times estimated earnings on average, compared with 13.7 times for the Standard & Poor’s 500 Index and a multiple of 12 for the Stoxx Europe 600 Index.
Japanse Stocks Advance on U.S. Retail Sales, Weaker Yen (Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average heading for the biggest gain in almost two weeks, as exporters gained after U.S. retail sales beat estimates and the yen weakened. Sony Corp., Japan’s biggest exporter of consumer electronics, rose 1.4 percent. Nissan Motor Co. (7201) gained 1.2 percent after the automaker and Renault SA said they aim to double cost savings from their alliance by 2016. Softbank Corp., the nation’s third-biggest mobile-phone carrier, soared 6.9 percent after agreeing to buy about 70 percent of Sprint Nextel Corp. for $20.1 billion. The Nikkei 225 gained 0.8 percent to 8,648.78 as of 9:15 a.m. in Tokyo, set for the steepest advance since Oct. 4. Volume on the gauge was 7.3 percent above the 30-day average. The broader Topix climbed 0.8 percent to 728.42, with almost three times as many shares rising as falling.
“Personal consumption in the U.S. is getting more solid than expected,” said Fumiyuki Nakanishi, a strategist at Tokyo- based SMBC Friend Securities Co. Stronger retail sales “will likely encourage expectations for year-end sales and favorable October-December corporate earnings.”
U.S. Stocks Rise as Retail Sales, Citigroup Top Estimates (Bloomberg)
U.S. stocks rose, as the Standard & Poor’s 500 Index (SPX) rebounded from its biggest weekly drop in four months, after American retail sales and Citigroup (C) Inc.’s earnings topped estimates. Citigroup soared 5.5 percent, the most since March, as results were helped by a surge in bond-trading revenue. Texas Instruments Inc. (TXN) rose 3.5 percent on a report Amazon.com Inc. (AMZN) may buy its mobile chip unit. PulteGroup Inc. (PHM) and KB Home jumped more than 4.9 percent as homebuilders rallied. Apple Inc. (AAPL) added 0.8 percent after falling as much as 0.9 percent earlier. The S&P 500 climbed 0.8 percent to 1,440.13 at 4 p.m. in New York. The Dow Jones Industrial Average (INDU) rose 95.38 points, or 0.7 percent, to 13,424.23. About 5.9 billion shares traded hands on U.S. exchanges, 2 percent below the three-month average.
“The retail sales report looked a little bit better than expected,” Dan Veru, who oversees $3.5 billion as chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. “The big question regarding earnings is whether expectations have come down enough so that companies can beat guidance.” U.S. stocks rose as the Commerce Department said retail sales climbed 1.1 in September following a revised 1.2 percent increase in August that was the biggest since October 2010 and larger than previously reported. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise. A separate report showed manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined.
Recap Stock Index Market Report (CME)
The December S&P 500 trended higher throughout the US trading session, supported by a boost in risk-taking sentiment, better than expected earnings from Citigroup and favorable Retail Sales data. This helped the December S&P make a run back up toward Friday's high. However, concerns over when Spain might request an EU bailout and New York Manufacturing data that showed a third consecutive month of contraction limited the upside charge. The morning gains also seemed hamstrung by a more than 2% drop in crude oil and weakness in related energy shares. Crude oil prices were able to pare their morning deficits, and that along with solid gains in Citigroup and Eli Lilly helped the December S&P 500 register a higher afternoon high. Most of the major S&P sectors were in positive territory, led by health care-related shares.
European Stocks Rise Amid M&A Deals; Orkla, Dougles Gain (Bloomberg)
European (SXXP) stocks climbed amid an increase in mergers-and-acquisition activity and as a U.S. report showed retail sales rose more than forecast in September. Orkla ASA (ORK) jumped 3.4 percent after agreeing to combine units with Norsk Hydro ASA. (NHY) Douglas Holding AG (DOU) jumped 8.1 percent after Advent International Corp. made a 1.5 billion euros ($1.9 billion) bid for the retailer. Vivendi SA (VIV) gained 2.8 percent on a report the company is in talks to merge its mobile- phone unit SFR with Numericable. The Stoxx Europe 600 Index advanced 0.5 percent to 270.8 at the close in London, after falling 1.7 percent last week. The benchmark gauge has rallied 16 percent from this year’s low on June 4 boosted by bond-purchasing programs from the European Central Bank and the Federal Reserve.
“We have been in a bit of a phase of consolidation; the question is ‘do you buy into that?’ and I think you do,” Giles Keating, head of research for private banking and asset management at Credit Suisse Group AG said on Bloomberg Television in London. “If we look at the economic data coming through, it’s on the positive side. I believe we are seeing an underlying global upswing. It’s slow and grinding, but it’s happening.” Stocks fell in Europe last week after the International Monetary Fund and the World Bank lowered economic-growth forecasts and companies predicted their earnings will miss estimates.
Emerging Stocks Drop as Policy Makers Disagree on Growth Plan (Bloomberg)
Emerging-market stocks fell for the first time in three days as global policy makers clashed on ways to boost economic growth and Chinese companies from ZTE Corp. (000063) to Yunnan Copper (000878) Industry Co. predicted losses. The MSCI Emerging Markets Index slid 0.1 percent to 995.22 at the close of trading in New York. ZTE, China’s second-largest maker of telephone equipment, sank the most in three months in Hong Kong while Yunnan Copper lost 2.4 percent in Shenzhen. Cosan SA Industria e Comercio, the world’s biggest sugar-cane processor, tumbled in Brazil after IstoE magazine said the government wants gasoline stations to lower prices. Vakiflar Bankasi TAO (VAKBN), a Turkish state-run lender, snapped a six-day rally as Goldman Sachs Group Inc. recommended selling the stock.
Finance chiefs at the International Monetary Fund meeting left Tokyo over the weekend at odds, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges. At stake is a world economy Bank of Israel Governor Stanley Fischer calls “awfully close” to recession. “Messages from the IMF and other policy makers are more negative,” Christian Keller, an emerging-markets analyst at Barclays Capital in London, said by telephone. “People have a little bit more doubt whether things will come together in Europe.” Eight of the 10 industry groups in the MSCI Emerging Markets Index slumped, led by consumer discretionary stocks. The developing-nations measure has climbed 8.6 percent this year, trailing an 11 percent increase by the MSCI World Index (MXWO) of developed countries. The emerging-markets index trades at 11.4 times estimated earnings, compared with the MSCI World’s multiple of 13.2, data compiled by Bloomberg show.
Yen Drops for 4th Day as U.S. Outlook Saps Safety Demand (Bloomberg)
The yen fell for a fourth day against the dollar before U.S. data this week forecast to show industrial production and housing starts increased last month, reducing demand for safety. The Japanese currency declined against most of its major peers after U.S. stocks rose on signs of improvement in the economy and as Federal Reserve Bank of St. Louis President James Bullard said domestic growth will pick up next year and push down the unemployment rate. New Zealand’s dollar declined after annual inflation grew at the slowest pace in more than 12 years. “We’re looking for further improvement in U.S. data,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The U.S. economy is set to outperform Japan and Europe and that should see some support for the U.S. dollar and weakness in the yen.” The yen weakened 0.2 percent to 78.79 per dollar as of 8:56 a.m. in Tokyo. Japan’s currency slid 0.3 percent to 102.18 per euro from 101.84 yesterday. The euro bought $1.2968 from $1.2949 yesterday.
In the U.S., industrial production probably increased 0.2 percent in September from the previous month, when it declined 1.2 percent, according to the median estimate of economists surveyed by Bloomberg News before the Federal Reserve releases the figures today. Economists in a separate Bloomberg poll predict that Commerce Department data due Oct. 17 will show new housing construction climbed 20,000 from August to a 770,000 annual rate last month, the most since October 2008. The Commerce department reported yesterday retail sales increased 1.1 percent last month, following a revised 1.2 percent gain in August that was the biggest since October 2010.
N.Z. Dollar Drops on Slowing Inflation; Aussie Advances (Bloomberg)
New Zealand’s dollar fell against all its major counterparts after data showed inflation slowed to the weakest pace in more than 12 years. Australia’s dollar climbed for a second day. New Zealand consumer prices rose 0.8 percent in the third quarter from a year earlier, the statistics office said in Wellington today. That was the lowest level since the fourth quarter of 1999, boosting speculation the country’s Reserve Bank will reduce interest rates. The Australian dollar extended a gain from yesterday. The Reserve Bank of Australia publishes minutes today of its Oct. 2 meeting, when policy makers cut the overnight cash-rate target by a quarter point to 3.25 percent. “The market is going to think that the RBNZ will cut” because data showed slower growth in inflation, said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. “That means that the currency should be weaker.”
The New Zealand dollar, nicknamed the kiwi, dropped 0.2 percent to 81.68 U.S. cents as of 10:51 a.m. in Sydney. It was little changed at 64.37 yen. The Australian dollar rose 0.1 percent to $1.0262, from $1.0253 yesterday. The so-called Aussie rose 0.3 percent to 80.87 yen. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined eight basis points, or 0.08 percentage point, to 2.5 percent. That’s the lowest level since June 7.
Goldman Joins Wall Street Firms in Seeing S&P at Record in 2013 (Bloomberg)
The Standard & Poor’s 500 Index may climb to a record 1,575 next year, Goldman Sachs Group Inc.’s David Kostin predicts, joining four other Wall Street firms in forecasting the benchmark gauge will exceed its 2007 peak. The strategist’ projection implies a 10 percent gain in the S&P 500 from the Oct. 12 close of 1,428.59. The advance would take the index above its all-time high of 1,565.15 reached on Oct. 9, 2007. Kostin, chief U.S. equity strategist at New York- based Goldman Sachs, reiterated his estimate for S&P 500 earnings to reach $107 a share next year. “S&P 500 faces near-term political risk in the form of the ‘fiscal cliff’ but has long-term policy support from QE3,” Kostin wrote in a note dated Oct. 12, referring to automatic deficit cuts that could go into effect starting in January and a third round of bond purchases from the Federal Reserve to stimulate economic growth.
Wall Street strategists so far are unanimous in predicting the S&P 500 will reach a record next year, according to the five firms that have made predictions out of 15 tracked by Bloomberg. Kostin’s estimate was shared by Bank of Montreal’s Brian Belski while lower than predictions of 1,600 by Bank of America Corp.’s Savita Subramanian, 1,615 by Tobias Levkovich at Citigroup Inc. and 1,585 by Oppenheimer & Co.’s John Stoltzfus. Kostin’s profit forecast is higher than the average estimate of $106.27 from the strategists tracked by Bloomberg.
Global Economy Distress 3.0 Looms as Emerging Markets Fall (Bloomberg)
The global economy is facing its third major brake on expansion in five years as emerging markets slow from China to Brazil, provoking debate about how much policy makers should respond. Three years after industrializing nations led the world out of the U.S. mortgage meltdown-induced recession, the reliability of the power source is waning as Europe’s debt crisis persists. The International Monetary Fund sees them growing an average 5.8 percent in the half-decade through 2016, almost two percentage points less than the five years before the 2009 slump. Finance chiefs at the IMF and World Bank annual meetings left Tokyo this weekend at odds over how to address the issue, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges. At stake is a world economy Bank of Israel Governor Stanley Fischer calls “awfully close” to recession.
“There is a concern that in the near term the engine of growth that provided such a great support seems to be slowing,” said Jacob Frenkel, chairman of JPMorgan Chase International and Fischer’s predecessor in Israel. “They still continue to grow, but we’re seeing a slower pace than anticipated all over the world.”
Retail Sales Beating Forecasts Support U.S. Growth (Bloomberg)
Americans snapped up goods from cars to iPhones in September at a faster pace than forecast by economists, showing consumer demand was heading into the year- end holidays on a high note. The 1.1 percent advance followed a revised 1.2 percent increase in August, the best back-to-back showing since late 2010, Commerce Department figures showed today in Washington. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise. “This keeps the economic expansion moving forward,” said Dean Maki, New York-based chief U.S. economist at Barclays Plc. “Consumer spending is continuing to grow solidly.” Gains were broad-based, with 12 of 13 retail categories showing an improvement, as shoppers were heartened by higher stock prices and home values. Faster payroll growth would further boost the consumer spending that’s needed to offset a slowdown in business investment, Maki said.
Maki raised his tracking estimate of third-quarter consumer spending to 2.1 percent from 1.8 percent, and for gross domestic product to 2 percent from 1.8 percent after the report. Shares climbed as the retail sales report and earnings from Citigroup Inc. overshadowed a slump in commodity prices. The Standard & Poor’s 500 Index rose 0.8 percent to 1,440.13 at the close in New York. Other reports today showed that inventories in the U.S. rose at a slower pace in August, indicating that unexpected strength in sales may be starting to drain stockpiles, and manufacturing in the New York region contracted in October for a third straight month.
Business Economists Reduce U.S. GDP Growth Forecasts (Bloomberg)
Business economists cut their U.S. growth outlook for next year to 2.4 percent as companies and consumers restrain spending, a survey released today showed. The growth estimate was lowered from 2.8 percent forecast in May, the survey by the Washington-based National Association for Business Economics showed. The prediction for this year was reduced to 1.9 percent from 2.4 percent. Economists responding to the survey “expect economic growth to be tepid overall in 2012 and 2013, but predict growth to slowly accelerate through 2013,” Shawn DuBravac, chief economist at the Consumer Electronics Association in Arlington, Virginia, who analyzed the results, said in a statement. The world’s largest economy is likely to skirt the worst damage from the so-called fiscal cliff, the more than $600 billion of federal spending cuts and tax increases that will automatically take effect at the start of next year unless Congress acts, the survey showed.
While business leaders don’t see that scenario playing out, the risk that it may is a reason they are bracing for slower growth, said Ken Simonson, NABE president-elect for 2012-2013 and chief economist at the Associated General Contractors of America, a trade group based in Arlington, Virginia. “I’ve heard repeatedly from business executives saying this uncertainty is causing us to hold back on investment,” Simonson told reporters today at NABE’s annual meeting in New York. “There’s certainly worry, and just having a small chance of a major disaster does cause people to be more cautious in their investment and hiring.”
Fed’s Bullard Says 3.5% 2013 Growth Will Cut Unemployment (Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard said U.S. economic growth will probably pick up to 3.5 percent next year, pushing the unemployment rate down to close to 7 percent. “I still think it is reasonable to expect faster growth as we go forward,” Bullard said in a speech in St. Louis. “The normal expectation would be the effects start to dissipate” from headwinds that have included the European debt crisis and the slow housing recovery, he said. The regional Fed bank president last week said he was still weighing what position to advocate at next week’s Federal Open Market Committee meeting, at which Fed officials will consider whether to make adjustments to their purchases of $40 billion of mortgage debt a month in a third round of quantitative easing. He didn’t comment on monetary policy in his prepared remarks.
Bullard told reporters after the speech the meeting would allow the committee to “review our current policy and see how that is performing against expectations” and that changes in asset purchases would be made over time in response to changes in the economic outlook. “How far you think the Fed will go depends in part on what your view of the economic outlook of the U.S. is over the next couple of years,” he said, making a comparison to changes in interest rates in normal times. “The whole idea is to say this is going to be outcome based, not based on a fixed amount or fixed date.”
Manufacturing in New York Region Contracts for Third Month (Bloomberg)
Manufacturing in the New York region contracted for a third straight month in October as shipments and employment declined, indicating the economy will get less support from factories. The Federal Reserve Bank of New York’s general economic index rose to minus 6.2 from minus 10.4 in September, which was the lowest since April 2009. The median forecast of 46 economists in a Bloomberg survey called for minus 4. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut. Manufacturing, a mainstay of the three-year economic expansion, has been cooling as overseas demands slows. Companies have also been curbing investment on concern that Congress will fail to avert more than $600 billion of automatic federal tax increases and spending cuts scheduled to go into effect early next year, slowing the economy.
“Manufacturing is stuck in neutral,” said Thomas Simons, an economist at Jefferies Group Inc. in New York, which had forecast minus 6 for the so-called Empire State index. Another report today showed retail sales in the U.S. rose more than projected in September, reflecting broad-based gains that indicate household spending helped bolster economic growth last quarter. The 1.1 percent increase followed a revised 1.2 percent increase in August that was the biggest since October 2010 and larger than previously reported, Commerce Department figures showed. The median forecast of 77 economists surveyed by Bloomberg called for a 0.8 percent rise.
Dudley Says Fed Won’t Make ‘Hasty’ Exit From Stimulus (Bloomberg)
Federal Reserve Bank of New York President William C. Dudley said the central bank won’t cut back record monetary stimulus too quickly when the economy begins to gain strength. “If we were to see some good news on growth I would not expect us to respond in a hasty manner,” Dudley said in a speech today in New York. Policy makers last month increased accommodation to boost an economy that central bankers said still faces “significant downside risks.” Fed officials announced a third round of asset purchases, agreeing to buy $40 billion of mortgage-backed bonds each month, and extended the horizon for record-low interest rates through at least the middle of 2015. The Fed may have not used enough stimulus measures to support the recovery in the aftermath of the financial crisis, Dudley said to the National Association for Business Economics.
“With the benefit of hindsight, monetary policy needed to be still more aggressive,” he said. “Consequently, it was appropriate to recalibrate our policy stance, which is what happened at the last” meeting of the Federal Open Market Committee. Monetary policy may have been “less powerful than normal” because of the impairment of the housing market, and because the “impetus from a given level of monetary accommodation likely has become attenuated -- that is, less powerful -- over time,” said Dudley, who is vice chairman of the FOMC. The Fed has kept its benchmark interest rate near zero since December 2008.
Business Inventories in U.S. Grew at a Slower Pace in August (Bloomberg)
Inventories in the U.S. rose at a slower pace in August, indicating that unexpected strength in sales may be starting to drain stockpiles. The 0.6 percent increase in goods on hand followed a 0.8 percent gain in July, Commerce Department data showed today in Washington. Sales at factories, wholesalers and retailers climbed 0.5 percent after advancing 0.9 percent the prior month. The biggest back-to-back gains in retail sales in almost two years may be making it difficult to keep shelves and warehouses stocked as companies reined in spending ahead of looming year-end tax and government spending changes in the U.S. The need to replenish depleted inventories may help give manufacturing a boost in the last three months of the year.
“Businesses are operating in a fairly lean environment right now,” Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “Definitely there’s hesitancy about these other economic issues that I think is weighing on inventory accumulation.” The gain in inventories compared with a 0.5 percent gain median forecast of 47 economists surveyed by Bloomberg. Estimates ranged from gains of 0.2 percent to 0.7 percent. At the current sales pace, businesses had enough goods on hand to last 1.28 months, the same as in July.
A separate Commerce Department report today showed retail sales rose more than projected in September, reflecting broad- based gains that indicate household spending helped bolster economic growth last quarter.
Consumers Paying Down Debt Helps Boost U.S. Expansion (Bloomberg)
Anita Bullock-Morley was $57,000 in debt on 27 credit cards and close to filing for bankruptcy in 2007. With help from an Atlanta counseling service, the 37-year- old says she paid about $1,400 a month and cleared her balances. Now she’s used cash to buy an $800 iPad and upgrade her iPhone. Three-plus years into a recovery from the worst financial crisis since the Great Depression, Americans finally are getting their finances back into shape, Federal Reserve figures show. Household debt as a share of disposable income sank to 113 percent in the second quarter from a record high of 134 percent in 2007 before the recession hit. Debt payments on that basis are the smallest in almost 18 years, while the delinquency rate for credit cards is the lowest since the end of 2008. “The household deleveraging process is largely over,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Credit use should soon go from being a significant headwind to the economy to a tailwind.”
The progress that consumers have been making will allow gross domestic product to absorb stepped-up deficit reduction by the federal government next year and keep on expanding, Zandi said. He sees GDP growing 2.1 percent in 2013, a bit slower than this year’s projected 2.2 percent, as Congress allows some, but not all, of the scheduled year-end tax increases and spending cuts to go ahead. The GDP number will mask stronger growth for the private side of the economy, to 3.6 percent from 3.1 percent, he said.
China Inflation Cools Amid Signs of Stable Economy Growth (Bloomberg)
China’s inflation was close to the slowest pace in two years in September, giving the government room to ease policies should the economy deteriorate. Consumer prices rose 1.9 percent from a year earlier while the producer-price index dropped 3.6 percent, the National Bureau of Statistics said on its website today. China’s imports increased 2.4 percent from a year earlier while overseas shipments climbed 9.9 percent, the customs administration said on Oct. 13. A report this week may show the nation’s expansion slid to 7.4 percent in the third quarter from a year earlier, the seventh straight deceleration, underscoring International Monetary Fund warnings that weakening growth in developed economies is spreading to emerging markets. At the same time, there are signs China’s economy is stabilizing after exports exceeded estimates in September and money supply grew at the fastest pace in 15 months.
“Muted inflation pressure will provide more room for the government to introduce additional policy easing or stimulus measures,” said Lu Ting, chief China economist at Bank of America Corp. in Hong Kong. “The top task for the central bank now is to prevent growth from slowing further while stemming the rebound in home prices, which is the major constraint for easing in 2012.” Asian stocks swung between gains and losses as concern the global economic slowdown is deepening was countered by China’s easing inflation and better-than-expected export data. The regional benchmark MSCI Asia Pacific Index (MXAP) was unchanged at 3:25 p.m. in Tokyo.
India’s Inflation Accelerates to 10-Month High (Bloomberg)
Indian inflation accelerated to a 10-month high in September after an increase in diesel prices, limiting room for an interest-rate cut to revive the economy. The wholesale-price index rose 7.81 percent from a year earlier, after climbing 7.55 percent in August, the Commerce Ministry said in a statement in New Delhi today. The median of 35 estimates in a Bloomberg News survey was 7.7 percent. India’s central bank has refrained from joining countries such as Brazil and South Korea in extending rate cuts, saying inflation exceeds a comfort zone of about 5 percent. At the same time, the nation’s finance officials are seeking lower borrowing costs to back an economic-policy revamp that included a rise in subsidized diesel tariffs last month to pare a fiscal deficit.
“Increasing diesel prices was a necessary step to control the budget deficit and, therefore, curb inflation in the medium to long term,” said Suvodeep Rakshit, an economist at Kotak Securities Ltd. in Mumbai. “It will cause a rise in inflation in the short term and the Reserve Bank will wait until inflation comes down into its comfort zone.” The policy overhaul since Sept. 13, which snapped months of political gridlock over how to boost the economy, also included measures to open industries such as retailing to more foreign investment, helping the rupee to rebound from a record low.
India Government Seeks Lower Rates as More Overhauls Planned (Bloomberg)
India’s finance officials are seeking lower interest rates from the central bank to revive growth as the government plans adding to its overhaul of economic policies. Inflation may slow to within the Reserve Bank of India’s comfort level by March as the rupee rises and the fiscal gap shrinks, Economic Affairs Secretary Arvind Mayaram said in an interview yesterday. Finance Minister Palaniappan Chidambaram said two days earlier he plans reform measures for capital markets, insurance, banking and infrastructure within weeks. “We hope that the RBI will be more benevolent with its policy” if it’s convinced the government is taking credible steps to lower the fiscal deficit and contain inflation, Mayaram said in Tokyo, where he participated in annual meetings of the International Monetary Fund along with Chidambaram. “They should give” some signals before March, he said.
Indian policy makers are trying to bring growth back from near the lowest in three years, with the International Monetary Fund saying last week the outlook for Asia’s third-largest economy is unusually uncertain. The government has revamped economic policy since Chidambaram, 67, became finance minister on July 31, opening up to more investment from abroad and raising subsidized diesel prices to tackle a budget deficit. The push snapped months of gridlock over how to revive the economy, helping the rupee rebound from a record low.
Zeti Says Malaysia Can Withstand Capital Flows: Southeast Asia (Bloomberg)
Malaysia can manage capital inflows due to quantitative easing in advanced economies, central bank Governor Zeti Akhtar Aziz said, as Asian nations take steps to prevent asset bubbles after the U.S. boosted stimulus. The country has policy tools and the flexibility to absorb any excess liquidity, said Zeti, who oversaw Malaysia’s response to capital outflows during the Asian financial crisis more than a decade ago. The Malaysian economy is withstanding the impact of weakening global growth, with gross domestic product forecast to expand about 5 percent this year, Zeti said in an Oct. 14 interview in Tokyo. “We certainly are the recipient of capital flows but the Malaysian financial system has reached a level of maturity in terms of development and in its functioning that is able to intermediate these flows, both surges of inflows as well as reversals,” Zeti said. “The effects are disbursed through the financial system rather than concentrated.”
Malaysia joins Brazil among emerging markets signaling confidence they can counter any surge in fund flows stemming from the U.S. Federal Reserve’s third round of quantitative easing. Fed Chairman Ben S. Bernanke two days ago rebutted concern that the central bank’s decision to purchase $40 billion in mortgage-backed bonds a month will cause a destabilizing influx of capital into developing economies. Brazil’s central bank President Alexandre Tombini said yesterday his country will defend itself from short-term capital flows that bring financial instability and inflation risks amid an easing push from major economies. “We have the conditions to protect ourselves and we are doing that,” he said.
