Asia Stocks Fall First Time in Six Days on Growth Concern (Bloomberg)
Asian stocks fell, with a regional benchmark index headed for its first loss in six days, as the Organization for Economic Cooperation and Development said failure to prevent the so-called fiscal cliff in the U.S. would increase the risk of a global recession. BHP Billiton Ltd. (BHP), the world’s largest mining company, sank 0.9 percent in Sydney, leading losses among companies with earnings closely tied to economic growth. Komatsu Ltd. (6301), which gets about a quarter of its sales in the U.S., fell 0.7 percent. Hulic Co. (3003) tumbled 11 percent after the Japanese real-estate operator said it plans a share sale. The MSCI Asia Pacific Index slid 0.2 percent to 123.48 as of 9:43 a.m in Tokyo, with almost three stocks falling for each that rose. Markets in China and Hong Kong are yet to open. The gauge rose 13 percent from this year’s low on June 4 through yesterday as central banks added stimulus to spur economic growth and data showed a slowdown in China may be ending.
“Most investors are still cautious to bearish in terms of their outlook, and certainly in terms of their positioning,” said Markus Rosgen, chief Asian strategist at Citigroup Inc. in Hong Kong. “As far as the markets are concerned here in Asia, increasingly people feel less about Greece and more about the fiscal cliff.” Japan’s Nikkei 225 Stock Average (NKY) lost 0.3 percent, South Korea’s Kospi Index sank 0.5 percent and Australia’s S&P/ASX 200 Index (AS51) slid 0.4 percent.
Japan Stocks Set to Halt Rally on Fiscal Cliff Concern (Bloomberg)
Nov. 28 (Bloomberg) -- Japanese shares fell, with the Nikkei 225 (NKY) Stock Average poised to halt a four-day rally, on concern U.S. lawmakers are making little progress on budget talks to avert the so-called fiscal cliff and after a technical indicator signaled the market may be overheating. Mazda Motor Corp. (7261), an automaker that gets 28 percent of its sales in North America, dropped 0.8 percent. Sumitomo Mitsui Financial Group Inc. (8316), the country’s second-biggest lender by market value, fell 0.5 percent, heading for its first decline in two weeks. Kawasaki Kisen Kaisha Ltd. (9107) led shipping lines lower after delaying expansion of its commodity-transport fleet. The Nikkei 225 slid 0.5 percent to 9,375.22 as of 10:10 a.m. in Tokyo after yesterday closing at the highest level since April. The broader Topix Index dropped 0.5 percent to 777.43, with about three stocks declining for each that rose.
“There’s definitely signs of short-term overheating as stocks have risen fast over the past two weeks,” said Fumio Matsumoto, a fund manager who helps oversee about 65 billion yen ($791 million) in Japanese equities at T&D Asset Management Co. “I’m concerned about the fiscal cliff in the short-term.” The Topix advanced 8.2 percent through yesterday from Nov. 14, when Prime Minister Yoshihiko Noda called for a Dec. 16 election, causing the yen to drop on speculation the opposition may win and call for more monetary easing.
U.S. Stocks Fall as Budget Negotiations Overshadow Greece (Bloomberg)
U.S. stocks fell for a second day as concern about progress in Washington budget negotiations overshadowed a European agreement on Greece aid and a better- than-forecast report on durable goods. Nine of 10 groups in the Standard & Poor’s 500 Index fell. Hewlett-Packard Co. (HPQ) lost 3 percent after Autonomy Corp.’s former chief executive officer challenged the computer maker’s board to explain allegations that the software company falsified financial statements. Seagate Technology Plc (STX) slid 5.1 percent as CLSA Asia-Pacific Markets said the magnitude of the personal- computer slowdown in emerging markets was worse than thought. The S&P 500 fell 0.5 percent to 1,398.94 in New York. The Dow Jones Industrial Average (INDU) lost 89.24 points, or 0.7 percent, to 12,878.13. More than 5.9 billion shares traded hands on U.S. exchanges, or 2.6 percent below the three-month average at this time of day, according to data compiled by Bloomberg.
“The market remains fixated on what’s going on in Washington,” Frederic Dickson, who helps oversee about $32 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a telephone interview. “The lack of progress in resolving major fiscal cliff issues is topic A and trumping any kind of positive news whether it’s coming out of Europe or positive economic reports.” U.S. equities extended declines after Senator Majority Leader Harry Reid said “little progress” has been made in talks to avert the so-called fiscal cliff. “We only have a couple weeks to get something done so we have to get away from the happy talk” and do “specific things,” he told reporters.
Recap Stock Index Market Report (CME)
The December S&P 500 experienced a choppy session that was initially higher on an agreement between EU and IMF leaders on a new debt target for Greece. However, those early morning gains evaporated as the market focus turned back to the US fiscal cliff. This morning's data on October Durable Goods Orders was better than expected and a reading on Consumer Confidence climbed to its highest level since February 2008. Despite the positive economic data readings, concerns over the US fiscal cliff weighed on sentiment. The S&P 500 registered its low of the session late in the day in response to comments out of Washington noting a lack of progress on resolving the fiscal cliff.
Europe Stocks Gain as Finance Ministers Agree Greek Deal (Bloomberg)
European (SXXP) stocks advanced after euro- region finance ministers eased the terms of aid for Greece and cleared the way for a loan instalment in December. Remy Cointreau SA, France’s second-largest distiller, surged 6.4 percent after posting first-half operating profit that beat estimates. SBM Offshore (SBMO) NV added 2.9 percent after Barclays Plc raised its recommendation on the stock. Galp Energia SGPS SA slid 5.9 percent after Eni SpA said it is selling shares in Portugal’s biggest oil company. The Stoxx Europe 600 Index climbed 0.3 percent to 272.86 at the close of trading, paring earlier gains of as much as 0.7 percent. The gauge rallied 4 percent last week as optimism grew that the U.S. Congress will agree on a budget that avoids automatic tax increases and spending cuts, and data showed China’s manufacturing expanded.
“This was the last chance after the finance ministers kept delaying a decision,” Guillaume Chaloin, a fund manager at Meeschaert Asset Management in Paris, which oversees $3.2 billion, said, referring to the decision on Greek aid. “We’ve evacuated one of the big worries and this has reassured the market.” European finance ministers eased the terms on emergency aid for the Mediterranean nation. In the latest bid to keep the 17- nation euro-area intact, the ministers cut the rates on bailout loans, suspended interest payments for a decade on money from the temporary rescue fund, gave the country more time to repay, and engineered a Greek bond buyback. Greece was also cleared to get a 34.4 billion-euro ($44.7 billion) loan instalment in December.
Emerging Stocks at 3-Week High as Greek Aid Buoys Risk (Bloomberg)
Emerging-market stocks rose, sending the benchmark index to a three-week high, as an agreement on emergency aid for Greece and better-than-forecast U.S. economic data boosted appetite for riskier assets. Hyundai Motor Co. (005380), which got 20 percent of its 2011 sales from Europe, gained the most in three weeks in Seoul. Power utility Centrais Eletricas Brasileiras SA (ELET6) rallied as Brazil considered raising the amount of compensation offered to companies that accept lower electricity rates. Unitech Ltd. (UT), a New Delhi-based real estate developer, led the gains on the developing-nations equities gauge, rallying 11 percent. The MSCI Emerging Markets Index (MXEF) added 0.1 percent to 996.44, the highest since Nov. 7. European finance ministers agreed to cut rates on Greece’s bailout loans, suspend interest payments for a decade and gave the nation more time for repayments.
The gauge pared gains after Senate Majority Leader Harry Reid said Democrats and Republicans have made little headway in negotiations over how to avoid $607 billion in tax increases and spending cuts set to take effect in 2013. “Better news on the economic front in the U.S. is certainly helping and you also have the Greece deal,” Aryam Vazquez, an economist at Wells Fargo & Co., said by phone from New York. “But anytime you get negative comments from political leaders that speak to the possibility that we may be pushed over the fiscal cliff, this carries adverse repercussions for international financial markets.” Brazil’s Bovespa Index retreated 0.9 percent as billionaire Eike Batista’s OGX Petroleo e Gas Participacoes SA slumped 3.7 percent to a four-year low on concern its $270 million purchase of an oil field stake will cut into cash holdings.
Treasuries Volatility Falls to Five-Year Low (Bloomberg)
Treasury market volatility dropped to the lowest level in five years as the pending U.S. fiscal cliff and Europe’s debt crisis kept alive demand for the relative safety of government debt. Bank of America Merrill Lynch’s MOVE index, which measures price swings for Treasuries based on options, fell to 51.7 yesterday in the U.S., the least since May 2007. The Treasury Department is scheduled to sell $35 billion of five-year notes today and $29 billion of seven-year securities tomorrow, after a two-year auction yesterday drew record demand. “A low-yield environment is in place,” said Tomohisa Fujiki, an interest-rate strategist in Tokyo at BNP Paribas SA, whose New York unit is one of the 21 primary dealers obliged to bid at U.S. debt sales. “We have some concerns about the fiscal cliff, and that that is supportive for Treasuries.”
Ten-year yields were little changed at 1.63 percent today as of 10:16 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 was 99 29/32. The rate fell five basis points, or 0.05 percentage point, over the past two days. It is less than the average of 3.68 percent over the past decade. Senate Majority Leader Harry Reid said yesterday Democrats and Republicans have made little headway in negotiations over how to avoid a year-end fiscal cliff of spending cuts and tax increases that are threatening the economy. A $35 billion two-year auction yesterday drew record demand. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 4.07, matching the record high in November 2011.
Investors are hiding in the securities until officials get through the fiscal negotiations in Washington, Scott Graham, head of government bond trading in Chicago at Bank of Montreal (BMO)’s BMO Capital Markets unit, said yesterday. BMO is another primary dealer. In Europe, finance ministers eased the terms on emergency aid for Greece yesterday, striving to keep 17-nation euro bloc intact.
Dollar Gains, Yen Advances Amid Fiscal Cliff Deadlock (Bloomberg)
The dollar gained against most of its major peers as a struggle among U.S. lawmakers to reach a budget consensus boosted demand for safe-haven assets. The yen rose against all its most-traded counterparts and the greenback stayed stronger versus the euro after Senate Majority Leader Harry Reid said he is “disappointed” in the lack of progress in discussions to avoid the so-called fiscal cliff. The euro declined against the yen for a third day before data forecast to show Germany’s jobless rate was near the highest in a year. “Prolonged negotiations over the fiscal cliff create a risk-off environment, so they are a dollar-buying catalyst,” said Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “From the perspective of economic fundamentals, the euro is more likely to edge down.”
The dollar bought $1.2928 per euro at 10:46 a.m. in Tokyo, up 0.1 percent from yesterday when it gained 0.2 percent to $1.2943. The 17-nation euro fell 0.4 percent to 105.91 yen from 106.34, having dropped 0.6 percent over the past two days. The Japanese currency rose 0.3 percent to 81.91 yen per dollar. The MSCI Asia Pacific Index (MXAP) of stocks lost 0.5 percent following a 0.5 percent decline in the Standard & Poor’s 500 Index of U.S. shares yesterday.
Aussie Remains Lower Before Business Investment Report (Bloomberg)
The Australian dollar remained lower following a decline yesterday amid speculation a report tomorrow will show a slowdown in capital expenditure growth, damping the outlook for the economy and the currency. The so-called Aussie held a two-day drop versus the yen as investors boosted bets the Reserve Bank of Australia will lower borrowing costs at its next meeting on Dec. 4. The New Zealand dollar, also known as the kiwi, failed to rally following a two- day slide after the country’s central bank Governor Graeme Wheeler said manufacturing has been hurt by the local currency’s gains. “If non-mining capital investment doesn’t show signs of picking up in 2013, that suggests that policy needs to be easier and that would be consistent with a rate cut next month” from the RBA, said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “It might weigh on the currency in the very short-term.”
The Australian dollar bought $1.0443 as of 11:10 a.m. in Sydney after falling 0.2 percent yesterday to $1.0446. It traded at 85.79 yen from 85.81. New Zealand’s currency fetched 82.05 U.S. cents from 82.03 and was at 67.40 yen, unchanged from yesterday. The yield on 10-year Australian government bonds fell seven basis points, or 0.07 percentage point, to 3.22 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.615 percent. Australian business investment probably rose 2 percent in the three months through September after advancing 3.4 percent in the previous quarter, according to the median estimate of economists surveyed by Bloomberg News. The statistics bureau will release the figures tomorrow. Interest-rate swaps data compiled by Bloomberg show traders see a 65 percent chance the RBA will cut the overnight cash rate target by 25 basis points to 3 percent at its next gathering. That’s up from 60 percent yesterday.
ANZ is among 15 of 26 companies polled by Bloomberg News this month that are predicting a quarter-percentage point interest-rate reduction.
U.S. Treasury Declines to Name China Currency Manipulator (Bloomberg)
China isn’t a currency manipulator under U.S. law, though the yuan “remains significantly undervalued” and needs to rise further, the Treasury Department said. China “has substantially reduced the level of official intervention in exchange markets since the third quarter of 2011,” the Treasury said in a statement accompanying its semi- annual currency report to Congress yesterday. The yuan has gained 9.3 percent in nominal terms and 12.6 percent in real terms against the dollar since June 2010, the Treasury said. “It appears that the strategy of the last two administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results,” William Reinsch, president of the National Foreign Trade Council, a Washington-based business group, said in an e-mail after the report. “There is clearly room for further appreciation, however.”
In declining to brand China a manipulator, the Treasury cited the reduced intervention and “steps to liberalize controls on capital movements, as part of a broader plan to move to a more flexible exchange-rate regime.” The U.S. hasn’t designated another nation since 1994, when it named China. Critics of China’s exchange-rate policies, including former Republican presidential candidate Mitt Romney, say the nation deliberately suppresses the value of its currency, making its goods cheaper in overseas markets and costing jobs in the U.S.
Obama Had Unannounced Fiscal Cliff Talk With Finance CEOs (Bloomberg)
President Barack Obama’s efforts to engage business leaders in negotiations to avoid the year-end fiscal cliff have included unannounced private talks with top financial executives at the White House. On Nov. 16, the same day Obama met with congressional leaders, he sat down with about a dozen financial services executives in the Roosevelt Room, where they were meeting with senior administration officials including Treasury Secretary Timothy F. Geithner. The session was part of a series of consultations Obama has had with outside groups aimed at pressuring Congress to strike a deal to avert more than $600 billion of automatic spending cuts and tax increases set to take effect in January.
The group included Blackstone Group LP (BX) President Tony James; Evercore Partners Inc. (EVR) chairman Roger Altman; Robert Wolf, chief executive officer of 32 Advisors LLC; Centerbridge Capital Partners LLC managing principal Mark Gallogly; Glenn Hutchins, co-founder of Silver Lake Management LLC; Marc Lasry, founder of Avenue Capital Group LLC; Blair Effron, co-founder of Centerview Partners LLC; and Orin Kramer, general partner at Boston Provident Partners LP, according to administration officials and a participant in the session. The meeting, held across from the Oval Office, wasn’t on the president’s public schedule. He dropped in on the 90-minute session as it was about halfway through.
Home Prices in 20 U.S. Cities Rose 3% in Year to September (Bloomberg)
Home prices rose in the year ended in September by the most since July 2010, showing the recovery in the U.S. real estate market is a source of strength for the economy. The S&P/Case-Shiller index of property values in 20 cities climbed 3 percent from September 2011, after advancing 2 percent in the year to August, the group said today in New York. The median forecast of 29 economists in a Bloomberg survey projected a 3 percent gain. Home prices from July through September climbed the most since the second quarter of 2010. An improving labor market and record-low mortgage rates are shoring up demand for properties, helping explain an increase in optimism among builders. At the same time, Federal Reserve policy makers are pressing forward with monetary accommodation that underpins the residential real-estate recovery and the economic expansion.
“I think it’s a stabilization on the sales side that’s probably helping with the prices here,” said Sean Incremona, senior economist at 4Cast Inc. in New York. “We’ve had several years now for the housing recovery to sort of catch its feet, and it looks like we are starting to crawl out of the giant hole that we dug into from the financial crisis.” Estimates in the Bloomberg survey ranged from gains of 2.2 percent to 3.6 percent. The Case-Shiller index is based on a three-month average, which means the September data were influenced by transactions in July and August.
Demand for U.S. Capital Goods Climbs in Spending Rebound (Bloomberg)
Consumer confidence climbed to a four-year high, home prices increased by the most since 2010 and demand for business equipment rose, signaling resilience in the U.S. economy as the new year approaches. The Conference Board’s confidence index increased to 73.7 in November from 73.1 the prior month, the New York-based group said today. The S&P/Case-Shiller index of property values in 20 cities advanced 3 percent in September from a year earlier. Bookings for non-defense capital goods excluding aircraft rose 1.7 percent last month, the most since May, the Commerce Department reported. “It’s good news starting out the fourth quarter,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “Concern that the fiscal cliff is a major roadblock to the recovery doesn’t seem to be holding up.”
Household finances and sentiment are getting a boost from a revival in the real-estate market, making it more likely that Americans will keep up the spending that accounts for 70 percent of the economy. At the same time, a rebound in business demand for machinery indicates that some companies were undeterred by the threat of automatic spending cuts and tax increases scheduled to take effect in January. Stocks fell as the budget debate in Washington overshadowed the improving economic data. The Standard & Poor’s 500 Index dropped 0.5 percent to 1,398.95 at the close in New York.
Consumer Confidence in U.S. Increases to Four-Year High (Bloomberg)
Consumer confidence rose in November to the highest level in more than four years, a sign U.S. household spending will keep growing. The Conference Board’s confidence index climbed to 73.7, the highest since February 2008, from a revised 73.1 reading the prior month, figures from the New York-based private research group showed today. The median forecast of 75 economists surveyed by Bloomberg projected a reading of 73. The report showed the share of Americans planning to buy a house rose to a record high, indicating improving property values and a job market recovery are making households more willing to make long-term commitments. Sustained gains in consumer spending, the biggest part of the economy, may help overcome concern over the fiscal cliff of tax increases and government spending cuts slated for early 2013.
“Confidence is holding up well,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who projected the confidence measure would climb to 74. “Spending is going to continue to increase. This bodes well for the fourth quarter.” Other reports today signaled business investment may rebound and home prices are climbing. Demand for goods such as machinery and electronics climbed in October by the most in five months, the Commerce Department reported. Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, rose 1.7 percent last month, the most since May.
U.S. Said to Weigh Tightening Rules for Foreign Lenders (Bloomberg)
U.S. units of foreign lenders including Deutsche Bank AG (DBK) may be required by regulators to comply with tougher capital rules that some banks sought to skirt, three people with knowledge of the discussions said. The Federal Reserve, drafting standards for the nation’s largest banks, may force non-U.S. firms to house all of their businesses within a U.S. holding company, said the people, who requested anonymity because the rules haven’t been completed. That means local units would have to meet minimum capital standards regardless of their parents’ resources. Deutsche Bank and London-based Barclays Plc (BARC) have changed their U.S. legal status in the past two years to discard the holding-company structure. The treatment could force foreign banks to inject capital into their U.S. units and limit their ability to move funds across borders, said Luigi De Ghenghi, a partner at law firm Davis Polk & Wardwell LLP in New York.
“Fragmenting capital along regional lines will impose real costs on doing cross-border banking,” said De Ghenghi, a member of the firm’s financial-institutions group. “Global banks will risk ending up with overcapitalized units all around the world because regulators are reluctant to allow the repatriation of capital once it’s moved to their jurisdiction.” Foreign lenders can choose whether to create U.S. bank holding companies. Those units were exempt from capital standards as long as their parent firms were well-capitalized.
Reid Says Parties Making Little Progress in Budget Talks (Bloomberg)
Senate Majority Leader Harry Reid said Democrats and Republicans have made little headway in negotiations over how to avoid a year-end fiscal cliff. “There’s been little progress with the Republicans, which is a disappointment to me,” Reid, a Nevada Democrat, told reporters today in Washington. Reid said that following a Nov. 16 White House meeting, Republicans backed away from earlier openness to considering new tax revenue as part of a year-end deal to avert the so-called cliff, $607 billion in tax increases and spending reductions set to begin in January. “They talked some happy talk about doing revenues, but we only have a couple weeks to get something done,” Reid said. “So we have to get away from the happy talk and start talking about specific things.” Still, Reid also said he was “extremely hopeful, and I do not believe that the Republicans are going to allow us to go over the cliff.”
U.S. stocks extended losses as Reid spoke. The Standard & Poor’s 500 Index slipped 0.3 percent to 1,402.03 as of 3:17 p.m. in New York. The Dow Jones Industrial Average fell 0.5 percent to 12,908.08. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said Democrats are politicizing the talks.
Carney Favors Rate Plan Copied by Bernanke Over BOE Doubt (Bloomberg)
Mark Carney may be more willing to look further into the future than Mervyn King. As Carney prepares to take control of the Bank of England, former central bank economists say his five years atop the Bank of Canada suggest he will be more inventive and open than the current governor in outlining plans to spur the U.K. recovery. Although King pursues quantitative easing, the Bank of England rejects a Canadian crisis-fighting strategy -- later adopted by Federal Reserve Chairman Ben S. Bernanke -- of specifying how long interest rates will remain low. That stance may be revisited if Carney arrives in London in seven months to find the U.K. still stuck in a recessionary rut. “Mervyn was very proactive in beginning gilt purchases, but he is still less pragmatic than Carney, who may be open to a wider range of options,” said Simon Wells, chief U.K. economist at HSBC Holdings Plc (HSBA) in London and a Bank of England official until last year.
Carney, 47, embraced greater transparency as an emergency tool in 2009 when he promised to keep Canada’s benchmark rate, then at 0.25 percent, low for 15 months as long as the inflation outlook didn’t change. Bernanke followed in August 2011 when the Fed said it would hold its key rate near zero at least through mid-2013, a range it subsequently extended by two years. Such vows are aimed at adding stimulus to an economy where short-term rates are already around rock-bottom by persuading investors to contain longer-term borrowing costs because they know official rates won’t rise.
China’s U.S. Debt Purchases Seen Limited, Former Adviser Says (Bloomberg)
China may limit its purchases of U.S. Treasuries because the central bank has reduced its buying of dollars at home, according to a Chinese academic who has served as a government adviser. The People’s Bank of China has “noticeably” reduced its purchases of dollars from local banks to allow commercial banks to trade among themselves, Ding Zhijie, dean of finance at Beijing’s University of International Business and Economics, said in a Nov. 23 interview. That may cap the nation’s foreign- exchange reserves and consequently its demand for U.S. government debt, he said. The scaled-back intervention is part of a shift toward managing the currency through the daily price fixing, Ding said. A reduction in China’s U.S. debt holdings may help defuse criticism by some American politicians that their country is becoming too dependent on the world’s second-largest economy.
“We are now witnessing a big change -- China’s official foreign-exchange reserves will be stable or even fall slightly in the coming years,” said Ding, who advised the government on creating the nation’s sovereign wealth fund. “That means China’s new purchases of Treasuries will be limited and as you can already see, purchases have already started ebbing in the last couple of months.” The PBOC has barely intervened in the foreign-exchange market for four quarters, Yi Gang, a deputy governor and head of the State Administration of Foreign Exchange, said at an International Monetary Fund meeting in Tokyo last month.
Korea’s Current-Account Surplus Narrows to $5.8 Billion (Bloomberg)
South Korea’s current-account surplus narrowed to a two-month low after imports of machinery and equipment increased. The surplus was $5.8 billion last month, compared with a revised excess of $5.9 billion in September, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income. South Korean officials announced measures yesterday to tighten limits on banks’ currency forward positions as gains in the won threaten to curtail a rebound in exports. The nation’s current-account surplus will help support further appreciation of the currency, said Wai Ho Leong, a Singapore-based economist at Barclays Plc. “The latest regulation is seen as more of a speed bump, not a road block,” Leong said before the data was released. Barclays forecasts the currency will reach 1,050 won per dollar within 12 months, he said.
The won, Asia’s best performing currency in the second half of the year, strengthened 0.1 percent to 1,084.08 per dollar at the close yesterday in Seoul, according to data compiled by Bloomberg. It reached 1,080.05 on Nov. 22, the highest level since Sept. 9, 2011. The Kospi (KOSPI) index of stocks climbed 0.9 percent yesterday.
Selling U.S. Treasuries Leads Standard Life to Australian Bonds (Bloomberg)
Edinburgh’s largest fund company sold Treasuries because it’s confident that politicians will find a budget compromise and avert another recession while the Federal Reserve stokes U.S. economic growth. Standard Life Investments instead is favoring Australia’s AAA-rated bonds due to the country’s tightening fiscal policy, prospects for lower interest rates and “decent credit worthiness,” said Sebastian Mackay, an investment director for fixed income. The firm also bought German bonds as Europe faces a “prolonged” period of low growth and interest rates.
U.S. Treasuries have beaten both German bunds and Australian bonds since President Barack Obama won re-election on Nov. 6 as investors opted for a safer home for their money on concern about the so-called fiscal cliff, or $607 billion of automatic tax increases and spending cuts starting in January. Obama, a Democrat, proposed cutting the deficit by reducing spending and allowing predecessor George W. Bush’s tax cuts for high-income earners to lapse. Republicans oppose tax increases. “We’re at the more relaxed end of the spectrum on the fiscal negotiations, given the Democrats overriding motive to avoid the cliff and the Republicans’ motive to maintain the Bush tax cuts,” Mackay said in an interview. “We are not positive on Treasuries at this juncture.”
The U.S. economy will advance by 2 percent in 2013, compared with an average 1.26 percent for the Group of 10 nations, according to Bloomberg surveys of economies. Over the course of 2014, the U.S. will exceed the G-10 average by 0.82 percent points, the surveys show.
Greece Wins Easier Debt Terms as EU Hails Rescue Formula (Bloomberg)
European finance ministers eased the terms on emergency aid for Greece, declaring after three years of false starts that Europe has found the formula for nursing the debt-stricken country back to health. In the latest bid to keep the 17-nation euro intact, the ministers cut the rates on bailout loans, suspended interest payments for a decade, gave Greece more time to repay and engineered a Greek bond buyback. The country was also cleared to receive a 34.4 billion-euro ($44.7 billion) loan installment in December. Greek bonds rose. “This has been a very difficult deal,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels after chairing a 13-hour meeting that ended early today. “All initiatives decided upon today will bring Greece’s public debt clearly back on a sustainable path.”
After 240 billion euros in loan pledges and the biggest writedown of privately held debt failed to turn Greece around, the creditor governments led by Germany proclaimed the latest fix just as they grappled with swelling financing needs in Cyprus and a potential aid request by Spain, the fourth-largest euro economy.
Credit Rating Firms in EU to Face Sovereign-Debt Limits (Bloomberg)
Credit rating companies face curbs on when they can assess government debt and restrictions on their ownership under draft plans agreed on by European Union officials and legislators. Lawmakers from the European Parliament and Cyprus, which holds the rotating presidency of the EU, also agreed yesterday to let investors sue ratings companies if they lose money because of malpractice or gross negligence. “We have reached a good result,” Michel Barnier, the EU’s financial services chief, said in an e-mailed statement. “With this agreement, we are taking another important step towards financial stability.” Barnier proposed the tougher ratings rules after warnings from nations including France and Germany that downgrades of sovereign debt had deepened the bloc’s fiscal crisis. Barnier said last year that ratings companies were guilty of “serious mistakes” and shouldn’t be allowed to “increase market volatility” through ill-timed or unjustified downgrades.
The European Commission, the 27-nation EU’s executive arm, has said that tougher regulation is needed to boost competition for the so-called big three ratings companies, Fitch Ratings Ltd., Moody’s Investors Service Inc. and Standard & Poor’s. Negotiators at yesterday’s meeting brokered a draft deal on the rules, which must be formally approved by governments and by the full parliament before they can be implemented.
