Asia FX By Cornelius Luca - Thu 03 Jan 2013 16:50:19 CT (www.lucafxta.com/CME)
The appetite for risk declined further on Thursday in the wake of the temporary solution of the "fiscal cliff" crisis and after the latest Fed Minutes showed disagreement over the duration of bond buying. FX traders quickly curbed their enthusiasm because the next two months will see more negotiations over the debt ceiling. The European and commodity currencies fell, while the yen consolidated near new lows for the downtrend. The US stock markets slipped. Gold, oil and silver declined as well. The short-term outlook for the foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short on European currencies and long on commodity currencies. Good luck!
Overnight
US: The jobless claims increased 10,000 to 372,000 in the week ended December 29th from the previous week's revised figure of 362,000 (from the 350,000 originally reported).
US: ADP said private sector employment increased by 215,000 jobs in December following an upwardly revised increase of 148,000 jobs in November (from 118,000 jobs originally reported).
Today's economic calendar
Australia: AiG performance of services index for December
China: HSBC China services PMI for December
Asian Stocks Outside Japan Decline on Fed Minutes; Nikkei Jumps (Bloomberg)
Asian stocks outside Japan fell after Federal Reserve policy makers said they will probably end their $85 billion monthly bond-purchase program sometime this year. Japanese equities rose as markets reopened today.
BHP Billiton Ltd., the world’s largest mining company, dropped 1.2 percent, as metals prices fell. Toyota Motor Corp. surged 4.1 percent as the yen weakened to the lowest level against the dollar since July 2010, boosting the earnings outlook for exporters. Japan Exchange Group began trading after the merger between Osaka Securities Exchange Co. and Tokyo Stock Exchange Group.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) declined 0.4 percent to 476.50 as of 9:21 a.m. in Tokyo. Japan’s Nikkei 225 Stock Average (NKY) gained 2.9 percent on its first trading day of 2013 after U.S. lawmakers passed a bill averting spending cuts and tax increases scheduled to come into effect this year. It is headed for its highest closing level since March 2011. Markets also reopen later today in China.
“The work that we’ve done shows often what has caused previous recessions was pulling stimulus off too early before growth started to build on itself,” James Lindsay, Auckland- based equity fund manager at Tyndall Investment Management Ltd., which oversees about $23 billion, said in a phone interview. “This has been more of a relief rally than anything else. The hard yards are still to come. U.S. economic data remains pretty mixed.”
Japan Stocks Jump as Market Reopens, Yen Lifts Exporters (Bloomberg)
Japanese stocks advanced, chasing gains among Asian markets following a four-day holiday, as the yen weakened to the lowest level since 2010, boost the earnings outlook for exporters including Toyota Motor Corp. (7203)
Toyota jumped 4.4 percent. Japan Exchange Group, created by the merger of the country’s two biggest bourses, plunged in its Tokyo trading debut. Sharp Corp. dropped 3 percent after the Yomiuri newspaper reported the loss-making television maker may raise 100 billion yen ($1.1 billion).
The Nikkei 225 Stock Average (NKY) jumped 2.9 percent to 10,696.23 as of 9:49 a.m. in Tokyo, heading for its highest close since March 2011. The broader Topix Index climbed 2.9 percent to 885.04. The Japanese market is trading for the first time this year and is catching up with other Asian markets, which rallied this week after the U.S. Congress passed legislation averting more than $600 billion in automatic tax increases and spending cuts.
“We’ve averted a worst-case scenario on the fiscal cliff and the market is breathing a sigh of relief,” said Juichi Wako, senior strategist at Nomura Securities Co. in Tokyo. “Companies have already settled their exchange rates for this quarter, so we shouldn’t too much upward movement in earnings from the yen’s weakness right away. But investors expect next quarter to look pretty good.”
The Japanese yen fell to a two-and-half year low against the dollar, heading for a 1.9 percent decline this week and extending losses for an eighth week. The yen fell before Bank of Japan Deputy Governor Kiyohiko Nishimura speaks today amid bets the BOJ will boost money supply to end deflation.
U.S. Stocks Fall as Fed Sees Bond Buying Ending in 2013 (Bloomberg)
U.S. stocks fell, following the biggest rally in a year for the Standard & Poor’s 500 Index, as Federal Reserve policy makers said they will probably end their $85 billion monthly bond-purchase program sometime in 2013.
Family Dollar Stores Inc. (FDO) tumbled 13 percent after forecasting second-quarter earnings that missed estimates. UnitedHealth Group Inc. (UNH) sank 4.7 percent after the biggest U.S. health insurer was cut to hold from buy at Deutsche Bank AG. Ross Stores Inc. and TJX Cos. jumped at least 3.3 percent as consumer-discretionary companies rallied amid same-store sales that topped estimates.
The Standard & Poor’s 500 Index fell 0.2 percent to 1,459.37 in New York. The benchmark index yesterday reached its highest level since September after lawmakers passed a budget bill, avoiding the so-called fiscal cliff. The Dow Jones Industrial Average lost 21.19 points, or 0.2 percent, to 13,391.36 today. About 6.7 billion shares traded hands on U.S. exchanges today, or 10 percent above the three-month average.
“Concern that they’re taking the punch bowl away could certainly cause some jitters in the market,” James Gaul, a portfolio manager at Boston Advisors LLC which oversees about $2.3 billion in assets, said in a telephone interview. “The sell-off sits with what we’ve been thinking, which is that this has been a Fed-supported rally. The liquidity the Fed has been providing to generate financial asset inflation has been driving the market.”
Four years after cutting the main interest rate to near zero, policy makers are expanding their third round of so-called quantitative easing to boost economic growth and cut the jobless rate, now at 7.7 percent. Minutes from the latest Federal Open Market Committee meeting show policy makers are likely to end their $85 billion monthly bond purchases sometime in 2013.
Euro-Area Stocks Retreat Amid Concern on U.S. Deficit (Bloomberg)
Euro-area stocks declined from a 17- month high amid concern a budget deal will fail to reduce the U.S. government’s fiscal deficit. Swiss shares rallied after the New Year holiday.
K+S AG (SDF) retreated 3.5 percent after Exane BNP Paribas lowered its price forecast for the potash maker’s shares. UBS AG (UBSN) and Cie. Financiere Richemont SA each rallied more than 4 percent, leading Swiss stocks higher. Alcatel-Lucent SA (ALU) climbed 9.8 percent as Credit Suisse Group AG raised its recommendation on the maker of telecommunication equipment.
The Euro Stoxx 50 Index of the euro area’s biggest companies fell 0.4 percent to 2,701.22 at the close of trading. The broader Stoxx Europe 600 Index added 0.5 percent to its highest since February 2011 as the Swiss Market Index jumped 2.9 percent after opening for the first time since Dec. 28.
“We’re not over all of the problems with the fiscal cliff,” Jane Coffey, who manages $19 billion as head of U.K. equities at Royal London Asset Management Ltd., said in a Bloomberg Television interview. “We still have to get through March. We have to look at the spending cuts they are going to put in this package.”
The Stoxx 600 (SXXP) rallied 2 percent yesterday after U.S. lawmakers passed a budget bill that avoided most scheduled tax increases. The so-called fiscal cliff of sweeping spending cuts and revenue raising had threatened to push the world’s largest economy into a recession.
Emerging Stocks Post Longest Rally in 14 Months After China Data (Bloomberg)
Emerging-market stocks rose for a ninth day, the longest stretch of gains in more than 14 months, as data showing expansion in Chinese service industries and U.S. consumer sentiment bolstered confidence in the global economy.
China International Marine Containers Group Co. Ltd. (2039), the world’s biggest container maker, surged 15 percent, while Shimao Property Holdings Ltd. (813) jumped the most in 13 months in Hong Kong as financial companies led gains on the MSCI Emerging Markets Index. Banco Bradesco SA (BBDC4) climbed to a record in Sao Paulo as Brazil’s Bovespa (IBOV) Index entered a bull market. Hyundai Motor Co. (005380) fell in Seoul on bets a stronger won may weigh on profits.
The developing-nations gauge added 0.4 percent to 1,082.68 in New York after rising to a 10-month high yesterday and entering a bull market. China’s services industries grew at the fastest pace in four months in December, boosting prospects the nation’s CSI 300 Index will also rally to a bull market when it resumes trading tomorrow. In the U.S., improving consumer sentiment and data showing companies added more workers than projected signaled the world’s largest economy picked up.
“There’s been an incredible turnaround in China sentiment and this data helps that,” John-Paul Smith, an emerging market strategist at Deutsche Bank AG, said by phone from London today. “People’s confidence toward the Chinese economy is almost as high as its ever been.”
Treasuries Are World’s Worst-Performing Bonds Before Jobs (Bloomberg)
Treasuries were the world’s worst performing bonds as economists said a report today will show the U.S. unemployment rate held at the lowest level since 2008.
Government securities maturing in 10 years and longer handed investors a 3.34 percent loss in the past month, the biggest decline of 144 bond indexes tracked by Bloomberg and the Federation of Financial Analysts Societies. Treasuries tumbled this week as lawmakers passed a budget to avert taxes and spending cuts that threatened to throw the economy into a recession, while Federal Reserve policy makers said they will probably end their monthly debt purchases in 2013.
“I’m bearish on Treasuries,” said Hajime Nagata, who helps oversee the equivalent of $117.7 billion as an investor in Tokyo at Diam Co., a unit of Dai-ichi Life Insurance Co. “The economy looks like it’s getting better. Stocks will probably outperform bonds.”
Benchmark 10-year yields were little changed today at 1.91 percent as of 9:08 a.m. in Tokyo, based on Bloomberg Bond Trader prices. The 1.625 percent note maturing in November 2022 changed hands at 97 13/32. The rate climbed 21 basis points, or 0.21 percentage point, this week, the most since March.
Diam trimmed its holdings in December when the 10-year yield fell to 1.6 percent, Nagata said. At the time, he said he’d consider buying 10-year Treasuries if the yield climbed to 1.9 percent. Even though the rate rose to that level yesterday, Nagata said he’s still not ready to purchase the securities given the outlook for the economy and the Fed.
Dollar Advances to 2010 High Versus Yen Before U.S. Jobs (Bloomberg)
The dollar climbed to a 2 1/2-year high against the yen before U.S. data today forecast to show employers added jobs last month, fanning speculation the Federal Reserve will cut cash infusions.
The greenback extended its gain to a third day versus the euro after minutes of the Fed’s last meeting showed policy makers said they’ll probably end their $85 billion monthly bond purchases this year. The yen fell against major peers before Bank of Japan (8301) Deputy Governor Kiyohiko Nishimura speaks today amid bets the BOJ will boost money supply to end deflation.
“Expectations are rising for better U.S. job numbers, which are supportive for the dollar,” said Yasuhiro Kaizaki, vice president of global markets in New York at Sumitomo Mitsui Trust Bank Ltd. “The Fed’s minutes are more hawkish than I thought they’d be.”
The dollar reached 87.78 yen, the highest since July 28, 2010, before trading at 87.65 as of 9:12 a.m. in Tokyo, up 0.5 percent from the close yesterday. It rose 0.1 percent to $1.3039 per euro following a 1.1 percent jump yesterday. The yen fell 0.4 percent to 114.30 per euro.
The U.S. currency climbed as much as 0.2 percent to S$1.2279, the highest against Singapore’s dollar since Nov. 16.
U.S. Labor Department data may show today that nonfarm payrolls rose by 153,000 last month, versus 146,000 in November, according to the median estimate of economists surveyed by Bloomberg News.
A few members of the Federal Open Market Committee “expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013,” minutes of their Dec. 11-12 meeting showed yesterday.
At that meeting, the FOMC announced Treasury purchases of $45 billion a month in addition to $40 billion a month of mortgage-debt purchases begun in September.
Aussie Set for Weekly Gain on Chinese Data; Bonds Fall (Bloomberg)
Australia’s dollar was set to gain for the first week in three before a private report that may add to signs of improvement in China’s economy, the South Pacific nation’s biggest trading partner.
Australian bonds fell, pushing benchmark 10-year yields to the highest in more than four months before HSBC Holdings Plc and Markit Economics report a purchasing managers’ index of Chinese non-manufacturing industries today after a government index yesterday showed expansion in services accelerated in December.
The currencies of “Australia and New Zealand benefit to some extent from better data out of China,” said Callum Henderson, global head of currency research in Singapore at Standard Chartered Plc.
The Australian dollar was little changed at $1.0460 as of 10:46 a.m. in Sydney from $1.0466 yesterday, poised for a 0.8 percent gain this week, the biggest since the five days ended Nov. 23. The so-called Aussie gained 0.4 percent to 91.69 yen from yesterday, when it touched 91.76, the highest since September 2008.
New Zealand’s dollar, known as the kiwi, was little changed at 82.73 U.S. cents, up 0.9 percent since Dec. 28. It added 0.4 percent today to 72.53 yen.
The yield on Australia’s 10-year government bond rose 7.5 basis points, or 0.075 percentage point, to 3.43 percent, after earlier touching 3.44 percent, the highest since Aug. 21.
A purchasing managers’ index of Chinese non-manufacturing rose to 56.1 last month from 55.6 in November, the statistics bureau data said yesterday.
Interest-rate swaps data compiled by Bloomberg show traders see a 44 percent chance the Reserve Bank of Australia will lower its benchmark to 2.75 percent in February, lower than the 59 percent probability indicated at the end of 2012.
Most FOMC Participants Saw QE3 Ending in 2013 (Bloomberg)
Federal Reserve policy makers said they will probably end their $85 billion monthly bond purchases sometime in 2013, with members divided between a mid- or end-of- year finish.
“A few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013” while a few others specified no time frame, according to the record of the Federal Open Market Committee’s Dec. 11-12 gathering released today in Washington. “Several others thought that it would probably be appropriate to slow or stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet.”
Four years after cutting the main interest rate to near zero, policy makers are expanding their third round of so-called quantitative easing to boost economic growth and cut the jobless rate, now at 7.7 percent. In prior rounds of bond purchases, the central bank bought $2.3 trillion in securities.
The minutes show a divide among FOMC participants on how long the purchases should last. Participants who provided estimates were “approximately evenly divided” between those who said it would be appropriate to end the purchases around mid-2013 and those who said they should continue beyond that date.
“They’re willing to do more QE on the premise that the net benefits outweigh the costs,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank AG in New York. “But they’re more willing to entertain the thought that these actions are going to lose a bit of their efficacy.”
Jobless Claims in U.S. Rose More Than Forecast in Holidays (Bloomberg)
More Americans than forecast filed claims for unemployment insurance payments last week, according to government figures that were estimated because some state agencies closed during the holidays.
Applications for jobless benefits increased 10,000 to 372,000 in the week ended Dec. 29, the Labor Department reported today in Washington. Economists forecast 360,000 claims, according to the median estimate in a Bloomberg survey. A report from the ADP Research Institute showed companies added more workers than projected in December.
“The underlying claims trend is still really low,” said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida. “There’s a lot of volatility this time of year. Job destruction is really not a problem right now, it’s really hiring that’s the issue.”
The four-week average of claims, a less volatile measure, was little changed, indicating employers held on to current staff at the end of 2012 even as Congress made little progress in budget talks. The deal passed by lawmakers this week averted tax increases on about 99 percent of households while failing to reach a bargain on spending and debt.
The data today from the Roseland, New Jersey-based ADP Research Institute indicated the job market finished 2012 with momentum. The 215,000 increase in employment was the group’s largest since February and followed a revised 148,000 gain the prior month that was larger than initially reported.
Job Gains Lure Investors to Employment-Services Stocks (Bloomberg)
Employment-services companies are attracting investors who are betting the U.S. labor market will keep up its steady pace of job creation.
The Standard & Poor’s Supercomposite Human Resources & Employment Services Index -- which includes Robert Half International Inc. (RHI) and Manpower Inc. (MAN) -- has risen 19 percent since Oct. 15, compared with a 1.5 percent increase for the S&P 500 Index. (SPX) The outperformance coincides with nonfarm payroll data for October and November that exceeded economists’ forecasts.
The better-than-projected reports are generating interest in companies that provide services such as recruitment, back- office administration and human-resources management, said Jeff Silber, a senior analyst in New York at BMO Capital Markets. Even though their businesses are tied more to the need for temporary workers, their near-term stock performance is driven by total hiring, he said.
Job growth that’s “not too hot and not too cold is actually great for these stocks,” because demand for temporary positions remains strong enough to drive earnings, Silber said. “We’re in a Goldilocks-type environment.”
Gains of about 100,000 to 150,000 a month will be “pretty good” for companies such as On Assignment Inc. (ASGN) and TrueBlue Inc. (TBI), Silber said. Nonfarm payrolls expanded by 150,000 in December, based on the median estimate of economists surveyed by Bloomberg. That would mark six straight months at more than 100,000, according to data from the Labor Department, which is scheduled to release the figures tomorrow.
Consumer Confidence Improves as Hiring in U.S. Picks Up (Bloomberg)
Consumer sentiment climbed last week and U.S. companies added more workers than projected in December, showing the world’s largest economy picked up even as lawmakers were embroiled in budget disputes.
The Bloomberg Consumer Comfort Index rose to minus 31.8 in the period ended Dec. 30, its highest since April, from minus 32.1 a week earlier, according to a report today. Figures from the ADP Research Institute showed a 215,000 increase in employment, the largest since February, while the Labor Department said more Americans filed claims for jobless benefits last week.
This week’s agreement averting income-tax increases on about 99 percent of households, combined with the pickup in hiring, may give confidence an added lift after spending at stores from Nordstrom Inc. (JWN) to Gap Inc. (GPS) topped analysts’ estimates last month. A strengthening economy lowers the risk that further deliberations on government spending cuts and the debt will derail the expansion.
“The economy is growing quite well,” said David Sloan, a New York-based senior economist at 4Cast Inc., the best ADP forecaster over the past two years, according to data compiled by Bloomberg. “The labor market seems to be expanding at a fairly solid pace. Consumer spending will continue to grow, but slowly.”
General Motors Co., Ford Motor Co. and Chrysler Group LLC posted December vehicle sales gains that exceeded analysts’ estimates in December, industry reports showed today. Auto purchases ran at a 15.3 million annual rate after 15.5 million in November, the best two months since early 2008.
Consumer Comfort in U.S. Climbed to an Eight-Month High (Bloomberg)
Consumer sentiment last week reached an eight-month high, reflecting broad-based gains that indicated even wealthy Americans were less concerned about tax increases and fiscal policy challenges heading into 2013.
The Bloomberg Consumer Comfort Index rose to minus 31.8 in the period ended Dec. 30, its highest since April, from minus 32.1 a week earlier. For the year, the index climbed 12.9 points, the biggest annual improvement since 1998. Americans earning $100,000 or more reported their most optimistic reading in more than two years.
“The rebuilding of wealth and modest income gains permitted consumer sentiment to overcome slow growth and a politically divisive environment in late 2012,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Rising home values and low interest rates in particular are buoying wealthier households, helping to overcome the threat of higher taxes in 2013, he said.
The index finished the year at its best level since mid- April, less than half a point from the 2012 high it reached twice that month. It has held above its traditional trouble zone, the minus 40s, for 15 straight weeks, a positive run last recorded in early 2008.
For the year, the index averaged minus 38.1, the most since 2007. It remains below its long-term average of minus 15.8.
Stocks fell, pulling the Standard & Poor’s 500 Index down from close to a five-year high. The S&P 500 eased 0.2 percent to 1,459.38 at 9:35 a.m. in New York.
Another report today from the ADP Research Institute showed companies added 215,000 workers in December, the most since February, after a 148,000 gain a month earlier that was larger than initially estimated.
Spain Registered Unemployment Falls for 1st Month in Five (Bloomberg)
Spain’s registered unemployment fell for the first time in five months in December as service industries boosted hiring over the holiday season.
The number of people registering for jobless benefits fell by 59,094 from November to 4.8 million, the Labor Ministry in Madrid said today. That’s the best result on record for December.
The figures suggest an interruption in the retrenchment of the euro area’s fourth-largest economy, which the Organization for Economic Cooperation and Development predicts will shrink for a second straight year in 2013. Economists have forecast an index of service industry activity due to be published tomorrow will show a contraction in December.
“This is quite unique for a December,” Martin Van Vliet, an economist at ING Bank in Amsterdam, said in a telephone interview. “The recession could end in the second half but I’m not holding my breath. With the sheer scale of fiscal tightening in the pipeline I’m still a bit cautious.”
The number of service-sector workers registered as jobless fell by 49,438. At the same time, 4,325 more construction workers and 2,794 more manufacturing workers were unemployed.
Companies are seeking to reduce costs as the deepest austerity measures in the nation’s democratic history undermine domestic demand amid a recession that has spread to the 17- nation euro region. IAG (IAG) is in talks with unions to shrink Spanish airline Iberia’s fleet by 4,500 jobs, while nationalized lender Bankia group pledged to axe 6,000 after securing European aid.
The OECD sees unemployment in Spain, already the highest in the European Union, reaching 27 percent this year.
German Unemployment Rose Less Than Forecast in December (Bloomberg)
German unemployment increased less than economists forecast in December even as Europe’s debt crisis curbed company investment and economic growth.
The number of people out of work rose a seasonally adjusted 3,000 to 2.942 million, the Nuremberg-based Federal Labor Agency said today. Economists predicted an increase of 10,000, the median of 19 estimates in a Bloomberg News survey showed. The adjusted jobless rate held steady at 6.9 percent, close to a two-decade low.
Germany’s economy, Europe’s largest, may have contracted markedly in the fourth quarter after the euro area’s succumbed to recession, the Bundesbank said on Dec. 17. Still, business confidence increased for a second month in December after demand from outside the region boosted factory orders and exports.
“The German labor market is showing signs of cooling, which isn’t that surprising given the economic slowdown in the course of 2012, said Thilo Heidrich, an economist at Deutsche Postbank AG (DPB) in Bonn. ‘‘If the economy stabilizes and recovers in 2013, the labor market could end its weak phase already at the end of the year.’’
The euro was little changed after the report and traded at $1.3139 at 11:04 a.m. in Frankfurt. The benchmark DAX index dropped 0.2 percent to 7760.88, while the Stoxx Europe 600 Index rose 0.2 percent to 286.0.
