7th , June - 2009
In reasserting his support last week for a new government health plan for the uninsured, President Obama stoked the fears of private insurers that they would not be able to compete with a Medicare-like option and might gradually be priced out of existence.
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Doug Mills/The New York Times
With health care officials behind him, President Obama delivered remarks on changing the health care system in May.
Related
Taking the Hill (June 7, 2009)
Obama to Forge a Greater Role on Health Care (June 7, 2009)
The Obama administration has sought to reassure the industry, with its substantial lobbying might, by pointing to the three dozen states that offer their employees a choice between government-backed insurance options and a menu of commercial policies.
But health policy experts are deeply divided about whether the state employee plans bear any meaningful resemblance to the public plan options being considered in Washington. And that divide reinforces how little can really be known about how a government plan may fare in competition with private carriers, and whether it may eventually evolve into the country’s lone health insurer.
Although state governments bear the ultimate financial risk for their self-insured employee plans, most are administered by major commercial insurers that are given broad authority to negotiate payment rates with doctors and hospitals. In addition, the state plans typically have not used their purchasing clout to control costs, link pay to medical performance or drive other quality improvements.
A 2002 study by two policy research groups concluded that state employee plans have been no more effective at controlling costs than private insurers. In some states, the plans have become a major financial headache, most notably in North Carolina, where the governor just signed a $675 million two-year bailout for the state’s employee health insurance plan.
“Even the best of them are pretty far short of what most of us who advocate public plan choice want,” said Jacob S. Hacker, a political scientist at the University of California, Berkeley, who is considered one of the intellectual forces behind the public plan option.
The very point of a federal public plan, as Mr. Obama explained in a letter to Senate leaders, would be to take advantage of an enormous risk pool and efficiencies of scale “to make the health care market more competitive and keep insurance companies honest.” But in projecting how such competition might actually affect the market, the devil is clearly in the details of who Congress would make eligible for coverage, what benefits would be granted and, perhaps most important, how much providers would be paid.
The public plan concept has excited intense opposition from Republicans, insurers and big business. Stuart Butler, a domestic policy expert at the conservative Heritage Foundation, calls it “a nuclear minefield on the road to universal coverage.”
But the White House and Democratic leaders in Congress continue to insist that it is vital to their broader goals of covering all Americans and slowing the growth of costs. Their focus now is on finding a compromise that will maintain a level playing field by requiring, for instance, that a public plan be self-sustaining rather than reliant on tax dollars and that it maintain reserves like a private insurer.
Insurance industry lobbyists are skeptical that the government can fairly referee a contest between its own insurance plan and private offerings. In an era of serial federal bailouts, they ask, would the government really let its own insurance plan fail?
But the administration’s leading voices on health policy say the coexistence of public and private options within state employee benefit programs demonstrates that it can be done.
State employee health plans cover more than three million workers, from park rangers to university professors, and some also offer coverage to municipal governments and authorities. A bill on its way to Gov. M. Jodi Rell of Connecticut would make that state the first to open its plan to small employers as well. Ms. Rell, a Republican, vetoed a similar bill last year.
In most cases, the state’s self-insured, or public, option is a preferred provider organization that competes against private health maintenance organizations. A 2008 survey by Mercer, the health benefits consulting firm, found that 61 percent of the members of state employee health plans were enrolled in P.P.O.’s, but that private H.M.O.’s managed to maintain a third of the market.
A notable exception is the largest state plan, the California Public Employees Retirement System, where more than two-thirds of members choose a private insurance option.
“It has not destroyed the market,” Kathleen Sebelius, the secretary of health and human services, said at her Senate confirmation hearing in April. “It has not tilted the playing field. But that’s all about the way the rules are set.”
Len Nichols, the director of health policy at the New America Foundation and the co-author of a proposal to level the field through governance and pricing regulations, said that state employee health plans are “proof of concept” that governments can maintain fair competition. “They do not unleash this impulse to take over the world,” Mr. Nichols said. “I don’t see this leviathan behavior.”
But critics argue that with low administrative costs and no need to produce profits, a public plan will start with an unfair pricing advantage. They say that if a public plan is allowed to pay doctors and hospitals at levels comparable to Medicare’s, which are substantially below commercial insurance rates, it could set premiums so low it would quickly consume the market.
Although the numbers are disputed by public plan advocates, the Lewin Group, a health care consulting firm, recently projected that a plan paying Medicare rates would prompt 119 million of the 172 million people who are privately insured to switch policies (while also providing coverage to 28 million of the 46 million uninsured).
“No one has ever put up a plan to compete that exploited the bargaining leverage that you have with Medicare,” said John F. Sheils, a senior vice president at Lewin, which is owned by UnitedHealth Group, a major insurer. “It’s never been done, and if it’s never been done there’s not much you can conclude from looking at these state plans.”
Mr. Sheils estimated that only 12 million people with private coverage would migrate to a public plan if Congress provided protections for insurers, along principles suggested by Senator Charles E. Schumer, Democrat of New York. Seeking to broker a deal that might attract Republican support, Mr. Schumer is promoting many of Mr. Nichols’s proposals, including that a public plan be subject to the same regulations as private plans and that it pay providers at higher levels than Medicare.
The question, at a time of deep concern over health costs, is whether that proposal would compromise away the full potential of a public plan to suppress provider payments and control the growth of premiums.
Saturday, June 6, 2009
Retail Sales Probably Rose on Auto Demand: U.S. Economy Preview
June 7 (Bloomberg) -- Sales at U.S. retailers probably rose in May for the first time in three months as demand for automobiles picked up, economists said before a government report this week.
Purchases climbed 0.5 percent, according to the median of 61 estimates in a Bloomberg News survey ahead of Commerce Department figures due June 11. Another report may show the trade gap widened in April, reflecting an increase in the cost of imported oil.
Shoppers returned to Chrysler LLC and General Motors Corp. showrooms looking for bargains as some dealers slashed prices leading up to the automakers’ restructuring. Smaller job cuts and government stimulus measures may give consumers the confidence and means to sustain spending and help pull the economy out of the recession.
“Consumers are out there spending again,” said Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “They are clearly feeling better about the health of their finances.”
The Labor Department reported last week that employers eliminated 345,000 jobs in May, the fewest since September and a sign the recession is abating. Retailers cut 17,500 positions, the smallest reduction since June 2008, the month before purchases started to sink.
Sales of cars and light trucks rose to a 9.9 million annual unit pace in May from a 9.3 million rate the prior month, according to industry figures released last week. Purchases reached a 9.1 million pace in February, the lowest level since December 1981.
Smaller Declines
General Motors, Chrysler and Ford Motor Co., the only major U.S. automaker not in bankruptcy, all had smaller declines than forecast in comparison with May 2008.
“It’s just a slight uptick,” Ken Czubay, Ford vice president of sales and marketing, said on a conference call last week. “This is still a very fragile industry.”
Commerce’s report may also show that, excluding automobiles, sales rose 0.2 percent last month, according to the median estimate of economists surveyed. The increase is likely to in part reflect an increase in service-station receipts as gasoline prices climbed.
The International Council of Shopping Centers last week said May same-store sales dropped 4.6 percent from the same month last year, more than double its forecast of a 2 percent decline. Macy’s Inc., Dillard’s Inc. and Saks Inc. were among merchants that reported steeper declines than analysts estimated as Americans focused on buying essentials rather than discretionary items.
Buying Necessities
With home values falling, credit tight and unemployment at a 25-year high of 9.4 percent and forecast to keep rising, consumers are reluctant to spend on anything beyond necessities such as gasoline and food.
Wal-Mart Stores Inc., the biggest retailer, projected last month that its U.S. comparable-store sales may rise as much as 3 percent in the 13 weeks through July 31.
As the economy steadies and oil prices climb, imports are likely to rise. The trade deficit probably widened to $29 billion in April, according to economists surveyed, from $27.6 billion the prior month. Commerce will release that report on June 10.
Business inventories probably shrank 1 percent in April, an eighth consecutive decrease, as companies continued to draw down stockpiles in the face of weak demand, economists said the Commerce Department’s report will show the following day.
More Expensive
A report from the Labor Department on June 12 may show the cost of imported goods rose 1.4 percent in May, due mainly to higher oil prices, the survey showed. Import prices increased 1.6 percent the prior month.
Rising stock prices and signs the economy may have bottomed are boosting consumer confidence. The Reuters/University of Michigan preliminary sentiment gauge for June may rise to 69.5, the highest reading since September, from 68.7 in May, according to economists surveyed before the June 12 release.
“Our expectation is that we’ll begin to see growth in the economy,” Federal Reserve Chairman Ben S. Bernanke told Congress last week. “Underlying that prediction is some stabilization in final demand, including consumer spending.”
Purchases climbed 0.5 percent, according to the median of 61 estimates in a Bloomberg News survey ahead of Commerce Department figures due June 11. Another report may show the trade gap widened in April, reflecting an increase in the cost of imported oil.
Shoppers returned to Chrysler LLC and General Motors Corp. showrooms looking for bargains as some dealers slashed prices leading up to the automakers’ restructuring. Smaller job cuts and government stimulus measures may give consumers the confidence and means to sustain spending and help pull the economy out of the recession.
“Consumers are out there spending again,” said Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “They are clearly feeling better about the health of their finances.”
The Labor Department reported last week that employers eliminated 345,000 jobs in May, the fewest since September and a sign the recession is abating. Retailers cut 17,500 positions, the smallest reduction since June 2008, the month before purchases started to sink.
Sales of cars and light trucks rose to a 9.9 million annual unit pace in May from a 9.3 million rate the prior month, according to industry figures released last week. Purchases reached a 9.1 million pace in February, the lowest level since December 1981.
Smaller Declines
General Motors, Chrysler and Ford Motor Co., the only major U.S. automaker not in bankruptcy, all had smaller declines than forecast in comparison with May 2008.
“It’s just a slight uptick,” Ken Czubay, Ford vice president of sales and marketing, said on a conference call last week. “This is still a very fragile industry.”
Commerce’s report may also show that, excluding automobiles, sales rose 0.2 percent last month, according to the median estimate of economists surveyed. The increase is likely to in part reflect an increase in service-station receipts as gasoline prices climbed.
The International Council of Shopping Centers last week said May same-store sales dropped 4.6 percent from the same month last year, more than double its forecast of a 2 percent decline. Macy’s Inc., Dillard’s Inc. and Saks Inc. were among merchants that reported steeper declines than analysts estimated as Americans focused on buying essentials rather than discretionary items.
Buying Necessities
With home values falling, credit tight and unemployment at a 25-year high of 9.4 percent and forecast to keep rising, consumers are reluctant to spend on anything beyond necessities such as gasoline and food.
Wal-Mart Stores Inc., the biggest retailer, projected last month that its U.S. comparable-store sales may rise as much as 3 percent in the 13 weeks through July 31.
As the economy steadies and oil prices climb, imports are likely to rise. The trade deficit probably widened to $29 billion in April, according to economists surveyed, from $27.6 billion the prior month. Commerce will release that report on June 10.
Business inventories probably shrank 1 percent in April, an eighth consecutive decrease, as companies continued to draw down stockpiles in the face of weak demand, economists said the Commerce Department’s report will show the following day.
More Expensive
A report from the Labor Department on June 12 may show the cost of imported goods rose 1.4 percent in May, due mainly to higher oil prices, the survey showed. Import prices increased 1.6 percent the prior month.
Rising stock prices and signs the economy may have bottomed are boosting consumer confidence. The Reuters/University of Michigan preliminary sentiment gauge for June may rise to 69.5, the highest reading since September, from 68.7 in May, according to economists surveyed before the June 12 release.
“Our expectation is that we’ll begin to see growth in the economy,” Federal Reserve Chairman Ben S. Bernanke told Congress last week. “Underlying that prediction is some stabilization in final demand, including consumer spending.”
Friday, June 5, 2009
Asian Currencies Gain, Led by Rupiah, Won as Recession Abates
June 6 (Bloomberg) -- Asian currencies rose this week, led by Indonesia’s rupiah and the Korean won, as reports signaling a global recession is easing bolstered demand for riskier assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, and the MSCI Asia-Pacific Index of shares both reached their highest levels since October after U.S. home sales jumped the most in seven years and China’s manufacturing expanded for a third month. Equity funds investing in the region’s emerging markets took in $1.54 billion in the week ended June 3, according to EPFR Global.
“We still see Asian currency strength,” said Emmanuel Ng, an economist at Oversea Chinese Banking Corp. in Singapore. “It is expected to ride on the recovery story.”
The rupiah advanced 3.8 percent this week to 9,930 per dollar in Jakarta, strengthening beyond 10,000 for the first time in more than seven months. The won appreciated 1 percent to 1,243.15 in Seoul.
The rupiah had its biggest weekly gain since April as the nation’s economic growth, the fastest in Southeast Asia, helped attract funds. Gross domestic product grew 4.4 percent in the first quarter from a year earlier, compared with 0.4 percent in the Philippines and contractions of more than 6 percent in Singapore, Malaysia and Thailand.
‘Fairly Robust’
“The rupiah is still one of our picks because the Indonesian economy is fairly robust,” Ng said.
Foreign investors bought $159 million more Indonesian equities than they sold this week, according to stock exchange data.
The rupiah, Asia’s best-performing currency this year, will rise 3.5 percent by the end of June due to the outlook for a “prudent” interest-rate policy and economic growth, according to Craig Chan, a Singapore-based strategist at Nomura Holdings Inc. The currency will advance to 9,600 by June 30, he said, revising an April forecast of 11,000.
South Korea’s currency approached a seven-month high of 1,225.97 reached on May 11 as global funds bought $552 million more of the nation’s shares than they sold this week and exporters repatriated overseas income.
“The won is experiencing modest upward pressure,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. “There are some flows from exporters.”
Worst Is Over
Share purchases by global funds also helped lift Thailand’s baht. The currency strengthened for a seventh week, the longest run of gains since 2007, after Finance Minister Korn Chatikavanij said on June 4 the economy has bottomed and government spending on “shovel-ready” projects will help spur demand and create jobs.
“We do believe the worst may be over for Thailand’s economy, and the rest of Asia,” said Suresh Kumar Ramanathan , a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Inflows are still going on, especially into Asia. Gains in Asian currencies are also being driven by dollar weakness.”
The Thai baht strengthened 0.4 percent this week to 34.19 per dollar. Overseas investors have bought $257 million more Thai shares than they sold this month, following net purchases in each of the last three months.
Elsewhere, Taiwan’s dollar rose 0.1 percent this week to NT$32.607 and the Philippine peso gained 0.2 percent to 47.24. The Malaysian ringgit weakened 0.2 percent to 3.4965 and the Singapore dollar fell 0.2 percent to S$1.4469.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, and the MSCI Asia-Pacific Index of shares both reached their highest levels since October after U.S. home sales jumped the most in seven years and China’s manufacturing expanded for a third month. Equity funds investing in the region’s emerging markets took in $1.54 billion in the week ended June 3, according to EPFR Global.
“We still see Asian currency strength,” said Emmanuel Ng, an economist at Oversea Chinese Banking Corp. in Singapore. “It is expected to ride on the recovery story.”
The rupiah advanced 3.8 percent this week to 9,930 per dollar in Jakarta, strengthening beyond 10,000 for the first time in more than seven months. The won appreciated 1 percent to 1,243.15 in Seoul.
The rupiah had its biggest weekly gain since April as the nation’s economic growth, the fastest in Southeast Asia, helped attract funds. Gross domestic product grew 4.4 percent in the first quarter from a year earlier, compared with 0.4 percent in the Philippines and contractions of more than 6 percent in Singapore, Malaysia and Thailand.
‘Fairly Robust’
“The rupiah is still one of our picks because the Indonesian economy is fairly robust,” Ng said.
Foreign investors bought $159 million more Indonesian equities than they sold this week, according to stock exchange data.
The rupiah, Asia’s best-performing currency this year, will rise 3.5 percent by the end of June due to the outlook for a “prudent” interest-rate policy and economic growth, according to Craig Chan, a Singapore-based strategist at Nomura Holdings Inc. The currency will advance to 9,600 by June 30, he said, revising an April forecast of 11,000.
South Korea’s currency approached a seven-month high of 1,225.97 reached on May 11 as global funds bought $552 million more of the nation’s shares than they sold this week and exporters repatriated overseas income.
“The won is experiencing modest upward pressure,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. “There are some flows from exporters.”
Worst Is Over
Share purchases by global funds also helped lift Thailand’s baht. The currency strengthened for a seventh week, the longest run of gains since 2007, after Finance Minister Korn Chatikavanij said on June 4 the economy has bottomed and government spending on “shovel-ready” projects will help spur demand and create jobs.
“We do believe the worst may be over for Thailand’s economy, and the rest of Asia,” said Suresh Kumar Ramanathan , a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Inflows are still going on, especially into Asia. Gains in Asian currencies are also being driven by dollar weakness.”
The Thai baht strengthened 0.4 percent this week to 34.19 per dollar. Overseas investors have bought $257 million more Thai shares than they sold this month, following net purchases in each of the last three months.
Elsewhere, Taiwan’s dollar rose 0.1 percent this week to NT$32.607 and the Philippine peso gained 0.2 percent to 47.24. The Malaysian ringgit weakened 0.2 percent to 3.4965 and the Singapore dollar fell 0.2 percent to S$1.4469.
Bank of America Stocks Board With Ex-Regulators, Former Bankers
June 6 (Bloomberg) -- Bank of America Corp. named two ex- regulators and two former bankers as directors, remaking the board five weeks after shareholders ousted Chief Executive Officer Kenneth Lewis as chairman.
The bank, recipient of a $45 billion government infusion, is revamping a board that lost two other members in the past two weeks. Among them was lead director O. Temple Sloan, who had defended Lewis against attempts to force him out for failing to disclose mounting losses at Merrill Lynch & Co. before the lender took it over this year.
The new directors, among them ex-Federal Reserve Board Governor Susan Bies and Donald Powell, former chairman of the Federal Deposit Insurance Corp., inherit a lender that faces the biggest capital gap among 19 companies scrutinized in federal stress tests. This week, it replaced Chief Risk Officer Amy Woods Brinkley with Gregory L. Curl, a three-decade bank veteran who helped Lewis arrange acquisitions including Countrywide Financial Corp.
“As chairman, Lewis has really selected the board members that he wanted,” said Gary Townsend, president of Hill-Townsend Capital, a hedge fund in Chevy Chase, Maryland. The board changes and Brinkley’s exit are “an indication that the level of his control is reduced,” he said.
Bies, 62, and Powell, 67, are joined on the board by William Boardman, 67, a retired executive of Bank One Corp. and Visa International Inc.; and D. Paul Jones, 66, who was CEO of Compass Bancshares Inc., Charlotte, North Carolina-based Bank of America said in a statement yesterday.
Stress Test
Bank of America had a $33.9 billion capital shortfall that could lead to loan losses for 2009 and 2010 of $136.6 billion, or 10 percent of total loans, according to the stress test. Regulators said they might press banks for management changes when the tests were done.
“You are going to have some real board meetings at Bank of America now, and this is no longer a good-old-boy, friend-of- Ken-Lewis board,” said Anthony Polini, an analyst at Raymond James & Associates Inc. “Now you’ve got some independent thinkers and industry experts. This is an incredible move for the company.”
Regulators urged Bank of America to recruit new board members with risk management and financial services expertise, Polini said. “I don’t think they gave them these specific names,” he said.
Bank of America Chairman Walter E. Massey promised to reconstitute the board in April after stockholders voted to oust Lewis as chairman and said he would consider directors with financial service backgrounds.
Southern U.S.
Three of the four bankers have experience working with lenders in the Southern United States. Bies was an executive vice president at First Tennessee National Corp. Powell was chief executive officer at First National Bank of Amarillo, Texas. Jones led Compass before its sale to Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender.
“These new directors bring a wealth of experience in financial services from a variety of perspectives,” Massey said in the statement. “Their participation will make our board even stronger.”
Massey would not be available for further comment, bank spokeswoman Eloise Hale said.
Lewis is scheduled to appear at a congressional hearing next week to testify about the purchase of Merrill Lynch and the bank’s need for federal assistance.
Questions
The House Oversight and Government Reform Committee posed seven questions about the purchase, including when Bank of America executives knew about deteriorating conditions at the New York brokerage and any role federal officials played in the decision to complete the deal.
New York Attorney General Andrew Cuomo revealed in April that Lewis had testified then-Treasury Secretary Henry Paulson may have threatened to remove the bank’s management and directors in December if the lender tried to back out of buying Merrill Lynch.
“I suspect the board wants to improve its regulatory relationships and believes having a couple of ex-regulators on the board will help in that process,” former FDIC Chairman William Isaac said.
Citigroup Inc. reached an agreement with the U.S. Treasury Department in February to alter its board so that the majority is comprised of independent directors. The agreement was part of the government’s plan to convert preferred shares into common stock to strengthen the bank.
Leaving Board
Chairman Winfried Bischoff and three other board members, including former Treasury Secretary Robert Rubin, announced in January they would be stepping down from New York-based Citigroup’s board. Four outside directors replaced them.
Bank of America’s new directors reflect the challenge of overseeing the bank while managing government influence, said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta.
“This would send a message: all four have banking experience,” Eisenbeis said. “Dealing with the regulators will be a key issue going forward. The deep government involvement in financial institutions is going to have to be unwound. In the meantime, they are going to have to deal with the regulators.”
The bank, recipient of a $45 billion government infusion, is revamping a board that lost two other members in the past two weeks. Among them was lead director O. Temple Sloan, who had defended Lewis against attempts to force him out for failing to disclose mounting losses at Merrill Lynch & Co. before the lender took it over this year.
The new directors, among them ex-Federal Reserve Board Governor Susan Bies and Donald Powell, former chairman of the Federal Deposit Insurance Corp., inherit a lender that faces the biggest capital gap among 19 companies scrutinized in federal stress tests. This week, it replaced Chief Risk Officer Amy Woods Brinkley with Gregory L. Curl, a three-decade bank veteran who helped Lewis arrange acquisitions including Countrywide Financial Corp.
“As chairman, Lewis has really selected the board members that he wanted,” said Gary Townsend, president of Hill-Townsend Capital, a hedge fund in Chevy Chase, Maryland. The board changes and Brinkley’s exit are “an indication that the level of his control is reduced,” he said.
Bies, 62, and Powell, 67, are joined on the board by William Boardman, 67, a retired executive of Bank One Corp. and Visa International Inc.; and D. Paul Jones, 66, who was CEO of Compass Bancshares Inc., Charlotte, North Carolina-based Bank of America said in a statement yesterday.
Stress Test
Bank of America had a $33.9 billion capital shortfall that could lead to loan losses for 2009 and 2010 of $136.6 billion, or 10 percent of total loans, according to the stress test. Regulators said they might press banks for management changes when the tests were done.
“You are going to have some real board meetings at Bank of America now, and this is no longer a good-old-boy, friend-of- Ken-Lewis board,” said Anthony Polini, an analyst at Raymond James & Associates Inc. “Now you’ve got some independent thinkers and industry experts. This is an incredible move for the company.”
Regulators urged Bank of America to recruit new board members with risk management and financial services expertise, Polini said. “I don’t think they gave them these specific names,” he said.
Bank of America Chairman Walter E. Massey promised to reconstitute the board in April after stockholders voted to oust Lewis as chairman and said he would consider directors with financial service backgrounds.
Southern U.S.
Three of the four bankers have experience working with lenders in the Southern United States. Bies was an executive vice president at First Tennessee National Corp. Powell was chief executive officer at First National Bank of Amarillo, Texas. Jones led Compass before its sale to Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender.
“These new directors bring a wealth of experience in financial services from a variety of perspectives,” Massey said in the statement. “Their participation will make our board even stronger.”
Massey would not be available for further comment, bank spokeswoman Eloise Hale said.
Lewis is scheduled to appear at a congressional hearing next week to testify about the purchase of Merrill Lynch and the bank’s need for federal assistance.
Questions
The House Oversight and Government Reform Committee posed seven questions about the purchase, including when Bank of America executives knew about deteriorating conditions at the New York brokerage and any role federal officials played in the decision to complete the deal.
New York Attorney General Andrew Cuomo revealed in April that Lewis had testified then-Treasury Secretary Henry Paulson may have threatened to remove the bank’s management and directors in December if the lender tried to back out of buying Merrill Lynch.
“I suspect the board wants to improve its regulatory relationships and believes having a couple of ex-regulators on the board will help in that process,” former FDIC Chairman William Isaac said.
Citigroup Inc. reached an agreement with the U.S. Treasury Department in February to alter its board so that the majority is comprised of independent directors. The agreement was part of the government’s plan to convert preferred shares into common stock to strengthen the bank.
Leaving Board
Chairman Winfried Bischoff and three other board members, including former Treasury Secretary Robert Rubin, announced in January they would be stepping down from New York-based Citigroup’s board. Four outside directors replaced them.
Bank of America’s new directors reflect the challenge of overseeing the bank while managing government influence, said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta.
“This would send a message: all four have banking experience,” Eisenbeis said. “Dealing with the regulators will be a key issue going forward. The deep government involvement in financial institutions is going to have to be unwound. In the meantime, they are going to have to deal with the regulators.”
Slower U.S. Job Losses Signal Recession Is Starting to Ease
June 6 (Bloomberg) -- Employers eliminated the fewest jobs in eight months in May, strengthening signs that the recession is easing, while a drop in wage growth offered a warning the recovery may be muted.
Payrolls fell by 345,000, less than forecast, while the unemployment rate hit a 25-year high of 9.4 percent, partly because more people joined the workforce to look for jobs, Labor Department figures showed. The annual rate of average hourly earnings growth touched its lowest since November 2005.
“The rate of decline has slowed some, but the losses to date are causing sharp declines in U.S. per capita income,” David Malpass, an economist and president of Encima Global in New York, wrote in a note to clients. Malpass predicted a “slow recovery” from the deepest recession in half a century.
Some investors focused on the report’s relief from payroll losses that surpassed half a million in each of the previous six months. The dollar rallied, Treasury yields rose and some traders added to bets the Federal Reserve will raise interest rates this year. The head of the panel that dates U.S. recessions warned it’s still “too early” to call an end to the slump.
Americans are spending less and saving more as home values fall and companies from American Express Co. to General Motors Corp. continue to cut workforces.
Credit Drops
Another report showed consumer borrowing dropped by $15.7 billion in April, the second-biggest decline on record, as loans remained difficult to get. Consumer credit fell at a 7.4 percent annual rate to $2.52 trillion, the Fed reported yesterday in Washington.
Yields on benchmark 10-year U.S. notes jumped to 3.83 percent in New York yesterday from 3.71 percent June 4, and the dollar climbed to a four-week high against the yen. The Standard & Poor’s 500 Stock Index slipped 0.3 percent to 940.09 after rising as much as 1 percent earlier.
Stocks initially rallied, then slid on concern that the Labor Department had overstated the slowdown in job losses. They recouped losses later when Labor Secretary Hilda Solis said the report was accurate. Labor’s estimate of net jobs created by the formation of new companies and demise of established firms, known as the birth/death model, had fed the confusion.
Revisions added 82,000 to payroll figures previously reported for April and March, the Labor report said.
Fed Rate
Some traders for the first time in months began to price in expectations that the Fed will raise interest rates this year as the economy improves.
Federal-funds futures contracts on the Chicago Board of Trade show a 59 percent probability the central bank will lift its target rate for overnight bank borrowing to at least 0.5 percent by November. The odds were 27 percent a day earlier.
While the economy is showing signs of stabilizing, it’s “way too early” to say the contraction is over, said Robert Hall, who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, the group that officially makes the call.
Payrolls were forecast to drop 520,000, according to the median of 76 economists surveyed by Bloomberg News. Estimates ranged from declines of 450,000 to 600,000. Job losses peaked at 741,000 in January, the most since 1949.
The jobless rate was projected to jump to 9.2 percent, with forecasts ranging from 9 percent to 9.4 percent.
6 Million
The world’s largest economy has lost 6 million jobs since the recession began in December 2007, exacerbating the biggest drop in any post-World War II economic downturn.
The U.S. may suffer additional “sizable” job losses, Fed Chairman Ben S. Bernanke said this week in testimony to lawmakers. While economic growth will return “later this year,” he said, unemployment will rise “into next year.”
“We are starting to see indications of economic progress as the recovery package begins to take hold,” Representative Carolyn Maloney, a New York Democrat who chairs the congressional Joint Economic Committee, said in a statement. Rising unemployment “is a sobering reminder that we still have a long way” to go, she added.
Including those who’ve stopped looking for work because they are discouraged by employment prospects and those working only part-time who prefer a full-time job, the jobless rate would’ve jumped to 16.4 percent in May, the highest level since comparable records began in 1994, from 15.8 percent in April.
Factory payrolls fell by 156,000. Economists forecast a drop of 150,000. The decline included a drop of 29,800 jobs in auto manufacturing and parts industries.
GM Bankruptcy
The bankruptcies of General Motors and Chrysler LLC may generate more job losses. AutoNation Inc., the largest U.S. new- vehicle retailer, plans to close seven showrooms, while Visteon Corp., the former parts-making unit of Ford Motor Co., and chassis manufacturer Metaldyne Corp. also filed for bankruptcy.
Builders cut 59,000 jobs and financial firms cut 30,000. Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 120,000 workers. Retail payrolls decreased by 17,500. Government payrolls fell by 7,000 after rising 92,000 in the prior month.
Some companies are looking to grow. Wal-Mart Stores Inc., the largest U.S. private employer, plans to add more than 22,000 jobs for the 142 to 157 outlets it may open or expand in the 12 months through Jan. 31.
Rising unemployment and record wealth destruction mean consumer spending may not sustain the gains reported in the first quarter. Purchases fell in April as Americans boosted the savings rate to a 14-year high. Department stores Macy’s Inc. and Dillard’s Inc. and luxury chain Saks Inc. reported steeper- than-forecast sales declines for May.
‘Fear’ Factor
“Fear drives conservatism in consumer spending, and the biggest fear now is about losing jobs,” Eric Wiseman, chief executive officer of VF Corp., the world’s largest clothing maker, said in an interview in May.
American Express, the largest U.S. credit-card company by purchases, will cut 4,000 positions as cardholders squeezed by job losses fail to pay debts.
The average work week shrank, while hourly earnings were 3.1 percent higher than May 2008, the smallest gain since November 2005.
Payrolls fell by 345,000, less than forecast, while the unemployment rate hit a 25-year high of 9.4 percent, partly because more people joined the workforce to look for jobs, Labor Department figures showed. The annual rate of average hourly earnings growth touched its lowest since November 2005.
“The rate of decline has slowed some, but the losses to date are causing sharp declines in U.S. per capita income,” David Malpass, an economist and president of Encima Global in New York, wrote in a note to clients. Malpass predicted a “slow recovery” from the deepest recession in half a century.
Some investors focused on the report’s relief from payroll losses that surpassed half a million in each of the previous six months. The dollar rallied, Treasury yields rose and some traders added to bets the Federal Reserve will raise interest rates this year. The head of the panel that dates U.S. recessions warned it’s still “too early” to call an end to the slump.
Americans are spending less and saving more as home values fall and companies from American Express Co. to General Motors Corp. continue to cut workforces.
Credit Drops
Another report showed consumer borrowing dropped by $15.7 billion in April, the second-biggest decline on record, as loans remained difficult to get. Consumer credit fell at a 7.4 percent annual rate to $2.52 trillion, the Fed reported yesterday in Washington.
Yields on benchmark 10-year U.S. notes jumped to 3.83 percent in New York yesterday from 3.71 percent June 4, and the dollar climbed to a four-week high against the yen. The Standard & Poor’s 500 Stock Index slipped 0.3 percent to 940.09 after rising as much as 1 percent earlier.
Stocks initially rallied, then slid on concern that the Labor Department had overstated the slowdown in job losses. They recouped losses later when Labor Secretary Hilda Solis said the report was accurate. Labor’s estimate of net jobs created by the formation of new companies and demise of established firms, known as the birth/death model, had fed the confusion.
Revisions added 82,000 to payroll figures previously reported for April and March, the Labor report said.
Fed Rate
Some traders for the first time in months began to price in expectations that the Fed will raise interest rates this year as the economy improves.
Federal-funds futures contracts on the Chicago Board of Trade show a 59 percent probability the central bank will lift its target rate for overnight bank borrowing to at least 0.5 percent by November. The odds were 27 percent a day earlier.
While the economy is showing signs of stabilizing, it’s “way too early” to say the contraction is over, said Robert Hall, who heads the National Bureau of Economic Research’s Business Cycle Dating Committee, the group that officially makes the call.
Payrolls were forecast to drop 520,000, according to the median of 76 economists surveyed by Bloomberg News. Estimates ranged from declines of 450,000 to 600,000. Job losses peaked at 741,000 in January, the most since 1949.
The jobless rate was projected to jump to 9.2 percent, with forecasts ranging from 9 percent to 9.4 percent.
6 Million
The world’s largest economy has lost 6 million jobs since the recession began in December 2007, exacerbating the biggest drop in any post-World War II economic downturn.
The U.S. may suffer additional “sizable” job losses, Fed Chairman Ben S. Bernanke said this week in testimony to lawmakers. While economic growth will return “later this year,” he said, unemployment will rise “into next year.”
“We are starting to see indications of economic progress as the recovery package begins to take hold,” Representative Carolyn Maloney, a New York Democrat who chairs the congressional Joint Economic Committee, said in a statement. Rising unemployment “is a sobering reminder that we still have a long way” to go, she added.
Including those who’ve stopped looking for work because they are discouraged by employment prospects and those working only part-time who prefer a full-time job, the jobless rate would’ve jumped to 16.4 percent in May, the highest level since comparable records began in 1994, from 15.8 percent in April.
Factory payrolls fell by 156,000. Economists forecast a drop of 150,000. The decline included a drop of 29,800 jobs in auto manufacturing and parts industries.
GM Bankruptcy
The bankruptcies of General Motors and Chrysler LLC may generate more job losses. AutoNation Inc., the largest U.S. new- vehicle retailer, plans to close seven showrooms, while Visteon Corp., the former parts-making unit of Ford Motor Co., and chassis manufacturer Metaldyne Corp. also filed for bankruptcy.
Builders cut 59,000 jobs and financial firms cut 30,000. Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 120,000 workers. Retail payrolls decreased by 17,500. Government payrolls fell by 7,000 after rising 92,000 in the prior month.
Some companies are looking to grow. Wal-Mart Stores Inc., the largest U.S. private employer, plans to add more than 22,000 jobs for the 142 to 157 outlets it may open or expand in the 12 months through Jan. 31.
Rising unemployment and record wealth destruction mean consumer spending may not sustain the gains reported in the first quarter. Purchases fell in April as Americans boosted the savings rate to a 14-year high. Department stores Macy’s Inc. and Dillard’s Inc. and luxury chain Saks Inc. reported steeper- than-forecast sales declines for May.
‘Fear’ Factor
“Fear drives conservatism in consumer spending, and the biggest fear now is about losing jobs,” Eric Wiseman, chief executive officer of VF Corp., the world’s largest clothing maker, said in an interview in May.
American Express, the largest U.S. credit-card company by purchases, will cut 4,000 positions as cardholders squeezed by job losses fail to pay debts.
The average work week shrank, while hourly earnings were 3.1 percent higher than May 2008, the smallest gain since November 2005.
Thursday, June 4, 2009
Intel Buys a Software Company to Extend Chip Marke
5th June - 2009
The Intel Corporation said Thursday that it had agreed to buy Wind River Systems, a software company, for about $884 million in a bid to put its chips into more consumer electronics and wireless devices.
Intel said it had agreed to pay $11.50 a share for Wind River, a 44 percent premium over its closing price on Wednesday.
Wind River makes operating systems for platforms as diverse as autos and mobile phones, serving customers like Sony and Boeing.
Intel, whose processors run about 80 percent of the world’s personal computers, is expanding into new markets, including chips for televisions and mobile devices. Wind River’s software and customer list will pave the way for Intel to win more chip contracts, said Cody Acree, an analyst at Stifel Nicolaus & Company in Dallas.
“If you have a chip you want to put in a lot of things other than a PC, you need code,” Mr. Acree said. “Wind River brings that, and it brings customers.”
Shares of Wind River, which is based in Alameda, Calif., rose $3.76, or 47 percent, to $11.76 a share. Shares of Intel, based in Santa Clara, Calif., rose 19 cents, to $16.13 a share.
It is Intel’s first major acquisition since Paul S. Otellini took over as chief executive in 2005.
Intel expects chips for so-called embedded systems, like the electronics in car navigation systems, to generate billions of dollars in annual sales, said Bill Kircos, a company spokesman. Intel already supplies chips to BMW for car stereos that use Wind River software.
“It’s trying to get our chips into new systems in your car, into new meters that let you monitor how you use electricity,” Mr. Kircos said. “It’s about getting into new consumer electronics, smartphones and health care.”
The Intel Corporation said Thursday that it had agreed to buy Wind River Systems, a software company, for about $884 million in a bid to put its chips into more consumer electronics and wireless devices.
Intel said it had agreed to pay $11.50 a share for Wind River, a 44 percent premium over its closing price on Wednesday.
Wind River makes operating systems for platforms as diverse as autos and mobile phones, serving customers like Sony and Boeing.
Intel, whose processors run about 80 percent of the world’s personal computers, is expanding into new markets, including chips for televisions and mobile devices. Wind River’s software and customer list will pave the way for Intel to win more chip contracts, said Cody Acree, an analyst at Stifel Nicolaus & Company in Dallas.
“If you have a chip you want to put in a lot of things other than a PC, you need code,” Mr. Acree said. “Wind River brings that, and it brings customers.”
Shares of Wind River, which is based in Alameda, Calif., rose $3.76, or 47 percent, to $11.76 a share. Shares of Intel, based in Santa Clara, Calif., rose 19 cents, to $16.13 a share.
It is Intel’s first major acquisition since Paul S. Otellini took over as chief executive in 2005.
Intel expects chips for so-called embedded systems, like the electronics in car navigation systems, to generate billions of dollars in annual sales, said Bill Kircos, a company spokesman. Intel already supplies chips to BMW for car stereos that use Wind River software.
“It’s trying to get our chips into new systems in your car, into new meters that let you monitor how you use electricity,” Mr. Kircos said. “It’s about getting into new consumer electronics, smartphones and health care.”
Asian Stocks Head for Third Weekly Gain; BHP, Rio Tinto Surge
June 5 (Bloomberg) -- Asian stocks gained, with the MSCI Asia Pacific Index set for its third weekly advance, after Rio Tinto Group scrapped an investment by China in favor of a $15.2 billion share sale as commodity prices rebound.
Rio surged 9.9 percent in Sydney after saying it will sell shares and form a $5.8 billion venture with BHP Billiton Ltd. instead of pursuing Aluminum Corp. of China’s investment. BHP, the world’s biggest mining company, climbed 8.1 percent. Inpex Corp., Japan’s largest oil explorer, jumped 5.6 percent after oil prices rose to a seven-month high. Mazda Motor Corp. climbed 8.4 percent as Nikko Citigroup Ltd. raised its stock forecast.
“Investors are looking for a reason to stay positive and the Rio and BHP news provides that,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The bull market for resources stocks continues today.”
The MSCI Asia Pacific Index added 0.3 percent to 103.49 as of 1:07 p.m. in Tokyo. The gauge has climbed 1.4 percent this week as a Chinese purchasing manager’s index and better-than- expected Australian gross domestic product figures fueled optimism that the global economy is recovering. The measure climbed 47 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average gained 0.5 percent as a weaker yen boosted the earnings prospects for companies reliant on overseas sales. Australia’s S&P/ASX 200 Index rose 1.1 percent. New Zealand’s NZX 50 Index added 0.5 percent.
Futures on the U.S. Standard & Poor’s 500 Index added 0.1 percent. The gauge climbed 1.2 percent after analysts recommended buying bank shares. Keycorp surged 20 percent after RBC Capital Markets named the bank a “top pick,” while Goldman Sachs Group Inc. rose 5.2 percent as Sanford C. Bernstein & Co. raised the shares to “outperform.”
Rio Share Sale
Rio Tinto, the world’s third-largest mining company, surged 9.9 percent to A$73.50. Today’s transactions allow Rio to reduce $38.9 billion in debt without selling stakes in its largest mines to Aluminum Corp., which investors said favored the Chinese company. Chinalco, as Aluminum Corp. is known, is China’s largest producer of the material.
“The Chinalco deal was wrong in a strategic sense,” said Prasad Patkar, who helps manage close to $1 billion at Platypus Asset Management in Sydney. “The market was right in marking the management and board down for trying to jam it down shareholders’ throats.”
Investors will be offered 21 new shares in Rio for every 40 they hold at 1,400 pence each, 49 percent below yesterday’s close in London, the company said. BHP, which agreed to pay Rio $5.8 billion to form an Australian iron ore joint venture, climbed 8.1 percent to A$37.96.
Best Performers
Mining and energy companies are the best performers of the MSCI Asia Pacific Index’s 10 industry group in the past month as prospects of a global recovery fueled optimism that demand for commodities will increase.
The Bank of Japan may upgrade its economic assessment of the country for a second straight month at the conclusion of a policy meeting beginning June 15, the Mainichi newspaper reported. Australia’s statistics office said this week gross domestic product gained 0.4 percent in the first quarter from the previous three months, compared with economist forecasts for a 0.2 percent contraction.
“The better-than-expected economic data is convincing people the worst is over,” said Will Seddon, who helps manage $250 million at White Funds Management Pty. in Sydney. “People who are underweight or short don’t want to get left out of the rally.”
Stock gains since March have driven the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Oct. 1.
Oil Prices
Inpex climbed 5.6 percent to 835,000 yen. Santos Ltd., Australia’s third-largest oil company, gained 3.6 percent to A$14.99.
Crude oil rose after Goldman Sachs said prices may reach $85 a barrel by the end of the year as world demand recovers and supplies shrink. Oil climbed 4.1 percent to $68.81 a barrel in New York, the highest settlement since Nov. 4 after the bank increased its year-end forecast from $65 and withdrew a prediction that prices will dip prior to a rally.
Mazda, which makes 28 percent of its revenue in North America, climbed 8.4 percent to 272 yen. Nikko Citigroup raised its target price to 350 yen from 257 yen, citing expectations for an earnings recovery in the second half of the business year.
Mazda shares also rose after the yen declined yesterday versus 15 of the 16 most-traded currencies on speculation Japanese investors are sending funds overseas to buy higher- yielding assets. The yen traded at 96.56 per dollar in Tokyo, after declining 0.6 percent yesterday to its lowest since May 29.
A weaker yen boosts the value of Japanese companies’ dollar-denominated sales. Sony Corp., which gets 24 percent of its revenue from the U.S., climbed 2.1 percent to 2,695 yen.
Rio surged 9.9 percent in Sydney after saying it will sell shares and form a $5.8 billion venture with BHP Billiton Ltd. instead of pursuing Aluminum Corp. of China’s investment. BHP, the world’s biggest mining company, climbed 8.1 percent. Inpex Corp., Japan’s largest oil explorer, jumped 5.6 percent after oil prices rose to a seven-month high. Mazda Motor Corp. climbed 8.4 percent as Nikko Citigroup Ltd. raised its stock forecast.
“Investors are looking for a reason to stay positive and the Rio and BHP news provides that,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The bull market for resources stocks continues today.”
The MSCI Asia Pacific Index added 0.3 percent to 103.49 as of 1:07 p.m. in Tokyo. The gauge has climbed 1.4 percent this week as a Chinese purchasing manager’s index and better-than- expected Australian gross domestic product figures fueled optimism that the global economy is recovering. The measure climbed 47 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average gained 0.5 percent as a weaker yen boosted the earnings prospects for companies reliant on overseas sales. Australia’s S&P/ASX 200 Index rose 1.1 percent. New Zealand’s NZX 50 Index added 0.5 percent.
Futures on the U.S. Standard & Poor’s 500 Index added 0.1 percent. The gauge climbed 1.2 percent after analysts recommended buying bank shares. Keycorp surged 20 percent after RBC Capital Markets named the bank a “top pick,” while Goldman Sachs Group Inc. rose 5.2 percent as Sanford C. Bernstein & Co. raised the shares to “outperform.”
Rio Share Sale
Rio Tinto, the world’s third-largest mining company, surged 9.9 percent to A$73.50. Today’s transactions allow Rio to reduce $38.9 billion in debt without selling stakes in its largest mines to Aluminum Corp., which investors said favored the Chinese company. Chinalco, as Aluminum Corp. is known, is China’s largest producer of the material.
“The Chinalco deal was wrong in a strategic sense,” said Prasad Patkar, who helps manage close to $1 billion at Platypus Asset Management in Sydney. “The market was right in marking the management and board down for trying to jam it down shareholders’ throats.”
Investors will be offered 21 new shares in Rio for every 40 they hold at 1,400 pence each, 49 percent below yesterday’s close in London, the company said. BHP, which agreed to pay Rio $5.8 billion to form an Australian iron ore joint venture, climbed 8.1 percent to A$37.96.
Best Performers
Mining and energy companies are the best performers of the MSCI Asia Pacific Index’s 10 industry group in the past month as prospects of a global recovery fueled optimism that demand for commodities will increase.
The Bank of Japan may upgrade its economic assessment of the country for a second straight month at the conclusion of a policy meeting beginning June 15, the Mainichi newspaper reported. Australia’s statistics office said this week gross domestic product gained 0.4 percent in the first quarter from the previous three months, compared with economist forecasts for a 0.2 percent contraction.
“The better-than-expected economic data is convincing people the worst is over,” said Will Seddon, who helps manage $250 million at White Funds Management Pty. in Sydney. “People who are underweight or short don’t want to get left out of the rally.”
Stock gains since March have driven the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Oct. 1.
Oil Prices
Inpex climbed 5.6 percent to 835,000 yen. Santos Ltd., Australia’s third-largest oil company, gained 3.6 percent to A$14.99.
Crude oil rose after Goldman Sachs said prices may reach $85 a barrel by the end of the year as world demand recovers and supplies shrink. Oil climbed 4.1 percent to $68.81 a barrel in New York, the highest settlement since Nov. 4 after the bank increased its year-end forecast from $65 and withdrew a prediction that prices will dip prior to a rally.
Mazda, which makes 28 percent of its revenue in North America, climbed 8.4 percent to 272 yen. Nikko Citigroup raised its target price to 350 yen from 257 yen, citing expectations for an earnings recovery in the second half of the business year.
Mazda shares also rose after the yen declined yesterday versus 15 of the 16 most-traded currencies on speculation Japanese investors are sending funds overseas to buy higher- yielding assets. The yen traded at 96.56 per dollar in Tokyo, after declining 0.6 percent yesterday to its lowest since May 29.
A weaker yen boosts the value of Japanese companies’ dollar-denominated sales. Sony Corp., which gets 24 percent of its revenue from the U.S., climbed 2.1 percent to 2,695 yen.
Thai Jobless Rate May Stabilize as Government Begins Spending
June 5 (Bloomberg) -- Thailand’s jobless rate may stabilize amid signs the nation’s economy is over the worst of its first recession in a decade and the government begins spending on projects to help spur demand and employment.
Unemployment rose to 2.1 percent in the first quarter, compared with 1.6 percent a year earlier, the National Economic & Social Development Board, said in Bangkok today.
“The situation shows positive signs because of the government’s job creation scheme and also the start of a stimulus package,” Suwannee Khamman, deputy secretary-general at the board, said at a press briefing.
Thailand’s economy shrank 7.1 percent in the first quarter, its second quarterly contraction, after the global recession led to a collapse in exports. The government began pumping cash into the economy in April to spur demand, and Finance Minister Korn Chatikavanij said yesterday the worst is over.
On March 3, the state-run board predicted Thailand’s jobless rate may surge to 3.5 percent this year from 1.3 percent in 2008 as about 500,000 people lose their jobs, taking unemployment to about 1.3 million people. The nation has a labor force of 38.5 million, according to Bank of Thailand data.
KCE Electronics Pcl, the country’s biggest publicly traded printed-circuit-board maker, said June 2 it’s increasing production. Tipco Asphalt Pcl, a maker of paving material, said a day later it expects sales to the Thai government will help it return to profit this year. Hana Microelectronics Pcl, a semiconductor packager, said last month orders have rebounded.
Industrial output declined the least in five months in April as exporters resumed filling orders from customers seeking to restock depleted inventory, the central bank said on May 29. Exports, which account for 70 percent of gross domestic product, have sunk every month since November.
Prime Minister Abhisit Vejjajiva’s government on May 6 unveiled a 1.4 trillion-baht ($41 billion) investment plan that it plans to implement by the end of 2012. His seven-party coalition government is strong enough to pass a borrowing plan and next year’s 1.7 trillion-baht budget, Abhisit said May 20.
Unemployment rose to 2.1 percent in the first quarter, compared with 1.6 percent a year earlier, the National Economic & Social Development Board, said in Bangkok today.
“The situation shows positive signs because of the government’s job creation scheme and also the start of a stimulus package,” Suwannee Khamman, deputy secretary-general at the board, said at a press briefing.
Thailand’s economy shrank 7.1 percent in the first quarter, its second quarterly contraction, after the global recession led to a collapse in exports. The government began pumping cash into the economy in April to spur demand, and Finance Minister Korn Chatikavanij said yesterday the worst is over.
On March 3, the state-run board predicted Thailand’s jobless rate may surge to 3.5 percent this year from 1.3 percent in 2008 as about 500,000 people lose their jobs, taking unemployment to about 1.3 million people. The nation has a labor force of 38.5 million, according to Bank of Thailand data.
KCE Electronics Pcl, the country’s biggest publicly traded printed-circuit-board maker, said June 2 it’s increasing production. Tipco Asphalt Pcl, a maker of paving material, said a day later it expects sales to the Thai government will help it return to profit this year. Hana Microelectronics Pcl, a semiconductor packager, said last month orders have rebounded.
Industrial output declined the least in five months in April as exporters resumed filling orders from customers seeking to restock depleted inventory, the central bank said on May 29. Exports, which account for 70 percent of gross domestic product, have sunk every month since November.
Prime Minister Abhisit Vejjajiva’s government on May 6 unveiled a 1.4 trillion-baht ($41 billion) investment plan that it plans to implement by the end of 2012. His seven-party coalition government is strong enough to pass a borrowing plan and next year’s 1.7 trillion-baht budget, Abhisit said May 20.
Wednesday, June 3, 2009
Infosys Chief Aims to Boost Sales From Europe, Emerging Markets
June 4 (Bloomberg) -- Infosys Technologies Ltd., India’s second-largest software-services provider, plans to raise its share of sales from Europe and emerging markets by half as U.S. clients cut spending and lawmakers seek tougher hiring rules.
Europe’s proportion of company revenue will swell to 40 percent from 30 percent and the share from emerging markets will double to 20 percent, Chief Executive Officer S. Gopalakrishnan said. The U.S.’s share will shrink to 40 percent from 60 percent.
Gopalakrishnan, 54, plans to shift the focus from Infosys’s biggest market after the global recession prompted the company to forecast its first annual sales decline. A bill moved by senators Dick Durbin and Chuck Grassley may deny Infosys access to lower-cost workers in the U.S.
“There is a pressing need” to generate a greater share of revenue from outside the U.S., Gopalakrishnan said yesterday in an interview in Bangalore, where Infosys is based. “The worst happening is that the bill is passed.” The company is also looking to make an acquisition in a non-English-speaking developed market to boost sales by 10 percent, he said.
The proposed H-1B and L-1 Visa Reform Act may place restrictions on Indian software companies sending workers to the U.S. to install and maintain software.
Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said in April the U.S. should resist the “potentially dangerous trend” of protectionism. Changes to immigration laws will constrain the New York-based investment bank’s ability to hire foreign workers, he said at the time.
2010 Revival?
“There is a reaction to what is happening today, the job losses and things like that,” Gopalakrishnan said. “If the worst happens, of course all of us are going to be impacted.”
Infosys, which provides computer services and back-office support to General Electric Co., Bank of America Corp., Goldman Sachs and other customers, doesn’t see a revival in demand until mid-2010, Gopalakrishnan said on May 29.
Revenue in the year ending March 31 will fall at least 3.1 percent to $4.52 billion, the company said in April. Clients remain tentative about spending decisions, Gopalakrishnan said.
Infosys declined 12 percent in Mumbai trading in the last 12 months to yesterday’s close, compared with a 4.2 percent drop in the benchmark Sensitive Index. The stock fell 2.8 percent to close at 1,641.5 rupees yesterday.
The software provider started diversifying its sales to territories outside the U.S. 10 years ago, Gopalakrishnan said.
Europe’s proportion of company revenue will swell to 40 percent from 30 percent and the share from emerging markets will double to 20 percent, Chief Executive Officer S. Gopalakrishnan said. The U.S.’s share will shrink to 40 percent from 60 percent.
Gopalakrishnan, 54, plans to shift the focus from Infosys’s biggest market after the global recession prompted the company to forecast its first annual sales decline. A bill moved by senators Dick Durbin and Chuck Grassley may deny Infosys access to lower-cost workers in the U.S.
“There is a pressing need” to generate a greater share of revenue from outside the U.S., Gopalakrishnan said yesterday in an interview in Bangalore, where Infosys is based. “The worst happening is that the bill is passed.” The company is also looking to make an acquisition in a non-English-speaking developed market to boost sales by 10 percent, he said.
The proposed H-1B and L-1 Visa Reform Act may place restrictions on Indian software companies sending workers to the U.S. to install and maintain software.
Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said in April the U.S. should resist the “potentially dangerous trend” of protectionism. Changes to immigration laws will constrain the New York-based investment bank’s ability to hire foreign workers, he said at the time.
2010 Revival?
“There is a reaction to what is happening today, the job losses and things like that,” Gopalakrishnan said. “If the worst happens, of course all of us are going to be impacted.”
Infosys, which provides computer services and back-office support to General Electric Co., Bank of America Corp., Goldman Sachs and other customers, doesn’t see a revival in demand until mid-2010, Gopalakrishnan said on May 29.
Revenue in the year ending March 31 will fall at least 3.1 percent to $4.52 billion, the company said in April. Clients remain tentative about spending decisions, Gopalakrishnan said.
Infosys declined 12 percent in Mumbai trading in the last 12 months to yesterday’s close, compared with a 4.2 percent drop in the benchmark Sensitive Index. The stock fell 2.8 percent to close at 1,641.5 rupees yesterday.
The software provider started diversifying its sales to territories outside the U.S. 10 years ago, Gopalakrishnan said.
Japan Companies Cut Spending by Record; Profits Slump
June 4 (Bloomberg) -- Japanese companies cut spending at the fastest pace in 54 years as a slump in global demand eroded profits, leaving less money for plant and equipment.
Capital spending excluding software fell 25.4 percent in the three months ended March 31 from a year earlier, the largest drop since the government began the survey in 1955, the Ministry of Finance said today in Tokyo. Profits tumbled a record 69 percent.
Manufacturers from Panasonic Corp. to Konica Minolta Holdings Inc. have cut jobs and are closing factories or scaling back spending plans amid an unprecedented decline in exports. Still, production and shipments abroad have picked up since last quarter, and companies will gradually start to increase spending later this year, said economist Kyohei Morita.
“Capital investment will probably return to growth from the third quarter, albeit slowly,” said Morita, chief Japan economist at Barclays Capital in Tokyo. “The main driver will be exports, especially to China.”
The yield on Japan’s 10-year bond fell 2.5 basis points to 1.52 percent at 1:20 p.m. in Tokyo. The Nikkei 225 Stock Average lost 0.5 percent, paring this year’s gains to 9 percent.
The government will use today’s report to revise gross domestic product on June 11. Preliminary figures showed the world’s second-largest economy shrank at a record 15.2 percent annual pace last quarter, and analysts predicted little change to that figure.
Revised GDP
Morita said GDP probably fell 14.5 percent, still the worst-ever contraction. Junko Nishioka, an economist at Royal Bank of Scotland Group Plc in Tokyo, predicted 15 percent, and Hiroshi Shiraishi of BNP Paribas SA said a “major” revision was unlikely.
Last quarter probably represented the worst of Japan’s deepest postwar recession. Finance Minister Kaoru Yosano said yesterday that the economy will probably resume growing this quarter, echoing a prediction made by Bank of Japan Governor Masaaki Shirakawa last month.
Industrial production climbed at the fastest pace in 56 years in April from March as companies made more cars and electronics to replenish stockpiles they ran down during the worst of the export slump. Exports rose for a second month.
Even after the increases, output and exports remain down by more than 30 percent from a year earlier, and the recession is spreading to consumers as companies cut jobs and paychecks. The unemployment rate climbed to a five-year high in April, when wages fell for an 11th month.
‘Subdued’ Growth
“We have to assume economic growth will be subdued for a considerable period after the boost from inventory reductions wanes,” said BNP’s Shiraishi.
Panasonic, the world’s largest maker of plasma televisions, said last month it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February. The company may delay the start of a chipmaking plant in Toyama, northwest of Tokyo, Kyodo News reported today.
Konica Minolta, a maker of film used in liquid-crystal displays, said this week that it will eliminate jobs and reduce spending on research to help save 33 billion yen ($345 million) in costs this year.
“Nobody’s building new factories,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. “Capital formation is unlikely to be a driver of growth in the foreseeable future.”
Capital spending excluding software fell 25.4 percent in the three months ended March 31 from a year earlier, the largest drop since the government began the survey in 1955, the Ministry of Finance said today in Tokyo. Profits tumbled a record 69 percent.
Manufacturers from Panasonic Corp. to Konica Minolta Holdings Inc. have cut jobs and are closing factories or scaling back spending plans amid an unprecedented decline in exports. Still, production and shipments abroad have picked up since last quarter, and companies will gradually start to increase spending later this year, said economist Kyohei Morita.
“Capital investment will probably return to growth from the third quarter, albeit slowly,” said Morita, chief Japan economist at Barclays Capital in Tokyo. “The main driver will be exports, especially to China.”
The yield on Japan’s 10-year bond fell 2.5 basis points to 1.52 percent at 1:20 p.m. in Tokyo. The Nikkei 225 Stock Average lost 0.5 percent, paring this year’s gains to 9 percent.
The government will use today’s report to revise gross domestic product on June 11. Preliminary figures showed the world’s second-largest economy shrank at a record 15.2 percent annual pace last quarter, and analysts predicted little change to that figure.
Revised GDP
Morita said GDP probably fell 14.5 percent, still the worst-ever contraction. Junko Nishioka, an economist at Royal Bank of Scotland Group Plc in Tokyo, predicted 15 percent, and Hiroshi Shiraishi of BNP Paribas SA said a “major” revision was unlikely.
Last quarter probably represented the worst of Japan’s deepest postwar recession. Finance Minister Kaoru Yosano said yesterday that the economy will probably resume growing this quarter, echoing a prediction made by Bank of Japan Governor Masaaki Shirakawa last month.
Industrial production climbed at the fastest pace in 56 years in April from March as companies made more cars and electronics to replenish stockpiles they ran down during the worst of the export slump. Exports rose for a second month.
Even after the increases, output and exports remain down by more than 30 percent from a year earlier, and the recession is spreading to consumers as companies cut jobs and paychecks. The unemployment rate climbed to a five-year high in April, when wages fell for an 11th month.
‘Subdued’ Growth
“We have to assume economic growth will be subdued for a considerable period after the boost from inventory reductions wanes,” said BNP’s Shiraishi.
Panasonic, the world’s largest maker of plasma televisions, said last month it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February. The company may delay the start of a chipmaking plant in Toyama, northwest of Tokyo, Kyodo News reported today.
Konica Minolta, a maker of film used in liquid-crystal displays, said this week that it will eliminate jobs and reduce spending on research to help save 33 billion yen ($345 million) in costs this year.
“Nobody’s building new factories,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. “Capital formation is unlikely to be a driver of growth in the foreseeable future.”
Asian Stocks Decline on Commodities Slump, U.S. Economy Reports
June 4 (Bloomberg) -- Asian stocks dropped for the first time in five days, led by mining and energy companies, as commodity prices slumped and a U.S. report showed the service sector improved less than expected.
BHP Billiton Ltd. and Rio Tinto Group, the world’s largest and third-largest mining companies, declined more than 4 percent after a gauge of commodity prices fell the most in six weeks. Cnooc Ltd., China’s largest offshore oil producer, sank 3.8 percent in Hong Kong. Japan’s Konami Corp., a game maker that gets 17 percent of profit from the Americas, lost 3.1 percent.
“It’s all probably come a bit too far, too fast,” said Matt Riordan, who helps manage about $3.2 billion at Paradice Investment Management in Sydney. “Where there are doubts about the recovery, you’re going to see volatility. Things seem to be improving, but if we continued to see more bad data it would have to worry you.”
The MSCI Asia Pacific Index fell 1.3 percent to 103.43 as of 12:40 p.m. in Tokyo, ending a four-day, 4.6 percent advance that took valuations on the gauge to an eight-month high. The measure rallied 48 percent through yesterday from a five-year low on March 9 on optimism the global economy is recovering.
Japan’s Nikkei 225 Stock Average fell 0.3 percent, while Australia’s S&P/ASX 200 Index sank 1.6 percent, as Finance Minister Lindsay Tanner told the government broadcaster that the economy was in a “serious downturn,” even after an unexpected expansion last quarter. South Korea’s Kospi Index slipped 1.2 percent as the government cautioned against being too optimistic about the economic outlook.
World’s Biggest Economy
Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge fell 1.4 percent yesterday, retreating from a seven-month high. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the world’s biggest economy, climbed to 44 from 43.7 in April. Economists predicted the index would rise to 45. A separate report showed U.S. companies cut 532,000 workers from payrolls.
BHP lost 4.2 percent to A$35.49, while Rio slumped 5.8 percent to A$67.47. The Reuters/Jefferies CRB Index dropped 2.7 percent, the biggest decline since April 20 for the gauge of energy, metals and crops. Separately, a measure of metals traded in London declined 1.8 percent, while crude oil in New York fell the most in two weeks.
Cnooc sank 3.8 percent to HK$10.54. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, dipped 3.2 percent to A$43.35.
Best Performers
Raw-materials producers and energy companies are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past three months as signs of a global recovery emerged. Japan last week raised its assessment of the world’s second- largest economy for the first time in three years.
Australia’s statistics bureau said yesterday gross domestic product gained 0.4 percent in the first quarter from the previous three months, compared with economist forecasts for a 0.2 percent contraction.
Prime Minister Kevin Rudd said that without payments to lower-income earners, the economy would have contracted about 0.2 percent in the quarter.
Stock gains since March have driven the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Oct. 1.
“We have been looking for a correction in the past three weeks as valuations have become stretched,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “We’ve seen a lot of these green shoots in the macro economic data but we have yet to see consumption in the U.S. picking up.”
Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, slumped 4.2 percent to A$3.16. The stock jumped 5.8 percent yesterday to a one-month high after the country’s GDP figures.
In Tokyo, Konami lost 3.2 percent to 1,731 yen. The company slashed its profit forecast by 45 percent in April.
BHP Billiton Ltd. and Rio Tinto Group, the world’s largest and third-largest mining companies, declined more than 4 percent after a gauge of commodity prices fell the most in six weeks. Cnooc Ltd., China’s largest offshore oil producer, sank 3.8 percent in Hong Kong. Japan’s Konami Corp., a game maker that gets 17 percent of profit from the Americas, lost 3.1 percent.
“It’s all probably come a bit too far, too fast,” said Matt Riordan, who helps manage about $3.2 billion at Paradice Investment Management in Sydney. “Where there are doubts about the recovery, you’re going to see volatility. Things seem to be improving, but if we continued to see more bad data it would have to worry you.”
The MSCI Asia Pacific Index fell 1.3 percent to 103.43 as of 12:40 p.m. in Tokyo, ending a four-day, 4.6 percent advance that took valuations on the gauge to an eight-month high. The measure rallied 48 percent through yesterday from a five-year low on March 9 on optimism the global economy is recovering.
Japan’s Nikkei 225 Stock Average fell 0.3 percent, while Australia’s S&P/ASX 200 Index sank 1.6 percent, as Finance Minister Lindsay Tanner told the government broadcaster that the economy was in a “serious downturn,” even after an unexpected expansion last quarter. South Korea’s Kospi Index slipped 1.2 percent as the government cautioned against being too optimistic about the economic outlook.
World’s Biggest Economy
Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge fell 1.4 percent yesterday, retreating from a seven-month high. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the world’s biggest economy, climbed to 44 from 43.7 in April. Economists predicted the index would rise to 45. A separate report showed U.S. companies cut 532,000 workers from payrolls.
BHP lost 4.2 percent to A$35.49, while Rio slumped 5.8 percent to A$67.47. The Reuters/Jefferies CRB Index dropped 2.7 percent, the biggest decline since April 20 for the gauge of energy, metals and crops. Separately, a measure of metals traded in London declined 1.8 percent, while crude oil in New York fell the most in two weeks.
Cnooc sank 3.8 percent to HK$10.54. Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, dipped 3.2 percent to A$43.35.
Best Performers
Raw-materials producers and energy companies are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past three months as signs of a global recovery emerged. Japan last week raised its assessment of the world’s second- largest economy for the first time in three years.
Australia’s statistics bureau said yesterday gross domestic product gained 0.4 percent in the first quarter from the previous three months, compared with economist forecasts for a 0.2 percent contraction.
Prime Minister Kevin Rudd said that without payments to lower-income earners, the economy would have contracted about 0.2 percent in the quarter.
Stock gains since March have driven the average valuation of companies on MSCI’s Asian index to 1.5 times the book value of assets, the highest level since Oct. 1.
“We have been looking for a correction in the past three weeks as valuations have become stretched,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “We’ve seen a lot of these green shoots in the macro economic data but we have yet to see consumption in the U.S. picking up.”
Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, slumped 4.2 percent to A$3.16. The stock jumped 5.8 percent yesterday to a one-month high after the country’s GDP figures.
In Tokyo, Konami lost 3.2 percent to 1,731 yen. The company slashed its profit forecast by 45 percent in April.
Tuesday, June 2, 2009
Australia Unexpectedly Grows 0.4%, Skirting Global Recession
June 3 (Bloomberg) -- Australia’s economy unexpectedly grew in the first quarter, skirting the global recession that has swamped the U.S., the U.K. and Japan, as exports and consumer spending increased.
Gross domestic product rose 0.4 percent in the three months to March 31 after it contracted a revised 0.6 percent in the fourth quarter, the Bureau of Statistics said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent decline.
Stocks rose and the nation’s currency jumped to the highest in eight months as the report confirmed Australia is one of only a few economies including China and India that expanded last quarter. Record interest-rate cuts and more than A$12 billion ($9.9 billion) in government cash handouts to consumers fueled growth even as businesses slashed investment spending.
“Rumors of the death of the Australian economy have been highly exaggerated,” said Craig James, chief equities economist at Commonwealth Bank of Australia in Sydney.
“Much of the credit for Australia’s resilience must be given to the swift actions of the Reserve Bank and government in stimulating our economy.”
The Australian dollar rose to 82.40 U.S. cents at 1:07 p.m. in Sydney from 81.91 cents before the report was released.
Stocks Rise
The S&P/ASX 200 stock index increased 1 percent, paced by shares of Australia’s largest telephone company, Telstra Corp., which gained 2.3 percent. Furniture retailer, Harvey Norman Holdings Ltd., rose 5.8 percent.
Consumer spending advanced 0.6 percent in the quarter, adding 0.3 percentage points to GDP, today’s report showed. Government spending rose 0.3 percent and exports increased 2.7 percent.
Still, parts of the economy remain weak. Business investment tumbled 6.1 percent and imports fell 7 percent as companies such as Rio Tinto Group cut spending and fired workers. Car sales dropped 14.9 percent in May from a year earlier, the Federal Chamber of Automotive Industries said today.
“We’re not out of the woods yet,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Technically we have skirted recession, but the underlying details in the data aren’t painting a great picture.
‘‘We’ve got investment falling and imports tanking, which is symptomatic of weaker investment, and households are being artificially supported by government cash handouts.”
Government Spending
Prime Minister Kevin Rudd, who said in April that the country’s economy is in its first recession since 1991, began distributing cash handouts of as much as A$900 in March to low- and middle-income earners.
“It’s been the right strategy under very difficult global conditions,” Rudd told reporters in Canberra today. Still, “difficulties and obstacles lie ahead.” Unemployment will rise and “there is no guarantee that GDP won’t fall in future.”
The jobless rate has climbed to 5.4 percent in April from 3.9 percent in February 2008 as companies such as Qantas Airways Ltd. fired workers.
Among evidence that Australia is weathering the global slump, building approvals jumped twice as much as economists forecast in April, new homes sales gained for a fourth month and the current account deficit narrowed in the first quarter as agricultural exports surged.
Today’s report showed rural exports jumped 18.3 percent in the quarter. Wheat output rose to 21.4 million tons in 2008-2009, the biggest crop in three years, from about 13 million tons a year earlier, according to the Australian Bureau of Resource and Agricultural Economics.
Retail sales rose in the first quarter and again in April.
‘More Resilient’
Woolworths Ltd., Australia’s largest retailer, said last month that sales surged 6.5 percent to A$12.3 billion in the three months ended April 5. Caltex Australia Ltd., the nation’s largest oil refiner, said on April 23 that first-quarter operating profit gained 11 percent.
“It’s good for confidence that we’ve avoided that technical recession,” defined as two consecutive quarters of declining GDP, said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. Today’s GDP figures “indicate Australia is much more resilient than many other economies.”
The economy grew 0.4 percent from a year earlier. Economists forecast a 0.4 percent contraction.
By contrast, Japan’s economy shrank 9.7 percent in the year, the U.K.’s GDP dropped 4.1 percent, the 16-member euro region contracted 4.6 percent and the U.S. slid 2.5 percent. The economy of China, Australia’s largest trading partner, grew 6.1 percent and India expanded 5.8 percent.
Interest Rates
The global turmoil, triggered by last year’s collapse of Lehman Brothers Holdings Inc., prompted Reserve Bank Governor Glenn Stevens to slash the overnight cash rate target between September and April by a record 4.25 percentage points.
Stevens left the rate unchanged at 3 percent yesterday for a second month and signaled that he is prepared to cut borrowing costs from a 49-year low to spur domestic demand “if needed.”
“The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy,” Stevens said.
Investors expect Australia’s overnight cash rate target will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the benchmark will be 24 basis points higher in 12 months, the index showed at 12:39 p.m. in Sydney. At the start of May, they tipped 37 basis points of cuts. A basis point is 0.01 percentage point.
Gross domestic product rose 0.4 percent in the three months to March 31 after it contracted a revised 0.6 percent in the fourth quarter, the Bureau of Statistics said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent decline.
Stocks rose and the nation’s currency jumped to the highest in eight months as the report confirmed Australia is one of only a few economies including China and India that expanded last quarter. Record interest-rate cuts and more than A$12 billion ($9.9 billion) in government cash handouts to consumers fueled growth even as businesses slashed investment spending.
“Rumors of the death of the Australian economy have been highly exaggerated,” said Craig James, chief equities economist at Commonwealth Bank of Australia in Sydney.
“Much of the credit for Australia’s resilience must be given to the swift actions of the Reserve Bank and government in stimulating our economy.”
The Australian dollar rose to 82.40 U.S. cents at 1:07 p.m. in Sydney from 81.91 cents before the report was released.
Stocks Rise
The S&P/ASX 200 stock index increased 1 percent, paced by shares of Australia’s largest telephone company, Telstra Corp., which gained 2.3 percent. Furniture retailer, Harvey Norman Holdings Ltd., rose 5.8 percent.
Consumer spending advanced 0.6 percent in the quarter, adding 0.3 percentage points to GDP, today’s report showed. Government spending rose 0.3 percent and exports increased 2.7 percent.
Still, parts of the economy remain weak. Business investment tumbled 6.1 percent and imports fell 7 percent as companies such as Rio Tinto Group cut spending and fired workers. Car sales dropped 14.9 percent in May from a year earlier, the Federal Chamber of Automotive Industries said today.
“We’re not out of the woods yet,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Technically we have skirted recession, but the underlying details in the data aren’t painting a great picture.
‘‘We’ve got investment falling and imports tanking, which is symptomatic of weaker investment, and households are being artificially supported by government cash handouts.”
Government Spending
Prime Minister Kevin Rudd, who said in April that the country’s economy is in its first recession since 1991, began distributing cash handouts of as much as A$900 in March to low- and middle-income earners.
“It’s been the right strategy under very difficult global conditions,” Rudd told reporters in Canberra today. Still, “difficulties and obstacles lie ahead.” Unemployment will rise and “there is no guarantee that GDP won’t fall in future.”
The jobless rate has climbed to 5.4 percent in April from 3.9 percent in February 2008 as companies such as Qantas Airways Ltd. fired workers.
Among evidence that Australia is weathering the global slump, building approvals jumped twice as much as economists forecast in April, new homes sales gained for a fourth month and the current account deficit narrowed in the first quarter as agricultural exports surged.
Today’s report showed rural exports jumped 18.3 percent in the quarter. Wheat output rose to 21.4 million tons in 2008-2009, the biggest crop in three years, from about 13 million tons a year earlier, according to the Australian Bureau of Resource and Agricultural Economics.
Retail sales rose in the first quarter and again in April.
‘More Resilient’
Woolworths Ltd., Australia’s largest retailer, said last month that sales surged 6.5 percent to A$12.3 billion in the three months ended April 5. Caltex Australia Ltd., the nation’s largest oil refiner, said on April 23 that first-quarter operating profit gained 11 percent.
“It’s good for confidence that we’ve avoided that technical recession,” defined as two consecutive quarters of declining GDP, said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. Today’s GDP figures “indicate Australia is much more resilient than many other economies.”
The economy grew 0.4 percent from a year earlier. Economists forecast a 0.4 percent contraction.
By contrast, Japan’s economy shrank 9.7 percent in the year, the U.K.’s GDP dropped 4.1 percent, the 16-member euro region contracted 4.6 percent and the U.S. slid 2.5 percent. The economy of China, Australia’s largest trading partner, grew 6.1 percent and India expanded 5.8 percent.
Interest Rates
The global turmoil, triggered by last year’s collapse of Lehman Brothers Holdings Inc., prompted Reserve Bank Governor Glenn Stevens to slash the overnight cash rate target between September and April by a record 4.25 percentage points.
Stevens left the rate unchanged at 3 percent yesterday for a second month and signaled that he is prepared to cut borrowing costs from a 49-year low to spur domestic demand “if needed.”
“The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy,” Stevens said.
Investors expect Australia’s overnight cash rate target will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the benchmark will be 24 basis points higher in 12 months, the index showed at 12:39 p.m. in Sydney. At the start of May, they tipped 37 basis points of cuts. A basis point is 0.01 percentage point.
Asian Stocks Rise for Fourth Day on Economic Growth Optimism
June 3 (Bloomberg) -- Asian stocks rose for a fourth- straight day, led by banks and consumer companies, as better- than-expected U.S. homes sales and Australian economic growth reports fueled optimism the global recession is easing.
Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, climbed 5.1 percent and Westpac Banking Corp. gained 1.6 percent in Sydney as the country’s economy unexpectedly expanded in the first quarter. Nissan Motor Co., Japan’s third-largest automaker, rose 1.5 percent to an eight- month high after it posted better-than-expected U.S. sales.
“There are encouraging signs that people are out there spending,” said Tim Schroeders, who helps manage $1 billion a Pengana Capital Ltd. in Melbourne. “The question is whether it’s enough. The situation is still fairly precarious.”
The MSCI Asia Pacific Index added 0.7 percent to 105.09 as of 11:43 a.m. in Tokyo, taking its four-day advance to 4.9 percent. The gauge has climbed 49 percent from a more than five- year low on March 9.
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Australia’s S&P/ASX 200 Index added 0.8 percent after the statistics bureau said first-quarter gross domestic product grew 0.4 percent from the previous quarter. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent decline.
South Korea’s Kospi fell as Woori Finance Holdings Co. sank 5.6 percent on concern the company may sell shares. Taiwan’s Prince Housing & Development Corp. and China Metal Products Co. fell by the daily limit in Taipei after their offices were searched by prosecutors.
Previously Owned Homes
Futures on the U.S. Standard & Poor’s 500 Index lost 0.3 percent. The gauge rose 0.2 percent yesterday as optimism the housing market is improving outweighed concern share sales will dilute stockholder value. A report yesterday showed the number of Americans signing contracts to buy previously owned homes climbed 6.7 percent in April, more than forecast and the fourth increase in five months.
Harvey Norman climbed 5.1 percent to A$3.28. Westpac added 1.6 percent to A$19.05.
Australia, helped by record interest-rate cuts, government spending and cash handouts to consumers, is one of only a few economies including China and India that expanded last quarter. Central bank Governor Glenn Stevens left the benchmark interest rate unchanged at 3 percent yesterday for a second month amid signs the economy is weathering the worst global slump since the Great Depression.
Global Recovery
Yesterday’s U.S. data added to signs of a global recovery. A Chinese purchasing manager’s index this week showed the country’s manufacturing industry expanded for a third month. Japan’s government last week raised its assessment of the economy for the first time in three years.
“The green shoots story continues to flourish,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “Despite the many encouraging signs, we still have many hurdles to overcome before we’re out of the woods.”
Nissan gained 1.5 percent to 603 yen. The company’s U.S. sales fell 33 percent in May, better than the 37 percent decline analysts expected.
Market share for Asian automakers slid to 45.6 percent last month, down 2.5 percentage points from a year earlier, according to Autodata Corp. It was the first drop since September 2008.
Woori Finance, South Korea’s largest financial company, dropped 5.6 percent to 10,800 won. Spokesman Song Seung Hyun said yesterday the company is looking at ways to raise capital, including a sale of new shares.
Share Sales
KB Financial Group Inc., which controls South Korea’s biggest bank, fell 3.5 percent to 41,500 won after spokesman Choi In Seok said the company is considering selling shares, among various measures for raising capital.
“Share sales raise concerns among existing shareholders about dilution of their stock value,” said Kim Joo Hyoung, who helps manage the equivalent of $324 million in equities at KTB Asset Management Co. in Seoul. “The companies are seeking to raise capital while the markets are relatively better.”
The rally drove the average valuation of companies on MSCI’s Asian index to 1.4 times the book value of assets on May 29, an increase of 17 percent from the end of 2008. Developing- nation stock funds attracted $12 billion of assets in the four weeks through May 27, according to EPFR Global, which tracks investment flows worldwide.
In Taipei, Prince Housing fell 6.9 percent to NT$17.50, while China Metal plunged 7 percent to NT$37.5.
The companies will cooperate in the investigations, they said in separate stock exchange filings yesterday, without giving details of the probes. The Taiex Index lost 0.9 percent today, paring its advance in the past three months to 55 percent.
“Prince Housing and China Metal were searched by prosecutors yesterday and investors are using this as an excuse to take a breather,” said Sam Hsieh, a Taipei-based fund manager at Fuh Hwa Investment Trust Co., who helps oversee the equivalent of $4.8 billion.
Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, climbed 5.1 percent and Westpac Banking Corp. gained 1.6 percent in Sydney as the country’s economy unexpectedly expanded in the first quarter. Nissan Motor Co., Japan’s third-largest automaker, rose 1.5 percent to an eight- month high after it posted better-than-expected U.S. sales.
“There are encouraging signs that people are out there spending,” said Tim Schroeders, who helps manage $1 billion a Pengana Capital Ltd. in Melbourne. “The question is whether it’s enough. The situation is still fairly precarious.”
The MSCI Asia Pacific Index added 0.7 percent to 105.09 as of 11:43 a.m. in Tokyo, taking its four-day advance to 4.9 percent. The gauge has climbed 49 percent from a more than five- year low on March 9.
Japan’s Nikkei 225 Stock Average gained 0.4 percent. Australia’s S&P/ASX 200 Index added 0.8 percent after the statistics bureau said first-quarter gross domestic product grew 0.4 percent from the previous quarter. The median estimate of 18 economists surveyed by Bloomberg was for a 0.2 percent decline.
South Korea’s Kospi fell as Woori Finance Holdings Co. sank 5.6 percent on concern the company may sell shares. Taiwan’s Prince Housing & Development Corp. and China Metal Products Co. fell by the daily limit in Taipei after their offices were searched by prosecutors.
Previously Owned Homes
Futures on the U.S. Standard & Poor’s 500 Index lost 0.3 percent. The gauge rose 0.2 percent yesterday as optimism the housing market is improving outweighed concern share sales will dilute stockholder value. A report yesterday showed the number of Americans signing contracts to buy previously owned homes climbed 6.7 percent in April, more than forecast and the fourth increase in five months.
Harvey Norman climbed 5.1 percent to A$3.28. Westpac added 1.6 percent to A$19.05.
Australia, helped by record interest-rate cuts, government spending and cash handouts to consumers, is one of only a few economies including China and India that expanded last quarter. Central bank Governor Glenn Stevens left the benchmark interest rate unchanged at 3 percent yesterday for a second month amid signs the economy is weathering the worst global slump since the Great Depression.
Global Recovery
Yesterday’s U.S. data added to signs of a global recovery. A Chinese purchasing manager’s index this week showed the country’s manufacturing industry expanded for a third month. Japan’s government last week raised its assessment of the economy for the first time in three years.
“The green shoots story continues to flourish,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “Despite the many encouraging signs, we still have many hurdles to overcome before we’re out of the woods.”
Nissan gained 1.5 percent to 603 yen. The company’s U.S. sales fell 33 percent in May, better than the 37 percent decline analysts expected.
Market share for Asian automakers slid to 45.6 percent last month, down 2.5 percentage points from a year earlier, according to Autodata Corp. It was the first drop since September 2008.
Woori Finance, South Korea’s largest financial company, dropped 5.6 percent to 10,800 won. Spokesman Song Seung Hyun said yesterday the company is looking at ways to raise capital, including a sale of new shares.
Share Sales
KB Financial Group Inc., which controls South Korea’s biggest bank, fell 3.5 percent to 41,500 won after spokesman Choi In Seok said the company is considering selling shares, among various measures for raising capital.
“Share sales raise concerns among existing shareholders about dilution of their stock value,” said Kim Joo Hyoung, who helps manage the equivalent of $324 million in equities at KTB Asset Management Co. in Seoul. “The companies are seeking to raise capital while the markets are relatively better.”
The rally drove the average valuation of companies on MSCI’s Asian index to 1.4 times the book value of assets on May 29, an increase of 17 percent from the end of 2008. Developing- nation stock funds attracted $12 billion of assets in the four weeks through May 27, according to EPFR Global, which tracks investment flows worldwide.
In Taipei, Prince Housing fell 6.9 percent to NT$17.50, while China Metal plunged 7 percent to NT$37.5.
The companies will cooperate in the investigations, they said in separate stock exchange filings yesterday, without giving details of the probes. The Taiex Index lost 0.9 percent today, paring its advance in the past three months to 55 percent.
“Prince Housing and China Metal were searched by prosecutors yesterday and investors are using this as an excuse to take a breather,” said Sam Hsieh, a Taipei-based fund manager at Fuh Hwa Investment Trust Co., who helps oversee the equivalent of $4.8 billion.
Asia Day Ahead: U.S. Stocks Rise; Pallotta to Close Raptor Fund
June 3 (Bloomberg) -- U.S. stocks rose for a fourth day as a rally in health-care companies and optimism that the housing market is improving overshadowed concern share sales will dilute earnings at lenders seeking to pay back bailout funds. James Pallotta is closing down Raptor Global Fund, which was spun off from Tudor Investment Corp.
TOP STORIES/MOST READ ON BLOOMBERG
Brazil Finds Debris in Search for Missing Airbus
Brazilian Air Force planes searching for an Air France Airbus that disappeared yesterday over the Atlantic Ocean with 228 people on board found floating wreckage including a plane seat, oil and other debris.
BlueMountain Set to Earn $817 Million on Credit Swaps
BlueMountain Capital Management LLC, the investment firm whose founders helped pioneer credit-default swaps, expects to make $817 million on derivatives trades that are working again as financial markets heal.
Bank of America Will ‘Comfortably’ Beat Capital Goal
Bank of America Corp., the biggest U.S. lender, has raised almost all of the $33.9 billion demanded by regulators after last month’s stress tests and now expects to “comfortably exceed” that number.
James Pallotta to Shut Down Raptor Global Hedge Fund
James Pallotta is closing down Raptor Global Fund, which was spun off from Tudor Investment Corp.
MAIN ECONOMIC RELEASES TODAY Australian 1Q GDP Seen Shrinking 0.2% Vs 4Q; Down 0.4% Vs Yr Ago Indonesia Central Bank May Cut Interest Rate to 7% From 7.25% Bank of Japan Board Member Kamezaki’s Speech in Shizuoka City Australia’s Performance of Services Index for May Is Released
MAIN ANALYST UPGRADES/DOWNGRADES *PTT EXPLORATION CUT TO ‘HOLD’ FROM ‘BUY’ AT TISCO SECURITIES *TAISEI CUT TO ‘NEUTRAL’ AT MERRILL *OLAM RAISED TO ‘BUY’ FROM ‘SELL’ AT RBS *NIPPON OIL CORP. RAISED TO ‘NEUTRAL’ AT TOKAI TOKYO *SANTEN PHARMACEUTICAL RAISED TO ‘BUY’ AT MERRILL LYNCH *THK RAISED TO ‘BUY’ FROM ‘HOLD’ AT KBC *GILDEMEISTER RAISED TO ‘BUY’ FROM ‘REDUCE’ AT BHF-BANK *TAKATA RAISED TO ‘NEUTRAL’ FROM ‘SELL’ BY UBS
ASIAN MARKETS
The Nikkei 225 futures contract due in June rose 30 points to 9,755. The Hang Seng Index futures for June fell 341 to 18,349. The S&P/ASX 200 Index futures contract due in June gained 16 to 3,975 at 6:59 a.m. in Sydney.
U.S. Stocks Gain as Homebuilders, Health-Care Shares Advance
U.S. stocks rose for a fourth day as a rally in health-care companies and optimism that the housing market is improving overshadowed concern share sales will dilute earnings at lenders seeking to pay back bailout funds.
Treasuries Rise as Yields Near Six-Month High Attract Investors
Treasury 10-year notes rose on speculation the surge yesterday that brought yields to levels not seen in six months was too large to sustain.
Dollar Declines as Nations Mull Reserve Currency Alternatives
The dollar weakened beyond $1.43 against the euro for the first time in 2009 on bets record U.S. borrowing will undermine the greenback, prompting nations to consider alternatives to the world’s main reserve currency.
European Stocks Are Little Changed; Barclays Declines, VW Gains
European stocks were little changed as concern a three- month rally has outpaced expectations for earnings and economic growth offset the biggest jump in pending U.S. home sales in seven years and a surge by automakers.
European Notes Gain as Unemployment Rises, Factory Prices Slip
European two-year government notes rose after a report showed unemployment in the region climbed in April to the highest level in almost a decade, prompting speculation the recession may worsen.
Gold Gains on Weaker Dollar; Silver Touches Nine-Month High
Gold rose in New York and London as the declining dollar increased the metal’s appeal as an alternative investment. Silver climbed to a nine-month high.
Crude Oil Is Little Changed as Dollar Weakens Against Euro
Crude oil rebounded from the day’s lows, finishing little changed, as the dollar weakened against the euro, bolstering the appeal of commodities as an alternative investment.
HIGHLIGHTS FROM NEWSPAPERS
Japan Airlines to Get 100 Billion Yen Loan, Nikkei Reports
Japan Airlines Corp. will get a 100 billion yen ($1.04 billion) loan from a syndicate of Japan’s three largest banks and the government’s Development Bank of Japan, Nikkei English News reported, citing people familiar with the matter.
TOP STORIES/MOST READ ON BLOOMBERG
Brazil Finds Debris in Search for Missing Airbus
Brazilian Air Force planes searching for an Air France Airbus that disappeared yesterday over the Atlantic Ocean with 228 people on board found floating wreckage including a plane seat, oil and other debris.
BlueMountain Set to Earn $817 Million on Credit Swaps
BlueMountain Capital Management LLC, the investment firm whose founders helped pioneer credit-default swaps, expects to make $817 million on derivatives trades that are working again as financial markets heal.
Bank of America Will ‘Comfortably’ Beat Capital Goal
Bank of America Corp., the biggest U.S. lender, has raised almost all of the $33.9 billion demanded by regulators after last month’s stress tests and now expects to “comfortably exceed” that number.
James Pallotta to Shut Down Raptor Global Hedge Fund
James Pallotta is closing down Raptor Global Fund, which was spun off from Tudor Investment Corp.
MAIN ECONOMIC RELEASES TODAY Australian 1Q GDP Seen Shrinking 0.2% Vs 4Q; Down 0.4% Vs Yr Ago Indonesia Central Bank May Cut Interest Rate to 7% From 7.25% Bank of Japan Board Member Kamezaki’s Speech in Shizuoka City Australia’s Performance of Services Index for May Is Released
MAIN ANALYST UPGRADES/DOWNGRADES *PTT EXPLORATION CUT TO ‘HOLD’ FROM ‘BUY’ AT TISCO SECURITIES *TAISEI CUT TO ‘NEUTRAL’ AT MERRILL *OLAM RAISED TO ‘BUY’ FROM ‘SELL’ AT RBS *NIPPON OIL CORP. RAISED TO ‘NEUTRAL’ AT TOKAI TOKYO *SANTEN PHARMACEUTICAL RAISED TO ‘BUY’ AT MERRILL LYNCH *THK RAISED TO ‘BUY’ FROM ‘HOLD’ AT KBC *GILDEMEISTER RAISED TO ‘BUY’ FROM ‘REDUCE’ AT BHF-BANK *TAKATA RAISED TO ‘NEUTRAL’ FROM ‘SELL’ BY UBS
ASIAN MARKETS
The Nikkei 225 futures contract due in June rose 30 points to 9,755. The Hang Seng Index futures for June fell 341 to 18,349. The S&P/ASX 200 Index futures contract due in June gained 16 to 3,975 at 6:59 a.m. in Sydney.
U.S. Stocks Gain as Homebuilders, Health-Care Shares Advance
U.S. stocks rose for a fourth day as a rally in health-care companies and optimism that the housing market is improving overshadowed concern share sales will dilute earnings at lenders seeking to pay back bailout funds.
Treasuries Rise as Yields Near Six-Month High Attract Investors
Treasury 10-year notes rose on speculation the surge yesterday that brought yields to levels not seen in six months was too large to sustain.
Dollar Declines as Nations Mull Reserve Currency Alternatives
The dollar weakened beyond $1.43 against the euro for the first time in 2009 on bets record U.S. borrowing will undermine the greenback, prompting nations to consider alternatives to the world’s main reserve currency.
European Stocks Are Little Changed; Barclays Declines, VW Gains
European stocks were little changed as concern a three- month rally has outpaced expectations for earnings and economic growth offset the biggest jump in pending U.S. home sales in seven years and a surge by automakers.
European Notes Gain as Unemployment Rises, Factory Prices Slip
European two-year government notes rose after a report showed unemployment in the region climbed in April to the highest level in almost a decade, prompting speculation the recession may worsen.
Gold Gains on Weaker Dollar; Silver Touches Nine-Month High
Gold rose in New York and London as the declining dollar increased the metal’s appeal as an alternative investment. Silver climbed to a nine-month high.
Crude Oil Is Little Changed as Dollar Weakens Against Euro
Crude oil rebounded from the day’s lows, finishing little changed, as the dollar weakened against the euro, bolstering the appeal of commodities as an alternative investment.
HIGHLIGHTS FROM NEWSPAPERS
Japan Airlines to Get 100 Billion Yen Loan, Nikkei Reports
Japan Airlines Corp. will get a 100 billion yen ($1.04 billion) loan from a syndicate of Japan’s three largest banks and the government’s Development Bank of Japan, Nikkei English News reported, citing people familiar with the matter.
Monday, June 1, 2009
Geithner Says China Has Confidence in U.S. Economy
June 2 (Bloomberg) -- Treasury Secretary Timothy Geithner said China, the biggest holder of U.S. Treasuries, has expressed confidence in the U.S. economy and the Obama administration’s actions to fight the recession.
“I’ve actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy,” Geithner said in an interview in Beijing with Chinese state media today.
China held $768 billion of Treasuries at the end of the first quarter. Premier Wen Jiabao called in March for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.
Yu Yongding, a former central bank adviser who acted as the interviewer for the China Daily newspaper, told Geithner: “I worry about details. We will be watching you very carefully.”
Treasury yields increased by the most in eight months yesterday as investors bet that the U.S. employment report on June 5 will show the economy has yet to pull out of the recession. They fell today.
“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
‘Sophisticated Understanding’
Geithner cited a “very sophisticated understanding” in China of why the U.S. is running up budget deficits in the short-term while also pledging to rein in borrowing over the medium term. He reiterated the U.S. commitment to cut spending and pull back government aid to the financial system once stability returns.
“We have a strong, independent central bank which is committed to keep inflation stable and low over time, we’re committed to a strong dollar, we have the deepest, most liquid Treasury markets in the world and we will do everything that is necessary to try to make sure we’re sustaining confidence in U.S. financial markets, not just in the United States but around the world.”
When asked by Yu whether there will be sufficient demand for all the debt the U.S. will be selling this year, Geithner responded “I believe there will be.”
Geithner also backed the leadership of Federal Reserve Chairman Ben S. Bernanke, in a separate interview today with China Daily, to be posted on its website.
‘Impressive Job’
Bernanke “has done an enormously impressive job in the worst financial crisis in decades, working with central banks not just in China but around the world, making sure that markets have liquidity, that monetary policy is appropriately expansive,” Geithner said. “I am completely confident, as should you be, that he will have not just the will but the ability to bring this down so that we achieve the obligation of making sure that inflation is low and stable in the United States going forward.”
Geithner said some Federal Reserve programs to aid the financial system already have begun to shrink as conditions stabilize.
“If you look carefully at what’s happened already to the exceptional financial programs they’ve put in place, they have started to come down as conditions in the financial system have normalized,” Geithner said. “They were designed to have that basic self-liquidating capacity. And that process has already started.”
“I’ve actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy,” Geithner said in an interview in Beijing with Chinese state media today.
China held $768 billion of Treasuries at the end of the first quarter. Premier Wen Jiabao called in March for the U.S. “to guarantee the safety of China’s assets” and central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.
Yu Yongding, a former central bank adviser who acted as the interviewer for the China Daily newspaper, told Geithner: “I worry about details. We will be watching you very carefully.”
Treasury yields increased by the most in eight months yesterday as investors bet that the U.S. employment report on June 5 will show the economy has yet to pull out of the recession. They fell today.
“China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
‘Sophisticated Understanding’
Geithner cited a “very sophisticated understanding” in China of why the U.S. is running up budget deficits in the short-term while also pledging to rein in borrowing over the medium term. He reiterated the U.S. commitment to cut spending and pull back government aid to the financial system once stability returns.
“We have a strong, independent central bank which is committed to keep inflation stable and low over time, we’re committed to a strong dollar, we have the deepest, most liquid Treasury markets in the world and we will do everything that is necessary to try to make sure we’re sustaining confidence in U.S. financial markets, not just in the United States but around the world.”
When asked by Yu whether there will be sufficient demand for all the debt the U.S. will be selling this year, Geithner responded “I believe there will be.”
Geithner also backed the leadership of Federal Reserve Chairman Ben S. Bernanke, in a separate interview today with China Daily, to be posted on its website.
‘Impressive Job’
Bernanke “has done an enormously impressive job in the worst financial crisis in decades, working with central banks not just in China but around the world, making sure that markets have liquidity, that monetary policy is appropriately expansive,” Geithner said. “I am completely confident, as should you be, that he will have not just the will but the ability to bring this down so that we achieve the obligation of making sure that inflation is low and stable in the United States going forward.”
Geithner said some Federal Reserve programs to aid the financial system already have begun to shrink as conditions stabilize.
“If you look carefully at what’s happened already to the exceptional financial programs they’ve put in place, they have started to come down as conditions in the financial system have normalized,” Geithner said. “They were designed to have that basic self-liquidating capacity. And that process has already started.”
Indian State-Backed Company Bonds Offer Yield Value, HSBC Says
June 2 (Bloomberg) -- Bonds sold by Indian government- backed companies are where investors looking for yields of as much as 10 percent should put their money, according HSBC Holdings Plc.
“It’s a function of your time horizon and risk tolerance, but if you can get a 9 to 10 percent yield on Indian government risk you have to be thinking about that,” Tarun Kataria, HSBC’s global banking and markets head for India, said in a phone interview from Mumbai.
With Asia’s third-largest economy growing at 5.8 percent in the March quarter, better than the 5 percent economists were expecting, India “probably with the exception of China, remains the only 5 percent growth story globally,” Kataria said.
India’s government is stepping up spending to spur growth and has said it plans to raise a record 2.41 trillion rupees ($51 billion) from bonds sales in the six months to Sept. 30. The nation’s gross domestic product growth rate may rise to 6.2 percent in 2010 on expansion of the financial services, real estate and business services industries, Morgan Stanley said in a May 29 note to clients.
Bonds sold by State Bank of India Ltd. March 6 and maturing in 2018 are yielding 8.6 percent, while 10-year bonds sold by NTPC Ltd., India’s biggest electricity producer, May 5 are yielding 8.8 percent, according to data compiled by Bloomberg. Similar-maturity Indian government bonds are yielding 6.9 percent, the data show.
Lack of liquidity in India’s bond market is the one downside to its development, Kataria said.
Secondary Market
“Today it is basically a buy and hold market. At some point supply and demand dynamics will encourage secondary market trading,” he said, adding most buyers are mutual funds and life insurance companies.
Indian borrowers sold 538 billion rupees of bonds in the first five months of this year, 54 percent more than in the same period of 2008, Bloomberg data show. Money raised from share sales fell 63 percent through May 31 and the aggregate value of syndicated loans declined 10 percent.
India’s central bank increased the limit on ownership of corporate bonds by foreign investors to $15 billion from $6 billion in January. Last month it asked banks to stop giving guarantees to bonds sold by companies, saying such measures “impede the development of a genuine corporate debt market.”
“It’s a function of your time horizon and risk tolerance, but if you can get a 9 to 10 percent yield on Indian government risk you have to be thinking about that,” Tarun Kataria, HSBC’s global banking and markets head for India, said in a phone interview from Mumbai.
With Asia’s third-largest economy growing at 5.8 percent in the March quarter, better than the 5 percent economists were expecting, India “probably with the exception of China, remains the only 5 percent growth story globally,” Kataria said.
India’s government is stepping up spending to spur growth and has said it plans to raise a record 2.41 trillion rupees ($51 billion) from bonds sales in the six months to Sept. 30. The nation’s gross domestic product growth rate may rise to 6.2 percent in 2010 on expansion of the financial services, real estate and business services industries, Morgan Stanley said in a May 29 note to clients.
Bonds sold by State Bank of India Ltd. March 6 and maturing in 2018 are yielding 8.6 percent, while 10-year bonds sold by NTPC Ltd., India’s biggest electricity producer, May 5 are yielding 8.8 percent, according to data compiled by Bloomberg. Similar-maturity Indian government bonds are yielding 6.9 percent, the data show.
Lack of liquidity in India’s bond market is the one downside to its development, Kataria said.
Secondary Market
“Today it is basically a buy and hold market. At some point supply and demand dynamics will encourage secondary market trading,” he said, adding most buyers are mutual funds and life insurance companies.
Indian borrowers sold 538 billion rupees of bonds in the first five months of this year, 54 percent more than in the same period of 2008, Bloomberg data show. Money raised from share sales fell 63 percent through May 31 and the aggregate value of syndicated loans declined 10 percent.
India’s central bank increased the limit on ownership of corporate bonds by foreign investors to $15 billion from $6 billion in January. Last month it asked banks to stop giving guarantees to bonds sold by companies, saying such measures “impede the development of a genuine corporate debt market.”
Australia May Keep Key Rate Unchanged at 3% as Recession Eases
June 2 (Bloomberg) -- Australia may leave interest rates unchanged today for a second month to gauge whether the lowest borrowing costs in 49 years will revive an economy that is probably in its first recession in two decades.
Central bank Governor Glenn Stevens will keep the overnight cash rate target at 3 percent at 2:30 p.m. in Sydney after cutting it in April for the sixth time since early September, according to all 19 analysts surveyed by Bloomberg News.
Australia is in a good position to benefit from a global recovery as rate cuts fuel demand and a pickup in China boosts commodity exports, Stevens said last month. A report tomorrow is forecast by economists to show the economy shrank 0.2 percent last quarter, which is less than the Japan economy’s 4 percent slump, a 1.9 percent drop in the U.K.’s gross domestic product and a 2.5 percent contraction in the 16-member euro region’s GDP.
“The Reserve Bank has become noticeably more comfortable with the outlook for the domestic economy in recent months,” said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. “Nevertheless, the bank retains an easing bias and is watching economic and financial data for anything which may impinge on a recovery.”
GDP decreased 0.2 percent from the fourth quarter, confirming the economy is in a recession for the first time since 1991 following the previous quarter’s 0.5 percent contraction, according to the median forecast of 18 economists surveyed by Bloomberg. The figures will be published tomorrow.
‘Expansionary Policy’
Stevens and his board cut the benchmark interest rate by a record 4.25 percentage points between early September and April.
Households, whose average mortgage is about A$250,000 ($201,500), are paying A$7,000 a year less than they were at the start of September, which is equal to about 8 percent of family incomes, according to Reserve Bank calculations.
“Certainly for the household sector, this is an expansionary monetary policy,” Stevens said on May 19. “The way households are responding confirms that.”
Australian retail sales advanced for a second month in April, new home sales gained for a fourth consecutive month and the manufacturing industry’s contraction eased in May, according to reports released yesterday.
Woolworths Ltd., Australia’s largest retailer, said last month that sales surged 6.5 percent to A$12.3 billion in the three months ended April 5. Metcash Ltd., the nation’s biggest grocery wholesaler, said yesterday that revenue climbed 8.5 percent in the year through April 30.
Home-building approvals rose 2 percent in April, the third straight gain, according to the median estimate of 17 economists surveyed by Bloomberg ahead of today’s report on housing permits.
Business Recession
In contrast, business investment tumbled at the fastest pace on record in the first quarter, dropping 8.9 percent from the previous three months. Corporate profits slumped 7.2 percent.
“Even if first-quarter GDP is a positive number, economic conditions are recessionary, with firms slashing investment spending and unemployment set to soar,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney.
A separate report to be published on June 4 will show the trade surplus narrowed in April to A$1.7 billion from A$2.5 billion, according to the median estimate of 17 economists.
“There is no doubt that further interest rate cuts are necessary,” said Annette Beacher, a senior economist at TD Securities Ltd. in Singapore.
“The cost of the Reserve Bank holding rates so high is the surge in the Australia dollar, which is now at levels that will inevitably strangle exporters and deepen the recession.”
The Australian dollar has climbed a record 25 percent in the three months ended May 31, which reduces exporters’ incomes when their offshore earnings are brought home. Overseas shipments are equivalent to about 20 percent of the nation’s GDP.
Global Rates
Policy makers in Europe and the U.K. are expected to join Australia in keeping borrowing costs unchanged this week. The European Central Bank will leave its benchmark rate at a record low of 1 percent on June 4, and the Bank of England will keep its rate at 0.5 percent, economists predict.
“We don’t expect the next move in Australia until the August board meeting, when a cut of half a percentage point is entirely possible,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney. “The bank would see very limited risks in over stimulating and, moreover, would be mindful of downside risks given the tentative pace of recovery.”
Investors expect Australia’s overnight cash rate target will be little changed in 12 months time, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the overnight cash rate target will be 4 basis points higher in 12 months, the index showed at 4:56 p.m. yesterday in Sydney. At the start of May, they tipped 37 basis points of reductions. A basis point is 0.01 percentage point.
While Australia “is well placed to take part in a renewed international expansion,” most observers think that the early part of any recovery “will be characterized by pretty slow growth,” Governor Stevens said last month.
Central bank Governor Glenn Stevens will keep the overnight cash rate target at 3 percent at 2:30 p.m. in Sydney after cutting it in April for the sixth time since early September, according to all 19 analysts surveyed by Bloomberg News.
Australia is in a good position to benefit from a global recovery as rate cuts fuel demand and a pickup in China boosts commodity exports, Stevens said last month. A report tomorrow is forecast by economists to show the economy shrank 0.2 percent last quarter, which is less than the Japan economy’s 4 percent slump, a 1.9 percent drop in the U.K.’s gross domestic product and a 2.5 percent contraction in the 16-member euro region’s GDP.
“The Reserve Bank has become noticeably more comfortable with the outlook for the domestic economy in recent months,” said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. “Nevertheless, the bank retains an easing bias and is watching economic and financial data for anything which may impinge on a recovery.”
GDP decreased 0.2 percent from the fourth quarter, confirming the economy is in a recession for the first time since 1991 following the previous quarter’s 0.5 percent contraction, according to the median forecast of 18 economists surveyed by Bloomberg. The figures will be published tomorrow.
‘Expansionary Policy’
Stevens and his board cut the benchmark interest rate by a record 4.25 percentage points between early September and April.
Households, whose average mortgage is about A$250,000 ($201,500), are paying A$7,000 a year less than they were at the start of September, which is equal to about 8 percent of family incomes, according to Reserve Bank calculations.
“Certainly for the household sector, this is an expansionary monetary policy,” Stevens said on May 19. “The way households are responding confirms that.”
Australian retail sales advanced for a second month in April, new home sales gained for a fourth consecutive month and the manufacturing industry’s contraction eased in May, according to reports released yesterday.
Woolworths Ltd., Australia’s largest retailer, said last month that sales surged 6.5 percent to A$12.3 billion in the three months ended April 5. Metcash Ltd., the nation’s biggest grocery wholesaler, said yesterday that revenue climbed 8.5 percent in the year through April 30.
Home-building approvals rose 2 percent in April, the third straight gain, according to the median estimate of 17 economists surveyed by Bloomberg ahead of today’s report on housing permits.
Business Recession
In contrast, business investment tumbled at the fastest pace on record in the first quarter, dropping 8.9 percent from the previous three months. Corporate profits slumped 7.2 percent.
“Even if first-quarter GDP is a positive number, economic conditions are recessionary, with firms slashing investment spending and unemployment set to soar,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney.
A separate report to be published on June 4 will show the trade surplus narrowed in April to A$1.7 billion from A$2.5 billion, according to the median estimate of 17 economists.
“There is no doubt that further interest rate cuts are necessary,” said Annette Beacher, a senior economist at TD Securities Ltd. in Singapore.
“The cost of the Reserve Bank holding rates so high is the surge in the Australia dollar, which is now at levels that will inevitably strangle exporters and deepen the recession.”
The Australian dollar has climbed a record 25 percent in the three months ended May 31, which reduces exporters’ incomes when their offshore earnings are brought home. Overseas shipments are equivalent to about 20 percent of the nation’s GDP.
Global Rates
Policy makers in Europe and the U.K. are expected to join Australia in keeping borrowing costs unchanged this week. The European Central Bank will leave its benchmark rate at a record low of 1 percent on June 4, and the Bank of England will keep its rate at 0.5 percent, economists predict.
“We don’t expect the next move in Australia until the August board meeting, when a cut of half a percentage point is entirely possible,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney. “The bank would see very limited risks in over stimulating and, moreover, would be mindful of downside risks given the tentative pace of recovery.”
Investors expect Australia’s overnight cash rate target will be little changed in 12 months time, according to a Credit Suisse Group AG index based on swaps trading.
Traders forecast the overnight cash rate target will be 4 basis points higher in 12 months, the index showed at 4:56 p.m. yesterday in Sydney. At the start of May, they tipped 37 basis points of reductions. A basis point is 0.01 percentage point.
While Australia “is well placed to take part in a renewed international expansion,” most observers think that the early part of any recovery “will be characterized by pretty slow growth,” Governor Stevens said last month.
Sunday, May 31, 2009
India Government to Release April Export Data Today: Week Ahead
June 1 (Bloomberg) -- India’s government will today release the trade data for April amid concerns that the nation’s exports may continue its longest declining streak in a decade.
Exports slumped 33 percent, the most on record, in March as the worst global recession since World War II damped demand for Indian products. The drop is likely to continue until September, Trade Secretary Gopal K. Pillai said April 13.
Falling overseas sales may cost India about 10 million jobs, the Federation of Indian Export Organisations, a lobby group, estimates. Exports, which account for about 15 percent of the Indian economy, grew 3.4 percent to $168.7 billion in the fiscal year ended March 31, missing a $200 billion target set by the government before the collapse of Lehman Brothers Holdings Inc. accelerated the world financial and economic slump.
The government expects exports to total $170 billion in the year that started April 1.
India’s parliament will convene today for the first session since elections in April and May for seven sittings, with the swearing in of newly elected members of the lower house, or Lok Sabha. The speaker of the house is due to be elected on the third day of the session. The Congress party’s Meira Kumar is a front runner for the post, the Hindu reported yesterday.
President Pratibha Patil is due to address a joint session of parliament on June 4, during which she will unveil the plans of the government led by Prime Minister Manmohan Singh.
Rupee, Bonds
India’s rupee completed its best month on record in May after optimism Singh will revive stalled reforms fueled a rally in stocks and attracted funds from overseas. The rupee closed at a five-month high of 47.0875 to a dollar, according to data compiled by Bloomberg. Its 6.4 percent gain last month was the best performance since at least 1973.
Ten-year bonds last week had their biggest weekly decline in two months on concern increasing supply will reduce demand for existing securities. Benchmark yields climbed for a fifth week, the longest stretch since June 2008. The yield on the 6.05 percent note due February 2019 climbed 21 basis points during the week to 6.7 percent. A basis point is 0.01 percentage point.
India’s benchmark stock index rose 5.3 percent last week, extending its winning streak to 12 weeks. The gain helped the Bombay Stock Exchange’s Sensitive Index cap its best month in 17 years. Reports that the government would boost spending to spur growth and better-than-expected expansion of the gross domestic product in the January-March quarter helped the advance.
Ranbaxy Laboratories Ltd., which rose 27 percent, Sterlite Industries (India) Ltd., which advanced 23 percent, and DLF Ltd., higher by 22 percent, were the top performers on the Sensex.
Exports slumped 33 percent, the most on record, in March as the worst global recession since World War II damped demand for Indian products. The drop is likely to continue until September, Trade Secretary Gopal K. Pillai said April 13.
Falling overseas sales may cost India about 10 million jobs, the Federation of Indian Export Organisations, a lobby group, estimates. Exports, which account for about 15 percent of the Indian economy, grew 3.4 percent to $168.7 billion in the fiscal year ended March 31, missing a $200 billion target set by the government before the collapse of Lehman Brothers Holdings Inc. accelerated the world financial and economic slump.
The government expects exports to total $170 billion in the year that started April 1.
India’s parliament will convene today for the first session since elections in April and May for seven sittings, with the swearing in of newly elected members of the lower house, or Lok Sabha. The speaker of the house is due to be elected on the third day of the session. The Congress party’s Meira Kumar is a front runner for the post, the Hindu reported yesterday.
President Pratibha Patil is due to address a joint session of parliament on June 4, during which she will unveil the plans of the government led by Prime Minister Manmohan Singh.
Rupee, Bonds
India’s rupee completed its best month on record in May after optimism Singh will revive stalled reforms fueled a rally in stocks and attracted funds from overseas. The rupee closed at a five-month high of 47.0875 to a dollar, according to data compiled by Bloomberg. Its 6.4 percent gain last month was the best performance since at least 1973.
Ten-year bonds last week had their biggest weekly decline in two months on concern increasing supply will reduce demand for existing securities. Benchmark yields climbed for a fifth week, the longest stretch since June 2008. The yield on the 6.05 percent note due February 2019 climbed 21 basis points during the week to 6.7 percent. A basis point is 0.01 percentage point.
India’s benchmark stock index rose 5.3 percent last week, extending its winning streak to 12 weeks. The gain helped the Bombay Stock Exchange’s Sensitive Index cap its best month in 17 years. Reports that the government would boost spending to spur growth and better-than-expected expansion of the gross domestic product in the January-March quarter helped the advance.
Ranbaxy Laboratories Ltd., which rose 27 percent, Sterlite Industries (India) Ltd., which advanced 23 percent, and DLF Ltd., higher by 22 percent, were the top performers on the Sensex.
Asian Stocks May Rise 8% Before Declining: Technical Analysis
June 1 (Bloomberg) -- Asian stocks may gain a further 8 percent before a “correction” that will pave the way for the next leg of a rally in regional markets, Elliott Wave International Inc. said.
The MSCI Asia-Pacific Index has retraced about 38.2 percent of the drop from the record in November 2007 on the logarithmic scale, and may rise to 110, the 50 percent level indicated by a Fibonacci chart, Elliott Wave International said in its June Asian-Pacific Financial Forecast report. The index may then retreat before rebounding in a “multi-month rally,” it added.
The MSCI regional index slipped 0.1 percent to 101.94 as of 8:08 a.m. in Singapore after jumping 12 percent last month. The measure has climbed 14 percent this year, rebounding from last year’s record 43 percent slump.
“Most Asian-Pacific indexes are losing momentum but their rally patterns appear incomplete,” the Gainesville, Georgia- based market researcher said in the report that was dated May 29. “A correction lasting at least a few weeks should begin by late June.”
Elliott Wave Theory, created by U.S. market analyst Ralph Elliott in 1938, attempts to predict future price moves by dividing past trends into sections, or waves, and calculating changes in value.
Elliott Wave International said in a May 1 report that Asian stocks are on the “final leg” of a rally from their March lows and face a “correction” by the middle of the month.
India Call
India is among markets that may give up some gains as momentum and volumes slow, the researcher said last month. That will be a correction amid the market’s longer bull market that can last for 15 years, the forecaster has predicted.
The benchmark Bombay Stock Exchange Sensitive Index soared 28 percent in May, its best month in 17 years, after the ruling Congress party had its biggest election victory in two decades.
“We didn’t pay enough attention to our own admonition that in a bull market, surprises come to the upside,” Elliott Wave International wrote in its June report. “Longer term, the recent price action was positive for our long-term bullish forecast.”
The MSCI Asia-Pacific Index has retraced about 38.2 percent of the drop from the record in November 2007 on the logarithmic scale, and may rise to 110, the 50 percent level indicated by a Fibonacci chart, Elliott Wave International said in its June Asian-Pacific Financial Forecast report. The index may then retreat before rebounding in a “multi-month rally,” it added.
The MSCI regional index slipped 0.1 percent to 101.94 as of 8:08 a.m. in Singapore after jumping 12 percent last month. The measure has climbed 14 percent this year, rebounding from last year’s record 43 percent slump.
“Most Asian-Pacific indexes are losing momentum but their rally patterns appear incomplete,” the Gainesville, Georgia- based market researcher said in the report that was dated May 29. “A correction lasting at least a few weeks should begin by late June.”
Elliott Wave Theory, created by U.S. market analyst Ralph Elliott in 1938, attempts to predict future price moves by dividing past trends into sections, or waves, and calculating changes in value.
Elliott Wave International said in a May 1 report that Asian stocks are on the “final leg” of a rally from their March lows and face a “correction” by the middle of the month.
India Call
India is among markets that may give up some gains as momentum and volumes slow, the researcher said last month. That will be a correction amid the market’s longer bull market that can last for 15 years, the forecaster has predicted.
The benchmark Bombay Stock Exchange Sensitive Index soared 28 percent in May, its best month in 17 years, after the ruling Congress party had its biggest election victory in two decades.
“We didn’t pay enough attention to our own admonition that in a bull market, surprises come to the upside,” Elliott Wave International wrote in its June report. “Longer term, the recent price action was positive for our long-term bullish forecast.”
Asian Stocks Advance on China Manufacturing, Commodity Prices
June 1 (Bloomberg) -- Asian stocks rose, extending the longest monthly winning streak since the financial crisis began in 2007, as an expansion in Chinese manufacturing for a third month drove commodity prices higher.
Mitsubishi Corp., a trading house that gets more than half of its profit from commodities, jumped 5.6 percent in Tokyo. Cnooc Ltd., China’s largest offshore oil producer, gained 4.7 percent as oil climbed to a seven-month high. BOC Hong Kong (Holdings) Ltd., a Bank of China Ltd. unit, surged 7.3 percent after Deutsche Bank AG recommended investors buy the stock.
“China has been the only beacon in the intense global economic storm we’ve found ourselves in,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management in Sydney. “Continuing strength in China’s economy bodes very well for the Asian region generally.”
The MSCI Asia Pacific Index advanced 1.5 percent to 103.57 at 12:01 p.m. in Tokyo. The gauge has surged 47 percent since falling to a more than five-year low on March 9 on speculation the worst of the financial crisis has passed.
The Nikkei 225 Stock Average rose 0.8 percent. Australia’s S&P/ASX 200 Index gained 1.3 percent as the government said retail sales rose for a second month. China’s Shanghai Composite Index jumped 2.3 percent after the Federation of Logistics and Purchasing reported a reading of 53.1 for its Purchasing Manager’s Index in May. A result above 50 indicates an expansion.
Sino Land Co. added 1.8 percent in Hong Kong, leading gains among the city’s real-estate developers, after saying it will increase prices at one of its projects. Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line by sales, jumped 7.7 percent as shipping rates climbed for a 20th day.
Oil, Copper Prices
Futures on the Standard & Poor’s 500 Index gained 0.5 percent, erasing an earlier 0.2 percent drop. The gauge climbed 1.4 percent in New York on May 29, capping a three-month rally for the index, as commodities climbed on optimism an economic recovery will boost demand for fuel, metals and crops.
Crude oil futures in New York climbed as much as 1 percent $66.95 a barrel in after-hours trading, the highest since Nov. 5. The price advanced 30 percent in May, the biggest monthly increase since March 1999. Copper prices rose 2.8 percent on May 29, capping a 7.3 percent gain in May.
Mitsubishi gained 5.6 percent to 1,900 yen in Tokyo. Its closest rival Mitsui & Co. climbed 4.6 percent to 1,272. BHP Billiton Ltd., the world’s largest mining company, added 2.6 percent to A$35.57 in Sydney.
Cnooc climbed 4.7 percent to HK$10.68. Jiangxi Copper Co., China’s largest producer of the metal, surged 8.4 percent to 30.90 yuan in Shanghai.
Stimulus Package
Loan growth, accelerating fixed-asset investment and rising retail sales in China have spurred confidence that Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus package is working. In Japan, the government last week raised its assessment of the economy for the first time in three years.
Optimism that government spending and interest-rate cuts will support a global economic recovery has helped drive the global stock rally since March. The average valuation of companies on MSCI’s Asian index climbed to 1.4 times the book value of assets on May 29, an increase of 17 percent from the end of 2008.
The MSCI gauge climbed 12 percent in May, its third monthly advance, and the longest winning streak since Bear Stearns Cos. filed for bankruptcy protection in July 2007 for two hedge funds.
BOC Hong Kong surged 7.3 percent to HK$13.24. Deutsche Bank raised its recommendation on the stock to “buy” from “hold,” saying it was the top pick among Hong Kong banks amid an increase in return on equity.
Baltic Dry
Sino Land rose 1.8 percent to HK$14.64. The company said it will lift prices at its Lake Silver development by as much as 5 percent after selling more than 1,600 apartments since May 27.
Kawasaki Kisen, Japan’s third-largest shipping line by sales, advanced 7.7 percent to 464 yen in Tokyo. STX Pan Ocean Ltd., South Korea’s biggest bulk carrier, added 3.8 percent to 13,700 won. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, rose 5.3 percent to HK$11.16.
The Baltic Dry Index, which measures the cost of shipping commodities, rose 5.9 percent in London on May 29, its 20th day of gains. The gauge climbed 96 percent in May, its biggest monthly advance on record.
Mitsubishi Corp., a trading house that gets more than half of its profit from commodities, jumped 5.6 percent in Tokyo. Cnooc Ltd., China’s largest offshore oil producer, gained 4.7 percent as oil climbed to a seven-month high. BOC Hong Kong (Holdings) Ltd., a Bank of China Ltd. unit, surged 7.3 percent after Deutsche Bank AG recommended investors buy the stock.
“China has been the only beacon in the intense global economic storm we’ve found ourselves in,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management in Sydney. “Continuing strength in China’s economy bodes very well for the Asian region generally.”
The MSCI Asia Pacific Index advanced 1.5 percent to 103.57 at 12:01 p.m. in Tokyo. The gauge has surged 47 percent since falling to a more than five-year low on March 9 on speculation the worst of the financial crisis has passed.
The Nikkei 225 Stock Average rose 0.8 percent. Australia’s S&P/ASX 200 Index gained 1.3 percent as the government said retail sales rose for a second month. China’s Shanghai Composite Index jumped 2.3 percent after the Federation of Logistics and Purchasing reported a reading of 53.1 for its Purchasing Manager’s Index in May. A result above 50 indicates an expansion.
Sino Land Co. added 1.8 percent in Hong Kong, leading gains among the city’s real-estate developers, after saying it will increase prices at one of its projects. Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line by sales, jumped 7.7 percent as shipping rates climbed for a 20th day.
Oil, Copper Prices
Futures on the Standard & Poor’s 500 Index gained 0.5 percent, erasing an earlier 0.2 percent drop. The gauge climbed 1.4 percent in New York on May 29, capping a three-month rally for the index, as commodities climbed on optimism an economic recovery will boost demand for fuel, metals and crops.
Crude oil futures in New York climbed as much as 1 percent $66.95 a barrel in after-hours trading, the highest since Nov. 5. The price advanced 30 percent in May, the biggest monthly increase since March 1999. Copper prices rose 2.8 percent on May 29, capping a 7.3 percent gain in May.
Mitsubishi gained 5.6 percent to 1,900 yen in Tokyo. Its closest rival Mitsui & Co. climbed 4.6 percent to 1,272. BHP Billiton Ltd., the world’s largest mining company, added 2.6 percent to A$35.57 in Sydney.
Cnooc climbed 4.7 percent to HK$10.68. Jiangxi Copper Co., China’s largest producer of the metal, surged 8.4 percent to 30.90 yuan in Shanghai.
Stimulus Package
Loan growth, accelerating fixed-asset investment and rising retail sales in China have spurred confidence that Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus package is working. In Japan, the government last week raised its assessment of the economy for the first time in three years.
Optimism that government spending and interest-rate cuts will support a global economic recovery has helped drive the global stock rally since March. The average valuation of companies on MSCI’s Asian index climbed to 1.4 times the book value of assets on May 29, an increase of 17 percent from the end of 2008.
The MSCI gauge climbed 12 percent in May, its third monthly advance, and the longest winning streak since Bear Stearns Cos. filed for bankruptcy protection in July 2007 for two hedge funds.
BOC Hong Kong surged 7.3 percent to HK$13.24. Deutsche Bank raised its recommendation on the stock to “buy” from “hold,” saying it was the top pick among Hong Kong banks amid an increase in return on equity.
Baltic Dry
Sino Land rose 1.8 percent to HK$14.64. The company said it will lift prices at its Lake Silver development by as much as 5 percent after selling more than 1,600 apartments since May 27.
Kawasaki Kisen, Japan’s third-largest shipping line by sales, advanced 7.7 percent to 464 yen in Tokyo. STX Pan Ocean Ltd., South Korea’s biggest bulk carrier, added 3.8 percent to 13,700 won. China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, rose 5.3 percent to HK$11.16.
The Baltic Dry Index, which measures the cost of shipping commodities, rose 5.9 percent in London on May 29, its 20th day of gains. The gauge climbed 96 percent in May, its biggest monthly advance on record.
Unemployment Probably Topped 9% in May: U.S. Economy Preview
May 31 (Bloomberg) -- Unemployment in the U.S. probably surpassed 9 percent in May for the first time in more than 25 years, underscoring forecasts that the economy will be slow to pull out of the worst recession in half a century, economists said before a report this week.
The jobless rate climbed to 9.2 percent, the highest level since September 1983, according to the median estimate in a Bloomberg News survey ahead of the Labor Department’s June 5 report. Other data may show manufacturing and service industries shrank at a slower pace and consumer spending dropped.
“The economy is decaying at a slower rate and that is the best you can say,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “I can’t tell you we are out of the woods yet.”
Economists forecast the jobless rate will head to almost 10 percent by the end of the year, depriving Americans of the income needed to propel spending and stoke a vigorous recovery. Access to credit will likely also be limited as record defaults and foreclosures make banks reluctant to lend.
The unemployment rate is predicted to rise from 8.9 percent in April. Payrolls probably fell by 521,000 this month after declining by 539,000 in April, the survey also showed. Job losses peaked at 741,000 in January, the most since 1949.
The economy has lost 5.7 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era.
Auto Slump
Restructuring at automakers including General Motors Corp. and Chrysler LLC may generate more job losses. AutoNation Inc., the largest U.S. new-vehicle retailer, has said it will close seven showrooms in line with bankrupt Chrysler’s termination of 789 dealerships.
Economists project the Labor report will show manufacturers cut payrolls by 150,000 in May, after slashing them by 149,000 in April.
Workforce reductions aren’t limited to the auto industry. American Express Co., the largest U.S. credit-card company by purchases, said on May 18 it will cut 4,000 positions as cardholders squeezed by rising unemployment fail to pay debts.
“We continue to be very cautious about the economic outlook,” Chief Executive Officer Kenneth Chenault said in a statement.
Consumer spending has taken a turn for the worse after improving in the first quarter. Purchases fell in April for a second month, and incomes declined for the sixth time in the last seven months, economists project a Commerce Department report tomorrow will show.
Short-Lived Gain
Household purchases rose at a 1.5 percent annual rate from January to March, less than previously estimated, after plunging at a 4.3 percent annual rate in the last three months of 2008, revised figures from Commerce last week showed.
Gross domestic product shrank at a 5.7 percent pace in the first quarter, less than the government previously estimated in April, the figures also showed. Following the 6.3 percent pace of decline in the last three months of 2008, the drop capped the worst six-month performance in five decades.
Also tomorrow, a report may show manufacturing shrank this month at a slower pace. The Institute for Supply Management’s factory index rose to 42 in May from 40.1 in April, according to the Bloomberg survey median. Readings below 50 signal contraction.
Underscoring the improvement at manufacturers, orders placed with factories probably rose 0.8 percent in April, the second gain this year, economists predicted ahead of a Commerce Department report June 3.
Service Industries
An ISM report the same day may show service industries, which make up almost 90 percent of the economy, are also stabilizing. The Tempe, Arizona-based group’s gauge of non- manufacturing businesses probably increased to 45 in May from 43.7 the prior month, according to the Bloomberg survey.
Stocks have surged and Treasuries have dropped amid reports showing the worst of the downturn may have passed. The Standard & Poor’s 500 Index has gained 36 percent since March 9, when it hit the lowest level in more than 12 years, closing at 919.14 on May 29. Yields on the benchmark 10-year note climbed to 3.74 percent last week from 2.86 percent during that period.
In other reports this week, the National Association of Realtors may report on June 2 that the number of Americans who signed contracts to buy previously owned homes rose in April for the third straight month as buyers took advantage of lower prices, according to the Bloomberg survey median.
The jobless rate climbed to 9.2 percent, the highest level since September 1983, according to the median estimate in a Bloomberg News survey ahead of the Labor Department’s June 5 report. Other data may show manufacturing and service industries shrank at a slower pace and consumer spending dropped.
“The economy is decaying at a slower rate and that is the best you can say,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “I can’t tell you we are out of the woods yet.”
Economists forecast the jobless rate will head to almost 10 percent by the end of the year, depriving Americans of the income needed to propel spending and stoke a vigorous recovery. Access to credit will likely also be limited as record defaults and foreclosures make banks reluctant to lend.
The unemployment rate is predicted to rise from 8.9 percent in April. Payrolls probably fell by 521,000 this month after declining by 539,000 in April, the survey also showed. Job losses peaked at 741,000 in January, the most since 1949.
The economy has lost 5.7 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era.
Auto Slump
Restructuring at automakers including General Motors Corp. and Chrysler LLC may generate more job losses. AutoNation Inc., the largest U.S. new-vehicle retailer, has said it will close seven showrooms in line with bankrupt Chrysler’s termination of 789 dealerships.
Economists project the Labor report will show manufacturers cut payrolls by 150,000 in May, after slashing them by 149,000 in April.
Workforce reductions aren’t limited to the auto industry. American Express Co., the largest U.S. credit-card company by purchases, said on May 18 it will cut 4,000 positions as cardholders squeezed by rising unemployment fail to pay debts.
“We continue to be very cautious about the economic outlook,” Chief Executive Officer Kenneth Chenault said in a statement.
Consumer spending has taken a turn for the worse after improving in the first quarter. Purchases fell in April for a second month, and incomes declined for the sixth time in the last seven months, economists project a Commerce Department report tomorrow will show.
Short-Lived Gain
Household purchases rose at a 1.5 percent annual rate from January to March, less than previously estimated, after plunging at a 4.3 percent annual rate in the last three months of 2008, revised figures from Commerce last week showed.
Gross domestic product shrank at a 5.7 percent pace in the first quarter, less than the government previously estimated in April, the figures also showed. Following the 6.3 percent pace of decline in the last three months of 2008, the drop capped the worst six-month performance in five decades.
Also tomorrow, a report may show manufacturing shrank this month at a slower pace. The Institute for Supply Management’s factory index rose to 42 in May from 40.1 in April, according to the Bloomberg survey median. Readings below 50 signal contraction.
Underscoring the improvement at manufacturers, orders placed with factories probably rose 0.8 percent in April, the second gain this year, economists predicted ahead of a Commerce Department report June 3.
Service Industries
An ISM report the same day may show service industries, which make up almost 90 percent of the economy, are also stabilizing. The Tempe, Arizona-based group’s gauge of non- manufacturing businesses probably increased to 45 in May from 43.7 the prior month, according to the Bloomberg survey.
Stocks have surged and Treasuries have dropped amid reports showing the worst of the downturn may have passed. The Standard & Poor’s 500 Index has gained 36 percent since March 9, when it hit the lowest level in more than 12 years, closing at 919.14 on May 29. Yields on the benchmark 10-year note climbed to 3.74 percent last week from 2.86 percent during that period.
In other reports this week, the National Association of Realtors may report on June 2 that the number of Americans who signed contracts to buy previously owned homes rose in April for the third straight month as buyers took advantage of lower prices, according to the Bloomberg survey median.
Microsoft to Drop Three-Application Limit of Windows 7 Starter
May 30 (Bloomberg) -- Microsoft Corp., the world’s largest software maker, plans to remove a restriction on the basic version of Windows 7 that would have limited users to running only three programs at a time.
The announcement, made on the Redmond, Washington-based company’s blog yesterday, eliminates one of the most significant differences between Windows 7 Starter Edition and pricier version of the operating system. Customers will be able to run as many programs simultaneously as they like, Microsoft said.
“These changes will make Windows 7 Starter an even more attractive option for customers who want a small notebook PC for very basic tasks, like browsing the Web, checking e-mail and personal productivity,” Microsoft said.
Windows 7 Starter is designed for cheaper PCs, especially small notebooks or so-called netbooks. Microsoft plans to offer several versions of Windows 7, and Chief Executive Officer Steve Ballmer said in February that the company would make sure that consumers could “trade up” to pricier versions. Windows accounts for 28 percent of Microsoft’s $60.4 billion in annual revenue.
Windows 7 Starter edition will still lack features in the other versions of the operating system, such as the ability to play DVDs, use more than one monitor, or change desktop backgrounds and window colors, Microsoft said.
Microsoft plans to start selling Windows 7 by the year-end holiday season.
Microsoft rose 44 cents to $20.89 yesterday in Nasdaq Stock Market trading. The shares have advanced 7.5 percent this year.
The announcement, made on the Redmond, Washington-based company’s blog yesterday, eliminates one of the most significant differences between Windows 7 Starter Edition and pricier version of the operating system. Customers will be able to run as many programs simultaneously as they like, Microsoft said.
“These changes will make Windows 7 Starter an even more attractive option for customers who want a small notebook PC for very basic tasks, like browsing the Web, checking e-mail and personal productivity,” Microsoft said.
Windows 7 Starter is designed for cheaper PCs, especially small notebooks or so-called netbooks. Microsoft plans to offer several versions of Windows 7, and Chief Executive Officer Steve Ballmer said in February that the company would make sure that consumers could “trade up” to pricier versions. Windows accounts for 28 percent of Microsoft’s $60.4 billion in annual revenue.
Windows 7 Starter edition will still lack features in the other versions of the operating system, such as the ability to play DVDs, use more than one monitor, or change desktop backgrounds and window colors, Microsoft said.
Microsoft plans to start selling Windows 7 by the year-end holiday season.
Microsoft rose 44 cents to $20.89 yesterday in Nasdaq Stock Market trading. The shares have advanced 7.5 percent this year.
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