July 12 (Bloomberg) -- Retail sales in the U.S. probably increased in June for a second straight month and factory production fell at a slower pace as the recession abated, economists said before reports this week.
Sales gained 0.4 percent after a 0.5 percent increase in May, according to the median estimate in a Bloomberg News survey before the Commerce Department’s report on July 14. The next day, Federal Reserve figures may show industrial output fell 0.6 percent last month after a 1.1 percent drop in May.
Consumers are venturing back into stores, seeking discounts and favoring necessities such as food or fuel. Even as the projected increase in sales and reports this week on housing may show the worst of the downturn has passed, a turnaround is likely to be gradual.
“The spending is more on staples than discretionary purchases,” Tom Porcelli, a senior economist at RBC Capital Markets in New York, said last week. “Aggregate demand is still amazingly weak. Things aren’t falling apart, but don’t expect a robust recovery.”
An index consumer confidence dropped last week on concerns about job losses, sending stocks lower. The Standard & Poor’s 500 Index closed at 879.13 in New York on July 10, down 0.4 percent from the previous day, capping its fourth straight weekly loss. The Dow Jones Industrial Average closed down 0.5 percent to 8146.52.
Car Sales
Car dealers struggled last month, as sales dropped to a 9.7 million annual pace from a 9.9 million rate in May, according to data from Woodcliff Lake, New Jersey-based Autodata Corp.
Sales plunged 42 percent from a year earlier at Auburn Hills, Michigan-based Chrysler Group LLC, and dropped 34 percent at General Motors Corp., located in Detroit. The carmakers, two of the three biggest in the U.S., are restructuring through bankruptcy.
Excluding automobiles, retail sales probably rose 0.5 percent in June, matching the gain in the prior month, according to the Bloomberg survey.
The Commerce report may also show receipts at service stations climbed, in part because of higher fuel prices. Regular unleaded gasoline averaged $2.64 a gallon at the pump in June, up 35 cents from the prior month, according to AAA.
Oil costs also will be reflected in June price reports due from the Labor Department. An index of producer prices, to be released on July 14, and a gauge of consumer prices, due the next day, may show bigger gains compared with May, the survey showed. Excluding food and energy, inflation remains contained, economists said.
Bargain Hunters
Bargain-conscious consumers drove sales gains at chains that sell discounted goods, reports showed last week, including Framingham, Massachusetts-based TJX Cos., owner of T.J. Maxx stores, and Pleasanton, California-based Ross Stores Inc., owner of the Ross Dress for Less chain.
Sales declined more than analysts forecast at San Francisco-based Gap Inc., operator of the Old Navy and Banana Republic chains, and Abercrombie & Fitch Co., a teen-clothing retailer based in New Albany, Ohio.
The International Council of Shopping Centers, which said June retail sales fell by 5.1 percent based on 32 chains, predicted July results may show as much as a 5 percent drop.
“Tough times certainly will linger for most, even through the summer,” Mike Niemira, the New York-based trade group’s chief economist, said in a July 9 telephone interview.
Meanwhile, one area of the economy showing signs of bottoming out is housing.
Housing, Construction
A Commerce Department report due July 17 may show builders broke ground on houses at a 528,000 annual rate in June, after a 532,000 pace the prior month and compared with a record-low 454,000 in April, according to the survey median.
Building permits, which point to future construction, likely rose.
The deterioration in industrial production may ease as companies, which have been slashing output to get rid of excess inventories, make progress in bringing stockpiles closer to demand. Still, the report may also show capacity utilization continued to decline, economists said.
Regional Fed reports from the New York and Philadelphia areas may add to evidence the manufacturing slump is waning, economists said. The reports are due on July 15 and 16.
On July 15, Fed policy makers will release minutes from their two-day meeting in June which will likely contain their most recent forecasts for growth, inflation and unemployment, plus officials’ discussion of monetary policy.
Saturday, July 11, 2009
Friday, July 10, 2009
Japanese Bonds Gain for Fourth Week as Producer Prices Slide
July 11 (Bloomberg) -- Japanese bonds rose for a fourth week after a central bank report showed producer prices fell at a record pace, helping boost the purchasing power of the fixed payments from debt.
Ten-year yields approached a three-month low yesterday after the Bank of Japan said the costs companies pay for commodities and unfinished goods tumbled 6.6 percent in June from a year earlier, after sliding a revised 5.5 percent in May. Demand for bonds this week was tempered as technical charts suggested the recent rally in the securities was excessive.
“The latest producer prices show demand remains much weaker than supply, helping bonds,” said Akio Kato, leader of a six-member team investing in Japanese bonds in Tokyo at Kokusai Asset Management Co., which runs the world’s second-biggest debt fund and has $73 billion in assets.
The yield on the 1.4 percent bond maturing in June 2019 fell two basis points this week to 1.295 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Yields declined to 1.27 percent on July 9, the lowest level since March 25.
Twenty-year yields fell half a basis point this week to 1.995 percent. Ten-year bond futures for September delivery added 0.40 to 138.84 this week at the Tokyo Stock Exchange.
Inflation Bonds
Five-year inflation bonds yesterday yielded 1.59 percentage points more than similar-maturity regular notes, according to data compiled by Bloomberg. Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Gains in bonds were limited as technical charts traders use to predict prices suggested the 15 percent gain in 10-year securities and the 8 percent advance in 20-year debt over the past month were excessive.
“Ten-year and 20-year bonds are showing signs that they are struggling to live below 1.3 percent and 2 percent respectively,” Peter Wilson, a yen strategist in London at the local subsidiary of Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by assets, wrote in a note on July 9.
The 14-day relative strength index on 10-year yields was 26 on July 9, below the 30 level that suggests the securities are poised to change direction. The stochastic oscillator on 20-year yields dropped to 5 on July 9, less than the 20 level that signals yields are likely to rebound. A stochastic oscillator chart measures the closing price of a security relative to its highs and lows to try to predict whether it will rise or fall.
Pimco Buys
Pacific Investment Management Co., which runs the world’s largest bond fund, said investors who avoid Japanese government debt may miss out on a rally.
Japan’s benchmark bonds may gain this year, pushing 10-year yields to the lowest since August 2003, as the world’s second- largest economy struggles to emerge from its worst postwar recession and avoid a deflationary spiral, said Tomoya Masanao, a Pimco executive vice president in Tokyo. The Newport Beach, California-based company manages $756 billion in assets.
“There is a huge risk not holding bonds,” Masanao said in an interview with Bloomberg News on July 8. “The growth rate won’t rise much and inflation will remain low.”
Japan’s economy is likely to contract 6 percent in the fiscal year that started April 1, the International Monetary Fund said this week. Economists in a Bloomberg News survey said Japan’s quarterly growth rate will remain below 3 percent through the three months ending June 30, 2010. Consumer prices, excluding fresh food, slid a record 1.1 percent in May from a year earlier, the statistics bureau said last month.
Ten-year yields approached a three-month low yesterday after the Bank of Japan said the costs companies pay for commodities and unfinished goods tumbled 6.6 percent in June from a year earlier, after sliding a revised 5.5 percent in May. Demand for bonds this week was tempered as technical charts suggested the recent rally in the securities was excessive.
“The latest producer prices show demand remains much weaker than supply, helping bonds,” said Akio Kato, leader of a six-member team investing in Japanese bonds in Tokyo at Kokusai Asset Management Co., which runs the world’s second-biggest debt fund and has $73 billion in assets.
The yield on the 1.4 percent bond maturing in June 2019 fell two basis points this week to 1.295 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker. Yields declined to 1.27 percent on July 9, the lowest level since March 25.
Twenty-year yields fell half a basis point this week to 1.995 percent. Ten-year bond futures for September delivery added 0.40 to 138.84 this week at the Tokyo Stock Exchange.
Inflation Bonds
Five-year inflation bonds yesterday yielded 1.59 percentage points more than similar-maturity regular notes, according to data compiled by Bloomberg. Inflation-adjusted securities typically yield less than regular bonds because their principal payment increases at the same rate as inflation.
Gains in bonds were limited as technical charts traders use to predict prices suggested the 15 percent gain in 10-year securities and the 8 percent advance in 20-year debt over the past month were excessive.
“Ten-year and 20-year bonds are showing signs that they are struggling to live below 1.3 percent and 2 percent respectively,” Peter Wilson, a yen strategist in London at the local subsidiary of Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by assets, wrote in a note on July 9.
The 14-day relative strength index on 10-year yields was 26 on July 9, below the 30 level that suggests the securities are poised to change direction. The stochastic oscillator on 20-year yields dropped to 5 on July 9, less than the 20 level that signals yields are likely to rebound. A stochastic oscillator chart measures the closing price of a security relative to its highs and lows to try to predict whether it will rise or fall.
Pimco Buys
Pacific Investment Management Co., which runs the world’s largest bond fund, said investors who avoid Japanese government debt may miss out on a rally.
Japan’s benchmark bonds may gain this year, pushing 10-year yields to the lowest since August 2003, as the world’s second- largest economy struggles to emerge from its worst postwar recession and avoid a deflationary spiral, said Tomoya Masanao, a Pimco executive vice president in Tokyo. The Newport Beach, California-based company manages $756 billion in assets.
“There is a huge risk not holding bonds,” Masanao said in an interview with Bloomberg News on July 8. “The growth rate won’t rise much and inflation will remain low.”
Japan’s economy is likely to contract 6 percent in the fiscal year that started April 1, the International Monetary Fund said this week. Economists in a Bloomberg News survey said Japan’s quarterly growth rate will remain below 3 percent through the three months ending June 30, 2010. Consumer prices, excluding fresh food, slid a record 1.1 percent in May from a year earlier, the statistics bureau said last month.
Indonesia, Vying to Enter BRIC, Has Star Role in ‘Chindonesia’
July 11 (Bloomberg) -- Indonesia’s economy may double in the next six years as the world’s biggest exporter of power- station coal and largest producer of palm oil taps surging demand from India and China, CLSA Asia-Pacific Markets said.
China, India and Indonesia will generate $10 trillion of wealth for investors by 2015, Nicholas Cashmore, head of Indonesia research at CLSA Asia-Pacific Markets, said in a note titled “Chindonesia: Enter the Komodo,” a reference to the reptile found only in eastern Indonesia. The three economies are Asia’s “next growth triangle,” he said.
Feeding the needs of the world’s two most-populated nations as demand from Western countries slows may help President Susilo Bambang Yudhoyono meet his target of boosting growth to 7 percent in his second term. Indonesia wants be included among the so-called BRIC nations of Brazil, Russia, India and China, Emil Salim, a presidential adviser, said.
“Together, China and India are increasingly becoming the biggest marketplace for almost everything sold on the planet,” Cashmore said in the report published yesterday. Indonesia plays a symbiotic role in the emergence of China and India and “as this role becomes more pronounced in years to come, it will boost growth, investment and consumption.”
India’s industrial production increased at the fastest pace in eight months in May, the statistics agency said yesterday. The South Asian nation, the biggest buyer of Indonesia’s palm oil and cashew, may overtake China next year as the world’s fastest growing major economy, according to the World Bank.
BRIC Membership
China’s economy will expand 7.2 percent in 2009 from a year earlier, the Washington-based lender said. Indonesia’s exports to China grew 16 percent last year, compared with a 10.7 percent expansion in demand from the U.S., the second-largest buyer of Indonesian products.
Indonesia’s economic acceleration provides a case for its inclusion among the BRIC economies, Morgan Stanley said in a report to clients last month.
The $433 billion economy can expand “significantly” more than 7 percent once Yudhoyono fixes the nation’s congested roads, neglected ports and ageing power plants, according to Joachim von Amsberg, the World Bank’s representative in Jakarta.
Yudhoyono is set to win a second term after presidential elections this week, providing the 59-year-old former general with a mandate to double spending on roads and power to $140 billion by 2014.
Congested Roads
Fixing Indonesia’s congested roads, neglected ports and ageing power plants needs to be among Yudhoyono’s top priorities for him to achieve his goal of boosting growth and reducing poverty, according to nine of 11 chief executive officers contacted in the past month by Bloomberg News.
He also needs to improve transparency in Indonesia’s legal system and reduce corruption to attract global investors, the survey found.
“Keeping the drive for fair and transparent practices and processes, which helps secure a level playing field for all,” will help business in Indonesia, Stuart Dean, Southeast Asia president of General Electric Co. said in a response to the survey last month.
In 2007, Tata Power Co., which is building a 4,000-megawatt plant in western India, bought a 30 percent stake in two coal mining units owned by Indonesia’s PT Bumi Resources. The $4.14 billion plant will run on coal from the Indonesian mines.
India’s coal imports will more than double to 100 million tons by 2012 from 40 million tons, estimates Kaamil Fareed, a senior trading manager at the Coal & Oil Group, which supplies coal in India and Pakistan. That’s about 40 percent of Indonesia’s estimated coal production for this year.
“As a leading supplier of commodities, Indonesia is leveraged to the growth of Chindia,” Cashmore said referring to China and India. “Indonesia is ready to rise in the world economic hierarchy and take its place alongside China and India.”
China, India and Indonesia will generate $10 trillion of wealth for investors by 2015, Nicholas Cashmore, head of Indonesia research at CLSA Asia-Pacific Markets, said in a note titled “Chindonesia: Enter the Komodo,” a reference to the reptile found only in eastern Indonesia. The three economies are Asia’s “next growth triangle,” he said.
Feeding the needs of the world’s two most-populated nations as demand from Western countries slows may help President Susilo Bambang Yudhoyono meet his target of boosting growth to 7 percent in his second term. Indonesia wants be included among the so-called BRIC nations of Brazil, Russia, India and China, Emil Salim, a presidential adviser, said.
“Together, China and India are increasingly becoming the biggest marketplace for almost everything sold on the planet,” Cashmore said in the report published yesterday. Indonesia plays a symbiotic role in the emergence of China and India and “as this role becomes more pronounced in years to come, it will boost growth, investment and consumption.”
India’s industrial production increased at the fastest pace in eight months in May, the statistics agency said yesterday. The South Asian nation, the biggest buyer of Indonesia’s palm oil and cashew, may overtake China next year as the world’s fastest growing major economy, according to the World Bank.
BRIC Membership
China’s economy will expand 7.2 percent in 2009 from a year earlier, the Washington-based lender said. Indonesia’s exports to China grew 16 percent last year, compared with a 10.7 percent expansion in demand from the U.S., the second-largest buyer of Indonesian products.
Indonesia’s economic acceleration provides a case for its inclusion among the BRIC economies, Morgan Stanley said in a report to clients last month.
The $433 billion economy can expand “significantly” more than 7 percent once Yudhoyono fixes the nation’s congested roads, neglected ports and ageing power plants, according to Joachim von Amsberg, the World Bank’s representative in Jakarta.
Yudhoyono is set to win a second term after presidential elections this week, providing the 59-year-old former general with a mandate to double spending on roads and power to $140 billion by 2014.
Congested Roads
Fixing Indonesia’s congested roads, neglected ports and ageing power plants needs to be among Yudhoyono’s top priorities for him to achieve his goal of boosting growth and reducing poverty, according to nine of 11 chief executive officers contacted in the past month by Bloomberg News.
He also needs to improve transparency in Indonesia’s legal system and reduce corruption to attract global investors, the survey found.
“Keeping the drive for fair and transparent practices and processes, which helps secure a level playing field for all,” will help business in Indonesia, Stuart Dean, Southeast Asia president of General Electric Co. said in a response to the survey last month.
In 2007, Tata Power Co., which is building a 4,000-megawatt plant in western India, bought a 30 percent stake in two coal mining units owned by Indonesia’s PT Bumi Resources. The $4.14 billion plant will run on coal from the Indonesian mines.
India’s coal imports will more than double to 100 million tons by 2012 from 40 million tons, estimates Kaamil Fareed, a senior trading manager at the Coal & Oil Group, which supplies coal in India and Pakistan. That’s about 40 percent of Indonesia’s estimated coal production for this year.
“As a leading supplier of commodities, Indonesia is leveraged to the growth of Chindia,” Cashmore said referring to China and India. “Indonesia is ready to rise in the world economic hierarchy and take its place alongside China and India.”
Asia Stocks Post Weekly Loss on Concern About Global Recovery
July 11 (Bloomberg) -- Asian stocks fell this week, the third weekly decline in four, as concern the global recovery will falter caused commodity prices to drop and the yen to strengthen.
BHP Billiton Ltd., the world’s biggest mining company, dropped for a fifth week after copper and oil prices slumped. Honda Motor Co., which makes 51 percent of its revenue in North America, tumbled 10 percent on concern a stronger yen will hurt the value of its overseas revenue. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, sank 11 percent as shipping rates declined.
The MSCI Asia Pacific Index lost 2.1 percent in the past five days, adding to last week’s 0.8 percent decline. That pared the measure’s record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing.
“The market is finally returning its focus to the present, rather than looking for an eventual recovery,” said Masaru Hamasaki, a Tokyo-based strategist at Toyota Asset Management Co., which oversees $14 billion. “The economic rebound won’t be rapid. Share prices are beginning to reflect that.”
The Asian stock benchmark, which plunged by a record last year as the global economy slipped into recession, has now climbed 43 percent since reaching a more than five-year low on March 9. Stocks on the gauge now trade at 22.8 times reported earnings, compared with 15 times at the market trough in March and 14.9 for the U.S.’s Standard & Poor’s 500 Index.
Disappointing Data
Shares of Japanese exporters declined as the yen rose 3.4 percent against the U.S. dollar, the most since the five days through May 15. Honda Motor slumped 10 percent to 2,355 yen. Toyota Motor Corp., which gets about 37 percent of revenue in North America, slipped 5.8 percent to 3,430 yen. Sony Corp., a consumer electronics maker that gets almost half of sales from U.S. and Europe, slid 8.6 percent to 2,230 yen.
Disappointing economic data, including worse-than-expected U.S. unemployment figures on July 2, has fanned investor concern that stock gains had outpaced prospects for an economic recovery.
Japan’s government said on July 8 that machinery orders declined 3 percent in May. Economists had estimated a 2 percent increase. Growth in Japanese bank lending slowed to 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said on the same day.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, declined 10 percent to 538 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, dropped 11 percent to 202 yen.
Chinese Developers
Shares of Chinese property developers retreated on concern the government will restrict lending for real estate investments. China Overseas Land & Investment Ltd., a developer controlled by the country’s construction ministry, plunged 9.4 percent to HK$16.20 in Hong Kong. Shimao Property Holdings Ltd., run by billionaire Xu Rongmao, sank 10 percent to HK$14.16 in Hong Kong.
Industrial & Commercial Bank of China Ltd., the world’s largest financial company by market capitalization, dropped 5.2 percent to HK$5.06. China Construction Bank Corp., the mainland’s No. 2 lender, slipped 5.9 percent to HK$5.60.
Rapid credit growth poses a risk to the nation’s lenders and a concentration of loans to some industries may damage the financial system, a China Banking Regulatory Commission official said in a speech posted on the agency’s Web site on July 7. New loans in mainland China rose almost fivefold in June from a year earlier to 1.53 trillion yuan ($224 billion), the central bank said July 8.
“There could be some scrutiny on credit policy to prevent an overheating in the real estate market rather than an overall shift in the policy stance,” Fan Cheuk Wan, head of Asia Pacific research at Credit Suisse Private Banking, said.
Copper, Oil
Shares of commodity producers declined as copper and oil prices dropped this week. The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said July 9 on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.
BHP Billiton dropped 2.3 percent to A$32.65, its fifth week of decline. Rio Tinto Ltd., the world’s third-largest mining company, fell 2.5 percent to A$48.36. Jiangxi Copper Co. Ltd., China’s biggest producer of the metal, slipped 5.1 percent to HK$12.22 in Hong Kong. Copper for September delivery sank 3.7 percent, its second weekly fall.
Baltic Dry Falls
PetroChina Co., the nation’s biggest oil producer and the world’s largest company by market capitalization, slipped 6.9 percent to HK$7.94. Inpex Corp., Japan’s largest oil explorer, dropped 6 percent to 691,000 yen. Woodside Petroleum Ltd., Australia’s second-largest oil producer, fell 3.7 percent to A$39.90.
The Baltic Dry Index, which measures the cost of shipping commodities, dropped 15 percent in London this week, the most since the five days ended March 20.
STX Pan Ocean slumped 11 percent to 10,350 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron- ore vessels, dropped 8.6 percent to 542 yen in Tokyo. China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, declined 6.9 percent to HK$8.52.
The first companies to go public in China since September surged. Guilin Sanjin Pharmaceutical Co., the nation’s largest maker of herbal lozenges, surged 82 percent to 36.10 yuan. Zhejiang Wanma Cable Co., which supplies cable to the nation’s dominant electricity distributor, jumped 125 percent to 25.93 yuan.
Funds Diverted
In Hong Kong, Amber Energy Ltd. soared 63 percent to HK$2.71 on its debut, after investors subscribed for more than 1,200 times the shares offered in an initial sale.
Chigo Holdings Ltd., which makes air conditioners, will start trading on July 13 In Hong Kong. BBMG Corp., the No. 1 building materials supplier in China’s Beijing, Tianjin and Hebei areas, will start taking orders from institutional investors next week for this year’s second-largest initial public offering in Hong Kong.
“The market’s pulling back as money is tied up with new stocks,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
-- With contribution from Patrick Rial and Kotaro Tsunetomi in Tokyo. Editors: Nick Gentle, Mike Millard.
BHP Billiton Ltd., the world’s biggest mining company, dropped for a fifth week after copper and oil prices slumped. Honda Motor Co., which makes 51 percent of its revenue in North America, tumbled 10 percent on concern a stronger yen will hurt the value of its overseas revenue. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, sank 11 percent as shipping rates declined.
The MSCI Asia Pacific Index lost 2.1 percent in the past five days, adding to last week’s 0.8 percent decline. That pared the measure’s record 28 percent in the three months ended June 30 on optimism the global economy is stabilizing.
“The market is finally returning its focus to the present, rather than looking for an eventual recovery,” said Masaru Hamasaki, a Tokyo-based strategist at Toyota Asset Management Co., which oversees $14 billion. “The economic rebound won’t be rapid. Share prices are beginning to reflect that.”
The Asian stock benchmark, which plunged by a record last year as the global economy slipped into recession, has now climbed 43 percent since reaching a more than five-year low on March 9. Stocks on the gauge now trade at 22.8 times reported earnings, compared with 15 times at the market trough in March and 14.9 for the U.S.’s Standard & Poor’s 500 Index.
Disappointing Data
Shares of Japanese exporters declined as the yen rose 3.4 percent against the U.S. dollar, the most since the five days through May 15. Honda Motor slumped 10 percent to 2,355 yen. Toyota Motor Corp., which gets about 37 percent of revenue in North America, slipped 5.8 percent to 3,430 yen. Sony Corp., a consumer electronics maker that gets almost half of sales from U.S. and Europe, slid 8.6 percent to 2,230 yen.
Disappointing economic data, including worse-than-expected U.S. unemployment figures on July 2, has fanned investor concern that stock gains had outpaced prospects for an economic recovery.
Japan’s government said on July 8 that machinery orders declined 3 percent in May. Economists had estimated a 2 percent increase. Growth in Japanese bank lending slowed to 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said on the same day.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, declined 10 percent to 538 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, dropped 11 percent to 202 yen.
Chinese Developers
Shares of Chinese property developers retreated on concern the government will restrict lending for real estate investments. China Overseas Land & Investment Ltd., a developer controlled by the country’s construction ministry, plunged 9.4 percent to HK$16.20 in Hong Kong. Shimao Property Holdings Ltd., run by billionaire Xu Rongmao, sank 10 percent to HK$14.16 in Hong Kong.
Industrial & Commercial Bank of China Ltd., the world’s largest financial company by market capitalization, dropped 5.2 percent to HK$5.06. China Construction Bank Corp., the mainland’s No. 2 lender, slipped 5.9 percent to HK$5.60.
Rapid credit growth poses a risk to the nation’s lenders and a concentration of loans to some industries may damage the financial system, a China Banking Regulatory Commission official said in a speech posted on the agency’s Web site on July 7. New loans in mainland China rose almost fivefold in June from a year earlier to 1.53 trillion yuan ($224 billion), the central bank said July 8.
“There could be some scrutiny on credit policy to prevent an overheating in the real estate market rather than an overall shift in the policy stance,” Fan Cheuk Wan, head of Asia Pacific research at Credit Suisse Private Banking, said.
Copper, Oil
Shares of commodity producers declined as copper and oil prices dropped this week. The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said July 9 on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.
BHP Billiton dropped 2.3 percent to A$32.65, its fifth week of decline. Rio Tinto Ltd., the world’s third-largest mining company, fell 2.5 percent to A$48.36. Jiangxi Copper Co. Ltd., China’s biggest producer of the metal, slipped 5.1 percent to HK$12.22 in Hong Kong. Copper for September delivery sank 3.7 percent, its second weekly fall.
Baltic Dry Falls
PetroChina Co., the nation’s biggest oil producer and the world’s largest company by market capitalization, slipped 6.9 percent to HK$7.94. Inpex Corp., Japan’s largest oil explorer, dropped 6 percent to 691,000 yen. Woodside Petroleum Ltd., Australia’s second-largest oil producer, fell 3.7 percent to A$39.90.
The Baltic Dry Index, which measures the cost of shipping commodities, dropped 15 percent in London this week, the most since the five days ended March 20.
STX Pan Ocean slumped 11 percent to 10,350 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron- ore vessels, dropped 8.6 percent to 542 yen in Tokyo. China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, declined 6.9 percent to HK$8.52.
The first companies to go public in China since September surged. Guilin Sanjin Pharmaceutical Co., the nation’s largest maker of herbal lozenges, surged 82 percent to 36.10 yuan. Zhejiang Wanma Cable Co., which supplies cable to the nation’s dominant electricity distributor, jumped 125 percent to 25.93 yuan.
Funds Diverted
In Hong Kong, Amber Energy Ltd. soared 63 percent to HK$2.71 on its debut, after investors subscribed for more than 1,200 times the shares offered in an initial sale.
Chigo Holdings Ltd., which makes air conditioners, will start trading on July 13 In Hong Kong. BBMG Corp., the No. 1 building materials supplier in China’s Beijing, Tianjin and Hebei areas, will start taking orders from institutional investors next week for this year’s second-largest initial public offering in Hong Kong.
“The market’s pulling back as money is tied up with new stocks,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.
-- With contribution from Patrick Rial and Kotaro Tsunetomi in Tokyo. Editors: Nick Gentle, Mike Millard.
Thursday, July 9, 2009
G-8’s Economic Dominance Faces Challenge From China, India
July 10 (Bloomberg) -- Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.
Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.
The encounter yesterday in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations -- led by China -- as the worst economic calamity since World War II batters the U.S. and its European allies.
“Everyone was of the opinion that the G-8 isn’t any longer the most ideal structure for dealing with the governance of the world economy,” Italian Prime Minister Silvio Berlusconi told reporters after chairing the session.
Leaders of the G-5 -- representing 3 billion people with gross domestic product of $7 trillion -- appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.
“What is happening here is simply the acknowledgment of a reality,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a Bloomberg Television interview. “Be it the fight against poverty, climate change, trade -- whatever you want that is global in nature -- you need those large emerging economies.”
Climate Clash
The eight -- the U.S., Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 -- unite 880 million people with combined GDP of $32 trillion.
Russia, which has joined Brazil, India and China in the BRIC bloc, views the G-8 as a forum for “brainstorming,” said Sergei Prikhodko, an aide to President Dmitry Medvedev. “It’s too early to talk about burying the G-8.”
The G-5 took aim at the advanced economies’ call for a 50 percent cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. No target can be set until world climate talks wrap up in December, they said, insisting on money and technology to help clean up the atmosphere.
“While we don’t expect to solve this problem in one meeting or one summit, I believe we’ve made some important strides,” President Barack Obama said.
Growth Gap
The contrast was highlighted July 7 when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.
Emerging economies led by China will expand 4.7 percent next year, the IMF said, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.
China is “better situated to deal with this crisis,” billionaire investor George Soros said in a Bloomberg Radio interview July 7. “The Chinese in my opinion are going to gain in power and influence in a way that people currently don’t recognize.”
In a statement in L’Aquila, the G-5 warned the industrial world against backsliding on aid commitments and sought “a new global governance,” including better representation in the IMF and United Nations.
After parallel summits July 8 in a region rebuilding from an earthquake in April, the G-8 and G-5 met yesterday to work out a statement to at least paper over the diverging worldviews.
Dollar Dispute
Central to their dispute is the status of the dollar, its role as the world’s dominant reserve currency under threat from the $2.3 trillion in debt run up by the U.S. since the start of 2008 to stem the financial crisis.
The G-5 -- mainly China -- held around $1 trillion in U.S. Treasury debt in April, giving them leverage over decisions made in Washington.
While officials from China, Russia, India and Brazil grumbled outside the conference room about the dollar’s hegemony, there was “not a serious discussion” of currencies on the inside, U.K. Prime Minister Gordon Brown said.
“There has been concern on the dollar, but there hasn’t been a coherent strategy put forth,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “We don’t think that’s going to be an issue weighing on the dollar for the balance of this year. It’s a much longer term issue.”
Brazilian and Russian officials said they intended to raise the issue at a G-20 meeting in Pittsburgh in September. The dollar “may well be” brought up there, Brazilian Foreign Minister Celso Amorim said. Arkady Dvorkovich, Medvedev’s economic aide, said currencies are a G-20 matter.
Hu’s Absence
Chinese President Hu Jintao didn’t need to show up in L’Aquila to project his influence. The Chinese leader hustled back to Beijing before the summit started to deal with ethnic disturbances along China’s western border, leaving State Councilor Dai Bingguo as a representative.
“Hu’s absence ironically demonstrated China’s presence,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo.
Five countries with almost half the world’s population -- China, India, Brazil, Mexico and South Africa -- challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.
The encounter yesterday in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations -- led by China -- as the worst economic calamity since World War II batters the U.S. and its European allies.
“Everyone was of the opinion that the G-8 isn’t any longer the most ideal structure for dealing with the governance of the world economy,” Italian Prime Minister Silvio Berlusconi told reporters after chairing the session.
Leaders of the G-5 -- representing 3 billion people with gross domestic product of $7 trillion -- appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.
“What is happening here is simply the acknowledgment of a reality,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a Bloomberg Television interview. “Be it the fight against poverty, climate change, trade -- whatever you want that is global in nature -- you need those large emerging economies.”
Climate Clash
The eight -- the U.S., Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 -- unite 880 million people with combined GDP of $32 trillion.
Russia, which has joined Brazil, India and China in the BRIC bloc, views the G-8 as a forum for “brainstorming,” said Sergei Prikhodko, an aide to President Dmitry Medvedev. “It’s too early to talk about burying the G-8.”
The G-5 took aim at the advanced economies’ call for a 50 percent cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. No target can be set until world climate talks wrap up in December, they said, insisting on money and technology to help clean up the atmosphere.
“While we don’t expect to solve this problem in one meeting or one summit, I believe we’ve made some important strides,” President Barack Obama said.
Growth Gap
The contrast was highlighted July 7 when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.
Emerging economies led by China will expand 4.7 percent next year, the IMF said, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.
China is “better situated to deal with this crisis,” billionaire investor George Soros said in a Bloomberg Radio interview July 7. “The Chinese in my opinion are going to gain in power and influence in a way that people currently don’t recognize.”
In a statement in L’Aquila, the G-5 warned the industrial world against backsliding on aid commitments and sought “a new global governance,” including better representation in the IMF and United Nations.
After parallel summits July 8 in a region rebuilding from an earthquake in April, the G-8 and G-5 met yesterday to work out a statement to at least paper over the diverging worldviews.
Dollar Dispute
Central to their dispute is the status of the dollar, its role as the world’s dominant reserve currency under threat from the $2.3 trillion in debt run up by the U.S. since the start of 2008 to stem the financial crisis.
The G-5 -- mainly China -- held around $1 trillion in U.S. Treasury debt in April, giving them leverage over decisions made in Washington.
While officials from China, Russia, India and Brazil grumbled outside the conference room about the dollar’s hegemony, there was “not a serious discussion” of currencies on the inside, U.K. Prime Minister Gordon Brown said.
“There has been concern on the dollar, but there hasn’t been a coherent strategy put forth,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “We don’t think that’s going to be an issue weighing on the dollar for the balance of this year. It’s a much longer term issue.”
Brazilian and Russian officials said they intended to raise the issue at a G-20 meeting in Pittsburgh in September. The dollar “may well be” brought up there, Brazilian Foreign Minister Celso Amorim said. Arkady Dvorkovich, Medvedev’s economic aide, said currencies are a G-20 matter.
Hu’s Absence
Chinese President Hu Jintao didn’t need to show up in L’Aquila to project his influence. The Chinese leader hustled back to Beijing before the summit started to deal with ethnic disturbances along China’s western border, leaving State Councilor Dai Bingguo as a representative.
“Hu’s absence ironically demonstrated China’s presence,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo.
Philippine Exports Decline the Least in Six Months
July 10 (Bloomberg) -- Philippine exports fell the least in six months, adding to signs the global recession that hurt demand for Asian-made electronics is easing.
Shipments abroad declined 27 percent from a year earlier to $3.09 billion in May after dropping 35.2 percent the previous month, the National Statistics Office said in Manila today. That compares with the median forecast for a 32 percent plunge in a Bloomberg News survey of nine economists.
The central bank cut its benchmark interest rate to a record low of 4 percent yesterday to revive the economy after the global slump crimped orders for Philippine-produced Intel Corp. computer chips and other goods. The government predicts growth will accelerate in the coming quarters after slumping to a decade low of 0.4 percent in the first three months.
“The bottom happened in the first quarter and we are now seeing an improvement,” said Arthur Young, chairman of Semiconductor and Electronics Industries of the Philippines Inc., an industry association. “There is pretty good strength in demand from certain markets such as China because of their stimulus plan.”
China’s new loans surged almost fivefold in June from a year earlier, helped by a 4 trillion-yuan government stimulus plan and a loosening of lending restrictions to spur growth. Japan’s industrial output rose for a third month in May and Australian consumer confidence jumped in July to the highest level in 19 months.
Semiconductor Sales
Electronics sales, which make up more than half of Philippine exports, fell 26.8 percent to $1.81 billion in May from a year earlier after dropping 33.2 percent in April.
The Philippine association raised its forecast for exports this year two weeks ago, predicting a drop of 15 percent to 20 percent compared with a previous estimate for a decline of as much as 30 percent, Young said.
Worldwide semiconductor sales rose 5.4 percent in May from April, according to the San Jose, California-based Semiconductor Industry Association.
Shipments abroad declined 27 percent from a year earlier to $3.09 billion in May after dropping 35.2 percent the previous month, the National Statistics Office said in Manila today. That compares with the median forecast for a 32 percent plunge in a Bloomberg News survey of nine economists.
The central bank cut its benchmark interest rate to a record low of 4 percent yesterday to revive the economy after the global slump crimped orders for Philippine-produced Intel Corp. computer chips and other goods. The government predicts growth will accelerate in the coming quarters after slumping to a decade low of 0.4 percent in the first three months.
“The bottom happened in the first quarter and we are now seeing an improvement,” said Arthur Young, chairman of Semiconductor and Electronics Industries of the Philippines Inc., an industry association. “There is pretty good strength in demand from certain markets such as China because of their stimulus plan.”
China’s new loans surged almost fivefold in June from a year earlier, helped by a 4 trillion-yuan government stimulus plan and a loosening of lending restrictions to spur growth. Japan’s industrial output rose for a third month in May and Australian consumer confidence jumped in July to the highest level in 19 months.
Semiconductor Sales
Electronics sales, which make up more than half of Philippine exports, fell 26.8 percent to $1.81 billion in May from a year earlier after dropping 33.2 percent in April.
The Philippine association raised its forecast for exports this year two weeks ago, predicting a drop of 15 percent to 20 percent compared with a previous estimate for a decline of as much as 30 percent, Young said.
Worldwide semiconductor sales rose 5.4 percent in May from April, according to the San Jose, California-based Semiconductor Industry Association.
Wednesday, July 8, 2009
IMF sees end to the global recession
By Krishna Guha and Sarah O'Connor in Washington and,Michael Mackenzie in New York
Published: July 9 2009 03:00 | Last updated: July 9 2009 03:00
The world economy is starting to pull out of recession, the International Monetary Fund said yesterday, marking up its growth forecasts for next year and hinting that it might reduce its estimates for bank losses.
"The recovery is coming," said Olivier Blanchard, IMF chief economist. But he cautioned "it is likely to be a weak recovery" and said policymakers needed to guard against ongoing economic and financial risks. However, investors signalled their doubts about the strength of any economic recovery by selling off commodities, notably oil and gold, and stocks.
The yen, a barometer of risk aversion, also shot up 3 per cent against the euro and the dollar.
Since the release of a much weaker-than-expected US jobs report for June last week, investors' appetite for risky assets has soured.
"When we do get a recovery, it will be pretty anaemic," said Jay Mueller, portfolio manager at Wells Capital. "The third quarter will be tough and the fourth does not look much better. People who had been optimistic that the economy has bottomed are rethinking . . . since last week's jobs report."
The IMF now forecasts global growth of 2.5 per cent next year, up from 1.9 per cent in April, led by strong growth in China and India, a rebound in Japan and positive but sub-trend growth in the US. It upgraded its forecasts for Europe too, but still expects the eurozone to contract 0.3 per cent next year, with Germany declining 0.6 per cent.
The Fund inched down its forecast for global growth this year to minus 1.4 per cent.
The IMF did not update its estimates for losses facing banks. However, José Viñals, IMF financial counsellor, said it would be reasonable to guess that the figures would end up being lowered. He said markdowns on securities "would be likely to be somewhat better now" following the improvements in financial markets.
However, the IMF warned against complacency, saying it was too soon to implement "exit strategies" and highlighting several risks to recovery. It urged further efforts to clean up the banking system, noting that "bank capitalisation remains a concern, notably in Europe".
The Fund also signalled concern that governments on both sides of the Atlantic had only "limited" success in dealing with problem assets.
Mr Blanchard said governments should prepare for the possibility that further stimulus could be needed. "It may be that private demand is going to be very weak for longer than we anticipated.
Published: July 9 2009 03:00 | Last updated: July 9 2009 03:00
The world economy is starting to pull out of recession, the International Monetary Fund said yesterday, marking up its growth forecasts for next year and hinting that it might reduce its estimates for bank losses.
"The recovery is coming," said Olivier Blanchard, IMF chief economist. But he cautioned "it is likely to be a weak recovery" and said policymakers needed to guard against ongoing economic and financial risks. However, investors signalled their doubts about the strength of any economic recovery by selling off commodities, notably oil and gold, and stocks.
The yen, a barometer of risk aversion, also shot up 3 per cent against the euro and the dollar.
Since the release of a much weaker-than-expected US jobs report for June last week, investors' appetite for risky assets has soured.
"When we do get a recovery, it will be pretty anaemic," said Jay Mueller, portfolio manager at Wells Capital. "The third quarter will be tough and the fourth does not look much better. People who had been optimistic that the economy has bottomed are rethinking . . . since last week's jobs report."
The IMF now forecasts global growth of 2.5 per cent next year, up from 1.9 per cent in April, led by strong growth in China and India, a rebound in Japan and positive but sub-trend growth in the US. It upgraded its forecasts for Europe too, but still expects the eurozone to contract 0.3 per cent next year, with Germany declining 0.6 per cent.
The Fund inched down its forecast for global growth this year to minus 1.4 per cent.
The IMF did not update its estimates for losses facing banks. However, José Viñals, IMF financial counsellor, said it would be reasonable to guess that the figures would end up being lowered. He said markdowns on securities "would be likely to be somewhat better now" following the improvements in financial markets.
However, the IMF warned against complacency, saying it was too soon to implement "exit strategies" and highlighting several risks to recovery. It urged further efforts to clean up the banking system, noting that "bank capitalisation remains a concern, notably in Europe".
The Fund also signalled concern that governments on both sides of the Atlantic had only "limited" success in dealing with problem assets.
Mr Blanchard said governments should prepare for the possibility that further stimulus could be needed. "It may be that private demand is going to be very weak for longer than we anticipated.
Australian Employers Cut 21,400 Jobs as Exports Slow
July 9 (Bloomberg) -- Australian employment fell in June as the global recession reduced demand for exports such as iron ore and coal, prompting mining companies to fire workers.
The number of people employed dropped 21,400 from May, the statistics bureau said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg was for a decline of 20,000. The jobless rate rose to 5.8 percent, the highest level in almost six years, from 5.7 percent.
Central bank Governor Glenn Stevens left borrowing costs at a half-century low of 3 percent this week for a third month to help stem firings at companies including BHP Billiton Ltd. Advertisements for job vacancies tumbled in June for a 14th month, a sign unemployment may rise in coming months.
“Forward-looking indicators continue to imply a fall in employment at least as pronounced as” when Australia was last in a recession in 1991, Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today’s report.
The number of full-time jobs dropped 21,900 in June and part-time employment increased 400 today’s report showed.
The Australian dollar traded at 78.17 U.S. cents at 11:44 a.m. in Sydney from 78.04 cents before the report was released. The two-year bond yield was little changed at 3.68 percent.
Australia’s economy has so far skirted the worst global recession since the Great Depression. Gross domestic product rose 0.4 percent in the first quarter, making it one of the few major economies including China and India to expand.
Cash Handouts
Consumer confidence jumped to the highest level since December 2007 and home-loan approvals rose for an eighth month, reports showed yesterday.
To help boost employment and cushion the economy against slower global demand for natural resources, Prime Minister Kevin Rudd’s government has distributed A$12 billion ($9.3 billion) in cash handouts to households this year and is spending A$22 billion to upgrade roads, railways, hospitals and ports.
Central bank policy makers also slashed the overnight cash rate target by a record 4.25 percentage points between September and April to 3 percent.
BHP Billiton, the world’s biggest miner, is shedding 3,400 workers in Australia after shuttering a nickel mine in January and reducing coking coal output. Qantas Airways, the nation’s largest carrier, said in April that it will cut 1,750 jobs as demand for business and first-class travel wanes.
ANZ Bank said today it will scrap 248 jobs as it closes mortgage administration offices in cities including Sydney, Brisbane and Perth. The bank is Australia’s fourth largest.
Exports Slump
“Weaker demand for labor is leading to lower growth in labor costs,” Reserve Bank Governor Glenn Stevens said on July 7. That gives policy makers “some scope for further easing of monetary policy, if needed,” he added.
Reports this month showed the construction industry shrank in June at a faster pace, exports slumped 5 percent in May from April and home-building approvals tumbled 12.5 percent, the biggest drop since November 2002.
Jobs advertisements dropped 6.7 percent last month from May and 51.4 percent from a year earlier, the largest annual decline since ANZ Bank began recording the figures in 1998.
Still, other reports suggest Australia’s economy will continue expanding this year. An index of consumer sentiment published yesterday by Westpac Banking Corp. climbed 23.2 percent in June and July, the largest two-month gain since the survey began in 1975.
Global Outlook
The International Monetary Fund said the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates.
The Washington-based lender said in a revised forecast released yesterday that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth.
Woolworths, Australia’s biggest retailer, has said it expects to add 7,000 workers and reaffirmed its forecast for an increase in annual profit of as much as 12 percent.
David Jones Ltd., Australia’s second-biggest department store chain, said last week that earnings after tax will rise by between 20 percent and 30 percent in the six months ending July 25. “The stimulus package has been good for confidence,” Chief Executive Officer Mark McInnes told reporters on a conference call on June 30.
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 key interest rate will be 43 basis points higher in a year, the index showed at 8:51 a.m. in Sydney. Late yesterday they tipped 48 basis points of gains.
The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.3 percent in June from a revised 65.4 percent, today’s report showed.
The number of people employed dropped 21,400 from May, the statistics bureau said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg was for a decline of 20,000. The jobless rate rose to 5.8 percent, the highest level in almost six years, from 5.7 percent.
Central bank Governor Glenn Stevens left borrowing costs at a half-century low of 3 percent this week for a third month to help stem firings at companies including BHP Billiton Ltd. Advertisements for job vacancies tumbled in June for a 14th month, a sign unemployment may rise in coming months.
“Forward-looking indicators continue to imply a fall in employment at least as pronounced as” when Australia was last in a recession in 1991, Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today’s report.
The number of full-time jobs dropped 21,900 in June and part-time employment increased 400 today’s report showed.
The Australian dollar traded at 78.17 U.S. cents at 11:44 a.m. in Sydney from 78.04 cents before the report was released. The two-year bond yield was little changed at 3.68 percent.
Australia’s economy has so far skirted the worst global recession since the Great Depression. Gross domestic product rose 0.4 percent in the first quarter, making it one of the few major economies including China and India to expand.
Cash Handouts
Consumer confidence jumped to the highest level since December 2007 and home-loan approvals rose for an eighth month, reports showed yesterday.
To help boost employment and cushion the economy against slower global demand for natural resources, Prime Minister Kevin Rudd’s government has distributed A$12 billion ($9.3 billion) in cash handouts to households this year and is spending A$22 billion to upgrade roads, railways, hospitals and ports.
Central bank policy makers also slashed the overnight cash rate target by a record 4.25 percentage points between September and April to 3 percent.
BHP Billiton, the world’s biggest miner, is shedding 3,400 workers in Australia after shuttering a nickel mine in January and reducing coking coal output. Qantas Airways, the nation’s largest carrier, said in April that it will cut 1,750 jobs as demand for business and first-class travel wanes.
ANZ Bank said today it will scrap 248 jobs as it closes mortgage administration offices in cities including Sydney, Brisbane and Perth. The bank is Australia’s fourth largest.
Exports Slump
“Weaker demand for labor is leading to lower growth in labor costs,” Reserve Bank Governor Glenn Stevens said on July 7. That gives policy makers “some scope for further easing of monetary policy, if needed,” he added.
Reports this month showed the construction industry shrank in June at a faster pace, exports slumped 5 percent in May from April and home-building approvals tumbled 12.5 percent, the biggest drop since November 2002.
Jobs advertisements dropped 6.7 percent last month from May and 51.4 percent from a year earlier, the largest annual decline since ANZ Bank began recording the figures in 1998.
Still, other reports suggest Australia’s economy will continue expanding this year. An index of consumer sentiment published yesterday by Westpac Banking Corp. climbed 23.2 percent in June and July, the largest two-month gain since the survey began in 1975.
Global Outlook
The International Monetary Fund said the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates.
The Washington-based lender said in a revised forecast released yesterday that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth.
Woolworths, Australia’s biggest retailer, has said it expects to add 7,000 workers and reaffirmed its forecast for an increase in annual profit of as much as 12 percent.
David Jones Ltd., Australia’s second-biggest department store chain, said last week that earnings after tax will rise by between 20 percent and 30 percent in the six months ending July 25. “The stimulus package has been good for confidence,” Chief Executive Officer Mark McInnes told reporters on a conference call on June 30.
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 key interest rate will be 43 basis points higher in a year, the index showed at 8:51 a.m. in Sydney. Late yesterday they tipped 48 basis points of gains.
The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.3 percent in June from a revised 65.4 percent, today’s report showed.
New Zealand Lawmakers Urge Banks to Lower Interest Rates
July 9 (Bloomberg) -- New Zealand banks should lower lending rates and sacrifice profits to prevent business failures, according to a parliamentary committee.
“We encourage the banks to recognize the national importance of lowering interest rates because unduly high interest costs could lead to the closure of businesses that may be fundamentally sound,” the finance and expenditure select committee said in a report posted on its Web site.
Reserve Bank Governor Alan Bollard has said there is scope for banks to lower variable home-loan interest rates further and Prime Minister John Key this week said banks “should listen carefully” to what the central bank was saying. The committee last week rejected calls to hold an inquiry into bank lending.
“A low-interest-rate environment is critical to New Zealand’s economic recovery,” it said in the today’s report.
“We recognize the need for the banking sector to remain profitable in the current economic environment, but we also believe that it should not be unduly so,” the committee said. “We are concerned that this may be the case at present.”
Local units of Australia’s biggest banks, National Australia Bank Ltd., Westpac Banking Corp., Australia & New Zealand Banking Group Ltd., and Commonwealth Bank of Australia, own about 90 percent of all New Zealand’s banking assets.
New Zealand’s economy began contracting in the first quarter last year and a prolonged global recession has stalled business investment and fanned unemployment. Many trading banks didn’t adjust lending rates when the central bank cut the official cash rate to a record-low in April.
The committee made its report after considering the Reserve Bank’s quarterly monetary policy statement. The committee comprises lawmakers from all parties and is chaired by a member of the governing National Party.
“We encourage the banks to recognize the national importance of lowering interest rates because unduly high interest costs could lead to the closure of businesses that may be fundamentally sound,” the finance and expenditure select committee said in a report posted on its Web site.
Reserve Bank Governor Alan Bollard has said there is scope for banks to lower variable home-loan interest rates further and Prime Minister John Key this week said banks “should listen carefully” to what the central bank was saying. The committee last week rejected calls to hold an inquiry into bank lending.
“A low-interest-rate environment is critical to New Zealand’s economic recovery,” it said in the today’s report.
“We recognize the need for the banking sector to remain profitable in the current economic environment, but we also believe that it should not be unduly so,” the committee said. “We are concerned that this may be the case at present.”
Local units of Australia’s biggest banks, National Australia Bank Ltd., Westpac Banking Corp., Australia & New Zealand Banking Group Ltd., and Commonwealth Bank of Australia, own about 90 percent of all New Zealand’s banking assets.
New Zealand’s economy began contracting in the first quarter last year and a prolonged global recession has stalled business investment and fanned unemployment. Many trading banks didn’t adjust lending rates when the central bank cut the official cash rate to a record-low in April.
The committee made its report after considering the Reserve Bank’s quarterly monetary policy statement. The committee comprises lawmakers from all parties and is chaired by a member of the governing National Party.
Tuesday, July 7, 2009
Australian Dollar Falls to Two-Week Low on Stocks, Jobs Report
July 8 (Bloomberg) -- The Australian dollar fell to its lowest level in two weeks before a government report tomorrow that economists say will show the nation’s jobless rate climbed to a six-year high. New Zealand’s currency declined.
The currencies also weakened versus the yen as Australia’s S&P/ASX 200 Index fell for a fourth day after the Standard & Poor’s 500 index yesterday slumped to the lowest since May 1. Higher interest rates in Australia and New Zealand attract investors to the South Pacific nations’ assets with the risk being that currency market moves will erase profits.
“The downturn in equities is reflecting a rise in risk aversion,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “The pressure on the downside may be maintained for the Aussie,” with markets preparing for a “weaker unemployment number,” she said referring to the currency by its nickname.
Australia’s currency fell 0.4 percent to 78.63 U.S. cents as of 11:48 a.m. in Sydney from 78.91 cents in New York yesterday. The currency slipped 0.7 percent to 74.39 yen. New Zealand’s dollar declined 0.2 percent to 62.78 U.S. cents from 62.89 cents in New York and slid 0.5 percent to 59.39 yen.
Australia’s unemployment rate climbed to 5.9 percent last month, the highest level since July 2003, according to the median forecast of 21 economists surveyed by Bloomberg News before the July 9 report. Employers probably cut 20,000 positions last month, the survey showed.
Jobs, Earnings
“The Australian dollar is looking a little vulnerable,” said Katie Dean, a senior economist in Melbourne at Australia & New Zealand Banking Group Ltd. “The main game is tomorrow’s employment data and, even if there are risks for an upside surprise, markets are unlikely to want to be long Australian dollar going into this very volatile release.” Long positions are a bet that a currency is going to gain.
The Australian dollar will find buyers at 78.60 cents and then 77.90 cents, she said.
Australian home-loan approvals rose in May for an eighth month, climbing 2.2 percent from April, the statistics bureau said today. Confidence among consumers increased in July to the highest level in 19 months, a Westpac Banking Corp. and Melbourne Institute survey conducted between June 29 and July 5 showed. The index climbed 23.2 percent in June and July, the largest two-month gain since the survey began in 1975.
Alcoa Earnings
The South Pacific nations’ currencies fell for a second day against the dollar as Asian equities declined for a sixth session, the longest losing streak since September. U.S. markets fell yesterday on concern second-quarter earnings will fail to justify a four-month rally in stocks. Alcoa Inc. will kick off the U.S. earnings season today as the first company in the Dow Jones Industrial Average to report results.
TD Securities recommended yesterday that investors sell the Australian dollar against the U.S. currency as it may decline to 76 U.S. cents. They should exit the trade if the so-called Aussie rises to 82 cents, the company said.
“We are firmly of the view that a distressed corporate sector -- spilling over into investment and employment loss -- will create inflation undershooting for some time to come,” wrote Annette Beacher, a senior strategist at TD Securities in Singapore, in a note to clients yesterday. “The next move from the RBA is still more likely to be down.”
Australian government bonds advanced. The yield on 10-year notes fell eight basis points, or 0.08 percentage point, to 5.41 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.610, or A$6.10 per A$1,000 face amount, to 98.836.
Two-Year Swap
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.71 percent from 3.74 percent yesterday.
Bill English, finance minister for New Zealand, said today the government may help local councils raise financing for roads and pipelines by combining all borrowing needs into a so-called “bond bank.” New Zealand councils may spend as much as NZ$30 billion ($19 billion) on infrastructure projects over the next 10 years, much of which would be funded by debt.
The currencies also weakened versus the yen as Australia’s S&P/ASX 200 Index fell for a fourth day after the Standard & Poor’s 500 index yesterday slumped to the lowest since May 1. Higher interest rates in Australia and New Zealand attract investors to the South Pacific nations’ assets with the risk being that currency market moves will erase profits.
“The downturn in equities is reflecting a rise in risk aversion,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “The pressure on the downside may be maintained for the Aussie,” with markets preparing for a “weaker unemployment number,” she said referring to the currency by its nickname.
Australia’s currency fell 0.4 percent to 78.63 U.S. cents as of 11:48 a.m. in Sydney from 78.91 cents in New York yesterday. The currency slipped 0.7 percent to 74.39 yen. New Zealand’s dollar declined 0.2 percent to 62.78 U.S. cents from 62.89 cents in New York and slid 0.5 percent to 59.39 yen.
Australia’s unemployment rate climbed to 5.9 percent last month, the highest level since July 2003, according to the median forecast of 21 economists surveyed by Bloomberg News before the July 9 report. Employers probably cut 20,000 positions last month, the survey showed.
Jobs, Earnings
“The Australian dollar is looking a little vulnerable,” said Katie Dean, a senior economist in Melbourne at Australia & New Zealand Banking Group Ltd. “The main game is tomorrow’s employment data and, even if there are risks for an upside surprise, markets are unlikely to want to be long Australian dollar going into this very volatile release.” Long positions are a bet that a currency is going to gain.
The Australian dollar will find buyers at 78.60 cents and then 77.90 cents, she said.
Australian home-loan approvals rose in May for an eighth month, climbing 2.2 percent from April, the statistics bureau said today. Confidence among consumers increased in July to the highest level in 19 months, a Westpac Banking Corp. and Melbourne Institute survey conducted between June 29 and July 5 showed. The index climbed 23.2 percent in June and July, the largest two-month gain since the survey began in 1975.
Alcoa Earnings
The South Pacific nations’ currencies fell for a second day against the dollar as Asian equities declined for a sixth session, the longest losing streak since September. U.S. markets fell yesterday on concern second-quarter earnings will fail to justify a four-month rally in stocks. Alcoa Inc. will kick off the U.S. earnings season today as the first company in the Dow Jones Industrial Average to report results.
TD Securities recommended yesterday that investors sell the Australian dollar against the U.S. currency as it may decline to 76 U.S. cents. They should exit the trade if the so-called Aussie rises to 82 cents, the company said.
“We are firmly of the view that a distressed corporate sector -- spilling over into investment and employment loss -- will create inflation undershooting for some time to come,” wrote Annette Beacher, a senior strategist at TD Securities in Singapore, in a note to clients yesterday. “The next move from the RBA is still more likely to be down.”
Australian government bonds advanced. The yield on 10-year notes fell eight basis points, or 0.08 percentage point, to 5.41 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.610, or A$6.10 per A$1,000 face amount, to 98.836.
Two-Year Swap
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.71 percent from 3.74 percent yesterday.
Bill English, finance minister for New Zealand, said today the government may help local councils raise financing for roads and pipelines by combining all borrowing needs into a so-called “bond bank.” New Zealand councils may spend as much as NZ$30 billion ($19 billion) on infrastructure projects over the next 10 years, much of which would be funded by debt.
Bank of Japan Considers Extending Credit Policies
July 8 (Bloomberg) -- The Bank of Japan may extend its emergency-credit programs as soon as next week as policy makers await evidence that banks are increasing lending to companies.
Officials may want to decide on the matter months before the programs expire at the end of September to quell any speculation they’re ready to scale back their efforts, said Masaaki Kanno, who worked at Japan’s central bank from 1974 to 1999 and served as a senior adviser on research and statistics. The Bank of Japan’s board next meets July 14-15 in Tokyo.
The debate reflects concern that the world’s second-biggest economy will struggle to emerge from its deepest postwar slump, and is a contrast from the U.S., where the Federal Reserve has already taken steps toward ending emergency-credit measures. BOJ Governor Masaaki Shirakawa this week said many companies are still struggling to borrow, after the bank’s quarterly Tankan survey last week showed access to credit remains constrained.
“Policy makers may conclude the bank had better decide on the extension this month if they need to do so anyway,” said Kanno, who is now chief economist in Tokyo at JPMorgan Chase & Co. “Making such an announcement in July can work as an anchor to prevent premature speculation about an exit policy.”
The Bank of Japan started purchasing commercial paper and corporate bonds this year, after lowering the overnight lending rate to 0.1 percent in December. Policy makers also offered unlimited loans to commercial banks at 0.1 percent in exchange for approved collateral. The three programs are scheduled to expire on Sept. 30.
Tankan Report
The Bank of Japan’s Tankan report showed on July 1 that the nation’s largest companies still consider their access to financing at close to the lowest level on record, and small firms perceived banks as reluctant to lend. Lending growth at Japanese banks slowed in June for a sixth straight month, a report showed today.
The Tankan also showed businesses plan deeper spending cuts than three months ago. Large firms estimate profit will fall 20 percent this year, almost twice the March forecast.
Another report today showed that machinery orders unexpectedly fell 3 percent in May from April, as sliding profits forced companies to cut spending on plant and equipment. The median estimate of 25 economists surveyed by Bloomberg was for a 2 percent increase.
The Nikkei 225 Stock Average dropped 1.9 percent at 10:02 a.m. in Tokyo. The yield on the benchmark 10-year bond fell two basis points to 1.285 percent, the lowest in more than three months.
Policy Makers
Bank of Japan policy makers have said they aren’t confident yet whether a recent rebound in exports and output will be sustained.
“The Tankan results turned out to be worse than expected, and there are no reasons in sight to be optimistic about the economy’s outlook,” said Teizo Taya, a former central-bank board member and now adviser to the Daiwa Institute of Research in Tokyo. “There is no merit for the Bank of Japan to adopt an exit policy too early.”
In the U.S., the Fed last month announced it will let one of its emergency-lending programs expire later this year, and trim two others.
Fed policy makers also said in their June 24 statement that they “currently anticipate that a number of these facilities may not need to be extended beyond February 1.” At the same time, they pledged to extend the terms of the remaining credit programs beyond February “as needed to promote financial stability and economic growth.”
Special Programs
Shirakawa said last month that Japan’s central bank will make a judgment on its special programs “by the end of September in a predictable manner to market participants” based on an assessment of the economy, financial markets and funding conditions for businesses.
“There is some speculation that the BOJ may want to be pro-active and indicate an extension of the programs rather than waiting for either next month or September,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. in New York. “On balance, the BOJ most likely will have to extend the programs, probably until next March, but look for a decision in August, not next week.”
The Bank of Japan already extended the emergency-credit policies at its February board meeting, one month before the initial expiration date of March 31. That example led some analysts to anticipate the bank will again make its announcement a month before the expiration.
Gains Momentum
That view gained momentum in May after minutes of the BOJ’s April meeting showed one board member said the bank should consider ways to unwind the emergency measures should the economy recover in line with the bank’s forecast.
Board member Atsushi Mizuno said in May that it’s necessary for the bank to have discussions on how to unwind the emergency steps even while the global economy remains fragile.
There may not be much point in waiting, said Naomi Hasegawa, a senior bond strategist in Tokyo at Mitsubishi UFJ Securities Co.
“It’s not conceivable that environments for corporate financing will improve just over the next one month,” Hasegawa said. “Rather, tension in financial markets may rise” if the bank postpones its decision.
An early decision would also allow policy makers to avoid acting in the middle of a potential general-election campaign. Prime Minister Taro Aso, whose support fell below 20 percent in recent polls, has to call the vote by mid-September.
Officials may want to decide on the matter months before the programs expire at the end of September to quell any speculation they’re ready to scale back their efforts, said Masaaki Kanno, who worked at Japan’s central bank from 1974 to 1999 and served as a senior adviser on research and statistics. The Bank of Japan’s board next meets July 14-15 in Tokyo.
The debate reflects concern that the world’s second-biggest economy will struggle to emerge from its deepest postwar slump, and is a contrast from the U.S., where the Federal Reserve has already taken steps toward ending emergency-credit measures. BOJ Governor Masaaki Shirakawa this week said many companies are still struggling to borrow, after the bank’s quarterly Tankan survey last week showed access to credit remains constrained.
“Policy makers may conclude the bank had better decide on the extension this month if they need to do so anyway,” said Kanno, who is now chief economist in Tokyo at JPMorgan Chase & Co. “Making such an announcement in July can work as an anchor to prevent premature speculation about an exit policy.”
The Bank of Japan started purchasing commercial paper and corporate bonds this year, after lowering the overnight lending rate to 0.1 percent in December. Policy makers also offered unlimited loans to commercial banks at 0.1 percent in exchange for approved collateral. The three programs are scheduled to expire on Sept. 30.
Tankan Report
The Bank of Japan’s Tankan report showed on July 1 that the nation’s largest companies still consider their access to financing at close to the lowest level on record, and small firms perceived banks as reluctant to lend. Lending growth at Japanese banks slowed in June for a sixth straight month, a report showed today.
The Tankan also showed businesses plan deeper spending cuts than three months ago. Large firms estimate profit will fall 20 percent this year, almost twice the March forecast.
Another report today showed that machinery orders unexpectedly fell 3 percent in May from April, as sliding profits forced companies to cut spending on plant and equipment. The median estimate of 25 economists surveyed by Bloomberg was for a 2 percent increase.
The Nikkei 225 Stock Average dropped 1.9 percent at 10:02 a.m. in Tokyo. The yield on the benchmark 10-year bond fell two basis points to 1.285 percent, the lowest in more than three months.
Policy Makers
Bank of Japan policy makers have said they aren’t confident yet whether a recent rebound in exports and output will be sustained.
“The Tankan results turned out to be worse than expected, and there are no reasons in sight to be optimistic about the economy’s outlook,” said Teizo Taya, a former central-bank board member and now adviser to the Daiwa Institute of Research in Tokyo. “There is no merit for the Bank of Japan to adopt an exit policy too early.”
In the U.S., the Fed last month announced it will let one of its emergency-lending programs expire later this year, and trim two others.
Fed policy makers also said in their June 24 statement that they “currently anticipate that a number of these facilities may not need to be extended beyond February 1.” At the same time, they pledged to extend the terms of the remaining credit programs beyond February “as needed to promote financial stability and economic growth.”
Special Programs
Shirakawa said last month that Japan’s central bank will make a judgment on its special programs “by the end of September in a predictable manner to market participants” based on an assessment of the economy, financial markets and funding conditions for businesses.
“There is some speculation that the BOJ may want to be pro-active and indicate an extension of the programs rather than waiting for either next month or September,” said Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. in New York. “On balance, the BOJ most likely will have to extend the programs, probably until next March, but look for a decision in August, not next week.”
The Bank of Japan already extended the emergency-credit policies at its February board meeting, one month before the initial expiration date of March 31. That example led some analysts to anticipate the bank will again make its announcement a month before the expiration.
Gains Momentum
That view gained momentum in May after minutes of the BOJ’s April meeting showed one board member said the bank should consider ways to unwind the emergency measures should the economy recover in line with the bank’s forecast.
Board member Atsushi Mizuno said in May that it’s necessary for the bank to have discussions on how to unwind the emergency steps even while the global economy remains fragile.
There may not be much point in waiting, said Naomi Hasegawa, a senior bond strategist in Tokyo at Mitsubishi UFJ Securities Co.
“It’s not conceivable that environments for corporate financing will improve just over the next one month,” Hasegawa said. “Rather, tension in financial markets may rise” if the bank postpones its decision.
An early decision would also allow policy makers to avoid acting in the middle of a potential general-election campaign. Prime Minister Taro Aso, whose support fell below 20 percent in recent polls, has to call the vote by mid-September.
Asian Stocks Fall for Sixth Day on Growth Concern; Honda Drops
July 8 (Bloomberg) -- Asian stocks fell for a sixth day, led by finance and mining companies, as an unexpected drop in Japanese machinery orders fanned concern a global economic recovery will falter.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by value, sank 2.9 percent after the nation’s bank lending slowed. BHP Billiton Ltd., the world’s largest mining company, lost 2.3 percent in Sydney on lower oil and copper prices. Honda Motor Co., which gets 45 percent of its sales in North America, slumped 4 percent in Tokyo as a stronger yen threatened the value of overseas revenue.
“The economic rebound won’t be rapid,” said Masaru Hamasaki, a Tokyo-based senior strategist at Toyota Asset Management Co., which oversees $14 billion. “It will take time, and share prices are beginning to reflect that.”
The MSCI Asia Pacific Index dropped 1.2 percent to 100.59 at 10:50 a.m. in Tokyo, taking its six-day decline to 2.5 percent. The index has fallen 4.4 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 42 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 1.8 percent. Australia’s S&P/ASX 200 Index declined 1.1 percent, erasing this year’s gains. Indonesia’s stock market is closed today for presidential elections.
South Korea’s Kospi lost 0.7 percent. Samsung Electronics Co., Asia’s largest maker of computer-memory chips, fell 0.9 percent in Seoul as researcher Gartner Inc. predicted spending on information technology will drop. Tokyo Electron Ltd., the world’s second-largest maker of semiconductor equipment, sank 5 percent on a Credit Suisse Group AG downgrade.
U.S. Earnings
Futures on the Standard & Poor’s 500 Index fell 0.2 percent. The gauge dropped 2 percent to the lowest level since May 1, amid concern second-quarter earnings will fail to justify a four-month rally in equities.
Alcoa Inc. will kick off the earnings season today as the first company in the Dow Jones Industrial Average to report results. Analysts estimate profits fell an average 34 percent at S&P 500 companies in the second quarter and will decrease 21 percent from July through September, according to data compiled by Bloomberg.
The MSCI Asia Pacific Index’s rally since March has been fueled by confidence stimulus policies worldwide will succeed in reviving global growth. Worse-than-expected U.S. unemployment data on July 2 fanned concern a recovery will falter. Japanese machinery orders declined 3 percent in May, the government said today. Economists had estimated a 2 percent increase.
Recovery Hopes
“The rally was built on recovery hopes, but a gap has developed between the level of the market and the real outlook for the economy,” said Hiroichi Nishi, general manager at Tokyo-based Nikko Cordial Securities Co. “All eyes are on the earnings about to kick off and the direction they will take.”
Mitsubishi UFJ slumped 2.9 percent to 572 yen as Japanese lending growth slowed in June for a sixth-straight month. Mizuho Financial Group Inc., Japan’s second-largest bank, sank 1.4 percent to 213 yen.
Loans, excluding those by credit associations, rose 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said today.
Shares of financial companies also fell as the cost of protecting Asia-Pacific corporate and sovereign bonds from default jumped, according to traders of credit-default swaps.
BHP lost 2.3 percent to A$31.52 after a measure of six metals traded on the London Metal Exchange, including copper and zinc, slipped 1.2 percent. Rio Tinto Group, the world’s third- largest mining company, dropped 1.2 percent to A$46.80.
Overseas Revenue
Inpex Corp., Japan’s largest oil explorer, fell 0.8 percent to 706,000 yen. Woodside Petroleum Ltd., Australia’s No. 2 oil company, dropped 1 percent to A$40.08. Crude oil futures in New York lost 1.2 percent today, set for a sixth day of declines.
Honda lost 4 percent to 2,430 yen as the yen climbed to 94.50 per dollar, the strongest since June 1. A stronger yen reduces income when overseas revenue is converted into local currency. Toyota Motor Corp., the world’s largest automaker, lost 3.1 percent to 3,480 yen.
Samsung Electronics fell 0.9 percent to 644,000 won. Gartner forecast technology spending to drop 6 percent this year, worse than the 3.8 percent decrease it predicted in March.
While the global recession shows signs of easing, Gartner said in an e-mail that “IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen their purse strings.”
Tokyo Electron retreated 5 percent to 4,350 yen after being cut to “underperform” from “neutral” at Credit Suisse Group AG. The brokerage cut its stance on Japan’s semiconductor production equipment industry to “market weight” from “overweight,” citing a weaker outlook for capital spending.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by value, sank 2.9 percent after the nation’s bank lending slowed. BHP Billiton Ltd., the world’s largest mining company, lost 2.3 percent in Sydney on lower oil and copper prices. Honda Motor Co., which gets 45 percent of its sales in North America, slumped 4 percent in Tokyo as a stronger yen threatened the value of overseas revenue.
“The economic rebound won’t be rapid,” said Masaru Hamasaki, a Tokyo-based senior strategist at Toyota Asset Management Co., which oversees $14 billion. “It will take time, and share prices are beginning to reflect that.”
The MSCI Asia Pacific Index dropped 1.2 percent to 100.59 at 10:50 a.m. in Tokyo, taking its six-day decline to 2.5 percent. The index has fallen 4.4 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 42 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 1.8 percent. Australia’s S&P/ASX 200 Index declined 1.1 percent, erasing this year’s gains. Indonesia’s stock market is closed today for presidential elections.
South Korea’s Kospi lost 0.7 percent. Samsung Electronics Co., Asia’s largest maker of computer-memory chips, fell 0.9 percent in Seoul as researcher Gartner Inc. predicted spending on information technology will drop. Tokyo Electron Ltd., the world’s second-largest maker of semiconductor equipment, sank 5 percent on a Credit Suisse Group AG downgrade.
U.S. Earnings
Futures on the Standard & Poor’s 500 Index fell 0.2 percent. The gauge dropped 2 percent to the lowest level since May 1, amid concern second-quarter earnings will fail to justify a four-month rally in equities.
Alcoa Inc. will kick off the earnings season today as the first company in the Dow Jones Industrial Average to report results. Analysts estimate profits fell an average 34 percent at S&P 500 companies in the second quarter and will decrease 21 percent from July through September, according to data compiled by Bloomberg.
The MSCI Asia Pacific Index’s rally since March has been fueled by confidence stimulus policies worldwide will succeed in reviving global growth. Worse-than-expected U.S. unemployment data on July 2 fanned concern a recovery will falter. Japanese machinery orders declined 3 percent in May, the government said today. Economists had estimated a 2 percent increase.
Recovery Hopes
“The rally was built on recovery hopes, but a gap has developed between the level of the market and the real outlook for the economy,” said Hiroichi Nishi, general manager at Tokyo-based Nikko Cordial Securities Co. “All eyes are on the earnings about to kick off and the direction they will take.”
Mitsubishi UFJ slumped 2.9 percent to 572 yen as Japanese lending growth slowed in June for a sixth-straight month. Mizuho Financial Group Inc., Japan’s second-largest bank, sank 1.4 percent to 213 yen.
Loans, excluding those by credit associations, rose 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said today.
Shares of financial companies also fell as the cost of protecting Asia-Pacific corporate and sovereign bonds from default jumped, according to traders of credit-default swaps.
BHP lost 2.3 percent to A$31.52 after a measure of six metals traded on the London Metal Exchange, including copper and zinc, slipped 1.2 percent. Rio Tinto Group, the world’s third- largest mining company, dropped 1.2 percent to A$46.80.
Overseas Revenue
Inpex Corp., Japan’s largest oil explorer, fell 0.8 percent to 706,000 yen. Woodside Petroleum Ltd., Australia’s No. 2 oil company, dropped 1 percent to A$40.08. Crude oil futures in New York lost 1.2 percent today, set for a sixth day of declines.
Honda lost 4 percent to 2,430 yen as the yen climbed to 94.50 per dollar, the strongest since June 1. A stronger yen reduces income when overseas revenue is converted into local currency. Toyota Motor Corp., the world’s largest automaker, lost 3.1 percent to 3,480 yen.
Samsung Electronics fell 0.9 percent to 644,000 won. Gartner forecast technology spending to drop 6 percent this year, worse than the 3.8 percent decrease it predicted in March.
While the global recession shows signs of easing, Gartner said in an e-mail that “IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen their purse strings.”
Tokyo Electron retreated 5 percent to 4,350 yen after being cut to “underperform” from “neutral” at Credit Suisse Group AG. The brokerage cut its stance on Japan’s semiconductor production equipment industry to “market weight” from “overweight,” citing a weaker outlook for capital spending.
Monday, July 6, 2009
N.Z. Business Confidence Improves on Global Outlook
July 7 (Bloomberg) -- New Zealand businesses are less pessimistic about the economic outlook and their earnings amid signs a recovery in the world’s largest economies will buoy exports and investment.
A net 25 percent of companies surveyed last quarter expect the economy will worsen over the next six months, the New Zealand Institute of Economic Research said today in Wellington. That compares with 65 percent that forecast a deterioration in the first quarter. The net is calculated by subtracting the pessimists from optimists.
“The recession is not over yet,” said Jean-Pierre de Raad, chief executive at the institute. “What we see is a general improvement in sentiment. It’s still negative.”
New Zealand may emerge from its worst recession in more than three decades by the end of the year amid signs of a recovery in global markets, Reserve Bank Governor Alan Bollard said last month. The central banker said he will keep borrowing costs at a record low until late 2010 to help stimulate spending and investment.
The economy contracted 1 percent in the three months ended March 31, the fifth straight contraction, according to a government report last month. Gross domestic product will also decline in the second and third quarter, de Raad said today.
The Organization for Economic Cooperation and Development last month raised its forecast for the economies of its 30 member nations for the first time in two years as the U.S. slump shows signs of easing.
Interest Rates
“There have been pieces of good news in Australia and China, which shows these markets are holding up for exporters,” said de Raad.
New Zealand’s economy has been contracting since the first quarter of last year as a global recession curbed exports and prompted companies to fire workers.
Bollard has reduced the benchmark official cash rate by 5.75 percentage points to 2.5 percent since July last year. He will leave the rate unchanged on July 30, according to all 12 economists surveyed by Bloomberg News.
New Zealand businesses reported a decline in sales in the second quarter and expect profits will fall in the third quarter, according to today’s survey.
A net 36 percent of companies said trading fell in the three months ended June 30. The net figure, which is seasonally adjusted, is calculated by subtracting those reporting an increase in activity from those seeing a drop.
Profit Outlook
A net 10 percent say trading will slow in the third quarter, down from 38 percent expecting a decline in the previous survey.
A net 44 percent say profits will decline and 23 percent of firms expect to invest less in plant and machinery.
Companies are firing workers as consumers rein in spending and as the global recession curbs demand for exports. A net 19 percent of companies expect to fire workers in the next year, today’s survey showed.
“Households have not yet felt the full impact of this recession,” said de Raad, who expects the jobless rate will reach 7.8 percent next year it current rate of 5 percent.
Firms have reduced capacity, working hours and fired staff, which suggests they may have to raise prices when demand picks up, the institute said.
Capacity utilization, a measure of factory usage, increased to 90.7 percent in the second quarter from 86.3 percent in the previous three months. That’s the largest jump in the history of the series.
“That would translate to some price pressures,” said de Raad. A net 7 percent of firms expect to raise prices in the next three months, the survey showed. A net 42 percent of firms said it is easier to find skilled workers, the highest reading in more than 30 years.
A net 25 percent of companies surveyed last quarter expect the economy will worsen over the next six months, the New Zealand Institute of Economic Research said today in Wellington. That compares with 65 percent that forecast a deterioration in the first quarter. The net is calculated by subtracting the pessimists from optimists.
“The recession is not over yet,” said Jean-Pierre de Raad, chief executive at the institute. “What we see is a general improvement in sentiment. It’s still negative.”
New Zealand may emerge from its worst recession in more than three decades by the end of the year amid signs of a recovery in global markets, Reserve Bank Governor Alan Bollard said last month. The central banker said he will keep borrowing costs at a record low until late 2010 to help stimulate spending and investment.
The economy contracted 1 percent in the three months ended March 31, the fifth straight contraction, according to a government report last month. Gross domestic product will also decline in the second and third quarter, de Raad said today.
The Organization for Economic Cooperation and Development last month raised its forecast for the economies of its 30 member nations for the first time in two years as the U.S. slump shows signs of easing.
Interest Rates
“There have been pieces of good news in Australia and China, which shows these markets are holding up for exporters,” said de Raad.
New Zealand’s economy has been contracting since the first quarter of last year as a global recession curbed exports and prompted companies to fire workers.
Bollard has reduced the benchmark official cash rate by 5.75 percentage points to 2.5 percent since July last year. He will leave the rate unchanged on July 30, according to all 12 economists surveyed by Bloomberg News.
New Zealand businesses reported a decline in sales in the second quarter and expect profits will fall in the third quarter, according to today’s survey.
A net 36 percent of companies said trading fell in the three months ended June 30. The net figure, which is seasonally adjusted, is calculated by subtracting those reporting an increase in activity from those seeing a drop.
Profit Outlook
A net 10 percent say trading will slow in the third quarter, down from 38 percent expecting a decline in the previous survey.
A net 44 percent say profits will decline and 23 percent of firms expect to invest less in plant and machinery.
Companies are firing workers as consumers rein in spending and as the global recession curbs demand for exports. A net 19 percent of companies expect to fire workers in the next year, today’s survey showed.
“Households have not yet felt the full impact of this recession,” said de Raad, who expects the jobless rate will reach 7.8 percent next year it current rate of 5 percent.
Firms have reduced capacity, working hours and fired staff, which suggests they may have to raise prices when demand picks up, the institute said.
Capacity utilization, a measure of factory usage, increased to 90.7 percent in the second quarter from 86.3 percent in the previous three months. That’s the largest jump in the history of the series.
“That would translate to some price pressures,” said de Raad. A net 7 percent of firms expect to raise prices in the next three months, the survey showed. A net 42 percent of firms said it is easier to find skilled workers, the highest reading in more than 30 years.
Most Asian Stocks Fall on Lower Commodity Prices; Samsung Gains
July 7 (Bloomberg) -- Most Asian stocks declined, led by commodity companies, on lower oil and metal prices. Utilities advanced on optimism energy costs will drop.
Rio Tinto Group Ltd., the world’s third-biggest mining company, declined 2.7 percent in Sydney, while Inpex Corp., Japan’s largest oil explorer, dropped 1.5 percent. Tokyo Electric Power Co., Asia’s largest utility, added 1.2 percent. Samsung Electronics Co., the world’s largest maker of computer- memory chips, gained 1.4 percent after BNP Paribas recommended investors buy the stock.
“Volumes are light and commodities are tumbling, which is encouraging investors to stay on the sidelines until they can get a fix on the direction of the economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
The MSCI Asia Pacific Index lost 0.5 percent to 101.66 at 10:51 a.m. in Tokyo, with four stocks declining for every three that rose. The measure has slipped 3.4 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 44 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 0.4 percent to 9,642.75. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, fell 2.3 percent after shipping rates fell for a fourth day. Australia’s S&P/ASX 200 Index declined 0.5 percent, while China’s Shanghai Composite Index sank 1.1 percent.
Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The measure gained 0.3 percent yesterday as Moody’s Investors Service said it may lift Brazil’s debt rating.
Commodities Slide
Rio Tinto declined 2.7 percent to A$47.18. BHP Billiton Ltd., the world’s largest mining company, lost 1.7 percent to A$32.06. Mitsubishi Corp., which gets almost half of sales from commodities, dipped 1.4 percent to 1,671 yen. Copper futures in New York fell 0.5 percent in after-hours trading, taking declines in the past three days to 3.5 percent.
Inpex Corp., Japan’s largest oil explorer, lost 1.5 percent to 702,000 yen. Woodside Petroleum Ltd., Australia’s second- largest oil producer, slid 1.3 percent to A$40.32. Crude oil slid 4 percent to $64.05 a barrel yesterday in New York, the lowest settlement since May 27.
Tokyo Electric gained 1.2 percent to 2,480 yen on optimism lower oil prices will cut its fuel bill. The company slashed its use of crude oil and fuel oil to generate power after it restarted a nuclear reactor on May 19.
Sumco, LG Electronics
Samsung Electronics gained 1.4 percent to 643,000 won. The company had its rating upgraded to “buy” from “hold” at BNP Paribas, which said the company’s second-quarter earnings guidance was “significantly” higher than analysts’ expectations. The brokerage lifted its share-price estimate to 740,000 won from 630,000 won in a report today. Sumco Corp., the world’s second-largest maker of silicon wafers, jumped 4.8 percent to 1,450 yen. The stock was lifted to “overweight” from “underweight” at Morgan Stanley, which said wafer prices are unlikely to fall further.
LG Electronics Co., the world’s third-largest maker of liquid-crystal display televisions, climbed 2 percent to 125,500 won. The company said it will invest $100 million in its Mexican manufacturing plants over the next three years.
Mitsui O.S.K. Lines sank 2.3 percent to 554 yen. STX Pan Ocean Co., South Korea’s biggest bulk-commodity shipping line, fell 2.6 percent to 11,150 won. The Baltic Dry Index, a measure of shipping costs for commodities, retreated 4.1 percent, taking losses since June 3 to 21 percent.
Daihatsu Motor Co. advanced 6.6 percent to 990 yen. Japan’s largest minicar maker was rated “buy” in new coverage at Deutsche Bank AG and was raised to “buy” from “underperform” at Bank of America Co.’s Merrill Lynch unit.
Rio Tinto Group Ltd., the world’s third-biggest mining company, declined 2.7 percent in Sydney, while Inpex Corp., Japan’s largest oil explorer, dropped 1.5 percent. Tokyo Electric Power Co., Asia’s largest utility, added 1.2 percent. Samsung Electronics Co., the world’s largest maker of computer- memory chips, gained 1.4 percent after BNP Paribas recommended investors buy the stock.
“Volumes are light and commodities are tumbling, which is encouraging investors to stay on the sidelines until they can get a fix on the direction of the economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
The MSCI Asia Pacific Index lost 0.5 percent to 101.66 at 10:51 a.m. in Tokyo, with four stocks declining for every three that rose. The measure has slipped 3.4 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 44 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 0.4 percent to 9,642.75. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, fell 2.3 percent after shipping rates fell for a fourth day. Australia’s S&P/ASX 200 Index declined 0.5 percent, while China’s Shanghai Composite Index sank 1.1 percent.
Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The measure gained 0.3 percent yesterday as Moody’s Investors Service said it may lift Brazil’s debt rating.
Commodities Slide
Rio Tinto declined 2.7 percent to A$47.18. BHP Billiton Ltd., the world’s largest mining company, lost 1.7 percent to A$32.06. Mitsubishi Corp., which gets almost half of sales from commodities, dipped 1.4 percent to 1,671 yen. Copper futures in New York fell 0.5 percent in after-hours trading, taking declines in the past three days to 3.5 percent.
Inpex Corp., Japan’s largest oil explorer, lost 1.5 percent to 702,000 yen. Woodside Petroleum Ltd., Australia’s second- largest oil producer, slid 1.3 percent to A$40.32. Crude oil slid 4 percent to $64.05 a barrel yesterday in New York, the lowest settlement since May 27.
Tokyo Electric gained 1.2 percent to 2,480 yen on optimism lower oil prices will cut its fuel bill. The company slashed its use of crude oil and fuel oil to generate power after it restarted a nuclear reactor on May 19.
Sumco, LG Electronics
Samsung Electronics gained 1.4 percent to 643,000 won. The company had its rating upgraded to “buy” from “hold” at BNP Paribas, which said the company’s second-quarter earnings guidance was “significantly” higher than analysts’ expectations. The brokerage lifted its share-price estimate to 740,000 won from 630,000 won in a report today. Sumco Corp., the world’s second-largest maker of silicon wafers, jumped 4.8 percent to 1,450 yen. The stock was lifted to “overweight” from “underweight” at Morgan Stanley, which said wafer prices are unlikely to fall further.
LG Electronics Co., the world’s third-largest maker of liquid-crystal display televisions, climbed 2 percent to 125,500 won. The company said it will invest $100 million in its Mexican manufacturing plants over the next three years.
Mitsui O.S.K. Lines sank 2.3 percent to 554 yen. STX Pan Ocean Co., South Korea’s biggest bulk-commodity shipping line, fell 2.6 percent to 11,150 won. The Baltic Dry Index, a measure of shipping costs for commodities, retreated 4.1 percent, taking losses since June 3 to 21 percent.
Daihatsu Motor Co. advanced 6.6 percent to 990 yen. Japan’s largest minicar maker was rated “buy” in new coverage at Deutsche Bank AG and was raised to “buy” from “underperform” at Bank of America Co.’s Merrill Lynch unit.
Mukherjee Seeks Support for Indian Budget After Stocks Plunge
July 7 (Bloomberg) -- India’s Finance Minister Pranab Mukherjee is seeking to convince investors that yesterday’s budget will help turn around the economy after stocks plunged the most in six months.
The finance minister is due to meet industry groups in New Delhi today after the stock index dropped 5.8 percent yesterday and the rupee suffered its worst fall in almost six weeks. Markets tumbled as Mukherjee unveiled the widest budget deficit in 16 years and failed to lay out firm plans to sell state-run assets and ease foreign investment rules.
Mukherjee, who presented his first budget in 1982 when India was a closed economy allied to the Soviet Union, yesterday pledged to spend more on food subsidies and rural jobs to help aid the poor. The 73-year-old politician now needs to convince investors that corporate India will also benefit from the rural growth, tax relief and increased outlays on roads and power.
The budget “will lead to faster economic growth, but it wasn’t packaged and sold well,” said Vikram Kotak, who helps manage the equivalent of $2.4 billion in Indian stocks and bonds at Birla Sun Life Insurance Co. in Mumbai. “His intentions in the budget were good. He now needs to convey them.”
The Sensitive stock index’s slump yesterday was the worst since Jan. 7. The rupee weakened 1.3 percent to 48.5375 against the dollar, while the benchmark bond yield surged 22 percent, the most since March 17, to 6.45 percent.
High Expectations
Investor expectations for the budget were high after Prime Minister Manmohan Singh won a resounding re-election in May, reducing his dependence on allies such as the communist parties who opposed asset sales and looser foreign investment policies during his first term.
Morgan Stanley, for example, expected Mukherjee to announce a target of between $4 billion and $5 billion from selling shares in state-run companies this year. Mukherjee provided for only 11.2 billion rupees ($227 million) in the budget.
Mukherjee lowered the income tax burden on companies and individuals by scrapping the fringe benefit tax and the 10 percent surcharge on personal income tax respectively. He also announced spending of 1.79 trillion rupees on roads, telecommunication and power, where capacity constraints are estimated by the finance ministry to shave two percentage points off the nation’s annual economic growth.
The minister also ended a plan to tax trading commodity futures in India, the world’s biggest user of gold and second- biggest grower of rice and wheat, luring more investors to a market that’s doubled to $1 trillion in the past three years.
Rural Jobs
To support consumption in rural India, where more than three-fifths of India’s 1.2 billion people live, Mukherjee allocated 391 billion rupees for a rural jobs program which benefited 45 million households last year. The amount earmarked is 144 percent more than the previous year, the minister said.
“The budget is a fiscal document and we think the short- term policy objective of stimulating demand will likely be achieved,” said Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group Inc.
Mukherjee said the government will provide rice and wheat at a subsidized rate of 3 rupees a kilogram to the rural poor.
Higher spending will see the budget deficit widen to 6.8 percent of GDP in the year ending March 31, from 6 percent, forcing the government to borrow a record 4.51 trillion rupees.
Reserve Bank of India Deputy Governor Shyamala Gopinath said yesterday that the central bank has enough debt-management tools to help the government successfully complete its record bond-sale plan for the current fiscal year.
Mixed Reviews
Mukherjee’s first budget in a quarter century received mixed reviews from credit rating companies. The minister served in the foreign and defense portfolios in the bulk of Singh’s first term.
While Standard & Poor’s said the fiscal deficit was “within the boundary” of their expectation, Fitch Ratings said the budget doesn’t “alleviate” pressure on India’s ratings.
S&P ranks India’s long-term local-currency rating at BBB-, their lowest investment grade. Fitch has a BBB- long-term rating on India, also their lowest investment-grade level.
Political analysts such as Mahesh Rangarajan, a Delhi University history professor, said the budget indicates that the Congress party-led government is looking to extend its support in upcoming state polls. Two of India’s three most populous states, Maharashtra and Bihar, hold elections within 16 months.
“It’s the first socialist budget of the reform era that started in 1991 -- not in terms of squeezing the rich, but in terms of really increasing outlays for welfare programs and public investment in infrastructure,” Rangarajan said. “The politics has been absolutely central to the economics.”
The finance minister is due to meet industry groups in New Delhi today after the stock index dropped 5.8 percent yesterday and the rupee suffered its worst fall in almost six weeks. Markets tumbled as Mukherjee unveiled the widest budget deficit in 16 years and failed to lay out firm plans to sell state-run assets and ease foreign investment rules.
Mukherjee, who presented his first budget in 1982 when India was a closed economy allied to the Soviet Union, yesterday pledged to spend more on food subsidies and rural jobs to help aid the poor. The 73-year-old politician now needs to convince investors that corporate India will also benefit from the rural growth, tax relief and increased outlays on roads and power.
The budget “will lead to faster economic growth, but it wasn’t packaged and sold well,” said Vikram Kotak, who helps manage the equivalent of $2.4 billion in Indian stocks and bonds at Birla Sun Life Insurance Co. in Mumbai. “His intentions in the budget were good. He now needs to convey them.”
The Sensitive stock index’s slump yesterday was the worst since Jan. 7. The rupee weakened 1.3 percent to 48.5375 against the dollar, while the benchmark bond yield surged 22 percent, the most since March 17, to 6.45 percent.
High Expectations
Investor expectations for the budget were high after Prime Minister Manmohan Singh won a resounding re-election in May, reducing his dependence on allies such as the communist parties who opposed asset sales and looser foreign investment policies during his first term.
Morgan Stanley, for example, expected Mukherjee to announce a target of between $4 billion and $5 billion from selling shares in state-run companies this year. Mukherjee provided for only 11.2 billion rupees ($227 million) in the budget.
Mukherjee lowered the income tax burden on companies and individuals by scrapping the fringe benefit tax and the 10 percent surcharge on personal income tax respectively. He also announced spending of 1.79 trillion rupees on roads, telecommunication and power, where capacity constraints are estimated by the finance ministry to shave two percentage points off the nation’s annual economic growth.
The minister also ended a plan to tax trading commodity futures in India, the world’s biggest user of gold and second- biggest grower of rice and wheat, luring more investors to a market that’s doubled to $1 trillion in the past three years.
Rural Jobs
To support consumption in rural India, where more than three-fifths of India’s 1.2 billion people live, Mukherjee allocated 391 billion rupees for a rural jobs program which benefited 45 million households last year. The amount earmarked is 144 percent more than the previous year, the minister said.
“The budget is a fiscal document and we think the short- term policy objective of stimulating demand will likely be achieved,” said Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group Inc.
Mukherjee said the government will provide rice and wheat at a subsidized rate of 3 rupees a kilogram to the rural poor.
Higher spending will see the budget deficit widen to 6.8 percent of GDP in the year ending March 31, from 6 percent, forcing the government to borrow a record 4.51 trillion rupees.
Reserve Bank of India Deputy Governor Shyamala Gopinath said yesterday that the central bank has enough debt-management tools to help the government successfully complete its record bond-sale plan for the current fiscal year.
Mixed Reviews
Mukherjee’s first budget in a quarter century received mixed reviews from credit rating companies. The minister served in the foreign and defense portfolios in the bulk of Singh’s first term.
While Standard & Poor’s said the fiscal deficit was “within the boundary” of their expectation, Fitch Ratings said the budget doesn’t “alleviate” pressure on India’s ratings.
S&P ranks India’s long-term local-currency rating at BBB-, their lowest investment grade. Fitch has a BBB- long-term rating on India, also their lowest investment-grade level.
Political analysts such as Mahesh Rangarajan, a Delhi University history professor, said the budget indicates that the Congress party-led government is looking to extend its support in upcoming state polls. Two of India’s three most populous states, Maharashtra and Bihar, hold elections within 16 months.
“It’s the first socialist budget of the reform era that started in 1991 -- not in terms of squeezing the rich, but in terms of really increasing outlays for welfare programs and public investment in infrastructure,” Rangarajan said. “The politics has been absolutely central to the economics.”
Sunday, July 5, 2009
Australian Job Advertisements Fell 6.7% in June, ANZ Bank Says
July 6 (Bloomberg) -- Australian advertisements for job vacancies tumbled in June for a 14th month, adding to signs the nation’s economy is being buffeted by the global recession.
Jobs advertised in newspapers and on the Internet dropped 6.7 percent from May and 51.4 percent from a year earlier, the largest annual decline since the series began in 1998, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.
Falling global demand for natural resources is prompting mining companies such as BHP Billiton Ltd. to pare production and workers. Central bank Governor Glenn Stevens will leave the benchmark interest rate at a half-century low of 3 percent tomorrow to spur domestic demand, according to all 20 economists surveyed by Bloomberg News.
Today’s report “suggest that hiring intentions by Australian businesses are still weak,” said Warren Hogan, head of economics at ANZ Bank in Sydney. “Employment outcomes will be critical in determining future interest rate moves,” he said.
National vacancies advertised in newspapers and on the Internet averaged 127,346 a week last month, today’s report showed. Newspaper advertisements rose 0.9 percent to an average of 8,192 a week. Internet notices dropped 7.2 percent to 119,154, the ANZ Bank report said.
Employers probably cut 20,000 jobs last month and the unemployment rate rose to 5.9 percent from 5.7 percent, according to the median estimate in a Bloomberg survey of economists. The government’s employment report will be released on July 9 in Sydney.
Jobs advertised in newspapers and on the Internet dropped 6.7 percent from May and 51.4 percent from a year earlier, the largest annual decline since the series began in 1998, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.
Falling global demand for natural resources is prompting mining companies such as BHP Billiton Ltd. to pare production and workers. Central bank Governor Glenn Stevens will leave the benchmark interest rate at a half-century low of 3 percent tomorrow to spur domestic demand, according to all 20 economists surveyed by Bloomberg News.
Today’s report “suggest that hiring intentions by Australian businesses are still weak,” said Warren Hogan, head of economics at ANZ Bank in Sydney. “Employment outcomes will be critical in determining future interest rate moves,” he said.
National vacancies advertised in newspapers and on the Internet averaged 127,346 a week last month, today’s report showed. Newspaper advertisements rose 0.9 percent to an average of 8,192 a week. Internet notices dropped 7.2 percent to 119,154, the ANZ Bank report said.
Employers probably cut 20,000 jobs last month and the unemployment rate rose to 5.9 percent from 5.7 percent, according to the median estimate in a Bloomberg survey of economists. The government’s employment report will be released on July 9 in Sydney.
Asian Stocks Decline as Commodity Prices, Shipping Rates Drop
July 6 (Bloomberg) -- Asian stocks declined as commodities prices and shipping rates dropped amid concern the global economic recovery will falter.
BHP Billiton Ltd., the world’s biggest mining company, dropped 1.7 percent after metals prices fell. Mitsui O.S.K. Lines Ltd., Japan’s second-biggest shipping line by sales, sank 2.4 percent after shipping rates slumped 4.1 percent on July 3 in London. Inpex Corp., Japan’s largest oil explorer, fell 2 percent after crude oil prices declined.
“There’s a tug of war going on as the focus shifts to the outlook for individual companies,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. “Right now, the market is waiting for some data to provide it with direction.”
The MSCI Asia Pacific Index lost 0.1 percent to 102.74 as of 9:50 a.m. in Tokyo. The gauge has slipped 2.4 percent since climbing to an eight-month high on June 12 as economic data including rising U.S. unemployment and new share issuances have damped enthusiasm for equities. The measure has rallied 45 percent since falling to a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average slid 0.6 percent to 9,755.83. Australia’s S&P/ASX 200 Index lost 0.8 percent and South Korea’s Kospi gained 0.9 percent.
Commodity Demand
In New York, markets were closed for the July 4 holiday. U.S. Vice President Joe Biden said the Obama administration “misread the economy” when it forecast unemployment would peak at 8 percent if Congress enacted a $787 billion fiscal stimulus plan. Biden, appearing on the ABC News program “This Week,” said that in crafting its initial economic policies, the Obama administration followed consensus views of the severity of the crisis. Unemployment reached 9.5 percent last month, the Labor Department said July 2.
BHP Billiton lost 1.7 percent to A$32.86. Rio Tinto Group Ltd., the world’s third largest mining company, slipped 1.2 percent to A$49.02. Mitsubishi Corp., which gets almost half of its sales from commodities, dropped 1.1 percent to 1,714 yen. A gauge of six metals traded in London fell 1.3 percent on July 3.
Mitsui O.S.K. dropped 2.4 percent to 579 yen. The Baltic Dry index finished a second-straight weekly loss last week amid mounting concern China’s demand for commodities such as iron ore will slow. The index has tumbled 18 percent in the last month.
Inpex dropped 2 percent to 720,000 yen. Crude oil fell as much as 2.7 percent in trading today.
BHP Billiton Ltd., the world’s biggest mining company, dropped 1.7 percent after metals prices fell. Mitsui O.S.K. Lines Ltd., Japan’s second-biggest shipping line by sales, sank 2.4 percent after shipping rates slumped 4.1 percent on July 3 in London. Inpex Corp., Japan’s largest oil explorer, fell 2 percent after crude oil prices declined.
“There’s a tug of war going on as the focus shifts to the outlook for individual companies,” said Tomochika Kitaoka, a senior strategist at Mizuho Securities Co. “Right now, the market is waiting for some data to provide it with direction.”
The MSCI Asia Pacific Index lost 0.1 percent to 102.74 as of 9:50 a.m. in Tokyo. The gauge has slipped 2.4 percent since climbing to an eight-month high on June 12 as economic data including rising U.S. unemployment and new share issuances have damped enthusiasm for equities. The measure has rallied 45 percent since falling to a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average slid 0.6 percent to 9,755.83. Australia’s S&P/ASX 200 Index lost 0.8 percent and South Korea’s Kospi gained 0.9 percent.
Commodity Demand
In New York, markets were closed for the July 4 holiday. U.S. Vice President Joe Biden said the Obama administration “misread the economy” when it forecast unemployment would peak at 8 percent if Congress enacted a $787 billion fiscal stimulus plan. Biden, appearing on the ABC News program “This Week,” said that in crafting its initial economic policies, the Obama administration followed consensus views of the severity of the crisis. Unemployment reached 9.5 percent last month, the Labor Department said July 2.
BHP Billiton lost 1.7 percent to A$32.86. Rio Tinto Group Ltd., the world’s third largest mining company, slipped 1.2 percent to A$49.02. Mitsubishi Corp., which gets almost half of its sales from commodities, dropped 1.1 percent to 1,714 yen. A gauge of six metals traded in London fell 1.3 percent on July 3.
Mitsui O.S.K. dropped 2.4 percent to 579 yen. The Baltic Dry index finished a second-straight weekly loss last week amid mounting concern China’s demand for commodities such as iron ore will slow. The index has tumbled 18 percent in the last month.
Inpex dropped 2 percent to 720,000 yen. Crude oil fell as much as 2.7 percent in trading today.
Russia and India Question Reliance on Dollar Before G-8 Summit
July 6 (Bloomberg) -- Russia and India said the world economy is too reliant on the U.S. dollar and called for changes in how $6.5 trillion in currency reserves are managed, as Group of Eight leaders prepare to meet this week.
“The dollar system or the system based on the dollar and euro have shown that they are flawed,” Russian President Dmitry Medvedev said in an interview with Corriere della Sera, repeating his proposal for a new international reserve currency.
Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said in a July 3 interview that he is urging his nation to diversify its foreign holdings away from the dollar.
The challenge to the dollar, a linchpin of world finance and trade since 1945, underlines the shift in relative economic power toward emerging markets and away from the developed nations that spawned the global crisis.
French Finance Minister Christine Lagarde, speaking yesterday at a conference in Aix en Provence, France, said that “we must explore better coordination of exchange-rate policy.”
Questions need to be asked about “the balance of currencies and the role of currencies in a world that has changed because of the crisis and the growing role of emerging countries,” she told reporters.
Bank of France Governor Christian Noyer said at the same conference, “We really need to make sure there is a greater stability between the big currencies in the period to come.”
Dollar Share Grows
For all the concerns about the dollar’s role, emerging markets such as China and India remain dependent on the currency. The International Monetary Fund said June 30 the share of dollars in allocated global foreign-exchange reserves increased to 65 percent, or $2.6 trillion, in the first three months of this year, the highest since 2007.
China doesn’t support the idea of creating a supranational reserve currency and expects the U.S. dollar to maintain its role for “many years to come,” Deputy Foreign Minister He Yafei told reporters in Rome yesterday.
While Medvedev said he sees “no alternative” to the dollar or euro now, he repeated his proposal that “regional reserve currencies” be developed and again questioned the wisdom of relying on the dollar.
‘Cannot Be Hostages’
“In the long term, we must also think about a single unit of payment such as the International Monetary Fund’s Special Drawing Rights,” a unit of an account linked to a basket of currencies, he told the Italian newspaper. “We cannot be hostages to the economic situation of a single country, as is happening today with the United States.”
Russia has support. India’s Tendulkar said he is advising Singh to diversify India’s $264.6 billion in foreign-exchange reserves and hold fewer dollars.
“The major part of Indian reserves are in dollars -- that is something that’s a problem for us,” he said in Aix en Provence. He said big dollar holders face a “prisoner’s dilemma,” a reference to a problem in game theory in which a rational choice for an individual has negative consequences for a group.
The People’s Bank of China, that country’s central bank, said June 26 that the IMF should manage more of its members’ reserves. China said July 2 that it will allow companies to use the yuan to settle cross-border trade and let them keep their entitlement to export tax rebates, seeking to reduce the reliance of importers and exporters on the U.S. dollar.
Safe Haven
The dollar’s role as a safe haven was highlighted last week when the currency advanced 0.5 percent against the euro, to $1.3894, on speculation the global economic recovery is faltering.
“Some emerging countries have decided to deal more in their respective currencies and trust each other,” Lagarde said in an interview yesterday. “That doesn’t stop other countries from seeing the dollar, and to a lesser extent the euro, as currencies of trading if not reserve currencies.”
Lagarde said that any discussion of currencies needs to encompass the dollar, the euro, the yuan and the yen and that the meetings of the Group of 20 are the right forum.
“The appropriate platform is the one in which all the major currencies are represented,” she said.
Asked in Aix en Provence about currencies, European Central Bank President Jean-Claude Trichet said it is “extremely important” that U.S. officials remain committed to their policy of supporting a strong dollar.
“The dollar system or the system based on the dollar and euro have shown that they are flawed,” Russian President Dmitry Medvedev said in an interview with Corriere della Sera, repeating his proposal for a new international reserve currency.
Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said in a July 3 interview that he is urging his nation to diversify its foreign holdings away from the dollar.
The challenge to the dollar, a linchpin of world finance and trade since 1945, underlines the shift in relative economic power toward emerging markets and away from the developed nations that spawned the global crisis.
French Finance Minister Christine Lagarde, speaking yesterday at a conference in Aix en Provence, France, said that “we must explore better coordination of exchange-rate policy.”
Questions need to be asked about “the balance of currencies and the role of currencies in a world that has changed because of the crisis and the growing role of emerging countries,” she told reporters.
Bank of France Governor Christian Noyer said at the same conference, “We really need to make sure there is a greater stability between the big currencies in the period to come.”
Dollar Share Grows
For all the concerns about the dollar’s role, emerging markets such as China and India remain dependent on the currency. The International Monetary Fund said June 30 the share of dollars in allocated global foreign-exchange reserves increased to 65 percent, or $2.6 trillion, in the first three months of this year, the highest since 2007.
China doesn’t support the idea of creating a supranational reserve currency and expects the U.S. dollar to maintain its role for “many years to come,” Deputy Foreign Minister He Yafei told reporters in Rome yesterday.
While Medvedev said he sees “no alternative” to the dollar or euro now, he repeated his proposal that “regional reserve currencies” be developed and again questioned the wisdom of relying on the dollar.
‘Cannot Be Hostages’
“In the long term, we must also think about a single unit of payment such as the International Monetary Fund’s Special Drawing Rights,” a unit of an account linked to a basket of currencies, he told the Italian newspaper. “We cannot be hostages to the economic situation of a single country, as is happening today with the United States.”
Russia has support. India’s Tendulkar said he is advising Singh to diversify India’s $264.6 billion in foreign-exchange reserves and hold fewer dollars.
“The major part of Indian reserves are in dollars -- that is something that’s a problem for us,” he said in Aix en Provence. He said big dollar holders face a “prisoner’s dilemma,” a reference to a problem in game theory in which a rational choice for an individual has negative consequences for a group.
The People’s Bank of China, that country’s central bank, said June 26 that the IMF should manage more of its members’ reserves. China said July 2 that it will allow companies to use the yuan to settle cross-border trade and let them keep their entitlement to export tax rebates, seeking to reduce the reliance of importers and exporters on the U.S. dollar.
Safe Haven
The dollar’s role as a safe haven was highlighted last week when the currency advanced 0.5 percent against the euro, to $1.3894, on speculation the global economic recovery is faltering.
“Some emerging countries have decided to deal more in their respective currencies and trust each other,” Lagarde said in an interview yesterday. “That doesn’t stop other countries from seeing the dollar, and to a lesser extent the euro, as currencies of trading if not reserve currencies.”
Lagarde said that any discussion of currencies needs to encompass the dollar, the euro, the yuan and the yen and that the meetings of the Group of 20 are the right forum.
“The appropriate platform is the one in which all the major currencies are represented,” she said.
Asked in Aix en Provence about currencies, European Central Bank President Jean-Claude Trichet said it is “extremely important” that U.S. officials remain committed to their policy of supporting a strong dollar.
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