Oct. 10 (Bloomberg) -- Remittances from Pakistanis living overseas rose to a record $806.1 million in September as workers sent more money home from the U.A.E. and Saudi Arabia.
Transfers of funds rose by $145.7 million, or 22.1 percent, in the third month of the fiscal year that began July 1, the Karachi-based State Bank of Pakistan said today in an e-mailed statement.
Workers in the Emirates transferred $504 million, up from $312.2 million a year earlier. Pakistanis in Saudi Arabia sent home $430.75 million, up from $398 million, and Pakistanis in the U.S. transferred $498.7 million, compared with $499.5 million.
Remittances from overseas Pakistanis rose to a record $7.81 billion in the year ended June 30, according to the central bank. The government is appealing to its 8 million expatriates to help resuscitate an economy that has slumped after a seven-year boom.
Saturday, October 10, 2009
Infosys raises forecast as outsourcing rises
Infosys Technologies said on Friday it had begun adding staff again and awarded its workforce a pay rise as India’s information technology outsourcing sector shows signs of life following the economic crisis.
S. Gopalakrishnan, chief executive of Infosys, said revenue grew 2.8 per cent during the three months ended September 30 against the June quarter, the first time in the past three quarters that sales have shown quarter-on-quarter growth.
EDITOR’S CHOICE
Cost cuts to boost Indian IT - Sep-29
Consolidation moves in China’s outsourcing - Sep-15
“You want to be cautious because it’s not completely out of the woods but we clearly see some growth,” said Mr Gopalakrishnan.
The improving outlook came as most Indian IT companies are forecasting an increase in outsourcing by their developed world clients, which are looking to cut costs to aid their recovery from the crisis. Infosys added 35 clients during the quarter.
Pricing pressure, which weighed heavily on the industry earlier this year, has also eased thanks to the new demand.
“The pricing environment seems to have stabilised,” said S.D. Shibulal, Infosys chief operating officer.
India’s second-largest computer services group gave its Indian staff an average wage increase of 8 per cent and international staff 2 per cent for this year.
The group had deferred any decision on the pay rise at the beginning of its fiscal year in April because of the uncertain global outlook.
The group also added a net 1,548 employees in the September quarter, bringing its workforce to nearly 105,500, reversing the trend in the first quarter of this fiscal year, when its workforce shrank for one of the first times in the company’s history.
Mr Gopalakrishnan forecast that Infosys would report a 1 per cent quarter-on-quarter increase in revenue and volume over the next two quarters.
“It has definitely been one of the toughest periods for us – for the first time in the history of the company we saw negative growth,” Mr Gopalakrishnan said.
But he added: “We are predicting the next two quarters of sequential growth, again only 1 per cent, but definitely growth.”
Infosys said sales grew 3.1 per cent year-on-year to Rs56bn ($1.2bn), based on the Indian GAAP accounting standard. Net profit rose 7.5 per cent to Rs15.4bn, compared with a Bloomberg forecast of Rs14.9bn.
Based on the international IFRS standard, however, net income fell 0.9 per cent from a year ago to $317m on a stronger rupee against the dollar.
S. Gopalakrishnan, chief executive of Infosys, said revenue grew 2.8 per cent during the three months ended September 30 against the June quarter, the first time in the past three quarters that sales have shown quarter-on-quarter growth.
EDITOR’S CHOICE
Cost cuts to boost Indian IT - Sep-29
Consolidation moves in China’s outsourcing - Sep-15
“You want to be cautious because it’s not completely out of the woods but we clearly see some growth,” said Mr Gopalakrishnan.
The improving outlook came as most Indian IT companies are forecasting an increase in outsourcing by their developed world clients, which are looking to cut costs to aid their recovery from the crisis. Infosys added 35 clients during the quarter.
Pricing pressure, which weighed heavily on the industry earlier this year, has also eased thanks to the new demand.
“The pricing environment seems to have stabilised,” said S.D. Shibulal, Infosys chief operating officer.
India’s second-largest computer services group gave its Indian staff an average wage increase of 8 per cent and international staff 2 per cent for this year.
The group had deferred any decision on the pay rise at the beginning of its fiscal year in April because of the uncertain global outlook.
The group also added a net 1,548 employees in the September quarter, bringing its workforce to nearly 105,500, reversing the trend in the first quarter of this fiscal year, when its workforce shrank for one of the first times in the company’s history.
Mr Gopalakrishnan forecast that Infosys would report a 1 per cent quarter-on-quarter increase in revenue and volume over the next two quarters.
“It has definitely been one of the toughest periods for us – for the first time in the history of the company we saw negative growth,” Mr Gopalakrishnan said.
But he added: “We are predicting the next two quarters of sequential growth, again only 1 per cent, but definitely growth.”
Infosys said sales grew 3.1 per cent year-on-year to Rs56bn ($1.2bn), based on the Indian GAAP accounting standard. Net profit rose 7.5 per cent to Rs15.4bn, compared with a Bloomberg forecast of Rs14.9bn.
Based on the international IFRS standard, however, net income fell 0.9 per cent from a year ago to $317m on a stronger rupee against the dollar.
Pakistan’s Trade Gap Narrows 55.9% in September as Imports Fall
Oct. 10 (Bloomberg) -- Pakistan’s trade deficit narrowed by 55.9 percent in September as imports fell faster than exports.
The trade gap narrowed to $897.9 million in the third month of the fiscal year, from $2.03 billion a year ago, according to data posted on the Web site of the Federal Bureau of Statistics in Islamabad.
Overseas sales fell 14.2 percent to $1.52 billion, while imports fell 36.4 percent to $2.42 billion, according to the data.
Pakistan is seeking to boost exports to sustain growth in a country where the World Bank estimates two-thirds of the population of 160 million people survive on less than $2 a day.
Pakistan’s trade deficit narrowed 18.5 percent to $17 billion in the fiscal year ended June 30, from $20.7 billion in the previous 12 months, according to the statistics agency. Exports fell 6.7 percent to $17.8 billion and imports dropped 12.9 percent to $34.8 billion.
The trade gap narrowed to $897.9 million in the third month of the fiscal year, from $2.03 billion a year ago, according to data posted on the Web site of the Federal Bureau of Statistics in Islamabad.
Overseas sales fell 14.2 percent to $1.52 billion, while imports fell 36.4 percent to $2.42 billion, according to the data.
Pakistan is seeking to boost exports to sustain growth in a country where the World Bank estimates two-thirds of the population of 160 million people survive on less than $2 a day.
Pakistan’s trade deficit narrowed 18.5 percent to $17 billion in the fiscal year ended June 30, from $20.7 billion in the previous 12 months, according to the statistics agency. Exports fell 6.7 percent to $17.8 billion and imports dropped 12.9 percent to $34.8 billion.
Lobbyists Fight Last Big Plans to Cut Health Care Costs
WASHINGTON — As the health care debate moves to the floor of Congress, most of the serious proposals to fulfill President Obama’s original vow to curb costs have fallen victim to organized interests and parochial politics.
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Doug Mills/The New York Times
Labor leaders and insurance and health industry executives joined President Obama as he discussed cost-cutting efforts in May.
Prescriptions Blog
A blog from The New York Times that tracks the health care debate as it unfolds.
* More Health Care Overhaul News
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Health Care Conversations
Share your thoughts about the health care debate.
Top Discussions: The Public Option | Medicare and the Elderly | A Single-Payer System
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Obama Cites G.O.P. Officials in Call to Action on Bill (October 11, 2009)
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Susan Walsh/Associated Press
Peter R. Orszag, the White House budget director, says containing costs will be a priority as health care legislation advances.
And now the last two initiatives with real bite that are still in contention — a scaled-back “Cadillac tax” on high-cost health plans and a nonpartisan Medicare budget-cutting commission — are under furious assault.
Most economists’ favorite idea for slowing the growth of health care spending was ending the income tax exemption for employer-paid health insurance to make lower-cost plans more attractive. But that would hurt workers with big benefit plans, and a labor-union lobbying blitz helped kill that idea by the Fourth of July.
Lobbying by doctors, hospitals and other health care providers, meanwhile, dimmed the prospects of various proposals to cut into their incomes, including allowing government negotiation of Medicare drug prices and creating a government insurer with the muscle to lower fee payments.
“The lobbyists are winning,” said Representative Jim Cooper, a conservative Tennessee Democrat who teaches health policy.
Total health care costs in the last 20 years have doubled to about 16 percent of the economy, with no signs of tapering. Along with universal coverage, Mr. Obama has made controlling those costs a central pillar of his health care overhaul, calling the current course “unsustainable.” The effort is a pivotal test of his campaign promise to break the stranglehold of special interests.
In his weekly radio address on Saturday, Mr. Obama applauded the bill set for a vote next week in the Senate Finance Committee. “By attacking waste and fraud within the system,” he said, “it will slow the growth in health care costs, without adding a dime to our deficits.”
In an interview, Peter R. Orszag, the White House budget director and the official most associated with the drive to cut costs, singled out the proposed Medicare commission and the “Cadillac tax” as evidence of progress. “A key priority now,” Mr. Orszag said, “is to make sure cost containment holds up as we move through the legislative process."
Neither element appears in any of the other four health care bills on Capitol Hill, and both face dug-in resistance in the House.
Although the bills contain other measures aimed at medical costs, most of the surviving ones do not antagonize any organized interest. Among them are voluntary efficiency measures like encouraging the coordination of medical records, disseminating information comparing the effectiveness of treatments and various pilot projects.
White House officials argue that in any case it is prudent to start with such tests, and that many could be expanded to more comprehensive programs. But their real impact is hard to gauge, and the nonpartisan Congressional Budget Office assigns them little weight. (The budget office credited the Finance Committee bill with reducing the federal deficit, but how much it will slow the growth of total public and private health spending is another question.)
The tax on gold-plated insurance plans is the last vestige of most economists’ favorite idea, eliminating the tax exemption for employer plans. The finance bill would impose a 40 percent excise tax on insurance plans that cost more than $8,000 a year for an individual or $21,000 for a family.
The bill has aroused the frantic opposition of labor and business lobbyists who appear to have found friends in the Capitol. On Wednesday, 157 House Democrats — a majority of the party — signed a letter to Speaker Nancy Pelosi opposing the tax.
“It has no legs in the House,” said Representative Pete Stark, the California Democrat who is chairman of the health subcommittee of the tax-writing panel.
The proposed Medicare commission, aimed at providers instead of consumers, is becoming a case study in the political difficulty of reducing medical payments.
The commission was intended to side-step the interest-group pressure that often stymies Congress. Modeled after the nonpartisan commission for military base closings, it would present a roster of Medicare cuts that Congress could block only with legislation.
But along the way, the White House and the Senate Finance Committee have cut deals for political support with lobbyists that may circumscribe the cost cuts, potentially including the recommendations of the commission.
For example, the White House and the panel’s chairman, Senator Max Baucus, Democrat of Montana, reached an agreement with the drug industry for its companies to contribute a total of $80 billion — but no more — over 10 years in reductions to their government payments.
Many Democrats would like to see the government negotiate far lower prices for the Medicare drugs it buys. But drug industry lobbyists say — and the debate on the finance bill appears to confirm — that Mr. Baucus’s agreement to limit the industry’s costs excludes such price negotiations. Now the drug lobbyists are pushing to be sure the Medicare commission could not force negotiations either. The relevant text of the bill is still being written.
Skip to next paragraph
Enlarge This Image
Doug Mills/The New York Times
Labor leaders and insurance and health industry executives joined President Obama as he discussed cost-cutting efforts in May.
Prescriptions Blog
A blog from The New York Times that tracks the health care debate as it unfolds.
* More Health Care Overhaul News
conversations
Health Care Conversations
Share your thoughts about the health care debate.
Top Discussions: The Public Option | Medicare and the Elderly | A Single-Payer System
Related
Obama Cites G.O.P. Officials in Call to Action on Bill (October 11, 2009)
Enlarge This Image
Susan Walsh/Associated Press
Peter R. Orszag, the White House budget director, says containing costs will be a priority as health care legislation advances.
And now the last two initiatives with real bite that are still in contention — a scaled-back “Cadillac tax” on high-cost health plans and a nonpartisan Medicare budget-cutting commission — are under furious assault.
Most economists’ favorite idea for slowing the growth of health care spending was ending the income tax exemption for employer-paid health insurance to make lower-cost plans more attractive. But that would hurt workers with big benefit plans, and a labor-union lobbying blitz helped kill that idea by the Fourth of July.
Lobbying by doctors, hospitals and other health care providers, meanwhile, dimmed the prospects of various proposals to cut into their incomes, including allowing government negotiation of Medicare drug prices and creating a government insurer with the muscle to lower fee payments.
“The lobbyists are winning,” said Representative Jim Cooper, a conservative Tennessee Democrat who teaches health policy.
Total health care costs in the last 20 years have doubled to about 16 percent of the economy, with no signs of tapering. Along with universal coverage, Mr. Obama has made controlling those costs a central pillar of his health care overhaul, calling the current course “unsustainable.” The effort is a pivotal test of his campaign promise to break the stranglehold of special interests.
In his weekly radio address on Saturday, Mr. Obama applauded the bill set for a vote next week in the Senate Finance Committee. “By attacking waste and fraud within the system,” he said, “it will slow the growth in health care costs, without adding a dime to our deficits.”
In an interview, Peter R. Orszag, the White House budget director and the official most associated with the drive to cut costs, singled out the proposed Medicare commission and the “Cadillac tax” as evidence of progress. “A key priority now,” Mr. Orszag said, “is to make sure cost containment holds up as we move through the legislative process."
Neither element appears in any of the other four health care bills on Capitol Hill, and both face dug-in resistance in the House.
Although the bills contain other measures aimed at medical costs, most of the surviving ones do not antagonize any organized interest. Among them are voluntary efficiency measures like encouraging the coordination of medical records, disseminating information comparing the effectiveness of treatments and various pilot projects.
White House officials argue that in any case it is prudent to start with such tests, and that many could be expanded to more comprehensive programs. But their real impact is hard to gauge, and the nonpartisan Congressional Budget Office assigns them little weight. (The budget office credited the Finance Committee bill with reducing the federal deficit, but how much it will slow the growth of total public and private health spending is another question.)
The tax on gold-plated insurance plans is the last vestige of most economists’ favorite idea, eliminating the tax exemption for employer plans. The finance bill would impose a 40 percent excise tax on insurance plans that cost more than $8,000 a year for an individual or $21,000 for a family.
The bill has aroused the frantic opposition of labor and business lobbyists who appear to have found friends in the Capitol. On Wednesday, 157 House Democrats — a majority of the party — signed a letter to Speaker Nancy Pelosi opposing the tax.
“It has no legs in the House,” said Representative Pete Stark, the California Democrat who is chairman of the health subcommittee of the tax-writing panel.
The proposed Medicare commission, aimed at providers instead of consumers, is becoming a case study in the political difficulty of reducing medical payments.
The commission was intended to side-step the interest-group pressure that often stymies Congress. Modeled after the nonpartisan commission for military base closings, it would present a roster of Medicare cuts that Congress could block only with legislation.
But along the way, the White House and the Senate Finance Committee have cut deals for political support with lobbyists that may circumscribe the cost cuts, potentially including the recommendations of the commission.
For example, the White House and the panel’s chairman, Senator Max Baucus, Democrat of Montana, reached an agreement with the drug industry for its companies to contribute a total of $80 billion — but no more — over 10 years in reductions to their government payments.
Many Democrats would like to see the government negotiate far lower prices for the Medicare drugs it buys. But drug industry lobbyists say — and the debate on the finance bill appears to confirm — that Mr. Baucus’s agreement to limit the industry’s costs excludes such price negotiations. Now the drug lobbyists are pushing to be sure the Medicare commission could not force negotiations either. The relevant text of the bill is still being written.
Friday, October 9, 2009
Japan’s Bonds Decline as Global Equity Gains Damp Safety Demand
Oct. 10 (Bloomberg) -- Japanese bonds declined after advancing stocks worldwide reduced investor demand for the relative safety of government debt.
Benchmark yields increased from near an eight-month low after Alcoa Inc. started the earnings season with an unexpected profit and U.S. jobless claims dropped. Japan’s machinery orders, an indicator of capital spending in the next three to six months, rose 0.5 percent in August, rebounding from a 9.3 percent decline in July, the Cabinet Office said yesterday in Tokyo.
“Good earnings and economic data enhance risk sentiment,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., part of Japan’s fourth-largest banking group. “Ample liquidity from active stimulus and monetary easing will continue to shift to riskier assets from safe-haven assets.”
The yield on 10-year bonds rose three basis points this week to 1.280 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker.
Ten-year bond futures for December delivery dropped 0.48 this week to 139.13 yen, while the Nikkei 225 Stock Average advanced 2.9 percent.
Japan’s 10-year yields had a correlation of 0.7 with the Nikkei 225 in the past three weeks, according to Bloomberg data. A value of 1 means the two moved in lockstep.
Ten-year yields reached 1.24 percent on Oct. 6, the lowest since Jan. 27. A basis point is 0.01 percentage point.
No ‘Double-Dip’ Recession
“Bond yields, which are already at unsustainable levels, will rise,” said Taro Saito, senior economist in Tokyo at NLI Research Institute Ltd., a unit of Japan’s biggest life insurer. “The Japanese economy won’t slip into a double-dip recession, even though the recovery path is slow.”
The MSCI World Index of stocks gained more than 4 percent this week after the U.S. government said first-time jobless claims slid to 521,000 last week, the lowest since January. Economists in a Bloomberg News survey estimated 540,000 claims.
Global shares also advanced after Alcoa, the first company in the Dow Jones Industrial Average to report earnings, said profit excluding certain items was 4 cents a share, beating the average analyst estimate for a 9-cent loss.
Japan’s Ministry of Finance will sell 2.3 trillion yen ($25.9 billion) in five-year notes on Oct. 15. Primary dealers, which are required to bid at government debt sales, often reduce holdings of bonds in case prices decline before they can pass on the new securities to investors.
Debt Supply
“Given the fact that supply and demand conditions for short- and mid-term notes are gradually deteriorating, the yield curve may flatten,” said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., one of the 23 primary dealers that are required to bid at bond auctions.
The extra yield on 30-year bonds over five-year notes narrowed to as low as 1.54 percentage points on Oct. 8, the least since July. A yield curve is a chart that plots the yields of bonds of the same quality, but different maturities. It steepens when yields on shorter-maturity notes fall, those on longer-dated bonds rise, or both happen simultaneously.
Japan’s debt burden will probably rise to 197 percent of gross domestic product next year, according to the Organization for Economic Cooperation and Development. The Finance Ministry in April said it will boost bond issuance by 15 percent to 130.2 trillion yen this fiscal year.
Bond losses were limited on speculation the yen’s recent gains will hurt exporters’ profits.
“No exporter can survive at the current exchange rate,” said Kazuto Uchida, chief economist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s biggest banking group. “The appreciation of the yen will thus strengthen downside risks for Japan, thereby supporting bonds.”
Japanese companies forecast the currency will average 94.50 in the year to March 2010, according to the Bank of Japan’s Tankan survey released Oct. 1. The yen reached 88.01 per dollar on Oct. 7, the strongest level since January.
Benchmark yields increased from near an eight-month low after Alcoa Inc. started the earnings season with an unexpected profit and U.S. jobless claims dropped. Japan’s machinery orders, an indicator of capital spending in the next three to six months, rose 0.5 percent in August, rebounding from a 9.3 percent decline in July, the Cabinet Office said yesterday in Tokyo.
“Good earnings and economic data enhance risk sentiment,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., part of Japan’s fourth-largest banking group. “Ample liquidity from active stimulus and monetary easing will continue to shift to riskier assets from safe-haven assets.”
The yield on 10-year bonds rose three basis points this week to 1.280 percent at Japan Bond Trading Co., the nation’s largest interdealer debt broker.
Ten-year bond futures for December delivery dropped 0.48 this week to 139.13 yen, while the Nikkei 225 Stock Average advanced 2.9 percent.
Japan’s 10-year yields had a correlation of 0.7 with the Nikkei 225 in the past three weeks, according to Bloomberg data. A value of 1 means the two moved in lockstep.
Ten-year yields reached 1.24 percent on Oct. 6, the lowest since Jan. 27. A basis point is 0.01 percentage point.
No ‘Double-Dip’ Recession
“Bond yields, which are already at unsustainable levels, will rise,” said Taro Saito, senior economist in Tokyo at NLI Research Institute Ltd., a unit of Japan’s biggest life insurer. “The Japanese economy won’t slip into a double-dip recession, even though the recovery path is slow.”
The MSCI World Index of stocks gained more than 4 percent this week after the U.S. government said first-time jobless claims slid to 521,000 last week, the lowest since January. Economists in a Bloomberg News survey estimated 540,000 claims.
Global shares also advanced after Alcoa, the first company in the Dow Jones Industrial Average to report earnings, said profit excluding certain items was 4 cents a share, beating the average analyst estimate for a 9-cent loss.
Japan’s Ministry of Finance will sell 2.3 trillion yen ($25.9 billion) in five-year notes on Oct. 15. Primary dealers, which are required to bid at government debt sales, often reduce holdings of bonds in case prices decline before they can pass on the new securities to investors.
Debt Supply
“Given the fact that supply and demand conditions for short- and mid-term notes are gradually deteriorating, the yield curve may flatten,” said Kazuhiko Sano, chief strategist in Tokyo at Citigroup Global Markets Japan Inc., one of the 23 primary dealers that are required to bid at bond auctions.
The extra yield on 30-year bonds over five-year notes narrowed to as low as 1.54 percentage points on Oct. 8, the least since July. A yield curve is a chart that plots the yields of bonds of the same quality, but different maturities. It steepens when yields on shorter-maturity notes fall, those on longer-dated bonds rise, or both happen simultaneously.
Japan’s debt burden will probably rise to 197 percent of gross domestic product next year, according to the Organization for Economic Cooperation and Development. The Finance Ministry in April said it will boost bond issuance by 15 percent to 130.2 trillion yen this fiscal year.
Bond losses were limited on speculation the yen’s recent gains will hurt exporters’ profits.
“No exporter can survive at the current exchange rate,” said Kazuto Uchida, chief economist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s biggest banking group. “The appreciation of the yen will thus strengthen downside risks for Japan, thereby supporting bonds.”
Japanese companies forecast the currency will average 94.50 in the year to March 2010, according to the Bank of Japan’s Tankan survey released Oct. 1. The yen reached 88.01 per dollar on Oct. 7, the strongest level since January.
Asian Currencies Advance as Inflows Overwhelm Intervention
Oct. 10 (Bloomberg) -- India’s rupee led weekly gains in Asian currencies as signs the region is recovering from a global recession attracted investment, overwhelming attempts by central banks to stem appreciation.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active regional currencies excluding the yen, rose 0.5 percent in the last five days, a sixth straight weekly gain, as Asian stocks rallied. Philippine central bank Deputy Governor Diwa Guinigundo signaled policy makers favored “more moderate” appreciation in the peso, and the Central Bank of the Republic of China (Taiwan) yesterday flagged the merits of capital controls after the island’s dollar reached a one-year high.
“We’re seeing real money flows, institutional investors globally making a large allocation into emerging markets, the strongest since early 2007,” said Steven Chang, senior managing director of foreign-exchange trading at State Street Bank & Trust Co. in Hong Kong. “Central banks in the region are smoothing the market appreciation.”
The rupee jumped 2.7 percent this week to 46.475, according to data compiled by Bloomberg. Malaysia’s ringgit rose 2.4 percent to 3.3981, Indonesia’s rupiah climbed 2 percent to 9,455 and South Korea’s won rose 0.9 percent to 1,164.38.
The Hong Kong Monetary Authority intervened three times during the week, injecting a total HK$16.3 billion ($2.1 billion) in the financial system to defend the currency’s fixed trading range of HK$7.75 to HK$7.85 per dollar, according to data compiled by Bloomberg. Central banks intervene by arranging purchases or sales of currencies to influence exchange rates.
‘Supporting the Dollar’
South Korea’s central bank yesterday kept its benchmark interest rate unchanged at a record-low 2 percent. Governor Lee Seong Tae said it was “undesirable” for the won to move in one direction.
The Bank of Korea’s decision came as other central banks begin to indicate a willingness to raise rates. Australia unexpectedly raised its benchmark on Oct. 6 from a 49-year low, becoming the first Group of 20 nation to act since the start of the global financial crisis more than a year ago.
“The only reason the won hasn’t strengthened a lot more is because the central bank is supporting the dollar,” State Street’s Chang said.
Foreign investors have bought $19.4 billion more Korean stocks than they sold this year, while net purchases in India and Taiwan each total more than $12 billion, exchange data show.
‘Positive Outlook’
Malaysia’s ringgit completed its biggest weekly gain this year after Bank Negara Malaysia said the economy contracted at a slower pace in the third quarter and will likely return to growth in the final three months of this year. Exports fell 19.8 percent in August from a year earlier, the least since March, the trade ministry said Oct. 8.
“The central bank is positive on the outlook and we should see better data supporting the ringgit,” said Azmi Shukri Rahman, a currency trader at CIMB Investment Bank Bhd. in Kuala Lumpur. “The weak dollar sentiment will continue for a while and we may see more foreign funds in stocks here.”
Indonesia’s rupiah rose a fifth week, the longest winning streak since April, after policy makers kept borrowing costs unchanged to stimulate economic growth. Bank Indonesia Deputy Governor Budi Mulya said on Oct. 5 the rupiah may strengthen further this year.
Intervention
The central bank on Oct. 5 held its reference rate at 6.5 percent, the highest benchmark among Asia’s 10 biggest economies. It also raised the 2009 growth forecast to 4.3 percent, from 4 percent, and said gross domestic product will accelerate 5.5 percent in 2010. Bank Indonesia does not want the rupiah to strengthen too rapidly, Deputy Governor Hartadi Sarwono said yesterday.
The central bank intervened the previous day because the rise in the rupiah “has been too fast,” said Lindawati Susanto, head of foreign-exchange trading at PT Bank Resona Perdania in Jakarta.
Bank Indonesia bought about $50 million of the U.S. currency on Oct. 8, Susanto said, adding that the central bank will continue to step into the market next week if the rupiah remains volatile.
Elsewhere, the Philippine peso climbed 1.4 percent this week to 46.46. Thailand’s baht gained 0.6 percent to 33.32 and the Singapore dollar climbed 1.7 percent to close at a 14-month high of S$1.3928.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active regional currencies excluding the yen, rose 0.5 percent in the last five days, a sixth straight weekly gain, as Asian stocks rallied. Philippine central bank Deputy Governor Diwa Guinigundo signaled policy makers favored “more moderate” appreciation in the peso, and the Central Bank of the Republic of China (Taiwan) yesterday flagged the merits of capital controls after the island’s dollar reached a one-year high.
“We’re seeing real money flows, institutional investors globally making a large allocation into emerging markets, the strongest since early 2007,” said Steven Chang, senior managing director of foreign-exchange trading at State Street Bank & Trust Co. in Hong Kong. “Central banks in the region are smoothing the market appreciation.”
The rupee jumped 2.7 percent this week to 46.475, according to data compiled by Bloomberg. Malaysia’s ringgit rose 2.4 percent to 3.3981, Indonesia’s rupiah climbed 2 percent to 9,455 and South Korea’s won rose 0.9 percent to 1,164.38.
The Hong Kong Monetary Authority intervened three times during the week, injecting a total HK$16.3 billion ($2.1 billion) in the financial system to defend the currency’s fixed trading range of HK$7.75 to HK$7.85 per dollar, according to data compiled by Bloomberg. Central banks intervene by arranging purchases or sales of currencies to influence exchange rates.
‘Supporting the Dollar’
South Korea’s central bank yesterday kept its benchmark interest rate unchanged at a record-low 2 percent. Governor Lee Seong Tae said it was “undesirable” for the won to move in one direction.
The Bank of Korea’s decision came as other central banks begin to indicate a willingness to raise rates. Australia unexpectedly raised its benchmark on Oct. 6 from a 49-year low, becoming the first Group of 20 nation to act since the start of the global financial crisis more than a year ago.
“The only reason the won hasn’t strengthened a lot more is because the central bank is supporting the dollar,” State Street’s Chang said.
Foreign investors have bought $19.4 billion more Korean stocks than they sold this year, while net purchases in India and Taiwan each total more than $12 billion, exchange data show.
‘Positive Outlook’
Malaysia’s ringgit completed its biggest weekly gain this year after Bank Negara Malaysia said the economy contracted at a slower pace in the third quarter and will likely return to growth in the final three months of this year. Exports fell 19.8 percent in August from a year earlier, the least since March, the trade ministry said Oct. 8.
“The central bank is positive on the outlook and we should see better data supporting the ringgit,” said Azmi Shukri Rahman, a currency trader at CIMB Investment Bank Bhd. in Kuala Lumpur. “The weak dollar sentiment will continue for a while and we may see more foreign funds in stocks here.”
Indonesia’s rupiah rose a fifth week, the longest winning streak since April, after policy makers kept borrowing costs unchanged to stimulate economic growth. Bank Indonesia Deputy Governor Budi Mulya said on Oct. 5 the rupiah may strengthen further this year.
Intervention
The central bank on Oct. 5 held its reference rate at 6.5 percent, the highest benchmark among Asia’s 10 biggest economies. It also raised the 2009 growth forecast to 4.3 percent, from 4 percent, and said gross domestic product will accelerate 5.5 percent in 2010. Bank Indonesia does not want the rupiah to strengthen too rapidly, Deputy Governor Hartadi Sarwono said yesterday.
The central bank intervened the previous day because the rise in the rupiah “has been too fast,” said Lindawati Susanto, head of foreign-exchange trading at PT Bank Resona Perdania in Jakarta.
Bank Indonesia bought about $50 million of the U.S. currency on Oct. 8, Susanto said, adding that the central bank will continue to step into the market next week if the rupiah remains volatile.
Elsewhere, the Philippine peso climbed 1.4 percent this week to 46.46. Thailand’s baht gained 0.6 percent to 33.32 and the Singapore dollar climbed 1.7 percent to close at a 14-month high of S$1.3928.
US trade tensions intensify with China
By Sarah O'Connor in Washington, Alan Beattie in London,and Justine Lau in Hong Kong
Published: October 9 2009 03:00 | Last updated: October 9 2009 03:00
Global trade tensions intensified yesterday as the US opened an investigation into Chinese steel imports and clashed with the European Union over chickens.
The US steel pipe investigation is likely to irritate Beijing, which last month accused its biggest trading partner of "rampant protectionism" after Barack Obama, the US president, imposed a heavy duty on imported Chinese tyres.
That decision rattled many economists, who feared that Mr Obama would backtrack on his free trade promises in an attempt to pacify the politically important US unions. Resentment towards China has been growing in the US as the recession pummels manufacturers.
The latest investigation into seamless steel pipes is one of a string that has been opened this year. A petition, filed by several steel companies and the United Steelworkers union, said unfairly low Chinese prices spurred a 218 per cent surge in imports last year to $328m (€222m, £206m). The petition asks for a 98.37 per cent anti-dumping duty as well as countervailing duties aimed at offsetting what it said were Chinese government subsidies. Beijing, which was on National Day holiday yesterday, has not reacted to the announcement. Such investigations are common and do not necessarily turn into tariffs but the move is likely to exacerbate China's fears that US companies have been encouraged by the tyres case to ask for more protection.
Yu Li of Winston & Strawn, a law firm, said: "The trade law has been around for some time and I think more US companies would make use of it as they look for someone to blame for falling profitability."
China has become a clear target amid the global downturn, and not just for US companies. Across the world, industry demands for new import restrictions on China rose 23 per cent in 2008 and are expected to increase again in 2009.
Another potential flashpoint between the US and China looms next week as the US Treasury prepares to declare whether or not Beijing is manipulating its currency. The US also escalated a dispute with Brussels over restrictions on imports of US poultry, asking the World Trade Organisation to open a dispute settlement panel.
The office of the US Trade Representative said: "The US poultry subject to the EU ban is safe. We regret that formal WTO consultations and significant US engagement over many years have not resulted in the lifting of the EU's ban."
The US has complained the EU has blocked chicken meat washed with chlorine and other chemicals even though US and European scientific agencies have concluded such treatments were safe for consumers.
Published: October 9 2009 03:00 | Last updated: October 9 2009 03:00
Global trade tensions intensified yesterday as the US opened an investigation into Chinese steel imports and clashed with the European Union over chickens.
The US steel pipe investigation is likely to irritate Beijing, which last month accused its biggest trading partner of "rampant protectionism" after Barack Obama, the US president, imposed a heavy duty on imported Chinese tyres.
That decision rattled many economists, who feared that Mr Obama would backtrack on his free trade promises in an attempt to pacify the politically important US unions. Resentment towards China has been growing in the US as the recession pummels manufacturers.
The latest investigation into seamless steel pipes is one of a string that has been opened this year. A petition, filed by several steel companies and the United Steelworkers union, said unfairly low Chinese prices spurred a 218 per cent surge in imports last year to $328m (€222m, £206m). The petition asks for a 98.37 per cent anti-dumping duty as well as countervailing duties aimed at offsetting what it said were Chinese government subsidies. Beijing, which was on National Day holiday yesterday, has not reacted to the announcement. Such investigations are common and do not necessarily turn into tariffs but the move is likely to exacerbate China's fears that US companies have been encouraged by the tyres case to ask for more protection.
Yu Li of Winston & Strawn, a law firm, said: "The trade law has been around for some time and I think more US companies would make use of it as they look for someone to blame for falling profitability."
China has become a clear target amid the global downturn, and not just for US companies. Across the world, industry demands for new import restrictions on China rose 23 per cent in 2008 and are expected to increase again in 2009.
Another potential flashpoint between the US and China looms next week as the US Treasury prepares to declare whether or not Beijing is manipulating its currency. The US also escalated a dispute with Brussels over restrictions on imports of US poultry, asking the World Trade Organisation to open a dispute settlement panel.
The office of the US Trade Representative said: "The US poultry subject to the EU ban is safe. We regret that formal WTO consultations and significant US engagement over many years have not resulted in the lifting of the EU's ban."
The US has complained the EU has blocked chicken meat washed with chlorine and other chemicals even though US and European scientific agencies have concluded such treatments were safe for consumers.
Bernanke Says Fed Ready to Tighten When Economy Improves Enough
Oct. 9 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the central bank will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”
“My colleagues at the Federal Reserve and I believe that accommodative policies will likely be warranted for an extended period,” Bernanke said at a Board of Governors conference yesterday in Washington, echoing language from last month’s meeting of the Federal Open Market Committee. “At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.”
The Fed chairman didn’t enter into the debate among his colleagues on the FOMC over the pace or timing of a change in monetary policy. Fed Governor Kevin Warsh said Sept. 25 interest rates may need to rise “with greater force” than usual, while New York Fed President William Dudley said Oct. 5 the recovery’s pace “is not likely to be robust” and inflation risks are “on the downside.”
The FOMC reiterated its pledge last month to keep the benchmark lending rate at around zero “for an extended period” to boost a weak recovery that has yet to create jobs. The unemployment rate rose to 9.8 percent last month, the highest level since 1983. Bernanke didn’t discuss the outlook for the economy in his prepared remarks, which outlined the Fed’s response to the financial crisis.
‘More Pointed’
“He could not have been more pointed when reminding his worldwide audience that the low-rates promise is conditional,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Money is free and easy right now, and the minute the job losses halt, you can bet the Fed will stop talking about exit strategies, including lifting the Fed funds rate, and start implementing them.”
The Fed chairman, responding to an audience question about the effect of the $787 billion fiscal stimulus package on monetary policy, said he is assessing the impact of the spending on growth.
“Looking at the amount of excess capacity in the economy, looking at the low rate of inflation, we believe that conditions will warrant policy accommodation for an extended period,” he said.
The U.S. currency strengthened to 89.11 yen as of 12:45 p.m. in Tokyo from 88.39 yen in New York yesterday, while it has dropped 0.8 percent this week. The dollar climbed to $1.4723 per euro from $1.4794, paring its decline on the week to 1 percent.
Stocks Gained
U.S. stocks gained as Alcoa Inc. started the earnings season with an unexpected profit and jobless claims decreased more than forecast. The Standard and Poor’s 500 Index rose 0.8 percent to 1,065.48. Yields on U.S. 10-year notes increased 8 basis points to 3.26 percent. A basis point is 0.01 percent.
The Fed staff is fine-tuning mechanisms designed to drain or neutralize excess cash in the banking system following a doubling of the central bank’s balance sheet. Those tools range from paying interest on bank reserves deposited at the Fed to reverse repurchase agreements, where the Fed pulls cash out of the financial system through a temporary sale of securities.
Bernanke said in the question-and-answer period the Fed could also conduct reverse repurchase agreements with Fannie Mae and Freddie Mac to soak up their excess cash balances.
Emergency Credit
U.S. central bankers boosted their balance sheet by $1.2 trillion after the collapse of Lehman Brothers Holdings Inc. in September 2008. The Fed has provided emergency credit to markets for commercial paper and asset-backed securities, expanded loans to banks and financed a $30 billion pool of high-risk securities to facilitate the merger of Bear Stearns Cos. with JPMorgan Chase & Co.
The Fed chairman said the bank reserves created through these operations haven’t created growth in broader measures of money. Still, he said Fed actions have improved liquidity and reduced lending spreads, two measures of success for a policy he calls “credit easing.”
“The unstinting provision of liquidity by the central bank is crucial for arresting a financial panic,” Bernanke said. “By backstopping these markets, the Federal Reserve has helped normalize credit flows for the benefit of the economy.”
To keep longer-term interest rates low, the Federal Open Market Committee is also conducting a $1.75 trillion purchase program of Treasury, housing agency and mortgage-backed securities.
Lower the Cost
“The principal goals of our recent security purchases are to lower the cost and improve the availability of credit for households and businesses,” Bernanke said. “The programs appear to be having their intended effect.”
The average rate on a 30-year fixed-rate mortgage fell to 4.87 percent, the lowest since May, Freddie Mac said yesterday. The Fed’s auctions of term loans to banks are also reducing pressures in the market for interbank loans.
The Fed won’t begin raising interest rates until the third quarter of 2010 as the recovery is likely to be too weak to lift employment and incomes, according to a September survey of 57 economists by Bloomberg News.
Richmond Fed President Jeffrey Lacker told reporters at a separate event in Washington yesterday that the risk the economy will slide back into recession “has diminished substantially” yet is “not entirely zero.”
Lacker also said Oct. 1 in a Bloomberg Radio interview that the growth and consumer spending outlook are “more fundamental” to the decision on when to tighten than “labor- market conditions.”
‘Extended Period’
Fed Governor Daniel Tarullo said yesterday in a speech in Phoenix that the strength of the U.S. recovery shouldn’t be exaggerated, while reiterating that rates are likely to remain low for “an extended period.”
“This turnaround is certainly welcome, but it should not be overstated,” Tarullo said. “Although we can expect positive growth to continue beyond the third quarter, economic activity remains relatively weak.”
The economy will expand at a 2.2 percent annual pace this quarter, the economists estimated. Housing markets have stabilized and manufacturing is picking up as companies re- stock lean inventories. Employers cut 263,000 jobs in September, pushing the unemployment rate up to 9.8 percent.
“The unemployment rate is much too high and it seems likely that the recovery will be less robust than desired,” New York Fed President William Dudley said Oct. 5. “This means that the economy has significant excess slack and implies that we face meaningful downside risks to inflation over the next year or two.”
Six Straight Months
Consumer prices have fallen for six straight months from year-earlier levels, the longest stretch of declines since a 12- month drop from September 1954 to August 1955, according to the Labor Department.
The core consumer-price index, which excludes food and energy, rose 1.4 percent in August from a year earlier, down from a 2.5 percent increase in September 2008.
“There is still downward pressure on core inflation and with the unemployment as weak as it is, there is a lot of room, as the Fed sees it, to maintain exceptionally low interest rates,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. LLC.
“My colleagues at the Federal Reserve and I believe that accommodative policies will likely be warranted for an extended period,” Bernanke said at a Board of Governors conference yesterday in Washington, echoing language from last month’s meeting of the Federal Open Market Committee. “At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road.”
The Fed chairman didn’t enter into the debate among his colleagues on the FOMC over the pace or timing of a change in monetary policy. Fed Governor Kevin Warsh said Sept. 25 interest rates may need to rise “with greater force” than usual, while New York Fed President William Dudley said Oct. 5 the recovery’s pace “is not likely to be robust” and inflation risks are “on the downside.”
The FOMC reiterated its pledge last month to keep the benchmark lending rate at around zero “for an extended period” to boost a weak recovery that has yet to create jobs. The unemployment rate rose to 9.8 percent last month, the highest level since 1983. Bernanke didn’t discuss the outlook for the economy in his prepared remarks, which outlined the Fed’s response to the financial crisis.
‘More Pointed’
“He could not have been more pointed when reminding his worldwide audience that the low-rates promise is conditional,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Money is free and easy right now, and the minute the job losses halt, you can bet the Fed will stop talking about exit strategies, including lifting the Fed funds rate, and start implementing them.”
The Fed chairman, responding to an audience question about the effect of the $787 billion fiscal stimulus package on monetary policy, said he is assessing the impact of the spending on growth.
“Looking at the amount of excess capacity in the economy, looking at the low rate of inflation, we believe that conditions will warrant policy accommodation for an extended period,” he said.
The U.S. currency strengthened to 89.11 yen as of 12:45 p.m. in Tokyo from 88.39 yen in New York yesterday, while it has dropped 0.8 percent this week. The dollar climbed to $1.4723 per euro from $1.4794, paring its decline on the week to 1 percent.
Stocks Gained
U.S. stocks gained as Alcoa Inc. started the earnings season with an unexpected profit and jobless claims decreased more than forecast. The Standard and Poor’s 500 Index rose 0.8 percent to 1,065.48. Yields on U.S. 10-year notes increased 8 basis points to 3.26 percent. A basis point is 0.01 percent.
The Fed staff is fine-tuning mechanisms designed to drain or neutralize excess cash in the banking system following a doubling of the central bank’s balance sheet. Those tools range from paying interest on bank reserves deposited at the Fed to reverse repurchase agreements, where the Fed pulls cash out of the financial system through a temporary sale of securities.
Bernanke said in the question-and-answer period the Fed could also conduct reverse repurchase agreements with Fannie Mae and Freddie Mac to soak up their excess cash balances.
Emergency Credit
U.S. central bankers boosted their balance sheet by $1.2 trillion after the collapse of Lehman Brothers Holdings Inc. in September 2008. The Fed has provided emergency credit to markets for commercial paper and asset-backed securities, expanded loans to banks and financed a $30 billion pool of high-risk securities to facilitate the merger of Bear Stearns Cos. with JPMorgan Chase & Co.
The Fed chairman said the bank reserves created through these operations haven’t created growth in broader measures of money. Still, he said Fed actions have improved liquidity and reduced lending spreads, two measures of success for a policy he calls “credit easing.”
“The unstinting provision of liquidity by the central bank is crucial for arresting a financial panic,” Bernanke said. “By backstopping these markets, the Federal Reserve has helped normalize credit flows for the benefit of the economy.”
To keep longer-term interest rates low, the Federal Open Market Committee is also conducting a $1.75 trillion purchase program of Treasury, housing agency and mortgage-backed securities.
Lower the Cost
“The principal goals of our recent security purchases are to lower the cost and improve the availability of credit for households and businesses,” Bernanke said. “The programs appear to be having their intended effect.”
The average rate on a 30-year fixed-rate mortgage fell to 4.87 percent, the lowest since May, Freddie Mac said yesterday. The Fed’s auctions of term loans to banks are also reducing pressures in the market for interbank loans.
The Fed won’t begin raising interest rates until the third quarter of 2010 as the recovery is likely to be too weak to lift employment and incomes, according to a September survey of 57 economists by Bloomberg News.
Richmond Fed President Jeffrey Lacker told reporters at a separate event in Washington yesterday that the risk the economy will slide back into recession “has diminished substantially” yet is “not entirely zero.”
Lacker also said Oct. 1 in a Bloomberg Radio interview that the growth and consumer spending outlook are “more fundamental” to the decision on when to tighten than “labor- market conditions.”
‘Extended Period’
Fed Governor Daniel Tarullo said yesterday in a speech in Phoenix that the strength of the U.S. recovery shouldn’t be exaggerated, while reiterating that rates are likely to remain low for “an extended period.”
“This turnaround is certainly welcome, but it should not be overstated,” Tarullo said. “Although we can expect positive growth to continue beyond the third quarter, economic activity remains relatively weak.”
The economy will expand at a 2.2 percent annual pace this quarter, the economists estimated. Housing markets have stabilized and manufacturing is picking up as companies re- stock lean inventories. Employers cut 263,000 jobs in September, pushing the unemployment rate up to 9.8 percent.
“The unemployment rate is much too high and it seems likely that the recovery will be less robust than desired,” New York Fed President William Dudley said Oct. 5. “This means that the economy has significant excess slack and implies that we face meaningful downside risks to inflation over the next year or two.”
Six Straight Months
Consumer prices have fallen for six straight months from year-earlier levels, the longest stretch of declines since a 12- month drop from September 1954 to August 1955, according to the Labor Department.
The core consumer-price index, which excludes food and energy, rose 1.4 percent in August from a year earlier, down from a 2.5 percent increase in September 2008.
“There is still downward pressure on core inflation and with the unemployment as weak as it is, there is a lot of room, as the Fed sees it, to maintain exceptionally low interest rates,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. LLC.
Thursday, October 8, 2009
Unemployment Will Suppress U.S. Consumer Spending, Survey Shows
Oct. 9 (Bloomberg) -- The rebound in U.S. consumer spending, driven by government stimulus, will wane as the unemployment rate surpasses 10 percent, a survey of economists showed.
Household purchases will grow at a 1 percent annual rate this quarter after rising at a 2.4 percent pace in the previous three months, according to the median forecast of 57 economists surveyed by Bloomberg News from Oct. 1 to Oct. 8. Analysts also marked down spending estimates for the first quarter of 2010.
“You just can’t see a lot of strength on the consumer side given how battered income is from job losses and weak hourly wage growth,” said David Greenlaw, chief fixed-income economist at Morgan Stanley & Co. in New York. “We’ve got a gradual recovery in the overall economy, but it’s not vigorous enough to knock down the unemployment rate by much.”
Auto sales plunged 35 percent last month after the “cash- for-clunkers” program expired, indicating gains in business and government spending will be needed to sustain the recovery into 2010. Mounting joblessness is intensifying pressure on the Obama administration to consider additional measures to boost hiring heading into next year’s Congressional elections.
Rising unemployment “could be enough to push the economy back into recession,” said Gus Faucher, director of macroeconomic research at Moody’s Economy.com in West Chester, Pennsylvania. “There is going to be more stimulus. The economy needs some support until consumer spending kicks in.”
Obama’s Options
Obama is considering a mix of options, including a boost in transportation spending and extensions of expiring bills that will prolong unemployment benefits and a tax credit for first-time homebuyers, administration officials have told allies in Congress.
The White House is balancing rising concern about unemployment with a budget deficit the Congressional Budget Office estimates will total $1.6 trillion for 2009, and $1.4 trillion in 2010.
The economy will probably grow at a 2.4 percent annual rate this quarter after expanding at a 3.2 percent pace from July through September, according to the survey median. Gross domestic product will increase 2.4 percent next year and 2.8 percent in 2011, the survey showed, less than the 3.4 percent average over the past six decades.
Analysts put the odds of the U.S. dipping back into a recession in the next 12 months at 20 percent, down from 25 percent last month. Easing concern that the economy will falter has helped push the Standard & Poor’s 500 Index up more than 57 percent from a 12-year low reached on March 9.
Spending Gains
Household spending will grow at a 1.5 percent pace in the first three months of 2010, and 1.8 percent in the second quarter, the survey showed.
The government’s $3 billion “clunkers” program caused consumer spending to rise 1.3 percent in August, the most in almost eight years, the Commerce Department reported last week. Following the program’s expiration, car sales plunged to the lowest level since February.
“Cash for clunkers merely pulled consumption forward from the fourth quarter, rather than as a result of any improvement in the consumer’s situation,” said David Semmens, an economist at Standard Chartered Bank in New York. “With consumers holding back on spending while they rebuild their balance sheets, we are in uncharted territory.”
U.S. holiday sales for the last two months of the year will probably fall 1 percent from the same period in 2008, the National Retail Federation forecast on Oct. 6. Last year’s 3.4 percent decline was the first drop since the Washington-based NRF started tracking the data in 1995.
Less Debt
“We are not counting on the economy,” John Mahoney, chief financial officer of Staples Inc., said in a Bloomberg Television interview this week. Shoppers are focusing on reducing debt instead of spending, Mahoney said, and consumers remain reluctant to make non-essential purchases. Staples is the world’s largest retailer of office supplies.
Consumer credit has dropped by a record $118.8 billion since peaking in July 2008, according to figures from the Federal Reserve, as Americans boosted savings and banks and credit-card companies restricted lending. The figures don’t include mortgage borrowing, which is also down.
The economic expansion won’t be enough to keep the jobless rate from exceeding 10 percent in the first quarter of 2010, the survey showed. Unemployment will average 9.9 percent next year and 9.1 percent in 2011, higher than projected last month, according to the median estimate.
Fed Chairman Ben S. Bernanke last week said the jobless rate may be above 9 percent at the end of 2010.
Economists this month anticipated policy makers will wait until the third quarter of 2010 to start raising the benchmark interest rate, the same as projected in September, as unemployment rises and inflation slows. The Fed’s rate has been near zero since December, the lowest on record.
The world’s largest economy contracted 3.8 percent in the year ended in June, the worst economic slump since the 1930s.
Household purchases will grow at a 1 percent annual rate this quarter after rising at a 2.4 percent pace in the previous three months, according to the median forecast of 57 economists surveyed by Bloomberg News from Oct. 1 to Oct. 8. Analysts also marked down spending estimates for the first quarter of 2010.
“You just can’t see a lot of strength on the consumer side given how battered income is from job losses and weak hourly wage growth,” said David Greenlaw, chief fixed-income economist at Morgan Stanley & Co. in New York. “We’ve got a gradual recovery in the overall economy, but it’s not vigorous enough to knock down the unemployment rate by much.”
Auto sales plunged 35 percent last month after the “cash- for-clunkers” program expired, indicating gains in business and government spending will be needed to sustain the recovery into 2010. Mounting joblessness is intensifying pressure on the Obama administration to consider additional measures to boost hiring heading into next year’s Congressional elections.
Rising unemployment “could be enough to push the economy back into recession,” said Gus Faucher, director of macroeconomic research at Moody’s Economy.com in West Chester, Pennsylvania. “There is going to be more stimulus. The economy needs some support until consumer spending kicks in.”
Obama’s Options
Obama is considering a mix of options, including a boost in transportation spending and extensions of expiring bills that will prolong unemployment benefits and a tax credit for first-time homebuyers, administration officials have told allies in Congress.
The White House is balancing rising concern about unemployment with a budget deficit the Congressional Budget Office estimates will total $1.6 trillion for 2009, and $1.4 trillion in 2010.
The economy will probably grow at a 2.4 percent annual rate this quarter after expanding at a 3.2 percent pace from July through September, according to the survey median. Gross domestic product will increase 2.4 percent next year and 2.8 percent in 2011, the survey showed, less than the 3.4 percent average over the past six decades.
Analysts put the odds of the U.S. dipping back into a recession in the next 12 months at 20 percent, down from 25 percent last month. Easing concern that the economy will falter has helped push the Standard & Poor’s 500 Index up more than 57 percent from a 12-year low reached on March 9.
Spending Gains
Household spending will grow at a 1.5 percent pace in the first three months of 2010, and 1.8 percent in the second quarter, the survey showed.
The government’s $3 billion “clunkers” program caused consumer spending to rise 1.3 percent in August, the most in almost eight years, the Commerce Department reported last week. Following the program’s expiration, car sales plunged to the lowest level since February.
“Cash for clunkers merely pulled consumption forward from the fourth quarter, rather than as a result of any improvement in the consumer’s situation,” said David Semmens, an economist at Standard Chartered Bank in New York. “With consumers holding back on spending while they rebuild their balance sheets, we are in uncharted territory.”
U.S. holiday sales for the last two months of the year will probably fall 1 percent from the same period in 2008, the National Retail Federation forecast on Oct. 6. Last year’s 3.4 percent decline was the first drop since the Washington-based NRF started tracking the data in 1995.
Less Debt
“We are not counting on the economy,” John Mahoney, chief financial officer of Staples Inc., said in a Bloomberg Television interview this week. Shoppers are focusing on reducing debt instead of spending, Mahoney said, and consumers remain reluctant to make non-essential purchases. Staples is the world’s largest retailer of office supplies.
Consumer credit has dropped by a record $118.8 billion since peaking in July 2008, according to figures from the Federal Reserve, as Americans boosted savings and banks and credit-card companies restricted lending. The figures don’t include mortgage borrowing, which is also down.
The economic expansion won’t be enough to keep the jobless rate from exceeding 10 percent in the first quarter of 2010, the survey showed. Unemployment will average 9.9 percent next year and 9.1 percent in 2011, higher than projected last month, according to the median estimate.
Fed Chairman Ben S. Bernanke last week said the jobless rate may be above 9 percent at the end of 2010.
Economists this month anticipated policy makers will wait until the third quarter of 2010 to start raising the benchmark interest rate, the same as projected in September, as unemployment rises and inflation slows. The Fed’s rate has been near zero since December, the lowest on record.
The world’s largest economy contracted 3.8 percent in the year ended in June, the worst economic slump since the 1930s.
Infosys Profit Gains 7.7%, Beats Estimates on Orders
Oct. 9 (Bloomberg) -- Infosys Technologies Ltd., India’s second-largest software exporter, reported second-quarter profit rose 7.7 percent, beating analysts’ estimates, after winning more business from its customers.
Net income increased to 15.4 billion rupees ($332 million), or 26.83 rupees a share, in the three months ended Sept. 30, from 14.3 billion rupees, or 24.97 rupees, a year earlier, Bangalore-based Infosys said today. That beat the 14.9 billion rupee median of 15 analyst estimates compiled by Bloomberg.
Chief Executive Officer S. Gopalakrishnan reduced prices to retain business from customers in the U.S. and Europe, his largest markets, amid the worst recession since the 1930s. Infosys won orders from Australia’s Telstra Corp. and the U.K.’s BP Plc after the two clients sought to decrease the number of suppliers to cut costs.
“It is a very positive result; the environment is getting much more stable,” said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. “We are in for a little uptick; things have stabilized and margins will improve from these levels.”
U.S. technology demand will begin to increase in the three months ending Dec. 31, followed by a global recovery in 2010, research firm Forrester Inc. said last month. White House adviser Lawrence Summers said yesterday there has been a “substantial return to more normal conditions” in the U.S., and cited economists’ estimates that the world’s largest economy returned to growth in the third quarter.
Raises Forecast
Infosys rose 1.7 percent to 2,249 rupees at 9:56 a.m. in Mumbai trading. The stock has doubled this year, compared with the 75 percent gain for the benchmark Sensitive Index and industry leader Tata Consultancy Services Ltd.’s 145 percent advance.
Sales will range from $4.60 billion to $4.62 billion in the year ending March 31, Infosys said, raising its July forecast of between $4.45 billion to $4.52 billion.
“The business climate has improved,” Gopalakrishnan said in a statement today. “Clients are now looking to invest in a few strategic initiatives and relationships to maximize value from the economic opportunities when the downturn ends.”
Second-quarter sales at Infosys climbed 3.3 percent to 56 billion rupees, matching analysts’ median estimate.
Infosys designs and builds software programs, maintains computers and provides back-office support to Citigroup Inc., Goldman Sachs Group Inc., BT Group Plc and other clients.
Strong Recovery
Forrester continues to expect a strong recovery in the US information technology market in 2010, with 7.7 percent growth, led by consulting services, the research firm’s analyst Andrew H. Bartels wrote in a report dated Sept. 29. Vendors need to look beyond the downturn and get prepared for a strong recovery in late 2009 and 2010, he wrote.
“I would say the recovery is already under way for them,” Anu Jain, who helps manage about $428 million at Mumbai-based IIFL Private Wealth Management Ltd., said before the results. “Growth isn’t an issue, the market is rebounding, they are getting good volumes, they are able to negotiate good prices.”
Net income increased to 15.4 billion rupees ($332 million), or 26.83 rupees a share, in the three months ended Sept. 30, from 14.3 billion rupees, or 24.97 rupees, a year earlier, Bangalore-based Infosys said today. That beat the 14.9 billion rupee median of 15 analyst estimates compiled by Bloomberg.
Chief Executive Officer S. Gopalakrishnan reduced prices to retain business from customers in the U.S. and Europe, his largest markets, amid the worst recession since the 1930s. Infosys won orders from Australia’s Telstra Corp. and the U.K.’s BP Plc after the two clients sought to decrease the number of suppliers to cut costs.
“It is a very positive result; the environment is getting much more stable,” said Vaibhav Sanghavi, a director at Ambit Capital Ltd. in Mumbai, who manages funds for wealthy individuals. “We are in for a little uptick; things have stabilized and margins will improve from these levels.”
U.S. technology demand will begin to increase in the three months ending Dec. 31, followed by a global recovery in 2010, research firm Forrester Inc. said last month. White House adviser Lawrence Summers said yesterday there has been a “substantial return to more normal conditions” in the U.S., and cited economists’ estimates that the world’s largest economy returned to growth in the third quarter.
Raises Forecast
Infosys rose 1.7 percent to 2,249 rupees at 9:56 a.m. in Mumbai trading. The stock has doubled this year, compared with the 75 percent gain for the benchmark Sensitive Index and industry leader Tata Consultancy Services Ltd.’s 145 percent advance.
Sales will range from $4.60 billion to $4.62 billion in the year ending March 31, Infosys said, raising its July forecast of between $4.45 billion to $4.52 billion.
“The business climate has improved,” Gopalakrishnan said in a statement today. “Clients are now looking to invest in a few strategic initiatives and relationships to maximize value from the economic opportunities when the downturn ends.”
Second-quarter sales at Infosys climbed 3.3 percent to 56 billion rupees, matching analysts’ median estimate.
Infosys designs and builds software programs, maintains computers and provides back-office support to Citigroup Inc., Goldman Sachs Group Inc., BT Group Plc and other clients.
Strong Recovery
Forrester continues to expect a strong recovery in the US information technology market in 2010, with 7.7 percent growth, led by consulting services, the research firm’s analyst Andrew H. Bartels wrote in a report dated Sept. 29. Vendors need to look beyond the downturn and get prepared for a strong recovery in late 2009 and 2010, he wrote.
“I would say the recovery is already under way for them,” Anu Jain, who helps manage about $428 million at Mumbai-based IIFL Private Wealth Management Ltd., said before the results. “Growth isn’t an issue, the market is rebounding, they are getting good volumes, they are able to negotiate good prices.”
Wednesday, October 7, 2009
Asian Stocks Rise on Australian Jobs Report, Alcoa Earnings
Oct. 8 (Bloomberg) -- Asian stocks advanced for a third day, led by banks and mining companies, after Australian employers unexpectedly added workers last month and Alcoa Inc. reported earnings that beat analyst estimates.
National Australia Bank Ltd. climbed 3.4 percent after the statistics bureau said country’s jobless rate fell. Alumina Ltd., Alcoa’s partner in the world’s biggest producer of the material used to make aluminum, climbed 4.6 percent in Sydney. Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K., Japan’s two largest shipping lines, climbed more after than 6 percent being upgraded at Bank of America-Merrill Lynch.
The MSCI Asia Pacific Index climbed 1 percent to 118.29 as of 10:14 a.m. in Tokyo. The gauge climbed 68 percent from a five-year low on March 9 as better-than-estimated economic and earnings reports boosted speculation the global economy is recovering from the worst slowdown since World War II.
“Valuations are no longer particularly cheap in Asia, but they don’t appear to be overly excessive either,” said Robert Horrocks, who helps manage $9.9 billion including Asian equities at Matthews International Capital Management LLC. “Markets now are going to be driven by the ability of companies to sustain a reasonable level of growth over the long term.”
Australia’s S&P/ASX 200 Index climbed 1.4 percent, the biggest advance in the region, as the statistics bureau said the number of people employed rose 40,600 from August, in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000.
Japan’s Nikkei 225 Stock Average added 0.2 percent, while South Korea’s Kospi Index gained 0.6 percent. All key indexes in the region advanced. China is closed today for a holiday.
Futures on the U.S. Standard & Poor’s 500 Index climbed 0.9 percent. The gauge added 0.3 percent yesterday as Alcoa, the largest U.S. aluminum producer, reported third-quarter profit, while analysts had estimated a loss. The company was the first in the Dow Jones Industrial Average to release results.
“The chances are high that other U.S. companies will follow Alcoa in reporting better-than-expected results and have positive impacts on markets here,” said Kenichi Hirano, general manager at Tokyo-based Tachibana Securities Co.
National Australia Bank Ltd. climbed 3.4 percent after the statistics bureau said country’s jobless rate fell. Alumina Ltd., Alcoa’s partner in the world’s biggest producer of the material used to make aluminum, climbed 4.6 percent in Sydney. Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K., Japan’s two largest shipping lines, climbed more after than 6 percent being upgraded at Bank of America-Merrill Lynch.
The MSCI Asia Pacific Index climbed 1 percent to 118.29 as of 10:14 a.m. in Tokyo. The gauge climbed 68 percent from a five-year low on March 9 as better-than-estimated economic and earnings reports boosted speculation the global economy is recovering from the worst slowdown since World War II.
“Valuations are no longer particularly cheap in Asia, but they don’t appear to be overly excessive either,” said Robert Horrocks, who helps manage $9.9 billion including Asian equities at Matthews International Capital Management LLC. “Markets now are going to be driven by the ability of companies to sustain a reasonable level of growth over the long term.”
Australia’s S&P/ASX 200 Index climbed 1.4 percent, the biggest advance in the region, as the statistics bureau said the number of people employed rose 40,600 from August, in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000.
Japan’s Nikkei 225 Stock Average added 0.2 percent, while South Korea’s Kospi Index gained 0.6 percent. All key indexes in the region advanced. China is closed today for a holiday.
Futures on the U.S. Standard & Poor’s 500 Index climbed 0.9 percent. The gauge added 0.3 percent yesterday as Alcoa, the largest U.S. aluminum producer, reported third-quarter profit, while analysts had estimated a loss. The company was the first in the Dow Jones Industrial Average to release results.
“The chances are high that other U.S. companies will follow Alcoa in reporting better-than-expected results and have positive impacts on markets here,” said Kenichi Hirano, general manager at Tokyo-based Tachibana Securities Co.
Euro Gains Against Dollar Amid Signs Economy Is Recovering
Oct. 8 (Bloomberg) -- The euro gained against the dollar before a report forecast to show German industrial output rose for a second month, boosting demand for higher-yielding assets.
The U.S. currency weakened against 15 of its 16 most-traded counterparts as Asian stocks advanced and on expectations the European Central Bank today will refrain from lowering interest rates amid signs the global economy is recovering. The Australian dollar jumped to a 14-month high after employment unexpectedly increased.
“The global economy is rebounding,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “That’s what the equity market is telling us and commodity markets are telling us. On that basis, I’m bullish on the euro.”
The euro traded at $1.4729 at 9:51 a.m. in Tokyo from $1.4691 in New York yesterday. The euro was at 130.13 yen from 130.18 yen. The yen was at 88.36 per dollar from 88.61. Yesterday it rose to as high as 88.01, the strongest level in more than eight months.
The MSCI Asia Pacific Index of regional shares rose 0.8 percent. The Standard & Poor’s 500 Index increased 0.3 percent in New York yesterday, while gold climbed to a record for the second straight day.
Economists in a Bloomberg News survey forecast German industrial output expanded 1.8 percent in August following a 0.9 percent drop in July. The Economy Ministry in Berlin is set to report the data today.
‘Worst is Over’
“People believe that the worst is over, which makes sense,” said Phil Burke, chief dealer for foreign-exchange spot trading at JPMorgan Securities in Sydney. “Overall, the dollar is still in a mid-term downtrend.”
The ECB will hold its main refinancing rate at a record low of 1 percent, and the Bank of England will keep its main rate at an all-time low of 0.5 percent at its meeting today, according to Bloomberg surveys.
The Federal Reserve will start raising its benchmark rate in the third quarter of 2010, according to analysts’ forecasts compiled by Bloomberg.
Australia’s dollar rose as much as 1.2 percent to 90.16 U.S. cents, the most since August 2008, from 89.12 cents yesterday in New York. The number of people employed rose 40,600 from August, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000. The jobless rate fell to 5.7 percent from 5.8 percent.
New Zealand’s dollar fetched 74.01 U.S. cents from 73.64 yesterday. Earlier it touched 74.21 cents, the strongest since July 2008. New Zealand Finance Minister Bill English said he’s “uncomfortable” with the level of its currency.
“Generally when we’ve had a recession, a low dollar has helped us kick-start out of that recession,” English said in an interview in London late yesterday. “That’s clearly not going to be the case this time.”
New Zealand is being “bundled” with Australia by investors when its economy has not performed as well, exacerbating the currency’s strength, he said.
The U.S. currency weakened against 15 of its 16 most-traded counterparts as Asian stocks advanced and on expectations the European Central Bank today will refrain from lowering interest rates amid signs the global economy is recovering. The Australian dollar jumped to a 14-month high after employment unexpectedly increased.
“The global economy is rebounding,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “That’s what the equity market is telling us and commodity markets are telling us. On that basis, I’m bullish on the euro.”
The euro traded at $1.4729 at 9:51 a.m. in Tokyo from $1.4691 in New York yesterday. The euro was at 130.13 yen from 130.18 yen. The yen was at 88.36 per dollar from 88.61. Yesterday it rose to as high as 88.01, the strongest level in more than eight months.
The MSCI Asia Pacific Index of regional shares rose 0.8 percent. The Standard & Poor’s 500 Index increased 0.3 percent in New York yesterday, while gold climbed to a record for the second straight day.
Economists in a Bloomberg News survey forecast German industrial output expanded 1.8 percent in August following a 0.9 percent drop in July. The Economy Ministry in Berlin is set to report the data today.
‘Worst is Over’
“People believe that the worst is over, which makes sense,” said Phil Burke, chief dealer for foreign-exchange spot trading at JPMorgan Securities in Sydney. “Overall, the dollar is still in a mid-term downtrend.”
The ECB will hold its main refinancing rate at a record low of 1 percent, and the Bank of England will keep its main rate at an all-time low of 0.5 percent at its meeting today, according to Bloomberg surveys.
The Federal Reserve will start raising its benchmark rate in the third quarter of 2010, according to analysts’ forecasts compiled by Bloomberg.
Australia’s dollar rose as much as 1.2 percent to 90.16 U.S. cents, the most since August 2008, from 89.12 cents yesterday in New York. The number of people employed rose 40,600 from August, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000. The jobless rate fell to 5.7 percent from 5.8 percent.
New Zealand’s dollar fetched 74.01 U.S. cents from 73.64 yesterday. Earlier it touched 74.21 cents, the strongest since July 2008. New Zealand Finance Minister Bill English said he’s “uncomfortable” with the level of its currency.
“Generally when we’ve had a recession, a low dollar has helped us kick-start out of that recession,” English said in an interview in London late yesterday. “That’s clearly not going to be the case this time.”
New Zealand is being “bundled” with Australia by investors when its economy has not performed as well, exacerbating the currency’s strength, he said.
Australia Unemployment Falls, Driving Bets of Second Rate Rise
Oct. 8 (Bloomberg) -- Australia’s jobless rate fell for the first time in five months as employment unexpectedly surged, driving the currency to a 14-month high as traders bet the central bank will raise interest rates again next month.
The number of people employed jumped 40,600 from August, cutting the jobless rate to 5.7 percent from 5.8 percent, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000.
Australia became the first Group of 20 nation to raise interest rates this week. Twenty-one of 23 economists surveyed by Bloomberg yesterday say Reserve Bank Governor Glenn Stevens will increase the benchmark by another quarter point to 3.5 percent next month.
“It really is quite surprising to see such strength so quickly,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney, one of only two analysts surveyed by Bloomberg to forecast a gain in employment. Today’s report “is supportive of a fairly quick tightening of monetary policy.”
The number of full-time jobs gained 35,400 in September and part-time employment increased 5,200, today’s report showed. Hours worked rose 0.9 percent to 1.52 billion, the highest level in seven months.
Since the collapse of Lehman Brothers Holdings Inc. in September 2008, Australia’s unemployment rate has risen to 5.7 percent from 4.3 percent. By contrast, the U.S. jobless rate jumped to 9.8 percent from 6.2 percent in the same period.
Currency Rises
The Australian dollar rose to 90.14 U.S. cents at 12:09 p.m. in Sydney from 89.30 cents just before the report was released. The two-year government bond yield surged 18 basis points to 4.52 percent. A basis point is 0.01 percentage point.
The nation’s benchmark S&P/ASX 200 stock index climbed 1.5 percent, taking this year’s gain to 28 percent.
Woolworths Ltd., Australia’s biggest retailer, is among companies that have announced plans this year to boost hiring. The company reported in August a 16 percent increase in profit in the six months through June 28.
The government is also stoking demand for workers as it spends A$22 billion ($19.8 billion) on roads, ports, schools and hospitals. An index published Oct. 7 by the Australian Industry Group showed the nation’s building industry expanded in September for the first time in 18 months.
The nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia, will create as many as 10,000 jobs when construction starts early next year, Chevron Corp. said on Sept. 14. Chevron and its partners say they will sell A$300 billion of gas to China, India and Japan in the project’s first 20 years.
Economy Outperforms
Australia’s economy has outperformed most other developed nations, expanding 1 percent in the first half of the year, and is forecast by the International Monetary Fund to grow 2 percent in 2010. By contrast, the U.S. economy will expand 1.5 percent next year, Japan by 1.7 percent and the euro region by just 0.3 percent, the fund said last week.
Growth in Australia has been stoked by A$20 billion in government cash handouts to consumers and the central bank’s decision to slash borrowing costs between September 2008 and April to the lowest level in half a century.
Australia and Israel are the only central banks to raise interest rates since the height of the global financial crisis. Israel is not a member of the G-20. Governor Stevens said this week the justification for a benchmark rate an “emergency” level of 3 percent “has now passed.”
“The risk of serious economic contraction” in Australia has passed, Stevens said in a statement on Oct. 6.
“Unemployment has not risen as far as had been expected. The board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy.”
Confidence Soars
Recent reports showed retail sales, approvals to build private homes, bank mortgage lending and property prices all jumped in August. Advertisements for job vacancies rose in September for a second straight month, gaining 4.4 percent, an Australia & New Zealand Banking Group Ltd. survey showed this week.
Consumer confidence jumped last month to the highest level in more than two years and business sentiment climbed in August to the highest level in almost six years.
Investors have a 92 percent expectation Stevens will raise the overnight cash rate target on Nov. 3 by another quarter point, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:14 p.m. Prior to today’s report, they tipped a 68 percent chance of an increase.
The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.2 percent in September from 65.1 percent, today’s report showed.
The number of people employed jumped 40,600 from August, cutting the jobless rate to 5.7 percent from 5.8 percent, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg was for a decline of 10,000.
Australia became the first Group of 20 nation to raise interest rates this week. Twenty-one of 23 economists surveyed by Bloomberg yesterday say Reserve Bank Governor Glenn Stevens will increase the benchmark by another quarter point to 3.5 percent next month.
“It really is quite surprising to see such strength so quickly,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney, one of only two analysts surveyed by Bloomberg to forecast a gain in employment. Today’s report “is supportive of a fairly quick tightening of monetary policy.”
The number of full-time jobs gained 35,400 in September and part-time employment increased 5,200, today’s report showed. Hours worked rose 0.9 percent to 1.52 billion, the highest level in seven months.
Since the collapse of Lehman Brothers Holdings Inc. in September 2008, Australia’s unemployment rate has risen to 5.7 percent from 4.3 percent. By contrast, the U.S. jobless rate jumped to 9.8 percent from 6.2 percent in the same period.
Currency Rises
The Australian dollar rose to 90.14 U.S. cents at 12:09 p.m. in Sydney from 89.30 cents just before the report was released. The two-year government bond yield surged 18 basis points to 4.52 percent. A basis point is 0.01 percentage point.
The nation’s benchmark S&P/ASX 200 stock index climbed 1.5 percent, taking this year’s gain to 28 percent.
Woolworths Ltd., Australia’s biggest retailer, is among companies that have announced plans this year to boost hiring. The company reported in August a 16 percent increase in profit in the six months through June 28.
The government is also stoking demand for workers as it spends A$22 billion ($19.8 billion) on roads, ports, schools and hospitals. An index published Oct. 7 by the Australian Industry Group showed the nation’s building industry expanded in September for the first time in 18 months.
The nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia, will create as many as 10,000 jobs when construction starts early next year, Chevron Corp. said on Sept. 14. Chevron and its partners say they will sell A$300 billion of gas to China, India and Japan in the project’s first 20 years.
Economy Outperforms
Australia’s economy has outperformed most other developed nations, expanding 1 percent in the first half of the year, and is forecast by the International Monetary Fund to grow 2 percent in 2010. By contrast, the U.S. economy will expand 1.5 percent next year, Japan by 1.7 percent and the euro region by just 0.3 percent, the fund said last week.
Growth in Australia has been stoked by A$20 billion in government cash handouts to consumers and the central bank’s decision to slash borrowing costs between September 2008 and April to the lowest level in half a century.
Australia and Israel are the only central banks to raise interest rates since the height of the global financial crisis. Israel is not a member of the G-20. Governor Stevens said this week the justification for a benchmark rate an “emergency” level of 3 percent “has now passed.”
“The risk of serious economic contraction” in Australia has passed, Stevens said in a statement on Oct. 6.
“Unemployment has not risen as far as had been expected. The board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy.”
Confidence Soars
Recent reports showed retail sales, approvals to build private homes, bank mortgage lending and property prices all jumped in August. Advertisements for job vacancies rose in September for a second straight month, gaining 4.4 percent, an Australia & New Zealand Banking Group Ltd. survey showed this week.
Consumer confidence jumped last month to the highest level in more than two years and business sentiment climbed in August to the highest level in almost six years.
Investors have a 92 percent expectation Stevens will raise the overnight cash rate target on Nov. 3 by another quarter point, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:14 p.m. Prior to today’s report, they tipped a 68 percent chance of an increase.
The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.2 percent in September from 65.1 percent, today’s report showed.
Tuesday, October 6, 2009
RBS Faced Risk of Full Seizure by Brown in Crisis, Gieve Says
Oct. 7 (Bloomberg) -- Royal Bank of Scotland Group Plc posed such a threat to the British and global financial systems at the height of the crisis last year that Prime Minister Gordon Brown could have ended up fully seizing the bank, former Bank of England official John Gieve said.
Brown didn’t need to go that far because Fred Goodwin, then RBS chief executive officer, conceded to government rescue aid on the weekend of Oct. 11-12, Gieve said. Other officials were scrambling from London to Washington and Paris at the time to coordinate the response to the panic sparked by Lehman Brothers Holdings Inc.’s collapse four weeks earlier.
“If Royal Bank of Scotland hadn’t been propped up as it was, in practice it would have been nationalized the following week,” Gieve, who was the bank’s deputy governor at the time of the 2008 crisis, said in a Bloomberg Television interview yesterday. “If RBS, HBOS, Lloyds had gone down, that would have had huge contagious effects throughout the rest of the world.”
Brown’s government took stakes in RBS, Europe’s biggest bank by assets at the time, and Lloyds Banking Group Plc, the bank formed in the merger of Lloyds TSB Group Plc and HBOS Plc, as the financial crisis intensified. Gieve said some bank chiefs resisted aid before realizing that “the game was up” and accepting the full rescue package unveiled on Oct. 13, 2008.
‘Crashing’ Dreams
“For the boards and chief executives, particularly of RBS and HBOS, this was a terrible day,” Gieve said. “All their dreams were crashing to the ground, but there wasn’t a great deal of arguing. In truth, both RBS and HBOS knew they needed government support and they were being told the terms they had to accept.”
Goodwin and Andy Hornby, who was chief executive officer of HBOS, then resigned as their banks ceded majority control to Brown’s government. HBOS, the country’s biggest mortgage lender at the time, is based in Edinburgh, as is RBS.
The two banks were not “confident they could get to the end of the day,” on Oct. 6 and Oct. 7, 2008, Bank of England Governor Mervyn King told the BBC in an interview broadcast last month. On Oct. 8, the government offered to take stakes in British banks to shore up their capital.
Gieve said that he spent much of the following weekend in negotiations with the banks, the U.K. Treasury and the Financial Services Authority to prepare the rescue package.
The talks took place amid an “intensive diplomatic effort” to press for other governments to recapitalize their banks, Gieve said. Alistair Darling, the finance minister, was with King at the International Monetary Fund meetings in Washington and Brown was in Paris to discuss the crisis with European Union leaders.
‘We Pulled it Off’
“This was something that has never been done before, an attempt to recapitalize the heart of the British banking system in two days flat, and at the same time persuade the rest of the world and the rest of Europe that this was the model which they should adopt,” Gieve said. “We pulled it off.”
The deal wasn’t perfect and had to be tweaked in January to adjust the terms of the RBS bailout, Gieve said. The government now owns stakes of 70 percent in RBS and 43 percent in Lloyds Banking Group.
“We had to convince the markets that this was enough, that they didn’t need to worry that any of these banks were going to fail,” he said. “It did that trick. It was a reestablishment of confidence that was key, not the actual fine print of the numbers.”
Gieve, who left the central bank at the end of February, also participated in the global coordinated interest-rate cut on Oct. 8, 2008.
‘Real Tsunami’
“The coordinated cut wasn’t as important as the recapitalization of the banks,” he said. “Everyone was focused on the fact there was a real risk of total financial meltdown, and a real risk of another Great Depression. In the summer, we’d been in a storm which was severe. We were now facing a real tsunami which could sweep away all we’d worked for, for years.”
Asked to identify his biggest mistakes during the three years he spent as deputy governor, Gieve said that he wished he had spoken out more about the risks to the financial system before the crisis. He also said that interest rates should have been higher in the U.K. from 2005.
“We did identify vulnerabilities in the financial system in 2006, including things like wholesale funding exposure and so on,” Gieve, 59, said. “But we didn’t make enough noise about them. Personally, I just wish that I’d beaten the drum a bit more than I did.” Oct. 7 (Bloomberg) -- Royal Bank of Scotland Group Plc posed such a threat to the British and global financial systems at the height of the crisis last year that Prime Minister Gordon Brown could have ended up fully seizing the bank, former Bank of England official John Gieve said.
Brown didn’t need to go that far because Fred Goodwin, then RBS chief executive officer, conceded to government rescue aid on the weekend of Oct. 11-12, Gieve said. Other officials were scrambling from London to Washington and Paris at the time to coordinate the response to the panic sparked by Lehman Brothers Holdings Inc.’s collapse four weeks earlier.
“If Royal Bank of Scotland hadn’t been propped up as it was, in practice it would have been nationalized the following week,” Gieve, who was the bank’s deputy governor at the time of the 2008 crisis, said in a Bloomberg Television interview yesterday. “If RBS, HBOS, Lloyds had gone down, that would have had huge contagious effects throughout the rest of the world.”
Brown’s government took stakes in RBS, Europe’s biggest bank by assets at the time, and Lloyds Banking Group Plc, the bank formed in the merger of Lloyds TSB Group Plc and HBOS Plc, as the financial crisis intensified. Gieve said some bank chiefs resisted aid before realizing that “the game was up” and accepting the full rescue package unveiled on Oct. 13, 2008.
‘Crashing’ Dreams
“For the boards and chief executives, particularly of RBS and HBOS, this was a terrible day,” Gieve said. “All their dreams were crashing to the ground, but there wasn’t a great deal of arguing. In truth, both RBS and HBOS knew they needed government support and they were being told the terms they had to accept.”
Goodwin and Andy Hornby, who was chief executive officer of HBOS, then resigned as their banks ceded majority control to Brown’s government. HBOS, the country’s biggest mortgage lender at the time, is based in Edinburgh, as is RBS.
The two banks were not “confident they could get to the end of the day,” on Oct. 6 and Oct. 7, 2008, Bank of England Governor Mervyn King told the BBC in an interview broadcast last month. On Oct. 8, the government offered to take stakes in British banks to shore up their capital.
Gieve said that he spent much of the following weekend in negotiations with the banks, the U.K. Treasury and the Financial Services Authority to prepare the rescue package.
The talks took place amid an “intensive diplomatic effort” to press for other governments to recapitalize their banks, Gieve said. Alistair Darling, the finance minister, was with King at the International Monetary Fund meetings in Washington and Brown was in Paris to discuss the crisis with European Union leaders.
‘We Pulled it Off’
“This was something that has never been done before, an attempt to recapitalize the heart of the British banking system in two days flat, and at the same time persuade the rest of the world and the rest of Europe that this was the model which they should adopt,” Gieve said. “We pulled it off.”
The deal wasn’t perfect and had to be tweaked in January to adjust the terms of the RBS bailout, Gieve said. The government now owns stakes of 70 percent in RBS and 43 percent in Lloyds Banking Group.
“We had to convince the markets that this was enough, that they didn’t need to worry that any of these banks were going to fail,” he said. “It did that trick. It was a reestablishment of confidence that was key, not the actual fine print of the numbers.”
Gieve, who left the central bank at the end of February, also participated in the global coordinated interest-rate cut on Oct. 8, 2008.
‘Real Tsunami’
“The coordinated cut wasn’t as important as the recapitalization of the banks,” he said. “Everyone was focused on the fact there was a real risk of total financial meltdown, and a real risk of another Great Depression. In the summer, we’d been in a storm which was severe. We were now facing a real tsunami which could sweep away all we’d worked for, for years.”
Asked to identify his biggest mistakes during the three years he spent as deputy governor, Gieve said that he wished he had spoken out more about the risks to the financial system before the crisis. He also said that interest rates should have been higher in the U.K. from 2005.
“We did identify vulnerabilities in the financial system in 2006, including things like wholesale funding exposure and so on,” Gieve, 59, said. “But we didn’t make enough noise about them. Personally, I just wish that I’d beaten the drum a bit more than I did.”
Brown didn’t need to go that far because Fred Goodwin, then RBS chief executive officer, conceded to government rescue aid on the weekend of Oct. 11-12, Gieve said. Other officials were scrambling from London to Washington and Paris at the time to coordinate the response to the panic sparked by Lehman Brothers Holdings Inc.’s collapse four weeks earlier.
“If Royal Bank of Scotland hadn’t been propped up as it was, in practice it would have been nationalized the following week,” Gieve, who was the bank’s deputy governor at the time of the 2008 crisis, said in a Bloomberg Television interview yesterday. “If RBS, HBOS, Lloyds had gone down, that would have had huge contagious effects throughout the rest of the world.”
Brown’s government took stakes in RBS, Europe’s biggest bank by assets at the time, and Lloyds Banking Group Plc, the bank formed in the merger of Lloyds TSB Group Plc and HBOS Plc, as the financial crisis intensified. Gieve said some bank chiefs resisted aid before realizing that “the game was up” and accepting the full rescue package unveiled on Oct. 13, 2008.
‘Crashing’ Dreams
“For the boards and chief executives, particularly of RBS and HBOS, this was a terrible day,” Gieve said. “All their dreams were crashing to the ground, but there wasn’t a great deal of arguing. In truth, both RBS and HBOS knew they needed government support and they were being told the terms they had to accept.”
Goodwin and Andy Hornby, who was chief executive officer of HBOS, then resigned as their banks ceded majority control to Brown’s government. HBOS, the country’s biggest mortgage lender at the time, is based in Edinburgh, as is RBS.
The two banks were not “confident they could get to the end of the day,” on Oct. 6 and Oct. 7, 2008, Bank of England Governor Mervyn King told the BBC in an interview broadcast last month. On Oct. 8, the government offered to take stakes in British banks to shore up their capital.
Gieve said that he spent much of the following weekend in negotiations with the banks, the U.K. Treasury and the Financial Services Authority to prepare the rescue package.
The talks took place amid an “intensive diplomatic effort” to press for other governments to recapitalize their banks, Gieve said. Alistair Darling, the finance minister, was with King at the International Monetary Fund meetings in Washington and Brown was in Paris to discuss the crisis with European Union leaders.
‘We Pulled it Off’
“This was something that has never been done before, an attempt to recapitalize the heart of the British banking system in two days flat, and at the same time persuade the rest of the world and the rest of Europe that this was the model which they should adopt,” Gieve said. “We pulled it off.”
The deal wasn’t perfect and had to be tweaked in January to adjust the terms of the RBS bailout, Gieve said. The government now owns stakes of 70 percent in RBS and 43 percent in Lloyds Banking Group.
“We had to convince the markets that this was enough, that they didn’t need to worry that any of these banks were going to fail,” he said. “It did that trick. It was a reestablishment of confidence that was key, not the actual fine print of the numbers.”
Gieve, who left the central bank at the end of February, also participated in the global coordinated interest-rate cut on Oct. 8, 2008.
‘Real Tsunami’
“The coordinated cut wasn’t as important as the recapitalization of the banks,” he said. “Everyone was focused on the fact there was a real risk of total financial meltdown, and a real risk of another Great Depression. In the summer, we’d been in a storm which was severe. We were now facing a real tsunami which could sweep away all we’d worked for, for years.”
Asked to identify his biggest mistakes during the three years he spent as deputy governor, Gieve said that he wished he had spoken out more about the risks to the financial system before the crisis. He also said that interest rates should have been higher in the U.K. from 2005.
“We did identify vulnerabilities in the financial system in 2006, including things like wholesale funding exposure and so on,” Gieve, 59, said. “But we didn’t make enough noise about them. Personally, I just wish that I’d beaten the drum a bit more than I did.” Oct. 7 (Bloomberg) -- Royal Bank of Scotland Group Plc posed such a threat to the British and global financial systems at the height of the crisis last year that Prime Minister Gordon Brown could have ended up fully seizing the bank, former Bank of England official John Gieve said.
Brown didn’t need to go that far because Fred Goodwin, then RBS chief executive officer, conceded to government rescue aid on the weekend of Oct. 11-12, Gieve said. Other officials were scrambling from London to Washington and Paris at the time to coordinate the response to the panic sparked by Lehman Brothers Holdings Inc.’s collapse four weeks earlier.
“If Royal Bank of Scotland hadn’t been propped up as it was, in practice it would have been nationalized the following week,” Gieve, who was the bank’s deputy governor at the time of the 2008 crisis, said in a Bloomberg Television interview yesterday. “If RBS, HBOS, Lloyds had gone down, that would have had huge contagious effects throughout the rest of the world.”
Brown’s government took stakes in RBS, Europe’s biggest bank by assets at the time, and Lloyds Banking Group Plc, the bank formed in the merger of Lloyds TSB Group Plc and HBOS Plc, as the financial crisis intensified. Gieve said some bank chiefs resisted aid before realizing that “the game was up” and accepting the full rescue package unveiled on Oct. 13, 2008.
‘Crashing’ Dreams
“For the boards and chief executives, particularly of RBS and HBOS, this was a terrible day,” Gieve said. “All their dreams were crashing to the ground, but there wasn’t a great deal of arguing. In truth, both RBS and HBOS knew they needed government support and they were being told the terms they had to accept.”
Goodwin and Andy Hornby, who was chief executive officer of HBOS, then resigned as their banks ceded majority control to Brown’s government. HBOS, the country’s biggest mortgage lender at the time, is based in Edinburgh, as is RBS.
The two banks were not “confident they could get to the end of the day,” on Oct. 6 and Oct. 7, 2008, Bank of England Governor Mervyn King told the BBC in an interview broadcast last month. On Oct. 8, the government offered to take stakes in British banks to shore up their capital.
Gieve said that he spent much of the following weekend in negotiations with the banks, the U.K. Treasury and the Financial Services Authority to prepare the rescue package.
The talks took place amid an “intensive diplomatic effort” to press for other governments to recapitalize their banks, Gieve said. Alistair Darling, the finance minister, was with King at the International Monetary Fund meetings in Washington and Brown was in Paris to discuss the crisis with European Union leaders.
‘We Pulled it Off’
“This was something that has never been done before, an attempt to recapitalize the heart of the British banking system in two days flat, and at the same time persuade the rest of the world and the rest of Europe that this was the model which they should adopt,” Gieve said. “We pulled it off.”
The deal wasn’t perfect and had to be tweaked in January to adjust the terms of the RBS bailout, Gieve said. The government now owns stakes of 70 percent in RBS and 43 percent in Lloyds Banking Group.
“We had to convince the markets that this was enough, that they didn’t need to worry that any of these banks were going to fail,” he said. “It did that trick. It was a reestablishment of confidence that was key, not the actual fine print of the numbers.”
Gieve, who left the central bank at the end of February, also participated in the global coordinated interest-rate cut on Oct. 8, 2008.
‘Real Tsunami’
“The coordinated cut wasn’t as important as the recapitalization of the banks,” he said. “Everyone was focused on the fact there was a real risk of total financial meltdown, and a real risk of another Great Depression. In the summer, we’d been in a storm which was severe. We were now facing a real tsunami which could sweep away all we’d worked for, for years.”
Asked to identify his biggest mistakes during the three years he spent as deputy governor, Gieve said that he wished he had spoken out more about the risks to the financial system before the crisis. He also said that interest rates should have been higher in the U.K. from 2005.
“We did identify vulnerabilities in the financial system in 2006, including things like wholesale funding exposure and so on,” Gieve, 59, said. “But we didn’t make enough noise about them. Personally, I just wish that I’d beaten the drum a bit more than I did.”
H3 Global Seeks Sovereign Wealth Investments to Grow Hedge Fund H3 Global Seeks Sovereign Wealth Investments to Grow Hedge Fund H3 Global Seeks Sovere
Oct. 7 (Bloomberg) -- H3 Global Advisors, a Sydney-based commodities and hedge-fund manager, is seeking to lure cash from sovereign wealth funds including Korea Investment Corp. as it aims to more than double assets by the end of 2010.
The firm has held talks with groups such as KIC, Government of Singapore Investment Corp., Abu Dhabi Investment Authority, and Australia’s Future Fund, H3’s co-founder and Chief Executive Officer Andrew Kaleel said in an interview. While H3 doesn’t manage any sovereign wealth money at the moment and no deals have yet been reached, sovereign funds may make up as much as 20 percent of the A$500 million ($445 million) H3 is aiming to manage by the end of next year, he said.
“These are the type of groups we are targeting,” Kaleel, 40, said. “ It’s early stages for a lot of these guys. Some like commodities and some are looking at building exposure.”
Kaleel and his younger brother and H3 co-founder Mathew are seeking to tap into increasing demand for alternative investments from the world’s sovereign wealth funds, stung after helping U.S. and European banks raise capital during the financial crisis. Sovereign funds manage a combined $3 trillion according to Deutsche Bank AG.
H3, founded by the Kaleel brothers with about A$500,000 of their own money in 1996, manages about A$200 million in three funds. Ascalon Capital Managers Ltd., owned by Westpac Banking Corp., Australia’s second biggest lender, owns 30 percent of H3.
Spokesmen at GIC, KIC, the Future Fund and Abu Dhabi Investment Authority refused to comment.
Commodities Fund
The H3 Global Commodities Fund returned 8.7 percent this year to the end of August according to H3 data, beating the DJUBS Commodity Index of futures contracts on 19 commodities, which rose 7.2 percent. Since inception in November 2005, H3’s commodities fund has returned 39 percent versus a 17 percent decline in the index, with lower annualized volatility, according to H3’s August fund report.
The A$60 million H3 Global Strategies Fund, started in 1999, is a macro hedge fund that invests across asset classes betting on economic trends. The A$10 million Global Currency Program was spun out of the macro fund in 2004, and in 2005 it hived off the commodities fund, which now manages about A$130 million.
The long-only commodities futures offering will drive the firm’s expansion, with its funds under management targeted to more than triple to A$400 million by the end of next year, Andrew Kaleel said.
“Once you get critical mass, you can then start getting in front of sovereign wealth funds,” Mathew Kaleel, 36, said.
Sovereign Wealth
GIC, manager of more than $100 billion of Singapore’s foreign reserves, increased its allocation to alternative investments, including hedge funds, to 30 percent in the year to March 31, from 23 percent a year earlier, it said last month. GIC spokeswoman Jennifer Lewis declined to comment on whether the fund is in discussions with H3.
Seoul-based KIC, set up in July 2005 to invest part of South Korea’s foreign-exchange reserves overseas, will start investing $1 billion this year in alternative investments, including commodities and hedge funds, Chief Executive Officer Chin Young Wook said in July.
“It is our policy not to comment on any investment plans until they are finalized,” Park Jong In, the director of KIC’s Investment Strategy Team, said by telephone from Seoul.
Australia’s A$61 billion Future Fund had 5 percent of its portfolio in alternative assets, according to its report for the year to June 30. Will Hetherton, head of public affairs at the Future Fund, declined to comment. An Abu Dhabi Investment Authority spokesman also declined to comment.
Gold, Silver
H3’s commodities fund is overweight gold and silver, betting on their alternative currency status in case the U.S. dollar continues to weaken. It’s underweight natural gas, which it says is oversupplied. The fund has about 28 percent invested in cash, down from as much as 90 percent at the end of 2008.
Gold futures have rallied 21 percent in the past year, while silver has surged 50 percent. Natural gas futures have tumbled 40 percent over the past year.
The global macro fund has returned 322 percent since starting in November 1999, with annualized returns of 16 percent. This year it’s down 3.3 percent in the January to end-August period, according to H3 data.
The Kaleel brothers teamed with Ascalon Capital in July 2007, when H3 managed about A$45 million, Andrew Kaleel said. That helped attract inflows last year, the worst on record for hedge funds, including A$35 million from Mercer in September 2008, the month Lehman Brothers Holdings Inc. filed for bankruptcy.
Russell Clarke, the Melbourne-based chief investment officer of Mercer, confirmed the allocation to H3.
“We made a strategic decision a couple of years ago to avoid the wholesale fund-of-fund market, even though you can raise money there very quickly, to try to target those investors that take a legitimate long-term view,” Andrew Kaleel said.
The firm has held talks with groups such as KIC, Government of Singapore Investment Corp., Abu Dhabi Investment Authority, and Australia’s Future Fund, H3’s co-founder and Chief Executive Officer Andrew Kaleel said in an interview. While H3 doesn’t manage any sovereign wealth money at the moment and no deals have yet been reached, sovereign funds may make up as much as 20 percent of the A$500 million ($445 million) H3 is aiming to manage by the end of next year, he said.
“These are the type of groups we are targeting,” Kaleel, 40, said. “ It’s early stages for a lot of these guys. Some like commodities and some are looking at building exposure.”
Kaleel and his younger brother and H3 co-founder Mathew are seeking to tap into increasing demand for alternative investments from the world’s sovereign wealth funds, stung after helping U.S. and European banks raise capital during the financial crisis. Sovereign funds manage a combined $3 trillion according to Deutsche Bank AG.
H3, founded by the Kaleel brothers with about A$500,000 of their own money in 1996, manages about A$200 million in three funds. Ascalon Capital Managers Ltd., owned by Westpac Banking Corp., Australia’s second biggest lender, owns 30 percent of H3.
Spokesmen at GIC, KIC, the Future Fund and Abu Dhabi Investment Authority refused to comment.
Commodities Fund
The H3 Global Commodities Fund returned 8.7 percent this year to the end of August according to H3 data, beating the DJUBS Commodity Index of futures contracts on 19 commodities, which rose 7.2 percent. Since inception in November 2005, H3’s commodities fund has returned 39 percent versus a 17 percent decline in the index, with lower annualized volatility, according to H3’s August fund report.
The A$60 million H3 Global Strategies Fund, started in 1999, is a macro hedge fund that invests across asset classes betting on economic trends. The A$10 million Global Currency Program was spun out of the macro fund in 2004, and in 2005 it hived off the commodities fund, which now manages about A$130 million.
The long-only commodities futures offering will drive the firm’s expansion, with its funds under management targeted to more than triple to A$400 million by the end of next year, Andrew Kaleel said.
“Once you get critical mass, you can then start getting in front of sovereign wealth funds,” Mathew Kaleel, 36, said.
Sovereign Wealth
GIC, manager of more than $100 billion of Singapore’s foreign reserves, increased its allocation to alternative investments, including hedge funds, to 30 percent in the year to March 31, from 23 percent a year earlier, it said last month. GIC spokeswoman Jennifer Lewis declined to comment on whether the fund is in discussions with H3.
Seoul-based KIC, set up in July 2005 to invest part of South Korea’s foreign-exchange reserves overseas, will start investing $1 billion this year in alternative investments, including commodities and hedge funds, Chief Executive Officer Chin Young Wook said in July.
“It is our policy not to comment on any investment plans until they are finalized,” Park Jong In, the director of KIC’s Investment Strategy Team, said by telephone from Seoul.
Australia’s A$61 billion Future Fund had 5 percent of its portfolio in alternative assets, according to its report for the year to June 30. Will Hetherton, head of public affairs at the Future Fund, declined to comment. An Abu Dhabi Investment Authority spokesman also declined to comment.
Gold, Silver
H3’s commodities fund is overweight gold and silver, betting on their alternative currency status in case the U.S. dollar continues to weaken. It’s underweight natural gas, which it says is oversupplied. The fund has about 28 percent invested in cash, down from as much as 90 percent at the end of 2008.
Gold futures have rallied 21 percent in the past year, while silver has surged 50 percent. Natural gas futures have tumbled 40 percent over the past year.
The global macro fund has returned 322 percent since starting in November 1999, with annualized returns of 16 percent. This year it’s down 3.3 percent in the January to end-August period, according to H3 data.
The Kaleel brothers teamed with Ascalon Capital in July 2007, when H3 managed about A$45 million, Andrew Kaleel said. That helped attract inflows last year, the worst on record for hedge funds, including A$35 million from Mercer in September 2008, the month Lehman Brothers Holdings Inc. filed for bankruptcy.
Russell Clarke, the Melbourne-based chief investment officer of Mercer, confirmed the allocation to H3.
“We made a strategic decision a couple of years ago to avoid the wholesale fund-of-fund market, even though you can raise money there very quickly, to try to target those investors that take a legitimate long-term view,” Andrew Kaleel said.
Asian Stocks Gain as Commodity Prices Rise; Hitachi Advances
Oct. 7 (Bloomberg) -- Asian stocks rose for a second day, led by mining companies, after prices for metals and oil advanced on speculation the world economy is recovering.
BHP Billiton Ltd., the world’s biggest mining company, gained 2.2 percent in Sydney. Newcrest Mining Ltd., Australia’s largest gold producer, surged 6.6 percent after prices for the metal climbed to a record. Hitachi Ltd., a nuclear reactor maker, added 7.7 percent in Tokyo as Mizuho Securities Co. raised its recommendation on the stock.
“What’s behind the rising commodity prices is the recovery in the global economy,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.
The MSCI Asia Pacific Index gained 1 percent to 116.79 as of 10:02 a.m. in Tokyo, extending yesterday’s 1.7 percent advance. The gauge has climbed 65 percent in the past seven months amid signs the global economy is emerging from its worst slowdown since World War II.
Japan’s Nikkei 225 Stock Average increased 1.1 percent, while Australia’s S&P/ASX 200 Index rose 1.5 percent. South Korea’s Kospi Index climbed 1.1 percent and Taiwan’s Taiex Index gained 1.1 percent.
Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge added 1.4 percent yesterday on speculation third-quarter earnings will top estimates. Alcoa Inc. is scheduled to release third-quarter results later today, the first company in the Dow Jones Industrial Average to report.
Material stocks accounted for 30 percent of the MSCI Asia Pacific Index’s advance today after gold futures climbed as much as 2.7 percent to a record $1,045 an ounce in New York, while copper increased for a second day with a 2.1 percent increase. Crude oil rose 0.7 percent.
Dollar Decline
BHP gained 2.2 percent to A$37.46, while Rio Tinto Group, the world’s third-largest mining company, climbed 3.8 percent to A$59.90. Newcrest jumped 6.6 percent to A$35.09. Inpex Corp., Japan’s largest oil explorer, rose 2.1 percent to 748,000 yen.
Raw-material prices climbed as the dollar’s decline spurred demand for commodities as a hedge against inflation. The Dollar Index, which measures the U.S. currency against six major counterparts, traded near a two-week low as speculation the Federal Reserve will trail other central banks in raising interest rates made the greenback less attractive.
The dollar weakened to as much as 88.65 yen overnight, from 88.98 at the 3 p.m. close of Tokyo stock trading yesterday.
Hitachi climbed 7.7 percent to 294 yen after Mizuho Securities raised its investment rating on the company to “strong buy” from “hold.”
BHP Billiton Ltd., the world’s biggest mining company, gained 2.2 percent in Sydney. Newcrest Mining Ltd., Australia’s largest gold producer, surged 6.6 percent after prices for the metal climbed to a record. Hitachi Ltd., a nuclear reactor maker, added 7.7 percent in Tokyo as Mizuho Securities Co. raised its recommendation on the stock.
“What’s behind the rising commodity prices is the recovery in the global economy,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.
The MSCI Asia Pacific Index gained 1 percent to 116.79 as of 10:02 a.m. in Tokyo, extending yesterday’s 1.7 percent advance. The gauge has climbed 65 percent in the past seven months amid signs the global economy is emerging from its worst slowdown since World War II.
Japan’s Nikkei 225 Stock Average increased 1.1 percent, while Australia’s S&P/ASX 200 Index rose 1.5 percent. South Korea’s Kospi Index climbed 1.1 percent and Taiwan’s Taiex Index gained 1.1 percent.
Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge added 1.4 percent yesterday on speculation third-quarter earnings will top estimates. Alcoa Inc. is scheduled to release third-quarter results later today, the first company in the Dow Jones Industrial Average to report.
Material stocks accounted for 30 percent of the MSCI Asia Pacific Index’s advance today after gold futures climbed as much as 2.7 percent to a record $1,045 an ounce in New York, while copper increased for a second day with a 2.1 percent increase. Crude oil rose 0.7 percent.
Dollar Decline
BHP gained 2.2 percent to A$37.46, while Rio Tinto Group, the world’s third-largest mining company, climbed 3.8 percent to A$59.90. Newcrest jumped 6.6 percent to A$35.09. Inpex Corp., Japan’s largest oil explorer, rose 2.1 percent to 748,000 yen.
Raw-material prices climbed as the dollar’s decline spurred demand for commodities as a hedge against inflation. The Dollar Index, which measures the U.S. currency against six major counterparts, traded near a two-week low as speculation the Federal Reserve will trail other central banks in raising interest rates made the greenback less attractive.
The dollar weakened to as much as 88.65 yen overnight, from 88.98 at the 3 p.m. close of Tokyo stock trading yesterday.
Hitachi climbed 7.7 percent to 294 yen after Mizuho Securities raised its investment rating on the company to “strong buy” from “hold.”
Monday, October 5, 2009
Philippine Inflation Accelerates From Two-Decade Low
Oct. 6 (Bloomberg) -- Philippine inflation accelerated from a 22-year low last month, supporting the central bank’s decision to stop cutting interest rates as economic growth recovers.
Consumer prices rose 0.7 percent from a year earlier, after a 0.1 percent gain in August, the National Statistics Office said in Manila today. That compares with the median forecast for a 0.6 percent increase in a Bloomberg survey of 10 economists.
Bangko Sentral ng Pilipinas kept its benchmark interest rate unchanged at 4 percent last week for a second straight meeting after slashing it by 2 percentage points from December to July. Inflationary risks have increased since August as the economy picks up, Deputy Governor Diwa Guinigundo said Oct. 1.
“Headline inflation is starting to accelerate” and will rise sharply in the coming months, said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “We expect the central bank to start preparing the ground for rate hikes early next year.”
The peso rose 0.4 percent to 46.53 per dollar as of 9:48 a.m. in Manila, its highest level since Jan. 7, according to Tullett Prebon Plc.
The Philippine economy expanded 1.5 percent in the second quarter from a year earlier, accelerating from a decade low as record-low borrowing costs and government stimulus helped Asian nations recover from the global recession.
‘Exit Strategy’
Bangko Sentral has “an exit strategy in place” and will “shift gradually to a different monetary stance” when it sees signs of firmer growth, Guinigundo said last week.
Fuel, electricity and water prices fell 3.4 percent from a year earlier last month, easing from a 5.4 percent decline in August. Food, beverage and tobacco costs climbed 2.2 percent.
Damage caused by tropical storms to crops and properties in the past two weeks may also fuel inflation, said Ildemarc Bautista, an economist at Metropolitan Bank & Trust Co.
“There is a potential for price increases as people purchase items to clean up and refurbish their houses,” said Bautista, who is based in Manila. “That’s a lot of people buying from the same hardware stores and groceries. It could cause a blip in inflation.”
Typhoon Parma, which hit the Philippines on Oct. 3, killed at least 16 people and brought more rain to areas still recovering from Tropical Storm Ketsana the week earlier. Ketsana dropped the most rain on Manila and nearby provinces in at least 40 years, leaving 293 dead.
Consumer prices rose 0.7 percent from a year earlier, after a 0.1 percent gain in August, the National Statistics Office said in Manila today. That compares with the median forecast for a 0.6 percent increase in a Bloomberg survey of 10 economists.
Bangko Sentral ng Pilipinas kept its benchmark interest rate unchanged at 4 percent last week for a second straight meeting after slashing it by 2 percentage points from December to July. Inflationary risks have increased since August as the economy picks up, Deputy Governor Diwa Guinigundo said Oct. 1.
“Headline inflation is starting to accelerate” and will rise sharply in the coming months, said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “We expect the central bank to start preparing the ground for rate hikes early next year.”
The peso rose 0.4 percent to 46.53 per dollar as of 9:48 a.m. in Manila, its highest level since Jan. 7, according to Tullett Prebon Plc.
The Philippine economy expanded 1.5 percent in the second quarter from a year earlier, accelerating from a decade low as record-low borrowing costs and government stimulus helped Asian nations recover from the global recession.
‘Exit Strategy’
Bangko Sentral has “an exit strategy in place” and will “shift gradually to a different monetary stance” when it sees signs of firmer growth, Guinigundo said last week.
Fuel, electricity and water prices fell 3.4 percent from a year earlier last month, easing from a 5.4 percent decline in August. Food, beverage and tobacco costs climbed 2.2 percent.
Damage caused by tropical storms to crops and properties in the past two weeks may also fuel inflation, said Ildemarc Bautista, an economist at Metropolitan Bank & Trust Co.
“There is a potential for price increases as people purchase items to clean up and refurbish their houses,” said Bautista, who is based in Manila. “That’s a lot of people buying from the same hardware stores and groceries. It could cause a blip in inflation.”
Typhoon Parma, which hit the Philippines on Oct. 3, killed at least 16 people and brought more rain to areas still recovering from Tropical Storm Ketsana the week earlier. Ketsana dropped the most rain on Manila and nearby provinces in at least 40 years, leaving 293 dead.
Asian Stocks Advance on U.S. Service Report; Mazda, Rio Gain
Oct. 6 (Bloomberg) -- Asian stocks rose for the first time in four days, led by companies reliant on overseas sales, after U.S. service industries returned to growth following 11 months of contraction and commodity prices gained.
Nissan Motor Co., which got 34 percent of sales from North America last year, gained 2.5 percent. Mazda Motor Corp., Japan’s No. 4 carmaker, jumped 6 percent after narrowing its full-year loss forecast. Rio Tinto Ltd., the world’s third- biggest mining company, climbed 2 percent in Sydney.
“There’ve been a few numbers in the last week or two that were a little bit more disappointing,” said Philip Schwartz, who manages $1.2 billion as head of international investting in New York at ING Investment Management. “But unless the numbers are really disappointing I don’t think there’s a lot of risk to the markets. Weaker economic numbers mean that policy around the world will continue to be very stimulative.”
The MSCI Asia Pacific Index climbed 0.6 percent to 114.36 as of 10:28 a.m. in Tokyo. The gauge has rallied 62 percent from a five-year low on March 9 amid better-than-estimated economic data and earnings reports.
Japan’s Nikkei 225 Stock Average added 0.1 percent in Tokyo, while New Zealand’s NZX 50 Index rose 0.4 percent. South Korea’s Kospi Index increased 0.1 percent.
Australia’s S&P/ASX 200 Index gained 0.6 percent. The nation’s central bank is scheduled to announce its decision on interest rates at 2:30 p.m. Sydney time. The bank will probably leave rates unchanged at 3 percent, according to 19 of 20 economists surveyed by Bloomberg News.
Supply Management
Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 1.5 percent in New York yesterday, breaking a four-day losing streak. The Institute for Supply Management said its index of non-manufacturing businesses climbed to 50.9 in September, exceeding the dividing line between expansion and contraction for the first time in a year.
Nissan, Japan’s No. 3 automaker, rose 2.5 percent to 606 yen in Tokyo. Honda Motor Co., which makes 45 percent of its revenue in North America, added 1.5 percent to 2,635 yen. James Hardie Industries NV, the biggest seller of home siding in the U.S., advanced 3.5 percent to A$7.46 in Sydney.
Mazda jumped 6 percent to 196 yen. The company narrowed its full-year loss forecast by 48 percent, citing increasing sales and cost cuts. Separately, Mazda said it will sell as many as 363 million new shares and 96.8 million existing shares it held to raise 96 billion yen ($1.1 billion).
Rio Tinto climbed 2 percent to A$57.98. BHP Billiton Ltd. the world’s biggest mining company, rose 1.4 percent to A$36.83. A gauge of six metals in London added 0.2 percent, ending two days of declines . Oil rose 0.7 percent to $70.41 a barrel in New York yesterday.
The MSCI Asia Pacific Index fell 3.8 percent last week, the most since the period ended Aug. 21, on concern its seven-month rally had outpaced the prospects for a revival in the global economy. The average price of companies in the gauge climbed to 1.6 times book value on Sept. 17, up from 1 at the March low. The measure now trades at 1.5 times book.
Nissan Motor Co., which got 34 percent of sales from North America last year, gained 2.5 percent. Mazda Motor Corp., Japan’s No. 4 carmaker, jumped 6 percent after narrowing its full-year loss forecast. Rio Tinto Ltd., the world’s third- biggest mining company, climbed 2 percent in Sydney.
“There’ve been a few numbers in the last week or two that were a little bit more disappointing,” said Philip Schwartz, who manages $1.2 billion as head of international investting in New York at ING Investment Management. “But unless the numbers are really disappointing I don’t think there’s a lot of risk to the markets. Weaker economic numbers mean that policy around the world will continue to be very stimulative.”
The MSCI Asia Pacific Index climbed 0.6 percent to 114.36 as of 10:28 a.m. in Tokyo. The gauge has rallied 62 percent from a five-year low on March 9 amid better-than-estimated economic data and earnings reports.
Japan’s Nikkei 225 Stock Average added 0.1 percent in Tokyo, while New Zealand’s NZX 50 Index rose 0.4 percent. South Korea’s Kospi Index increased 0.1 percent.
Australia’s S&P/ASX 200 Index gained 0.6 percent. The nation’s central bank is scheduled to announce its decision on interest rates at 2:30 p.m. Sydney time. The bank will probably leave rates unchanged at 3 percent, according to 19 of 20 economists surveyed by Bloomberg News.
Supply Management
Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 1.5 percent in New York yesterday, breaking a four-day losing streak. The Institute for Supply Management said its index of non-manufacturing businesses climbed to 50.9 in September, exceeding the dividing line between expansion and contraction for the first time in a year.
Nissan, Japan’s No. 3 automaker, rose 2.5 percent to 606 yen in Tokyo. Honda Motor Co., which makes 45 percent of its revenue in North America, added 1.5 percent to 2,635 yen. James Hardie Industries NV, the biggest seller of home siding in the U.S., advanced 3.5 percent to A$7.46 in Sydney.
Mazda jumped 6 percent to 196 yen. The company narrowed its full-year loss forecast by 48 percent, citing increasing sales and cost cuts. Separately, Mazda said it will sell as many as 363 million new shares and 96.8 million existing shares it held to raise 96 billion yen ($1.1 billion).
Rio Tinto climbed 2 percent to A$57.98. BHP Billiton Ltd. the world’s biggest mining company, rose 1.4 percent to A$36.83. A gauge of six metals in London added 0.2 percent, ending two days of declines . Oil rose 0.7 percent to $70.41 a barrel in New York yesterday.
The MSCI Asia Pacific Index fell 3.8 percent last week, the most since the period ended Aug. 21, on concern its seven-month rally had outpaced the prospects for a revival in the global economy. The average price of companies in the gauge climbed to 1.6 times book value on Sept. 17, up from 1 at the March low. The measure now trades at 1.5 times book.
New Zealand Business Confidence Jumps to 10-Year High
Oct. 6 (Bloomberg) -- New Zealand business confidence jumped to a 10-year high as the domestic recession ended and signs emerged of a recovery in the world’s largest economies.
A net 36 percent of companies surveyed last quarter expect the economy will improve over the next six months, the New Zealand Institute of Economic Research said today in Wellington. That compares with 25 percent that forecast a deterioration in the second quarter. The net is calculated by subtracting the pessimists from optimists.
New Zealand’s economy expanded 0.1 percent in the three months to June, the first growth in six quarters, ending the worst recession in three decades. Reserve Bank Governor Alan Bollard last month said he will keep borrowing costs at a record low until late 2010 to help stimulate spending and investment.
“The worst of the recession is over,” Shamubeel Eaqub, principal economist at the institute, told reporters today. “The steepness of the recovery path is still very uncertain.”
The International Monetary Fund last week said New Zealand’s economy will shrink 2.2 percent this year and grow 2.2 percent in 2010. Finance Minister Bill English yesterday said the economy could contract again if the global recovery falters.
Bollard has kept the benchmark interest rate at a record low 2.5 percent since April. Eleven of 12 economists surveyed by Bloomberg News expect the rate will be unchanged until at least March 31. One predicts a quarter-point increase in the first quarter.
Profit Outlook
New Zealand businesses reported a decline in sales in the third quarter, but expect earnings will increase in the fourth quarter, according to today’s survey.
A net 20 percent of companies said trading fell in the three months ended Sept. 30. The net figure, which is seasonally adjusted, is calculated by subtracting those reporting an increase in activity from those recording a drop.
A net 17 percent expect trading will increase in the fourth quarter. A net 3 percent say profits will decline.
“There is a considerable disparity between expectations and reality,” said Eaqub. “While firms are more confident about the economic outlook, their recent performance has been weak and they remain cautious about hiring more staff or lifting investment.”
A net 8 percent for firms expect to invest less in plant and machinery, down from 23 percent in the previous survey.
A net 25 percent of companies said it is easier to find skilled workers, today’s survey showed. Those expecting to fire workers in the next three months equaled those expecting to hire.
Capacity utilization, a measure of factory usage, declined to 88.4 percent in the third quarter from 90.7 percent in the previous three months.
A net 36 percent of companies surveyed last quarter expect the economy will improve over the next six months, the New Zealand Institute of Economic Research said today in Wellington. That compares with 25 percent that forecast a deterioration in the second quarter. The net is calculated by subtracting the pessimists from optimists.
New Zealand’s economy expanded 0.1 percent in the three months to June, the first growth in six quarters, ending the worst recession in three decades. Reserve Bank Governor Alan Bollard last month said he will keep borrowing costs at a record low until late 2010 to help stimulate spending and investment.
“The worst of the recession is over,” Shamubeel Eaqub, principal economist at the institute, told reporters today. “The steepness of the recovery path is still very uncertain.”
The International Monetary Fund last week said New Zealand’s economy will shrink 2.2 percent this year and grow 2.2 percent in 2010. Finance Minister Bill English yesterday said the economy could contract again if the global recovery falters.
Bollard has kept the benchmark interest rate at a record low 2.5 percent since April. Eleven of 12 economists surveyed by Bloomberg News expect the rate will be unchanged until at least March 31. One predicts a quarter-point increase in the first quarter.
Profit Outlook
New Zealand businesses reported a decline in sales in the third quarter, but expect earnings will increase in the fourth quarter, according to today’s survey.
A net 20 percent of companies said trading fell in the three months ended Sept. 30. The net figure, which is seasonally adjusted, is calculated by subtracting those reporting an increase in activity from those recording a drop.
A net 17 percent expect trading will increase in the fourth quarter. A net 3 percent say profits will decline.
“There is a considerable disparity between expectations and reality,” said Eaqub. “While firms are more confident about the economic outlook, their recent performance has been weak and they remain cautious about hiring more staff or lifting investment.”
A net 8 percent for firms expect to invest less in plant and machinery, down from 23 percent in the previous survey.
A net 25 percent of companies said it is easier to find skilled workers, today’s survey showed. Those expecting to fire workers in the next three months equaled those expecting to hire.
Capacity utilization, a measure of factory usage, declined to 88.4 percent in the third quarter from 90.7 percent in the previous three months.
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