May 15 (Bloomberg) -- Asian currencies appreciated this week, led by Malaysia’s ringgit and South Korea’s won, on signs the region’s economic growth is gathering pace, bolstering demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index had its biggest weekly gain since Jan. 8 after Malaysia reported gross domestic product increased 10.1 percent in the first three months of 2010, the best quarterly performance in a decade. The Philippine peso climbed the most this year as presidential elections passed without incident, spurring a rally in local stocks. A government report yesterday showed Hong Kong’s economy expanded at the fastest pace in four years.
“Asia is fundamentally looking much better,” said Mitul Kotecha, head of global currency strategy at Credit Agricole CIB in Hong Kong. “I don’t think it will escape untarnished from what is happening in Europe, but there is some semblance of resilience for Asian currencies. The data have been upbeat and continue to press for higher interest rates in the region.”
The ringgit strengthened 2.4 percent this week to 3.1955 per dollar in Kuala Lumpur, the biggest five-day gain since October 2009, according to data compiled by Bloomberg. South Korea’s won rose 2.2 percent to 1,130.93, and the Philippine peso climbed 1.7 percent to 44.76.
Bank Negara Malaysia raised its overnight interest rate by 25 basis points to 2.5 percent on May 13, citing a strong recovery in emerging markets. Hong Kong’s GDP rose 8.2 percent in the first quarter from a year earlier, compared with revised growth of 2.5 percent in the prior three months.
Rate Increases
Goldman Sachs Group Inc. raised its forecast for Malaysia’s 2010 growth to 7.3 percent from 5.5 percent. Goldman and HSBC Holdings Plc predicted borrowing costs will climb to 3 percent by year-end, according to research notes to clients.
“The numbers obviously support the currency and the medium-term macro theme in Asia,” said Faizal Yussof, a foreign-exchange trader at KAF Investment Bank Bhd. in Kuala Lumpur. “Whether this will take the rally to 3.15 per dollar is still too early to say.”
Yuan forwards appreciated 0.6 percent this week, the biggest five-day gain since December, on speculation the second U.S.-China Strategic and Economic Dialogue in Beijing on May 24- 25 will foster currency appreciation.
Yuan Peg
China had a trade surplus of $1.68 billion last month as exports climbed 30.5 percent from a year earlier, the customs bureau reported on May 10, topping the 28.9 percent median estimate of 30 economists in a Bloomberg survey.
The People’s Bank of China has indicated it will likely allow appreciation, Xia Bin, one of its academic advisers, said in the China Business News newspaper on May 11. Xia said a reference in the central bank’s latest quarterly report to managing the yuan “with reference to a currency basket” shows a change to the peg is coming.
South Korea’s won gained the most this week since the five- day period ended Jan. 8 after the nation’s unemployment rate dropped to 3.7 percent in April. That marked a third monthly decline from a 10-year high of 4.8 percent reached in January.
The Philippine peso rose on optimism the nation’s debt ratings will be raised following the election of a new president.
Election Euphoria
The Philippines may get a higher rating after the success of its first automated voting “as campaign pledges are translated into policies,” central bank Deputy Governor Diwa Guinigundo said. The cost of protecting the sovereign’s debt from default declined the most this year after Moody’s Investors Service said presidential aspirant Benigno Aquino’s apparent victory “sets a favorable tone for the country’s fundamentals.”
“The market is riding on the euphoria of the elections and the possibility of an upgrade once the new administration firms up its plans on fiscal consolidation,” said Roland Avante, a treasurer at Sterling Bank of Asia in Manila. “The tone is generally optimistic, with waves of risk aversion, depending on external developments.”
Elsewhere, Taiwan’s dollar was little changed this week at NT$31.848 versus the U.S. currency and Thailand’s baht traded at 32.38 compared with 32.35 on May 7. Indonesia’s rupiah climbed 1.3 percent to 9,105 and India’s rupee appreciated 0.6 percent to 45.23.
Friday, May 14, 2010
H&M Examining Latin America, Australia for Openings
May 14 (Bloomberg) -- Hennes & Mauritz AB, Europe’s second- largest clothing retailer, is looking at opening its first store in the southern hemisphere to tap emerging-market growth and catch up with larger rival Inditex SA.
“Brazil and Argentina are very interesting,” Chief Executive Officer Karl-Johan Persson, 35, said in an interview at his Stockholm office, adding that he’s also looked at Australia. The company wants to enter the region at some point after making “sure we can handle it.”
None of H&M’s 2,000 stores are south of the equator, as seasonal differences make it more complex to organize supply logistics. Inditex entered Brazil in 1999 and has about twice the outlets globally as H&M. Retail sales grew 15.7 percent in March in Latin America’s biggest economy, more than five times the pace of growth in Germany, H&M’s largest market.
The Swedish retailer, which has sold lines designed by Karl Lagerfeld and offers bikini tops for less than $5, has added stores at a rate of about 14 percent over the past five years and can meet its 10 to 15 percent growth goal without entering the southern hemisphere, said Persson, who took the helm of his family’s firm in July and is the youngest CEO in the Swedish benchmark index.
The company may also make more acquisitions, following the March 2008 purchase of fashion company Fabric Scandinavien AB, the first takeover in H&M’s history. H&M introduced the higher- priced COS chain in 2007 and its first H&M Home store last year.
Fast Retailing
“We are keeping our eyes open, but don’t have any immediate plans” to make an acquisition, the CEO said, adding that the company has the financial resources to do so. H&M isn’t looking at Fast Retailing Co., Japan’s biggest clothing retailer, or its Uniqlo business, he said.
Inditex, the world’s No. 1 clothing retailer, owns eight store formats including Zara and Bershka. Gap Inc., the second- largest retailer, operates Banana Republic and Old Navy chains. H&M fell 14.60 kronor, or 3.2 percent, to 442.50 kronor in Stockholm trading today. The shares have risen 11 percent this year, giving the company a market value of 366 billion kronor ($47.2 billion), while Inditex’s advanced 3.4 percent.
First-quarter profit at H&M advanced more than 40 percent, beating analysts’ estimates, as a weaker dollar reduced purchasing costs. H&M buys its goods from about 700 independent suppliers, mostly in Asia and Europe, and may add more in the southern hemisphere when it expands there, Persson said. The retailer is targeting positive sales growth at stores open at least a year in 2010, the CEO said.
Cutting Prices
“My guess is that 2010 will be better year than 2009 for retailers,” said Persson, a father of two. “If that’s right, the prices for raw materials and transport will go up and spare capacity down at suppliers. Not our prices, we are looking to improve the offer.”
Store expansion this year may be more difficult than in 2009, Persson said, as an improving economy lifts demand for existing real estate and as some projects were halted during the recession. The clothier last year opened 250 stores, surpassing its own goal of 225 outlets, and this year targets 240.
The company, founded in 1947 by Persson’s grandfather Erling, aims to reduce its reliance on Germany, which now accounts for about a quarter of sales. The U.S., Japan and China will be the main focus for expansion, he said.
“There’s still a lot to do in Germany, but looking at countries like the U.S., Japan, China and a lot of markets we haven’t entered yet, the growth potential there is obviously bigger,” Persson said.
India Opportunities
H&M has no immediate plans to enter India because of operational restrictions on foreign ownership, he said. The company would like to enter the market “at some point.”
India is “growing like crazy,” he said. “There will be great possibilities, it is still young in terms of fashion retail.”
The company opened its first store in Seoul and entered Israel this year. It sells clothes on the Internet in seven countries, and will offer fashions online in the U.K. later this year.
Persson is the son of H&M chairman and largest shareholder Stefan Persson. A competitive tennis player as a teenager who will hit with former world No. 1 tennis player Stefan Edberg next week, the CEO graduated in 2000 from the European Business School in London and joined the company board in 2006.
H&M shares have risen about 34 percent since his appointment in February 2009. The CEO said he has bought shares since taking the position.
“Brazil and Argentina are very interesting,” Chief Executive Officer Karl-Johan Persson, 35, said in an interview at his Stockholm office, adding that he’s also looked at Australia. The company wants to enter the region at some point after making “sure we can handle it.”
None of H&M’s 2,000 stores are south of the equator, as seasonal differences make it more complex to organize supply logistics. Inditex entered Brazil in 1999 and has about twice the outlets globally as H&M. Retail sales grew 15.7 percent in March in Latin America’s biggest economy, more than five times the pace of growth in Germany, H&M’s largest market.
The Swedish retailer, which has sold lines designed by Karl Lagerfeld and offers bikini tops for less than $5, has added stores at a rate of about 14 percent over the past five years and can meet its 10 to 15 percent growth goal without entering the southern hemisphere, said Persson, who took the helm of his family’s firm in July and is the youngest CEO in the Swedish benchmark index.
The company may also make more acquisitions, following the March 2008 purchase of fashion company Fabric Scandinavien AB, the first takeover in H&M’s history. H&M introduced the higher- priced COS chain in 2007 and its first H&M Home store last year.
Fast Retailing
“We are keeping our eyes open, but don’t have any immediate plans” to make an acquisition, the CEO said, adding that the company has the financial resources to do so. H&M isn’t looking at Fast Retailing Co., Japan’s biggest clothing retailer, or its Uniqlo business, he said.
Inditex, the world’s No. 1 clothing retailer, owns eight store formats including Zara and Bershka. Gap Inc., the second- largest retailer, operates Banana Republic and Old Navy chains. H&M fell 14.60 kronor, or 3.2 percent, to 442.50 kronor in Stockholm trading today. The shares have risen 11 percent this year, giving the company a market value of 366 billion kronor ($47.2 billion), while Inditex’s advanced 3.4 percent.
First-quarter profit at H&M advanced more than 40 percent, beating analysts’ estimates, as a weaker dollar reduced purchasing costs. H&M buys its goods from about 700 independent suppliers, mostly in Asia and Europe, and may add more in the southern hemisphere when it expands there, Persson said. The retailer is targeting positive sales growth at stores open at least a year in 2010, the CEO said.
Cutting Prices
“My guess is that 2010 will be better year than 2009 for retailers,” said Persson, a father of two. “If that’s right, the prices for raw materials and transport will go up and spare capacity down at suppliers. Not our prices, we are looking to improve the offer.”
Store expansion this year may be more difficult than in 2009, Persson said, as an improving economy lifts demand for existing real estate and as some projects were halted during the recession. The clothier last year opened 250 stores, surpassing its own goal of 225 outlets, and this year targets 240.
The company, founded in 1947 by Persson’s grandfather Erling, aims to reduce its reliance on Germany, which now accounts for about a quarter of sales. The U.S., Japan and China will be the main focus for expansion, he said.
“There’s still a lot to do in Germany, but looking at countries like the U.S., Japan, China and a lot of markets we haven’t entered yet, the growth potential there is obviously bigger,” Persson said.
India Opportunities
H&M has no immediate plans to enter India because of operational restrictions on foreign ownership, he said. The company would like to enter the market “at some point.”
India is “growing like crazy,” he said. “There will be great possibilities, it is still young in terms of fashion retail.”
The company opened its first store in Seoul and entered Israel this year. It sells clothes on the Internet in seven countries, and will offer fashions online in the U.K. later this year.
Persson is the son of H&M chairman and largest shareholder Stefan Persson. A competitive tennis player as a teenager who will hit with former world No. 1 tennis player Stefan Edberg next week, the CEO graduated in 2000 from the European Business School in London and joined the company board in 2006.
H&M shares have risen about 34 percent since his appointment in February 2009. The CEO said he has bought shares since taking the position.
State Bank of India Profit Misses Analysts’ Estimates
May 14 (Bloomberg) -- State Bank of India, the nation’s largest lender, posted its first drop in profit in more than three years and missed analysts’ estimates as it set aside more funds for bad loans. The shares fell.
Net income for the three months ended March 31 fell 32 percent to 18.7 billion rupees ($413 million) from 27.4 billion rupees a year earlier, according to a filing to the National Stock Exchange today. The profit compared with the 27.3 billion rupee average of 21 estimates compiled by Bloomberg.
Chairman Om Prakash Bhatt is increasing provisions for delinquencies at the government-controlled lender, which accounts for almost a fifth of the nation’s banking assets, after India’s central bank raised interest rates twice since mid-March to curb inflation. The bank’s profit on sale of investments also fell 72 percent during the quarter.
“These are poor numbers compared to most other frontline public-sector banks,” Prabodh Agrawal, executive director at IIFL, said in an interview from Singapore. “Other banks that have high exposure to the small-and-medium enterprise segment haven’t seen this kind of pain: Most banks are indicating that the worst of the credit crisis is over for Indian companies.”
IIFL rates State Bank stock as an “add.”
Shares Drop
Shares of State Bank dropped 4 percent, its biggest decline in more than three months, to 2,224.25 rupees at the close of trading in Mumbai today. The stock was the third-worst performer in the quarter ended March 31 on the Bombay Stock Exchange’s Bankex index, which tracks 14 lenders.
The Mumbai-based lender, whose results are reported on a stand-alone basis, operates more than 12,000 branches.
State Bank, which is in talks with the government about raising capital, plans to sell 200 billion rupees in shares in a rights offer to investors, and wants its biggest stakeholder to invest, Bhatt told reporters in Kolkata. The timing of the share sale hasn’t been determined, and the offering won’t reduce the government’s stake in the company, he said.
During the quarter, the bank increased provisions for non- performing assets, or NPAs, by 69 percent to 21.9 billion rupees from 13 billion rupees a year earlier, according to the statement. Its gross NPA ratio widened to 3.05 percent from 2.86 percent.
The growth in NPAs is likely to slow, Bhatt said today.
Lending Profitability
Net interest income, or revenue from borrowers after deducting interest paid to depositors, rose 39 percent to 67.2 billion rupees. Net interest margin, a measure of lending profitability, widened to 2.96 percent from 2.39 percent.
Treasury income, or earnings from trading in bonds and currencies, rose 25 percent on a pretax basis to 46.7 billion rupees from 37.4 billion rupees. State Bank’s earnings from wholesale and retail banking declined.
Smaller rival ICICI Bank Ltd., India’s largest non-state lender, last month said fourth-quarter profit rose 35 percent to 10.1 billion rupees as it reduced unsecured loans while boosting domestic lending. That was in line with the 10 billion rupee average of 21 estimates compiled by Bloomberg.
Net income for the three months ended March 31 fell 32 percent to 18.7 billion rupees ($413 million) from 27.4 billion rupees a year earlier, according to a filing to the National Stock Exchange today. The profit compared with the 27.3 billion rupee average of 21 estimates compiled by Bloomberg.
Chairman Om Prakash Bhatt is increasing provisions for delinquencies at the government-controlled lender, which accounts for almost a fifth of the nation’s banking assets, after India’s central bank raised interest rates twice since mid-March to curb inflation. The bank’s profit on sale of investments also fell 72 percent during the quarter.
“These are poor numbers compared to most other frontline public-sector banks,” Prabodh Agrawal, executive director at IIFL, said in an interview from Singapore. “Other banks that have high exposure to the small-and-medium enterprise segment haven’t seen this kind of pain: Most banks are indicating that the worst of the credit crisis is over for Indian companies.”
IIFL rates State Bank stock as an “add.”
Shares Drop
Shares of State Bank dropped 4 percent, its biggest decline in more than three months, to 2,224.25 rupees at the close of trading in Mumbai today. The stock was the third-worst performer in the quarter ended March 31 on the Bombay Stock Exchange’s Bankex index, which tracks 14 lenders.
The Mumbai-based lender, whose results are reported on a stand-alone basis, operates more than 12,000 branches.
State Bank, which is in talks with the government about raising capital, plans to sell 200 billion rupees in shares in a rights offer to investors, and wants its biggest stakeholder to invest, Bhatt told reporters in Kolkata. The timing of the share sale hasn’t been determined, and the offering won’t reduce the government’s stake in the company, he said.
During the quarter, the bank increased provisions for non- performing assets, or NPAs, by 69 percent to 21.9 billion rupees from 13 billion rupees a year earlier, according to the statement. Its gross NPA ratio widened to 3.05 percent from 2.86 percent.
The growth in NPAs is likely to slow, Bhatt said today.
Lending Profitability
Net interest income, or revenue from borrowers after deducting interest paid to depositors, rose 39 percent to 67.2 billion rupees. Net interest margin, a measure of lending profitability, widened to 2.96 percent from 2.39 percent.
Treasury income, or earnings from trading in bonds and currencies, rose 25 percent on a pretax basis to 46.7 billion rupees from 37.4 billion rupees. State Bank’s earnings from wholesale and retail banking declined.
Smaller rival ICICI Bank Ltd., India’s largest non-state lender, last month said fourth-quarter profit rose 35 percent to 10.1 billion rupees as it reduced unsecured loans while boosting domestic lending. That was in line with the 10 billion rupee average of 21 estimates compiled by Bloomberg.
Wednesday, May 12, 2010
Industrial Output in India Grew 13.5% in March, Stoking Inflation Pressure
India’s industrial production grew more than 10 percent for a sixth straight month, adding to inflation pressures even as Europe’s debt crisis threatens to undermine the global economic recovery.
Output at factories, utilities and mines rose 13.5 percent in March from a year earlier after gaining 15.1 percent in February, the statistics department said in a statement in New Delhi today. The median estimate of 24 economists in a Bloomberg News survey was for a 15.1 percent increase.
India’s figures come a day after China said its industrial output grew 17.8 percent in April, highlighting the challenge the world’s fastest-growing major economies face in containing inflation while keeping an eye on the dangers posed by Europe. Reserve Bank of India Governor Duvvuri Subbarao has said he plans to raise interest rates in a “calibrated” way, given the risks to global growth.
“The developments in Europe have vindicated the RBI’s approach of gradualism in monetary tightening, something which economists like us were worried about as growth had recovered very strongly in the Indian economy,” said Mridul Saggar, a Mumbai-based economist at Kotak Securities Ltd. “We still expect a further rate hike of 25 basis points or more in July.”
European policy makers on May 10 unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to contain a sovereign-debt crisis emanating from Greece. The rescue program comes after a 110 billion-euro aid package for Greece and would be used for countries like Portugal or Spain in case their finances buckle.
Limited Impact
While the developments in Europe may have limited impact on India, policy makers are carefully monitoring the situation, Commerce and Industry Minister Anand Sharma said May 10.
Subbarao on April 20 raised the central bank’s benchmark interest rates by a quarter percentage point for the second time in a month, increasing the reverse repurchase rate to 3.75 percent and the repurchase rate to 5.25 percent. The next monetary policy statement is scheduled for release on July 27.
Inflation pressures are also building up in other parts of Asia as the region rebounds from the global recession.
In China, consumer prices climbed at the fastest pace in 18 months in April, adding pressure on policy makers to raise interest rates and allow yuan gains.
Malaysia’s economy probably grew the most since 2000 in the first quarter, an acceleration that may convince the central bank to raise interest rates tomorrow even in the aftermath of Europe’s debt crisis, surveys of economists showed.
Manufacturing Slowed
India’s industrial output growth slowed in March as manufacturing expanded 14.3 percent compared with a 16.1 percent gain in the previous month, today’s report showed, without giving any reason. Mining grew 11 percent in March, while electricity production rose 7.7 percent.
The benchmark 10-year bond yield fell four basis points to 7.57 percent as of 12:40 p.m. in Mumbai, according to data compiled by Bloomberg. The Sensitive Index fell 0.4 percent to 17,068.72 on the Bombay Stock Exchange while the rupee was little changed at 45.28 per dollar.
Factory output is gaining strength in India as wages rise, spurring demand for houses and cars. Salaries in India may grow at the fastest pace in the Asia Pacific this year, according to Hewitt Associates Inc., the Lincolnshire, Illinois-based human resources adviser.
Cement, Cars
Cement production by companies including ACC Ltd., India’s biggest cement maker, gained 10.1 percent in March, the government said on April 27. Sales at car companies such as Maruti Suzuki India Ltd. and Tata Motors Ltd. climbed 39.5 percent in April from a year earlier.
India’s $1.2 trillion economy may have grown 8.6 percent last quarter, the fastest pace in more than two years, Kaushik Basu, the chief economic adviser in the finance ministry, said on May 4.
Faster economic expansion has helped the stock index gain more than 40 percent in the past year, and the rupee rise 8.5 percent during the period. The 10-year government bond yield has advanced 39 basis points since Jan. 1 as demand outstrips supply, stoking inflation.
Prime Minister Manmohan Singh’s coalition is under pressure to control rising prices. Inflation provoked opposition parties including the Bharatiya Janata Party to move a motion in parliament this month, challenging the government to prove its majority. Singh defeated the motion after receiving support from regional parties.
Output at factories, utilities and mines rose 13.5 percent in March from a year earlier after gaining 15.1 percent in February, the statistics department said in a statement in New Delhi today. The median estimate of 24 economists in a Bloomberg News survey was for a 15.1 percent increase.
India’s figures come a day after China said its industrial output grew 17.8 percent in April, highlighting the challenge the world’s fastest-growing major economies face in containing inflation while keeping an eye on the dangers posed by Europe. Reserve Bank of India Governor Duvvuri Subbarao has said he plans to raise interest rates in a “calibrated” way, given the risks to global growth.
“The developments in Europe have vindicated the RBI’s approach of gradualism in monetary tightening, something which economists like us were worried about as growth had recovered very strongly in the Indian economy,” said Mridul Saggar, a Mumbai-based economist at Kotak Securities Ltd. “We still expect a further rate hike of 25 basis points or more in July.”
European policy makers on May 10 unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to contain a sovereign-debt crisis emanating from Greece. The rescue program comes after a 110 billion-euro aid package for Greece and would be used for countries like Portugal or Spain in case their finances buckle.
Limited Impact
While the developments in Europe may have limited impact on India, policy makers are carefully monitoring the situation, Commerce and Industry Minister Anand Sharma said May 10.
Subbarao on April 20 raised the central bank’s benchmark interest rates by a quarter percentage point for the second time in a month, increasing the reverse repurchase rate to 3.75 percent and the repurchase rate to 5.25 percent. The next monetary policy statement is scheduled for release on July 27.
Inflation pressures are also building up in other parts of Asia as the region rebounds from the global recession.
In China, consumer prices climbed at the fastest pace in 18 months in April, adding pressure on policy makers to raise interest rates and allow yuan gains.
Malaysia’s economy probably grew the most since 2000 in the first quarter, an acceleration that may convince the central bank to raise interest rates tomorrow even in the aftermath of Europe’s debt crisis, surveys of economists showed.
Manufacturing Slowed
India’s industrial output growth slowed in March as manufacturing expanded 14.3 percent compared with a 16.1 percent gain in the previous month, today’s report showed, without giving any reason. Mining grew 11 percent in March, while electricity production rose 7.7 percent.
The benchmark 10-year bond yield fell four basis points to 7.57 percent as of 12:40 p.m. in Mumbai, according to data compiled by Bloomberg. The Sensitive Index fell 0.4 percent to 17,068.72 on the Bombay Stock Exchange while the rupee was little changed at 45.28 per dollar.
Factory output is gaining strength in India as wages rise, spurring demand for houses and cars. Salaries in India may grow at the fastest pace in the Asia Pacific this year, according to Hewitt Associates Inc., the Lincolnshire, Illinois-based human resources adviser.
Cement, Cars
Cement production by companies including ACC Ltd., India’s biggest cement maker, gained 10.1 percent in March, the government said on April 27. Sales at car companies such as Maruti Suzuki India Ltd. and Tata Motors Ltd. climbed 39.5 percent in April from a year earlier.
India’s $1.2 trillion economy may have grown 8.6 percent last quarter, the fastest pace in more than two years, Kaushik Basu, the chief economic adviser in the finance ministry, said on May 4.
Faster economic expansion has helped the stock index gain more than 40 percent in the past year, and the rupee rise 8.5 percent during the period. The 10-year government bond yield has advanced 39 basis points since Jan. 1 as demand outstrips supply, stoking inflation.
Prime Minister Manmohan Singh’s coalition is under pressure to control rising prices. Inflation provoked opposition parties including the Bharatiya Janata Party to move a motion in parliament this month, challenging the government to prove its majority. Singh defeated the motion after receiving support from regional parties.
India Not Considering Tobin Tax on Capital Inflows, Governor Subbarao Says
ndia has no plans to impose the so- called Tobin tax on foreign capital inflows, Reserve Bank of India Governor Duvvuri Subbarao said, adding the position may be reviewed in future.
“As regards a Tobin type tax, we have not so far imposed nor are we contemplating one,” Subbarao said in a speech in Zurich yesterday, a copy of which is posted on the central bank’s website. “However, it needs reiterating that no policy instrument is clearly off the table and our choice of instruments will be determined by the context.”
The concept of a transactions tax is often called a Tobin Tax, though current proposals go beyond the levy on currency transactions that the late Nobel laureate James Tobin proposed in the 1970s. Emerging markets in Asia are grappling with a surge in foreign investments in stocks as their economies expand and outpace the rest of the world.
Subbarao said large capital movements to and from a country can “jeopardize financial stability” and that India has experienced such floods and sudden stops. Net flows dropped to $7 billion in the year ended March 31, 2009, from $107 billion in the previous financial year, he said.
India’s rupee strengthened in the first four months of 2010, the longest winning streak in three years, as overseas investors bought 276.7 billion rupees ($6.1 billion) of stocks, according to Bloomberg data.
‘Liberal’ Policy
“Our policy on equity flows has been quite liberal, and in sharp contrast to other emerging market economies which liberalized and then reversed the liberalization when flows became volatile,” Subbarao said. “Our policy has been quite stable.”
India permits the rupee to be freely convertible on the trade and current account and places curbs on the capital account. An advisory panel formed by the central bank in 2006 suggested the rupee be made fully convertible in five years.
India also caps the amount of funds local companies can raise from overseas and places a ceiling on foreign investments in debt instruments. The limit on foreign investment in government debt is $5 billion and on corporate debt is $10 billion.
“India has followed a consistent policy on allowing capital inflows in general and on capital account management in particular,” Subbarao said. “Our position is that capital account convertibility is not a standalone objective but a means for higher and stable growth.”
“As regards a Tobin type tax, we have not so far imposed nor are we contemplating one,” Subbarao said in a speech in Zurich yesterday, a copy of which is posted on the central bank’s website. “However, it needs reiterating that no policy instrument is clearly off the table and our choice of instruments will be determined by the context.”
The concept of a transactions tax is often called a Tobin Tax, though current proposals go beyond the levy on currency transactions that the late Nobel laureate James Tobin proposed in the 1970s. Emerging markets in Asia are grappling with a surge in foreign investments in stocks as their economies expand and outpace the rest of the world.
Subbarao said large capital movements to and from a country can “jeopardize financial stability” and that India has experienced such floods and sudden stops. Net flows dropped to $7 billion in the year ended March 31, 2009, from $107 billion in the previous financial year, he said.
India’s rupee strengthened in the first four months of 2010, the longest winning streak in three years, as overseas investors bought 276.7 billion rupees ($6.1 billion) of stocks, according to Bloomberg data.
‘Liberal’ Policy
“Our policy on equity flows has been quite liberal, and in sharp contrast to other emerging market economies which liberalized and then reversed the liberalization when flows became volatile,” Subbarao said. “Our policy has been quite stable.”
India permits the rupee to be freely convertible on the trade and current account and places curbs on the capital account. An advisory panel formed by the central bank in 2006 suggested the rupee be made fully convertible in five years.
India also caps the amount of funds local companies can raise from overseas and places a ceiling on foreign investments in debt instruments. The limit on foreign investment in government debt is $5 billion and on corporate debt is $10 billion.
“India has followed a consistent policy on allowing capital inflows in general and on capital account management in particular,” Subbarao said. “Our position is that capital account convertibility is not a standalone objective but a means for higher and stable growth.”
Monday, May 10, 2010
Australian, New Zealand Dollars Fall on European Debt Concerns
May 11 (Bloomberg) -- The Australian and New Zealand dollars fell for the first time in three days against the yen on speculation a loan plan of almost $1 trillion to aid debt- laden European governments won’t end the fiscal crisis.
Both currencies ended two days of gains versus the dollar after European Central Bank President Jean-Claude Trichet said yesterday the move wasn’t supported by all 22 of its Governing Council members. The euro pared what had been the biggest two- day advance since March 2009, making investors less interested in buying high-yielding currencies.
“The currency markets in general seem to be taking a less optimistic view of the bailout package,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “The fact that the euro-dollar has come down removes some of the follow- through support for the Australian dollar.”
Australia’s dollar declined to 83.84 yen as of 9:33 a.m. in Sydney from 84.23 yen in New York yesterday. The so-called Aussie fell to 90.10 U.S. cents from 90.28 cents. New Zealand’s dollar dropped to 66.94 yen from 67.43 yen, and slipped to 71.96 U.S. cents from 72.27 cents.
Governments of the 16-euro nations agreed yesterday to lend as much as 750 billion euros ($958 billion) to the most- indebted countries. The European Central Bank said it will counter “severe tensions” in “certain” markets by purchasing government and private debt.
Moody’s on Greece
Greece may have its credit rating lowered to junk within the next month, Moody’s Investors Service said yesterday, citing the country’s “dismal” economic prospects.
Portugal’s rating, which is also on review for a downgrade, will probably be lowered one level to Aa3 from Aa2, though an “adjustment” of two steps to A1 can’t be ruled out, Moody’s said. No “significant” rating action is likely “in the short run” for Ireland, the company said.
“While the support package has soothed immediate fears of contagion from the Greek crisis, market sentiment remains fragile,” Mike Jones, currency strategist at Bank of New Zealand Ltd. in Wellington wrote in an e-mailed note.
Both currencies ended two days of gains versus the dollar after European Central Bank President Jean-Claude Trichet said yesterday the move wasn’t supported by all 22 of its Governing Council members. The euro pared what had been the biggest two- day advance since March 2009, making investors less interested in buying high-yielding currencies.
“The currency markets in general seem to be taking a less optimistic view of the bailout package,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “The fact that the euro-dollar has come down removes some of the follow- through support for the Australian dollar.”
Australia’s dollar declined to 83.84 yen as of 9:33 a.m. in Sydney from 84.23 yen in New York yesterday. The so-called Aussie fell to 90.10 U.S. cents from 90.28 cents. New Zealand’s dollar dropped to 66.94 yen from 67.43 yen, and slipped to 71.96 U.S. cents from 72.27 cents.
Governments of the 16-euro nations agreed yesterday to lend as much as 750 billion euros ($958 billion) to the most- indebted countries. The European Central Bank said it will counter “severe tensions” in “certain” markets by purchasing government and private debt.
Moody’s on Greece
Greece may have its credit rating lowered to junk within the next month, Moody’s Investors Service said yesterday, citing the country’s “dismal” economic prospects.
Portugal’s rating, which is also on review for a downgrade, will probably be lowered one level to Aa3 from Aa2, though an “adjustment” of two steps to A1 can’t be ruled out, Moody’s said. No “significant” rating action is likely “in the short run” for Ireland, the company said.
“While the support package has soothed immediate fears of contagion from the Greek crisis, market sentiment remains fragile,” Mike Jones, currency strategist at Bank of New Zealand Ltd. in Wellington wrote in an e-mailed note.
Founding ECB Vision Eclipsed by Europe’s Debt Crisis
May 11 (Bloomberg) -- The central bank envisioned by the euro’s founding fathers is being eclipsed as the sovereign debt crisis forces it to help clean up the fiscal mess of governments.
Fighting speculation that soaring budget deficits would break up the 16-nation currency, euro region finance ministers yesterday came up with an unprecedented aid package worth almost $1 trillion -- and relied on the independent European Central Bank to help foot the bill.
Ministers pushed through the decisions at the 14-hour overnight crisis session at the European Union’s Brussels headquarters to put the euro on a sounder footing with more unified economic policies. The risk is that they will instead stoke investors’ concerns that uncontrolled deficits will undermine the euro -- a danger highlighted by the currency surrendering gains made after the announcement.
“Think differently about the place from now on,” said Kevin Gaynor, chief markets economist at Royal Bank of Scotland Group Plc in London. “What we’re seeing is everything being glued together by bailouts rather than integration. The currency is starting to turn into an average of its members rather than the deutsche mark, which people thought it would be.”
Gains Lost
The euro traded at $1.2777 as of 9:49 a.m. in Tokyo, down from a high of $1.3094 reached yesterday in the aftermath of the bailout announcement. The currency has lost almost 16 percent since late November and is down against 15 of the 16 most-traded currencies this year.
“No one’s saying that this is easy,” said John Lipsky, the No. 2 official at the International Monetary Fund, in an interview with Bloomberg Television today. “It’s an important step. Now let’s see what happens in other countries that need to undertake adjustment programs.” As part of the European Union’s agreement, Spain and Portugal pledged deeper budget cuts to be outlined this month.
Lipsky added that “this was a very big step by the ECB” to agree to buy bonds.
ECB President Jean-Claude Trichet was in Basel, Switzerland, 570 kilometers (354 miles) away, when finance ministers threw out Germany’s insistence on budgetary rigor and standalone monetary policy that governed the euro since it was conceived in 1991.
Fighting Contagion
The euro’s political leadership agreed to rescue countries that failed to control their deficits and a divided ECB backstopped it by purchasing government bonds after the Greek fiscal crisis sparked a sell-off in Spanish and Portuguese debt.
“We’ve reached a crossroads,” said Paul de Grauwe, a professor at the Catholic University of Leuven in Belgium and two-time candidate for an ECB post, in a telephone interview. “They have realized there is more to monetary union than a central bank. Whether you like it or not, that is increasingly a fiscal union.”
Trichet’s decision to sign up to a euro-region bailout mechanism may see him start his final year in office fighting suspicions that the German model of the independent central bank no longer applies. Just hours after the program was announced, Bundesbank President Axel Weber said buying bonds has “significant risks.”
Risk Taking
Weber’s predecessors warned that it would be irresponsible for central banks to finance deficits, arguing that this would kindle inflation and rely on government assistance if the purchases turned sour.
A ban on central bank overdraft facilities for governments or direct loans is “of especial importance,” Germany’s central bank wrote in February 1992, two months after European governments hashed out the euro’s founding treaty.
The ECB’s actions may also open it to the same attacks that the Federal Reserve has fought for the past year. Its critics argue that propping up companies triggers greater risk-taking among investors confident they will be saved if their bets turn sour.
Trichet, an architect of the euro who oversaw the French central bank’s deliverance from political control in the 1990s, denies that the ECB sacrificed its autonomy by volunteering to purchase government bonds on the market.
‘Fiercely Independent’
Yesterday’s ECB move also skirts the direct-financing prohibition by buying the bonds of countries like Portugal or Spain on the secondary market. The bank described the move as “interventions” that aimed to ensure “depth and liquidity.” The purchases will be sterilized, meaning they won’t increase the overall money supply.
While the ECB remains “fiercely independent,” Trichet said in a Bloomberg Television interview that the bank’s 22- member decision-making council only mustered “an overwhelming majority” -- instead of unanimity -- to venture into the uncharted territory of financing public debt.
Weber, the Bundesbank’s current chief, broke with Trichet yesterday to say he’s “critical” of the bond plan. The risks stemming from purchases must be kept “as minimal as possible,” he said in an interview with Boersen-Zeitung newspaper.
The comments suggest that Trichet struggled to build a consensus for bond purchases before the monthly council meeting of May 6, where he says they weren’t even discussed.
ECB Reluctance
The ECB’s perceived reluctance to take that route last week rattled markets around the world, even briefly driving the Dow Jones Industrial Average down by almost 1,000 points on May 6, erasing more than $1 trillion in wealth before the market bounced back.
By the evening of May 7, the euro zone was in crisis mode, its political leaders closeted with Trichet in Brussels to improvise a strategy for heading off a sovereign debt explosion -- and to do so by a 48-hour deadline before the markets reopened yesterday.
“For all of the ECB’s attempts to remain independent and bask in the image of the Bundesbank, there was no ability to push back on the EU power base in a crisis period,” David Zervos, a managing director at Jeffries & Co. in New York, said in an e-mailed note to investors. “This, in the end, makes the euro area far less stable in any crisis times than a traditional national union.”
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomnerg.net
Fighting speculation that soaring budget deficits would break up the 16-nation currency, euro region finance ministers yesterday came up with an unprecedented aid package worth almost $1 trillion -- and relied on the independent European Central Bank to help foot the bill.
Ministers pushed through the decisions at the 14-hour overnight crisis session at the European Union’s Brussels headquarters to put the euro on a sounder footing with more unified economic policies. The risk is that they will instead stoke investors’ concerns that uncontrolled deficits will undermine the euro -- a danger highlighted by the currency surrendering gains made after the announcement.
“Think differently about the place from now on,” said Kevin Gaynor, chief markets economist at Royal Bank of Scotland Group Plc in London. “What we’re seeing is everything being glued together by bailouts rather than integration. The currency is starting to turn into an average of its members rather than the deutsche mark, which people thought it would be.”
Gains Lost
The euro traded at $1.2777 as of 9:49 a.m. in Tokyo, down from a high of $1.3094 reached yesterday in the aftermath of the bailout announcement. The currency has lost almost 16 percent since late November and is down against 15 of the 16 most-traded currencies this year.
“No one’s saying that this is easy,” said John Lipsky, the No. 2 official at the International Monetary Fund, in an interview with Bloomberg Television today. “It’s an important step. Now let’s see what happens in other countries that need to undertake adjustment programs.” As part of the European Union’s agreement, Spain and Portugal pledged deeper budget cuts to be outlined this month.
Lipsky added that “this was a very big step by the ECB” to agree to buy bonds.
ECB President Jean-Claude Trichet was in Basel, Switzerland, 570 kilometers (354 miles) away, when finance ministers threw out Germany’s insistence on budgetary rigor and standalone monetary policy that governed the euro since it was conceived in 1991.
Fighting Contagion
The euro’s political leadership agreed to rescue countries that failed to control their deficits and a divided ECB backstopped it by purchasing government bonds after the Greek fiscal crisis sparked a sell-off in Spanish and Portuguese debt.
“We’ve reached a crossroads,” said Paul de Grauwe, a professor at the Catholic University of Leuven in Belgium and two-time candidate for an ECB post, in a telephone interview. “They have realized there is more to monetary union than a central bank. Whether you like it or not, that is increasingly a fiscal union.”
Trichet’s decision to sign up to a euro-region bailout mechanism may see him start his final year in office fighting suspicions that the German model of the independent central bank no longer applies. Just hours after the program was announced, Bundesbank President Axel Weber said buying bonds has “significant risks.”
Risk Taking
Weber’s predecessors warned that it would be irresponsible for central banks to finance deficits, arguing that this would kindle inflation and rely on government assistance if the purchases turned sour.
A ban on central bank overdraft facilities for governments or direct loans is “of especial importance,” Germany’s central bank wrote in February 1992, two months after European governments hashed out the euro’s founding treaty.
The ECB’s actions may also open it to the same attacks that the Federal Reserve has fought for the past year. Its critics argue that propping up companies triggers greater risk-taking among investors confident they will be saved if their bets turn sour.
Trichet, an architect of the euro who oversaw the French central bank’s deliverance from political control in the 1990s, denies that the ECB sacrificed its autonomy by volunteering to purchase government bonds on the market.
‘Fiercely Independent’
Yesterday’s ECB move also skirts the direct-financing prohibition by buying the bonds of countries like Portugal or Spain on the secondary market. The bank described the move as “interventions” that aimed to ensure “depth and liquidity.” The purchases will be sterilized, meaning they won’t increase the overall money supply.
While the ECB remains “fiercely independent,” Trichet said in a Bloomberg Television interview that the bank’s 22- member decision-making council only mustered “an overwhelming majority” -- instead of unanimity -- to venture into the uncharted territory of financing public debt.
Weber, the Bundesbank’s current chief, broke with Trichet yesterday to say he’s “critical” of the bond plan. The risks stemming from purchases must be kept “as minimal as possible,” he said in an interview with Boersen-Zeitung newspaper.
The comments suggest that Trichet struggled to build a consensus for bond purchases before the monthly council meeting of May 6, where he says they weren’t even discussed.
ECB Reluctance
The ECB’s perceived reluctance to take that route last week rattled markets around the world, even briefly driving the Dow Jones Industrial Average down by almost 1,000 points on May 6, erasing more than $1 trillion in wealth before the market bounced back.
By the evening of May 7, the euro zone was in crisis mode, its political leaders closeted with Trichet in Brussels to improvise a strategy for heading off a sovereign debt explosion -- and to do so by a 48-hour deadline before the markets reopened yesterday.
“For all of the ECB’s attempts to remain independent and bask in the image of the Bundesbank, there was no ability to push back on the EU power base in a crisis period,” David Zervos, a managing director at Jeffries & Co. in New York, said in an e-mailed note to investors. “This, in the end, makes the euro area far less stable in any crisis times than a traditional national union.”
To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomnerg.net
Sunday, May 9, 2010
Retail Sales Probably Increased in April: U.S. Economy Preview
May 9 (Bloomberg) -- Sales at U.S. retailers probably rose in April for a seventh straight month, pointing to a rebound in consumer spending that is broadening the recovery, economists said before reports this week.
Purchases increased 0.2 percent in April, extending the most successive gains since 1999, according to the median estimate of 60 economists surveyed by Bloomberg News before Commerce Department figures on May 14. Other reports may show manufacturing picked up and the trade gap was little changed.
The biggest increase in payrolls in four years may be a harbinger of additional gains as employers become more certain sales will grow, which in turn will lift wages and consumer spending further. Electronics stores may have led retailers last month as Apple Inc. sold at least 1 million iPads.
“Retail sales are picking up because of income growth,” said Dean Maki, chief U.S. economist at Barclays Capital in New York. “Consumption is going to be growing at a firm pace through the end of the year. We are in a sustainable recovery now.”
Cupertino, California-based Apple said it sold out of all three versions of the iPad 3g, which went on sale two weeks ago, at its retail stores in 13 U.S. cities.
“Demand continues to exceed supply,” Natalie Kerris, a spokeswoman for Apple, said May 6. “We’re working hard” to provide iPads to additional customers, she said.
Government Rebates
A remnant of last year’s government stimulus package may have also propelled sales of appliances last month, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Almost two-thirds of the $300 million the government allotted for state rebates on purchases of energy efficient appliances became available last month, Feroli said in a May 3 note to clients.
Florida’s rebate program ran out of funds in three days last month, while Texas and Illinois ran through the money in a day, he said. The incentives may boost core retail sales, which exclude items such as autos, building materials and gasoline, by 0.3 percentage point, according to Feroli.
One reason Americans are spending may be that the employment outlook is brightening. Payrolls increased by 290,000 in April, the most in four years, according to figures from the Labor Department last week. Unemployment climbed to 9.9 percent from 9.7 percent as thousands of jobseekers entered the workforce.
Less Broad-Based
The increase in April sales may have been less broad-based than in prior months. Chain stores reported the smallest increase in monthly sales since November, industry figures showed last week. Demand was dragged down by teen-clothing retailers Abercrombie & Fitch Co. and Aeropostale Inc., and an early Easter, which boosted March sales at the expense of April.
The debt crisis in Europe also raises the risk that tumbling stock prices may cause households to rein in spending. Shares have been pummeled the past two weeks, with the Standard & Poor’s 500 Index dropping 8.7 percent since April 23.
“Clearly, a blossoming labor market recovery is a big positive,” economists Paul Ashworth and Paul Dales of Capital Economics Ltd. in Toronto, said in a note to clients last week. “But if equity and house prices continue to fall, households will ramp up their savings to compensate for the loss of wealth, perhaps undermining consumption.”
For now, more jobs may trump the drop in stocks. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for May probably rose to 73.5 from 72.2 the prior month, according to the survey median. The figures are due May 14.
Factory Gains
Manufacturing, which accounts for about 12 percent of the economy, continues to expand. A Federal Reserve report May 14 may show production at factories, mines and utilities climbed 0.6 percent in April, the tenth straight gain, according to the survey median.
The need to replenish depleted inventories, combined with rising business spending, is giving factories a lift. Stockpiles in the U.S. probably rose 0.4 percent in March, capping the first three-month gain since 2008, economists said ahead of a Commerce Department report on May 14.
Finally, the trade deficit in March was probably little changed at $40 billion, compared with $39.7 billion the prior month, according to the survey median before a May 12 report from the Commerce Department
Purchases increased 0.2 percent in April, extending the most successive gains since 1999, according to the median estimate of 60 economists surveyed by Bloomberg News before Commerce Department figures on May 14. Other reports may show manufacturing picked up and the trade gap was little changed.
The biggest increase in payrolls in four years may be a harbinger of additional gains as employers become more certain sales will grow, which in turn will lift wages and consumer spending further. Electronics stores may have led retailers last month as Apple Inc. sold at least 1 million iPads.
“Retail sales are picking up because of income growth,” said Dean Maki, chief U.S. economist at Barclays Capital in New York. “Consumption is going to be growing at a firm pace through the end of the year. We are in a sustainable recovery now.”
Cupertino, California-based Apple said it sold out of all three versions of the iPad 3g, which went on sale two weeks ago, at its retail stores in 13 U.S. cities.
“Demand continues to exceed supply,” Natalie Kerris, a spokeswoman for Apple, said May 6. “We’re working hard” to provide iPads to additional customers, she said.
Government Rebates
A remnant of last year’s government stimulus package may have also propelled sales of appliances last month, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Almost two-thirds of the $300 million the government allotted for state rebates on purchases of energy efficient appliances became available last month, Feroli said in a May 3 note to clients.
Florida’s rebate program ran out of funds in three days last month, while Texas and Illinois ran through the money in a day, he said. The incentives may boost core retail sales, which exclude items such as autos, building materials and gasoline, by 0.3 percentage point, according to Feroli.
One reason Americans are spending may be that the employment outlook is brightening. Payrolls increased by 290,000 in April, the most in four years, according to figures from the Labor Department last week. Unemployment climbed to 9.9 percent from 9.7 percent as thousands of jobseekers entered the workforce.
Less Broad-Based
The increase in April sales may have been less broad-based than in prior months. Chain stores reported the smallest increase in monthly sales since November, industry figures showed last week. Demand was dragged down by teen-clothing retailers Abercrombie & Fitch Co. and Aeropostale Inc., and an early Easter, which boosted March sales at the expense of April.
The debt crisis in Europe also raises the risk that tumbling stock prices may cause households to rein in spending. Shares have been pummeled the past two weeks, with the Standard & Poor’s 500 Index dropping 8.7 percent since April 23.
“Clearly, a blossoming labor market recovery is a big positive,” economists Paul Ashworth and Paul Dales of Capital Economics Ltd. in Toronto, said in a note to clients last week. “But if equity and house prices continue to fall, households will ramp up their savings to compensate for the loss of wealth, perhaps undermining consumption.”
For now, more jobs may trump the drop in stocks. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for May probably rose to 73.5 from 72.2 the prior month, according to the survey median. The figures are due May 14.
Factory Gains
Manufacturing, which accounts for about 12 percent of the economy, continues to expand. A Federal Reserve report May 14 may show production at factories, mines and utilities climbed 0.6 percent in April, the tenth straight gain, according to the survey median.
The need to replenish depleted inventories, combined with rising business spending, is giving factories a lift. Stockpiles in the U.S. probably rose 0.4 percent in March, capping the first three-month gain since 2008, economists said ahead of a Commerce Department report on May 14.
Finally, the trade deficit in March was probably little changed at $40 billion, compared with $39.7 billion the prior month, according to the survey median before a May 12 report from the Commerce Department
Israeli Stocks Fall, Bonds Gain on Europe Debt Crisis Concerns
May 9 (Bloomberg) -- Israeli stocks slid to the lowest level in three months on concern Greece’s debt crisis is spreading and as a U.S. jury ruled against a unit of Teva Pharmaceutical Industries Ltd.
Israel’s benchmark TA-25 index declined 1.1 percent to 1,128.14, the lowest since Feb. 8, in Tel Aviv. The measure earlier dropped as much as 3 percent. Teva, the world’s largest generic drugmaker, slumped the most in more than a month. Government bonds rose, with the yield on the benchmark Mimshal Shiklit note due February 2019 falling to a two-week low of 4.77 percent as the price increased 0.22 shekel to 109.85.
Stock losses “were expected following the collapse in the global markets,” said Yaron Fridman, equity strategist at Bank Hapoalim Ltd. in Tel Aviv. “There is no reason for long-term declines as they stem from the global retreats and not from real economic reasons, as the Israeli economy is strong and companies’ performances should continue to be strong.”
U.S. stocks fell the most in 14 months on May 7 with the Standard & Poor’s 500 Index erasing 2010 gains amid concern a 110 billion-euro ($140 billion) rescue package for Greece won’t be enough to keep Europe’s most indebted nations from defaulting. Moody’s Investors Service said May 6 that banks in Portugal, Spain, Italy, Ireland and the U.K. could be at risk as the threat of contagion grows.
Europe’s troubles shouldn’t affect Israel because of its “restrained” economic policies, Finance Minister Yuval Steinitz told Israel’s Army Radio today.
Propofol Ruling
Teva declined 2.6 percent, the most since March 19, to 221.50 shekels. A jury said Teva Parenteral Medicines must pay $356 million over its propofol medicine, which is used to sedate surgery patients.
The Tel-Bond 60 index, a gauge of the 60 largest corporate bonds, declined 0.6 percent. The shekel gained 0.2 percent to 3.7975 per dollar on May 7.
Israel’s benchmark TA-25 index declined 1.1 percent to 1,128.14, the lowest since Feb. 8, in Tel Aviv. The measure earlier dropped as much as 3 percent. Teva, the world’s largest generic drugmaker, slumped the most in more than a month. Government bonds rose, with the yield on the benchmark Mimshal Shiklit note due February 2019 falling to a two-week low of 4.77 percent as the price increased 0.22 shekel to 109.85.
Stock losses “were expected following the collapse in the global markets,” said Yaron Fridman, equity strategist at Bank Hapoalim Ltd. in Tel Aviv. “There is no reason for long-term declines as they stem from the global retreats and not from real economic reasons, as the Israeli economy is strong and companies’ performances should continue to be strong.”
U.S. stocks fell the most in 14 months on May 7 with the Standard & Poor’s 500 Index erasing 2010 gains amid concern a 110 billion-euro ($140 billion) rescue package for Greece won’t be enough to keep Europe’s most indebted nations from defaulting. Moody’s Investors Service said May 6 that banks in Portugal, Spain, Italy, Ireland and the U.K. could be at risk as the threat of contagion grows.
Europe’s troubles shouldn’t affect Israel because of its “restrained” economic policies, Finance Minister Yuval Steinitz told Israel’s Army Radio today.
Propofol Ruling
Teva declined 2.6 percent, the most since March 19, to 221.50 shekels. A jury said Teva Parenteral Medicines must pay $356 million over its propofol medicine, which is used to sedate surgery patients.
The Tel-Bond 60 index, a gauge of the 60 largest corporate bonds, declined 0.6 percent. The shekel gained 0.2 percent to 3.7975 per dollar on May 7.
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