Oct. 29 (Bloomberg) -- Asian stocks dropped, extending a global decline, after the head of Australia & New Zealand Banking Group Ltd. said the Australian economy is “still fragile” and new-home sales unexpectedly fell in the U.S.
ANZ Bank, Australia’s second-biggest provider of business loans, dropped 2 percent in Sydney as it reported lower-than- estimated earnings. Advantest Corp., the world’s No. 1 maker of memory-chip testers, sank 4.5 percent after posting a wider loss on slumping orders. BHP Billiton Ltd., the world’s largest mining company, slid 3 percent after commodity prices declined.
The MSCI Asia Pacific Index slipped 0.8 percent to 115.43 as of 10:27 a.m. in Tokyo, extending a 2.9 percent decline in the past two days. The gauge has climbed 63 percent from a more than five-year low on March 9 amid signs the global economy is recovering from its worst slowdown since World War II. The MSCI World Index lost 0.2 percent, after slumping 2 percent yesterday.
“Cracks have been showing up,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Markets, which holds $75 billion in assets. “Investors are worried about whether the improvements we’ve seen are self-sustaining or just the result of stimulus which is fading.”
Japan’s Nikkei 225 Stock Average sank 1.5 percent to 9,923.92. Australia’s S&P/ASX 200 Index slid 1.9 percent, while New Zealand’s NZX 50 Index dipped 1 percent. South Korea’s Kospi Index declined 1.6 percent.
New Home Sales
Futures on the Standard & Poor’s 500 Index lost 0.1 percent. The gauge fell 2 percent in New York yesterday, the most in a month, as the Commerce Department said sales of new homes fell 3.6 percent to a level that was lower than the most pessimistic economist’s forecast.
ANZ Bank dropped 2 percent to A$22.98. The lender said full-year net income fell 11 percent to A$2.94 billion ($2.6 billion). The bank was expected to report full-year profit of A$3.13 billion, according to the average of six analysts’ estimates compiled by Bloomberg.
Australia’s central bank should have waited longer before raising borrowing costs because the economy is “still fragile,” ANZ Bank Chief Executive Officer Mike Smith told reporters in Sydney today.
The Reserve Bank of Australia this month became the first central bank among Group of 20 nations to raise interest rates amid signs of strength in the country’s economy.
Advantest Loss
“It wouldn’t have been a bad idea just to let Christmas wash through and then see what needed to happen in the new year,” ANZ Bank’s Smith said.
Advantest slumped 4.5 percent to 2,110 yen. The company’s second-quarter net loss widened to 3.3 billion yen ($36 million) from 2.8 billion yen a year earlier.
Better-than-estimated earnings and economic reports have driven the global stock rally since March. Companies in the MSCI Asia Pacific Index are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for Europe’s Dow Jones Stoxx 600 Index.
Resources companies declined after crude oil for December delivery tumbled 2.6 percent, the most in a month, to $77.46 a barrel in New York yesterday, while the London Metals Index, a measure of six metals, slumped 3.2 percent.
BHP dropped 3 percent to A$37.24. Rio Tinto Ltd., the world’s second-biggest mining company, slipped 4.4 percent to A$61.26. Woodside Petroleum Ltd., Australia’s second-largest oil producer, dropped 2.5 percent to A$47.18. Inpex Corp., Japan’s largest oil explorer, fell 2.6 percent to 750,000 yen.
NEC Electronics
Nippon Mining Holdings Inc. sank 3.9 percent to 392 yen. Japan’s biggest copper producer and an oil refiner said in a preliminary earnings statement first-half net income was 18.8 billion yen, missing its projection by 18 percent, amid narrower margins for petroleum products.
NEC Electronics Corp. had yet to trade and was being bid for at 650 yen, compared with its close yesterday of 750 yen. Japan’s fourth-largest chipmaker widened its full-year net loss forecast, citing lower demand for semiconductors used in cars, flat-panel televisions and handsets.
The loss in the 12 months ending March 31 will probably be 55 billion yen, wider than the 9 billion yen projected earlier, the company said in a statement.
Wednesday, October 28, 2009
Tuesday, October 27, 2009
Australia Inflation Cools to Slowest in Decade, Eases Rate Talk
Oct. 28 (Bloomberg) -- Australian inflation cooled to the slowest pace in 10 years, easing pressure on central bank Governor Glenn Stevens to increase the benchmark lending rate by half a percentage point next week.
The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, the Bureau of Statistics said in Sydney today. Prices rose 1 percent from the second quarter.
Australia’s dollar fell after the report as traders boosted bets Stevens will slow the pace of future interest-rate increases. The Reserve Bank of Australia, the first Group of 20 central bank to raise borrowing costs since the height of the global financial crisis, said keeping borrowing costs too low may threaten its goal of maintaining inflation between 2 percent and 3 percent on average.
“Anyone worrying about inflation in the near term is barking up the wrong tree,” said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. “Today’s report probably won’t alter the RBA’s stance on gradually withdrawing monetary stimulus from ‘emergency’ levels.”
The Australian dollar fell to 91.41 U.S. cents at 12:15 p.m. in Sydney from 91.80 just before the report. Australia’s two- year government bond yield declined 8 basis points to 4.85 percent. A basis is 0.01 percentage point.
Bets Pared
Investors are certain Governor Stevens will increase the rate by a quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. There is also a 10 percent chance of a half-point increase, the futures showed at 12:37 p.m., down from 16 percent prior to the report.
Food prices fell 0.8 percent and health costs slipped 1 percent in the third quarter, today’s report showed. By contrast, electricity costs rose 11.4 percent and gasoline advanced 4 percent.
The median estimate of economists surveyed by Bloomberg News was for annual inflation of 1.2 percent.
The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published today.
The weighted-median gauge of inflation advanced 0.8 percent in the third quarter for an annual increase of 3.8 percent. Economists forecast gains of 0.8 percent and 3.7 percent respectively.
“The Reserve Bank is on a path back to neutral but there’s nothing in the data that suggests they have to ramp up their rhetoric or their tightening,” said Annette Beacher, senior strategist at TD Securities in Singapore.
Strengthening Economy
Signs are mounting that Australia’s economy, one of the few including China and India to skirt a recession in the first half of this year, will strengthen in coming months.
Reports published since Sept. 30 show consumer confidence jumped this month to the highest level in more than two years, business sentiment held last month near a six-year high, retail sales rose in August, and house prices climbed 7.9 percent this year through August.
An index of skilled vacancies in Australia rose 1.9 percent in October from September, a report today showed.
Gross domestic product expanded 1 percent in the first half of this year as consumers increased spending, spurred by the central bank slashing borrowing costs by a record 4.25 percentage points between September last year and April, plus A$42 billion ($39 billion) in government stimulus spending.
‘Trend’ Pace Growth
Governor Stevens expects GDP growth to accelerate close to its “trend” pace of 3 percent next year.
Australia’s experience of the global recession has been “much milder than elsewhere,” Assistant Governor Malcolm Edey said in Sydney today. “Australia came into the most intense phase of the crisis period in better shape than most, and with more scope than most to make timely macroeconomic policy responses.”
The economy’s rebound from the worst global recession since the Great Depression was a key reason central bank policy makers raised the benchmark interest rate to 3.25 percent from a 49- year low of 3 percent on Oct. 6.
Keeping the rate at “very low levels” may be “imprudent,” the bank said in minutes of its October meeting, published last week.
“While the current forecasts suggested inflation would fall in the coming year, the expected trough in inflation was significantly higher than earlier thought,” the bank said on Oct. 20. “By 2011 inflation could be rising again.”
The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, the Bureau of Statistics said in Sydney today. Prices rose 1 percent from the second quarter.
Australia’s dollar fell after the report as traders boosted bets Stevens will slow the pace of future interest-rate increases. The Reserve Bank of Australia, the first Group of 20 central bank to raise borrowing costs since the height of the global financial crisis, said keeping borrowing costs too low may threaten its goal of maintaining inflation between 2 percent and 3 percent on average.
“Anyone worrying about inflation in the near term is barking up the wrong tree,” said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. “Today’s report probably won’t alter the RBA’s stance on gradually withdrawing monetary stimulus from ‘emergency’ levels.”
The Australian dollar fell to 91.41 U.S. cents at 12:15 p.m. in Sydney from 91.80 just before the report. Australia’s two- year government bond yield declined 8 basis points to 4.85 percent. A basis is 0.01 percentage point.
Bets Pared
Investors are certain Governor Stevens will increase the rate by a quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. There is also a 10 percent chance of a half-point increase, the futures showed at 12:37 p.m., down from 16 percent prior to the report.
Food prices fell 0.8 percent and health costs slipped 1 percent in the third quarter, today’s report showed. By contrast, electricity costs rose 11.4 percent and gasoline advanced 4 percent.
The median estimate of economists surveyed by Bloomberg News was for annual inflation of 1.2 percent.
The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published today.
The weighted-median gauge of inflation advanced 0.8 percent in the third quarter for an annual increase of 3.8 percent. Economists forecast gains of 0.8 percent and 3.7 percent respectively.
“The Reserve Bank is on a path back to neutral but there’s nothing in the data that suggests they have to ramp up their rhetoric or their tightening,” said Annette Beacher, senior strategist at TD Securities in Singapore.
Strengthening Economy
Signs are mounting that Australia’s economy, one of the few including China and India to skirt a recession in the first half of this year, will strengthen in coming months.
Reports published since Sept. 30 show consumer confidence jumped this month to the highest level in more than two years, business sentiment held last month near a six-year high, retail sales rose in August, and house prices climbed 7.9 percent this year through August.
An index of skilled vacancies in Australia rose 1.9 percent in October from September, a report today showed.
Gross domestic product expanded 1 percent in the first half of this year as consumers increased spending, spurred by the central bank slashing borrowing costs by a record 4.25 percentage points between September last year and April, plus A$42 billion ($39 billion) in government stimulus spending.
‘Trend’ Pace Growth
Governor Stevens expects GDP growth to accelerate close to its “trend” pace of 3 percent next year.
Australia’s experience of the global recession has been “much milder than elsewhere,” Assistant Governor Malcolm Edey said in Sydney today. “Australia came into the most intense phase of the crisis period in better shape than most, and with more scope than most to make timely macroeconomic policy responses.”
The economy’s rebound from the worst global recession since the Great Depression was a key reason central bank policy makers raised the benchmark interest rate to 3.25 percent from a 49- year low of 3 percent on Oct. 6.
Keeping the rate at “very low levels” may be “imprudent,” the bank said in minutes of its October meeting, published last week.
“While the current forecasts suggested inflation would fall in the coming year, the expected trough in inflation was significantly higher than earlier thought,” the bank said on Oct. 20. “By 2011 inflation could be rising again.”
Australian Dollar Falls as Consumer Prices Damp Rate Prospects
Oct. 28 (Bloomberg) -- The Australian dollar fell after annual consumer prices slowed in line with economists’ expectations, prompting speculation the central bank may temper the pace of interest rate increases.
New Zealand’s currency dropped for a fifth day before a central bank meeting tomorrow where policy makers may hold interest rates at a record low. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter from 1.5 percent. Economists in a Bloomberg survey forecast 1.2 percent.
“The market was going into this thinking the risks were to the upside in terms of the consensus forecasts,” said Robert Rennie, currency research head in Sydney at Westpac Banking Corp. “This isn’t a strong enough piece of data to see the Australian dollar gain. We are in a short-term corrective phase.”
Australia’s currency fell 0.2 percent to 91.48 U.S. cents as of 11:52 a.m. in Sydney from 91.66 cents in New York yesterday when it touched 91.22 cents, the least since Oct. 19. The currency fell 0.4 percent to 83.80 yen.
New Zealand’s dollar declined 0.2 percent to 74.29 U.S. cents from 74.42 cents in New York yesterday. It earlier dropped to 74.13 cents, also the weakest since Oct. 19. The so-called kiwi slipped 0.4 percent to 68.06 yen.
Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
An Australian index measuring the number of jobs available for skilled workers rose 1.9 percent in October from September, a government report showed today.
Australian government bonds advanced. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 5.65 percent, according to Bloomberg data. The price of the 5.25 percent security due March 2019 gained 0.256 to 97.114.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.71 percent from 4.73 yesterday.
New Zealand’s currency dropped for a fifth day before a central bank meeting tomorrow where policy makers may hold interest rates at a record low. Annual consumer price inflation in Australia slowed to 1.3 percent in the third quarter from 1.5 percent. Economists in a Bloomberg survey forecast 1.2 percent.
“The market was going into this thinking the risks were to the upside in terms of the consensus forecasts,” said Robert Rennie, currency research head in Sydney at Westpac Banking Corp. “This isn’t a strong enough piece of data to see the Australian dollar gain. We are in a short-term corrective phase.”
Australia’s currency fell 0.2 percent to 91.48 U.S. cents as of 11:52 a.m. in Sydney from 91.66 cents in New York yesterday when it touched 91.22 cents, the least since Oct. 19. The currency fell 0.4 percent to 83.80 yen.
New Zealand’s dollar declined 0.2 percent to 74.29 U.S. cents from 74.42 cents in New York yesterday. It earlier dropped to 74.13 cents, also the weakest since Oct. 19. The so-called kiwi slipped 0.4 percent to 68.06 yen.
Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
An Australian index measuring the number of jobs available for skilled workers rose 1.9 percent in October from September, a government report showed today.
Australian government bonds advanced. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 5.65 percent, according to Bloomberg data. The price of the 5.25 percent security due March 2019 gained 0.256 to 97.114.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.71 percent from 4.73 yesterday.
National Australia Slumps to Six-Month Loss on Debts
Oct. 28 (Bloomberg) -- National Australia Bank Ltd., the country’s biggest lender to businesses, slumped to a fiscal second-half loss after charges for bad debts climbed and the company set aside funds for a tax settlement in New Zealand.
The net loss of A$75 million ($69 million) in the six months ended Sept. 30 compared with a profit of A$1.85 billion in the year-earlier period, the Melbourne-based bank said in a statement today. Cash earnings, which strip out one-time items, rose 8 percent to A$1.81 billion.
Chief Executive Officer Cameron Clyne, who bought insurance, mortgage and brokerage assets since July, said he may consider reducing capital buffers that protect against future loan losses as the economy recovers. Australia’s central bank this month became the first among Group of 20 nations to raise interest rates since the global financial crisis began.
“The outlook is suggesting the worst is over,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. including National Australia shares. “Once bad debts start coming off, if they can maintain market share with a similar margin, we’ll see expanded earnings going forward.”
National Australia shares fell 0.6 percent to A$30.53 at 11:17 a.m. in Sydney. The shares have advanced 46 percent this year as analysts forecast an earnings rebound after the country dodged the global recession and the jobless rate unexpectedly fell in September.
‘Robust’ Prospects
Second-half net interest income, or revenue from borrowers minus interest paid to depositors, rose to A$6.19 billion from A$5.84 billion, National Australia said.
“Near- to medium-term prospects for sustainable growth look robust,” Ben Potter, research analyst at IG Markets, said in a note today. “We would expect some upwards revisions to price targets.”
Charges for bad and doubtful debts rose to A$2 billion in the second half from A$1.76 billion a year earlier. The lender also set aside A$542 million for a tax bill after New Zealand authorities reviewed structured finance transactions it carried out.
It may not be possible to judge whether bad debts have peaked for another six months because Australia’s economy is still supported by a government stimulus, National Australia executives said during a conference call today.
‘Somewhat Cautious’
“There are a number of positive signs but you also need to be somewhat cautious,” Clyne told reporters in Sydney. Asset quality “might be stabilizing, but there are still a number of issues to be worked through.”
National Australia said it may reduce its Tier 1 capital ratio, a measure of the lender’s ability to withstand future losses, “when conditions become more predictable.”
The bank’s Tier 1 ratio climbed 65 basis points from March to 8.96 percent on Sept. 30. A basis point is 0.01 of a percentage point. National Australia will pay a final dividend of 73 cents, down from 97 cents a year ago.
Australian banks can absorb possible defaults by businesses and households and losses may be limited to 2 percent of outstanding loans, or A$33 billion of A$1.65 trillion in total credits as of March this year, the International Monetary Fund said in an Oct. 14 report.
The nation’s top four banks may amass as much as A$18 billion of surplus Tier 1 capital before the end of next year, Credit Suisse AG said in an Oct. 14 report. The banks may return A$15 billion of that to investors through share buybacks as asset quality improves and bad debts ease, Credit Suisse said.
Acquisition Spree
National Australia in September bought Aviva Plc’s Australian wealth advisory and life insurance units for A$825 million. In August, the bank agreed to purchase the mortgage business of Challenger Financial Services Group for A$385 million. A month earlier, it said it would buy most of Goldman Sachs JBWere Pty’s private brokerage for A$99 million.
Full-year profit fell as bad debts swelled and earnings slumped in the recession-hit U.K., where National Australia runs Clydesdale Bank and Yorkshire Bank. Net income dropped to A$2.59 billion from A$4.54 billion.
National Australia was expected to report annual profit of A$4.18 billion, according to the average of seven analysts’ estimates compiled by Bloomberg.
The net loss of A$75 million ($69 million) in the six months ended Sept. 30 compared with a profit of A$1.85 billion in the year-earlier period, the Melbourne-based bank said in a statement today. Cash earnings, which strip out one-time items, rose 8 percent to A$1.81 billion.
Chief Executive Officer Cameron Clyne, who bought insurance, mortgage and brokerage assets since July, said he may consider reducing capital buffers that protect against future loan losses as the economy recovers. Australia’s central bank this month became the first among Group of 20 nations to raise interest rates since the global financial crisis began.
“The outlook is suggesting the worst is over,” said Hugh Dive, who helps manage about $3 billion at Investors Mutual Ltd. including National Australia shares. “Once bad debts start coming off, if they can maintain market share with a similar margin, we’ll see expanded earnings going forward.”
National Australia shares fell 0.6 percent to A$30.53 at 11:17 a.m. in Sydney. The shares have advanced 46 percent this year as analysts forecast an earnings rebound after the country dodged the global recession and the jobless rate unexpectedly fell in September.
‘Robust’ Prospects
Second-half net interest income, or revenue from borrowers minus interest paid to depositors, rose to A$6.19 billion from A$5.84 billion, National Australia said.
“Near- to medium-term prospects for sustainable growth look robust,” Ben Potter, research analyst at IG Markets, said in a note today. “We would expect some upwards revisions to price targets.”
Charges for bad and doubtful debts rose to A$2 billion in the second half from A$1.76 billion a year earlier. The lender also set aside A$542 million for a tax bill after New Zealand authorities reviewed structured finance transactions it carried out.
It may not be possible to judge whether bad debts have peaked for another six months because Australia’s economy is still supported by a government stimulus, National Australia executives said during a conference call today.
‘Somewhat Cautious’
“There are a number of positive signs but you also need to be somewhat cautious,” Clyne told reporters in Sydney. Asset quality “might be stabilizing, but there are still a number of issues to be worked through.”
National Australia said it may reduce its Tier 1 capital ratio, a measure of the lender’s ability to withstand future losses, “when conditions become more predictable.”
The bank’s Tier 1 ratio climbed 65 basis points from March to 8.96 percent on Sept. 30. A basis point is 0.01 of a percentage point. National Australia will pay a final dividend of 73 cents, down from 97 cents a year ago.
Australian banks can absorb possible defaults by businesses and households and losses may be limited to 2 percent of outstanding loans, or A$33 billion of A$1.65 trillion in total credits as of March this year, the International Monetary Fund said in an Oct. 14 report.
The nation’s top four banks may amass as much as A$18 billion of surplus Tier 1 capital before the end of next year, Credit Suisse AG said in an Oct. 14 report. The banks may return A$15 billion of that to investors through share buybacks as asset quality improves and bad debts ease, Credit Suisse said.
Acquisition Spree
National Australia in September bought Aviva Plc’s Australian wealth advisory and life insurance units for A$825 million. In August, the bank agreed to purchase the mortgage business of Challenger Financial Services Group for A$385 million. A month earlier, it said it would buy most of Goldman Sachs JBWere Pty’s private brokerage for A$99 million.
Full-year profit fell as bad debts swelled and earnings slumped in the recession-hit U.K., where National Australia runs Clydesdale Bank and Yorkshire Bank. Net income dropped to A$2.59 billion from A$4.54 billion.
National Australia was expected to report annual profit of A$4.18 billion, according to the average of seven analysts’ estimates compiled by Bloomberg.
Indian ADRs: ICICI Bank, HDFC Bank, Sterlite Industries, Wipro
Oct. 27 (Bloomberg) -- The Bank of New York Mellon India ADR Index decreased 3.6 percent to 895.40, the most in two months. The ChIndia Index, composed of 50 Chinese and Indian American depositary receipts, slumped 2.4 percent. The Bombay Stock Exchange Sensitive Index, or Sensex, declined 2.3 percent to 16,353.40.
The following Indian ADRs had unusual price changes. Stock symbols are in parentheses.
ICICI Bank Ltd. (IBN US) sank 8.2 percent to $34.32, the most since March 30. India’s second largest lender slumped after the Reserve Bank of India proposed that banks increase the minimum provision ratio for bad debts to 70 percent from 10 percent.
HDFC Bank Ltd. (HDB US) dropped 2.1 percent to $144.13.
Sterlite Industries Ltd. (SLT US) decreased 6.7 percent to $16.10, extending its losses to a third day. India’s largest copper producer dropped as prices of the metal declined after a report showed U.S. consumer sentiment slipping, stoking concern that a stalling economic recovery may limit demand for the metal.
Wipro Ltd. (WIT US) rose 0.4 percent to $18.74, gaining the most since Oct. 19. India’s third-largest software-services exporter reported second-quarter profit that beat analysts’ estimates as the global economic recovery spurred clients to increase orders.
The following Indian ADRs had unusual price changes. Stock symbols are in parentheses.
ICICI Bank Ltd. (IBN US) sank 8.2 percent to $34.32, the most since March 30. India’s second largest lender slumped after the Reserve Bank of India proposed that banks increase the minimum provision ratio for bad debts to 70 percent from 10 percent.
HDFC Bank Ltd. (HDB US) dropped 2.1 percent to $144.13.
Sterlite Industries Ltd. (SLT US) decreased 6.7 percent to $16.10, extending its losses to a third day. India’s largest copper producer dropped as prices of the metal declined after a report showed U.S. consumer sentiment slipping, stoking concern that a stalling economic recovery may limit demand for the metal.
Wipro Ltd. (WIT US) rose 0.4 percent to $18.74, gaining the most since Oct. 19. India’s third-largest software-services exporter reported second-quarter profit that beat analysts’ estimates as the global economic recovery spurred clients to increase orders.
Monday, October 26, 2009
Japanese Stocks Fall as Commodities Companies, Banks Decline
Oct. 27 (Bloomberg) -- Japanese stocks fell, headed for their biggest drop in three weeks, after a decline in the price of crude weighed on commodities companies and banks slumped on concern they will be slow to recover from the recession.
Mitsubishi Corp. and Mitsui & Co., Japan’s largest commodities traders, sank more than 3.5 percent after crude dropped the most in a month in New York yesterday. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, lost 1.3 percent, mirroring declines by U.S. financial shares after Rochdale Securities LLC analyst Richard Bove said Bank of America Corp. may have to sell shares to pay back its government bailout.
“Financial stocks will be the focus of selling,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Energy-related stocks should fall on lower commodity prices as well.”
The Nikkei 225 Stock Average lost 1.2 percent to 10,234.10 as of 10:10 a.m. in Tokyo. The broader Topix index decreased 1.7 percent to 895.44, with more than eight times as many shares retreating as advancing. Both gauges were on course for their steepest slump since Oct. 2.
In New York yesterday, the Standard & Poor’s 500 Index retreated 1.2 percent. Financial companies led the decline after Bove said the government will force Bank of America to raise more capital before repaying the Troubled Asset Relief Program. Crude oil for December delivery lost 2.3 percent to $78.68 a barrel, the biggest drop since Sept. 24.
Sumitomo Mitsui dropped 1.3 percent to 3,100 yen. Tokio Marine Holdings Inc., Japan’s largest casualty insurer, lost 3.2 percent to 2,305 yen. A measure of insurance companies in the Topix had the largest decline among 33 industry groups.
Hitachi Ltd., a maker of nuclear reactors, jumped 4 percent to 311 yen, on course for its biggest increase since Oct. 7. The company narrowed its full-year net loss forecast because of a recovery in demand in China and other emerging markets.
Mitsubishi Corp. and Mitsui & Co., Japan’s largest commodities traders, sank more than 3.5 percent after crude dropped the most in a month in New York yesterday. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, lost 1.3 percent, mirroring declines by U.S. financial shares after Rochdale Securities LLC analyst Richard Bove said Bank of America Corp. may have to sell shares to pay back its government bailout.
“Financial stocks will be the focus of selling,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Energy-related stocks should fall on lower commodity prices as well.”
The Nikkei 225 Stock Average lost 1.2 percent to 10,234.10 as of 10:10 a.m. in Tokyo. The broader Topix index decreased 1.7 percent to 895.44, with more than eight times as many shares retreating as advancing. Both gauges were on course for their steepest slump since Oct. 2.
In New York yesterday, the Standard & Poor’s 500 Index retreated 1.2 percent. Financial companies led the decline after Bove said the government will force Bank of America to raise more capital before repaying the Troubled Asset Relief Program. Crude oil for December delivery lost 2.3 percent to $78.68 a barrel, the biggest drop since Sept. 24.
Sumitomo Mitsui dropped 1.3 percent to 3,100 yen. Tokio Marine Holdings Inc., Japan’s largest casualty insurer, lost 3.2 percent to 2,305 yen. A measure of insurance companies in the Topix had the largest decline among 33 industry groups.
Hitachi Ltd., a maker of nuclear reactors, jumped 4 percent to 311 yen, on course for its biggest increase since Oct. 7. The company narrowed its full-year net loss forecast because of a recovery in demand in China and other emerging markets.
India May Signal Plans to Reverse Deepest Rate Cuts on Record
Oct. 27 (Bloomberg) -- India’s central bank may today signal plans to reverse its deepest interest-rate cuts on record as inflation pressures build in Asia’s third-largest economy.
The Reserve Bank of India will probably raise its inflation forecast and indicate policy is at a “turning point,” said Macquarie Group Ltd. economist Rajeev Malik. Morgan Stanley’s Chetan Ahya said the bank may ask lenders to set aside more cash as reserves in its quarterly statement due 11:15 a.m. in Mumbai.
At stake: safeguarding the purchasing power of India’s 1.2 billion people without a premature boost to borrowing costs that endangers the nation’s economic recovery. Benchmark 10-year bond yields have advanced to the highest level in more than a month on concern accelerating inflation will prompt the central bank to increase borrowing costs.
“We expect the RBI to set the foundation for the upcoming reversal of its expansionary measures,” said Sonal Varma, a Mumbai-based economist at Nomura Securities Co., Japan’s largest brokerage. “There are incipient signs of recovery as well as of rising inflationary pressures.”
The majority of economists surveyed by Bloomberg News expect no change in policy rates today. Governor Duvvuri Subbarao may keep the benchmark reverse repurchase rate at 3.25 percent and the cash reserve ratio at 5 percent, according to the median forecast of 24 economists in a Bloomberg News survey.
Central banks globally have stepped up their vigil against inflation and asset-price increases.
Global Shift
The Reserve Bank of Australia was the first among the Group of 20 nations to increase rates three weeks ago, citing costlier real estate as a reason. Norway’s Norges Bank is set to raise borrowing costs on Oct. 28, according to a Bloomberg survey. Bank of Korea Governor Lee Seong Tae said Oct. 23 that keeping rates at a record low may not be healthy for the economy.
At the Federal Reserve, officials under Chairman Ben S. Bernanke are reviewing whether recent gains in asset prices and narrowing credit spreads are justified as they try to ensure near-zero borrowing costs don’t create bubbles.
Subbarao this month said policy makers within the Reserve Bank agree on the need to tighten policy, while not on “when and how” to exit. The yield on India’s 6.90 percent note due July 2019 was 7.44 percent at 1:35 p.m. in Mumbai yesterday, the highest level since Sept. 4.
Political Context
India’s government has also commented on the central bank’s decision, adding a political dimension to today’s decision, analysts said. Finance Minister Pranab Mukherjee told Bloomberg- UTV television channel on Oct. 8 that promoting growth and containing inflation are both important and the central bank shouldn’t “compromise” one for the other. He stressed the need to “strike a balance” while setting interest rates.
Subbarao and Mukherjee met in New Delhi on Oct. 23 for an hour-long meeting to discuss the state of economy, a practice held before monetary policy announcements in India.
“The Reserve Bank could make a case for pre-emptive monetary tightening,” said Robert Prior-Wandesforde, senior Asian economist at HSBC Group Plc in Singapore. “But, with bank lending so low and political pressure not to act, the likelihood is that all rates will be left unchanged.”
Commercial bank loans grew 10.75 percent in the week ended Oct. 9, according to the central bank, which is almost a third of the pace a year ago and indicates demand remains diminished. The Reserve Bank expects economic growth of around 6 percent in the current financial year ending March 31, the weakest pace since 2003.
Inflation Rate
At the same time, consumer-price inflation in India is running above 10 percent and may accelerate further after the smallest monsoon rains since 1972 create food shortages. India’s $1.2 trillion economy depends on the June to September rains to water crops.
“Inflation is a concern in India and could quickly develop into a problem,” said Kevin Grice, an economist at Capital Economics Ltd. in London.
Subbarao wants to ensure that monetary and fiscal stimulus, which the central bank estimates is worth more than 12 percent of gross domestic product, doesn’t cause demand for goods and services including cars and mortgages to surge and worsen inflation.
India uses wholesale price data as its key inflation gauge; consumer price indexes are calculated on the basis of rural and urban workers and don’t capture the aggregate price picture.
Wholesale prices rose for a sixth week on Oct. 10, gaining 1.21 percent. HSBC’s Prior-Wandesforde expects the rate to hit 8 percent by March 31. Asset prices are also rising, evidenced by the 75 percent climb in the Bombay Stock Exchange’s Sensitive index since January.
“The central bank faces a very delicate situation to manage growth and inflation,” said Ravi Sud, chief financial officer at Hero Honda Motors Ltd., India’s biggest motorcycle maker. “On balance, inflation is the risk as it will hurt consumption and eventually hurt growth as well.”
It will be a “big challenge” to sustain Hero Honda’s profit margins because of rising commodity prices, Sud said last week. Hero Honda, based in New Delhi, is the Indian affiliate of Japan’s Honda Motor Co.
The Reserve Bank of India will probably raise its inflation forecast and indicate policy is at a “turning point,” said Macquarie Group Ltd. economist Rajeev Malik. Morgan Stanley’s Chetan Ahya said the bank may ask lenders to set aside more cash as reserves in its quarterly statement due 11:15 a.m. in Mumbai.
At stake: safeguarding the purchasing power of India’s 1.2 billion people without a premature boost to borrowing costs that endangers the nation’s economic recovery. Benchmark 10-year bond yields have advanced to the highest level in more than a month on concern accelerating inflation will prompt the central bank to increase borrowing costs.
“We expect the RBI to set the foundation for the upcoming reversal of its expansionary measures,” said Sonal Varma, a Mumbai-based economist at Nomura Securities Co., Japan’s largest brokerage. “There are incipient signs of recovery as well as of rising inflationary pressures.”
The majority of economists surveyed by Bloomberg News expect no change in policy rates today. Governor Duvvuri Subbarao may keep the benchmark reverse repurchase rate at 3.25 percent and the cash reserve ratio at 5 percent, according to the median forecast of 24 economists in a Bloomberg News survey.
Central banks globally have stepped up their vigil against inflation and asset-price increases.
Global Shift
The Reserve Bank of Australia was the first among the Group of 20 nations to increase rates three weeks ago, citing costlier real estate as a reason. Norway’s Norges Bank is set to raise borrowing costs on Oct. 28, according to a Bloomberg survey. Bank of Korea Governor Lee Seong Tae said Oct. 23 that keeping rates at a record low may not be healthy for the economy.
At the Federal Reserve, officials under Chairman Ben S. Bernanke are reviewing whether recent gains in asset prices and narrowing credit spreads are justified as they try to ensure near-zero borrowing costs don’t create bubbles.
Subbarao this month said policy makers within the Reserve Bank agree on the need to tighten policy, while not on “when and how” to exit. The yield on India’s 6.90 percent note due July 2019 was 7.44 percent at 1:35 p.m. in Mumbai yesterday, the highest level since Sept. 4.
Political Context
India’s government has also commented on the central bank’s decision, adding a political dimension to today’s decision, analysts said. Finance Minister Pranab Mukherjee told Bloomberg- UTV television channel on Oct. 8 that promoting growth and containing inflation are both important and the central bank shouldn’t “compromise” one for the other. He stressed the need to “strike a balance” while setting interest rates.
Subbarao and Mukherjee met in New Delhi on Oct. 23 for an hour-long meeting to discuss the state of economy, a practice held before monetary policy announcements in India.
“The Reserve Bank could make a case for pre-emptive monetary tightening,” said Robert Prior-Wandesforde, senior Asian economist at HSBC Group Plc in Singapore. “But, with bank lending so low and political pressure not to act, the likelihood is that all rates will be left unchanged.”
Commercial bank loans grew 10.75 percent in the week ended Oct. 9, according to the central bank, which is almost a third of the pace a year ago and indicates demand remains diminished. The Reserve Bank expects economic growth of around 6 percent in the current financial year ending March 31, the weakest pace since 2003.
Inflation Rate
At the same time, consumer-price inflation in India is running above 10 percent and may accelerate further after the smallest monsoon rains since 1972 create food shortages. India’s $1.2 trillion economy depends on the June to September rains to water crops.
“Inflation is a concern in India and could quickly develop into a problem,” said Kevin Grice, an economist at Capital Economics Ltd. in London.
Subbarao wants to ensure that monetary and fiscal stimulus, which the central bank estimates is worth more than 12 percent of gross domestic product, doesn’t cause demand for goods and services including cars and mortgages to surge and worsen inflation.
India uses wholesale price data as its key inflation gauge; consumer price indexes are calculated on the basis of rural and urban workers and don’t capture the aggregate price picture.
Wholesale prices rose for a sixth week on Oct. 10, gaining 1.21 percent. HSBC’s Prior-Wandesforde expects the rate to hit 8 percent by March 31. Asset prices are also rising, evidenced by the 75 percent climb in the Bombay Stock Exchange’s Sensitive index since January.
“The central bank faces a very delicate situation to manage growth and inflation,” said Ravi Sud, chief financial officer at Hero Honda Motors Ltd., India’s biggest motorcycle maker. “On balance, inflation is the risk as it will hurt consumption and eventually hurt growth as well.”
It will be a “big challenge” to sustain Hero Honda’s profit margins because of rising commodity prices, Sud said last week. Hero Honda, based in New Delhi, is the Indian affiliate of Japan’s Honda Motor Co.
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