Feb. 4 (Bloomberg) -- Asian stocks dropped, dragging the MSCI Asia Pacific Index lower for the first time in three days, after Australian retail sales unexpectedly fell in December and commodity prices declined.
BHP Billiton Ltd., Australia’s biggest oil producer and the world’s biggest mining company, dropped 1.5 percent in Sydney after oil and metal prices declined. CSR Ltd., Australia’s second-largest building-products maker, tumbled 6 percent after the Federal Court of Australia blocked its plan to separate its sugar business. Honda Motor Co. rose 2.7 percent in Tokyo after boosting its profit forecast.
The MSCI Asia Pacific Index lost 0.4 percent to 118.06 as of 9:52 a.m. in Tokyo, snapping a two-day, 1.9 percent gain. The gauge sank 3 percent last month, the most since February last year, on concern central banks from China to India will tighten monetary policy to curb inflation.
Japan’s Nikkei 225 Stock Average dropped 0.3 percent to 10,370.65. Australia’s S&P/ASX 200 Index declined 0.9 percent as a government report showed the country’s retail sales fell in December for the first time in five months. A Bloomberg economist survey had projected an increase. South Korea’s Kospi advanced 0.1 percent.
Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge sank 0.6 percent yesterday as a gauge of the country’s service industries expanded less than forecast and Pfizer Inc.’s profit trailed estimates.
The MSCI Asia Pacific Index climbed 34 percent last year, outpacing gains of 23 percent by the Standard & Poor’s 500 Index in the U.S. and 28 percent for Europe’s Dow Jones Stoxx 600 Index. Companies in the MSCI index trade at 18.9 times estimated earnings, compared with 14.1 times for the S&P 500 and 12.5 times for the Stoxx 600.
Wednesday, February 3, 2010
New Zealand Jobless Rate Rises to 10-Year-High 7.3%
Feb. 4 (Bloomberg) -- New Zealand’s unemployment soared to the highest level in more than 10 years as a surge of immigrants failed to find jobs. The currency fell as traders bet the central bank will have to delay a planned mid-year rate increase.
The jobless rate rose to 7.3 percent in the fourth quarter from 6.5 percent in the previous three months, Statistics New Zealand said in Wellington today. The median of 10 estimates in a Bloomberg News survey was for 6.8 percent.
Unemployment now exceeds the peak forecast by both Finance Minister Bill English and Reserve Bank Governor Alan Bollard as the economy battles to emerge from its worst recession in three decades. The currency dropped to the lowest in more than four months as investors bet Bollard may keep the official cash rate at a record-low of 2.5 percent until the second half of the year.
“The weakness in today’s data raises the real possibility that the Reserve Bank waits beyond June to begin hiking,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland.
Bollard said last week he expected to raise borrowing costs “around the middle of 2010.”
New Zealand’s dollar fell to 69.82 U.S. cents at 12:05 p.m. in Wellington from 70.61 cents immediately before the release. The currency is its lowest since Sep. 14.
Exporters Struggle
Exporters such as Cedenco Foods Ltd. and Winstone Pulp International Ltd. closed plants last year, citing increasing costs and the affect of the rising currency on returns. In July, Cedenco said it would shut a vegetable processing plant in Gisborne at a cost of 125 jobs. In October, Winstone said it couldn’t keep a South Island lumber mill open, leaving 110 workers out of jobs.
New Zealand’s immigration growth in 2009 was the highest in more than five years, Statistics New Zealand said in a second report today. The surge in net immigration has been boosted by fewer New Zealanders heading abroad. About 41,600 citizens left last year, the lowest calendar year tally since 2003.
The Reserve Bank on Dec. 10 forecast a peak jobless rate of 6.7 percent in the second quarter. Bollard said last week he didn’t expect to raise the benchmark interest rate until the middle of 2010 because business spending remained weak.
English, who expected the jobless rate would rise to about 7 percent, said this week any subsequent decline may be gradual because companies will give existing employees more hours rather than hire extra workers.
Hours Reduced
Total actual hours worked per week declined for a sixth quarter, dropping 0.4 percent to the lowest level in more than five years, today’s report showed.
Companies such as Fisher & Paykel Appliances Holdings Ltd., the nation’s largest maker of refrigerators and washing machines, last year took advantage of government subsidies to work a nine- day fortnight and save about 60 jobs.
The jobless rate has risen from 5 percent in the first quarter last year, which signaled the end of the nation’s worst recession in three decades.
“As most economists will tell you, employment almost always lags behind economic growth, but we’re not out of the woods yet,” Employment Minister Paula Bennett said in an e- mailed statement.
Companies are optimistic about the economy’s recovery in the next six months, although most expect profits will fall in the first quarter, according to a New Zealand Institute of Economic Research Inc. survey published last month.
The number of firms expecting to hire workers in the first quarter barely exceeded the number planning to reduce staff, the Wellington-based institute said.
Growth Forecast
The Reserve Bank expects the economy will grow 3.1 percent this year after contracting 1.4 percent in 2009. Employment may increase about 0.6 percent this year, it said.
Employment declined 0.1 percent or about 2,000 jobs in the fourth quarter, matching economists’ median expectation, today’s report showed. Employment shrank 2.4 percent from a year earlier.
The number of people out of work rose 18,000 from the third quarter to a 16-year high of 168,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce.
The surge in unemployment reflects more people looking for jobs but unable to find them, the statistics agency said.
The participation rate, which measures the proportion of the working age population employed or seeking employment, rose to 68.1 percent from 68 percent in the third quarter, matching analysts’ median expectation.
Full-time employment fell by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustment. Part-time employment was unchanged. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add up to the total change in employment.
The rising unemployment rate removes pressure on employers to pay higher wages and eases inflation. Wages for non- government workers rose 1.5 percent in the fourth quarter from a year earlier, the slowest pace in nine years, the statistics agency said this week.
The jobless rate rose to 7.3 percent in the fourth quarter from 6.5 percent in the previous three months, Statistics New Zealand said in Wellington today. The median of 10 estimates in a Bloomberg News survey was for 6.8 percent.
Unemployment now exceeds the peak forecast by both Finance Minister Bill English and Reserve Bank Governor Alan Bollard as the economy battles to emerge from its worst recession in three decades. The currency dropped to the lowest in more than four months as investors bet Bollard may keep the official cash rate at a record-low of 2.5 percent until the second half of the year.
“The weakness in today’s data raises the real possibility that the Reserve Bank waits beyond June to begin hiking,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland.
Bollard said last week he expected to raise borrowing costs “around the middle of 2010.”
New Zealand’s dollar fell to 69.82 U.S. cents at 12:05 p.m. in Wellington from 70.61 cents immediately before the release. The currency is its lowest since Sep. 14.
Exporters Struggle
Exporters such as Cedenco Foods Ltd. and Winstone Pulp International Ltd. closed plants last year, citing increasing costs and the affect of the rising currency on returns. In July, Cedenco said it would shut a vegetable processing plant in Gisborne at a cost of 125 jobs. In October, Winstone said it couldn’t keep a South Island lumber mill open, leaving 110 workers out of jobs.
New Zealand’s immigration growth in 2009 was the highest in more than five years, Statistics New Zealand said in a second report today. The surge in net immigration has been boosted by fewer New Zealanders heading abroad. About 41,600 citizens left last year, the lowest calendar year tally since 2003.
The Reserve Bank on Dec. 10 forecast a peak jobless rate of 6.7 percent in the second quarter. Bollard said last week he didn’t expect to raise the benchmark interest rate until the middle of 2010 because business spending remained weak.
English, who expected the jobless rate would rise to about 7 percent, said this week any subsequent decline may be gradual because companies will give existing employees more hours rather than hire extra workers.
Hours Reduced
Total actual hours worked per week declined for a sixth quarter, dropping 0.4 percent to the lowest level in more than five years, today’s report showed.
Companies such as Fisher & Paykel Appliances Holdings Ltd., the nation’s largest maker of refrigerators and washing machines, last year took advantage of government subsidies to work a nine- day fortnight and save about 60 jobs.
The jobless rate has risen from 5 percent in the first quarter last year, which signaled the end of the nation’s worst recession in three decades.
“As most economists will tell you, employment almost always lags behind economic growth, but we’re not out of the woods yet,” Employment Minister Paula Bennett said in an e- mailed statement.
Companies are optimistic about the economy’s recovery in the next six months, although most expect profits will fall in the first quarter, according to a New Zealand Institute of Economic Research Inc. survey published last month.
The number of firms expecting to hire workers in the first quarter barely exceeded the number planning to reduce staff, the Wellington-based institute said.
Growth Forecast
The Reserve Bank expects the economy will grow 3.1 percent this year after contracting 1.4 percent in 2009. Employment may increase about 0.6 percent this year, it said.
Employment declined 0.1 percent or about 2,000 jobs in the fourth quarter, matching economists’ median expectation, today’s report showed. Employment shrank 2.4 percent from a year earlier.
The number of people out of work rose 18,000 from the third quarter to a 16-year high of 168,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce.
The surge in unemployment reflects more people looking for jobs but unable to find them, the statistics agency said.
The participation rate, which measures the proportion of the working age population employed or seeking employment, rose to 68.1 percent from 68 percent in the third quarter, matching analysts’ median expectation.
Full-time employment fell by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustment. Part-time employment was unchanged. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add up to the total change in employment.
The rising unemployment rate removes pressure on employers to pay higher wages and eases inflation. Wages for non- government workers rose 1.5 percent in the fourth quarter from a year earlier, the slowest pace in nine years, the statistics agency said this week.
New Zealand Jobless Rate Rises to 10-Year-High 7.3%
Feb. 4 (Bloomberg) -- New Zealand’s unemployment soared to the highest level in more than 10 years as a surge of immigrants failed to find jobs. The currency fell as traders bet the central bank will have to delay a planned mid-year rate increase.
The jobless rate rose to 7.3 percent in the fourth quarter from 6.5 percent in the previous three months, Statistics New Zealand said in Wellington today. The median of 10 estimates in a Bloomberg News survey was for 6.8 percent.
Unemployment now exceeds the peak forecast by both Finance Minister Bill English and Reserve Bank Governor Alan Bollard as the economy battles to emerge from its worst recession in three decades. The currency dropped to the lowest in more than four months as investors bet Bollard may keep the official cash rate at a record-low of 2.5 percent until the second half of the year.
“The weakness in today’s data raises the real possibility that the Reserve Bank waits beyond June to begin hiking,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland.
Bollard said last week he expected to raise borrowing costs “around the middle of 2010.”
New Zealand’s dollar fell to 69.82 U.S. cents at 12:05 p.m. in Wellington from 70.61 cents immediately before the release. The currency is its lowest since Sep. 14.
Exporters Struggle
Exporters such as Cedenco Foods Ltd. and Winstone Pulp International Ltd. closed plants last year, citing increasing costs and the affect of the rising currency on returns. In July, Cedenco said it would shut a vegetable processing plant in Gisborne at a cost of 125 jobs. In October, Winstone said it couldn’t keep a South Island lumber mill open, leaving 110 workers out of jobs.
New Zealand’s immigration growth in 2009 was the highest in more than five years, Statistics New Zealand said in a second report today. The surge in net immigration has been boosted by fewer New Zealanders heading abroad. About 41,600 citizens left last year, the lowest calendar year tally since 2003.
The Reserve Bank on Dec. 10 forecast a peak jobless rate of 6.7 percent in the second quarter. Bollard said last week he didn’t expect to raise the benchmark interest rate until the middle of 2010 because business spending remained weak.
English, who expected the jobless rate would rise to about 7 percent, said this week any subsequent decline may be gradual because companies will give existing employees more hours rather than hire extra workers.
Hours Reduced
Total actual hours worked per week declined for a sixth quarter, dropping 0.4 percent to the lowest level in more than five years, today’s report showed.
Companies such as Fisher & Paykel Appliances Holdings Ltd., the nation’s largest maker of refrigerators and washing machines, last year took advantage of government subsidies to work a nine- day fortnight and save about 60 jobs.
The jobless rate has risen from 5 percent in the first quarter last year, which signaled the end of the nation’s worst recession in three decades.
“As most economists will tell you, employment almost always lags behind economic growth, but we’re not out of the woods yet,” Employment Minister Paula Bennett said in an e- mailed statement.
Companies are optimistic about the economy’s recovery in the next six months, although most expect profits will fall in the first quarter, according to a New Zealand Institute of Economic Research Inc. survey published last month.
The number of firms expecting to hire workers in the first quarter barely exceeded the number planning to reduce staff, the Wellington-based institute said.
Growth Forecast
The Reserve Bank expects the economy will grow 3.1 percent this year after contracting 1.4 percent in 2009. Employment may increase about 0.6 percent this year, it said.
Employment declined 0.1 percent or about 2,000 jobs in the fourth quarter, matching economists’ median expectation, today’s report showed. Employment shrank 2.4 percent from a year earlier.
The number of people out of work rose 18,000 from the third quarter to a 16-year high of 168,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce.
The surge in unemployment reflects more people looking for jobs but unable to find them, the statistics agency said.
The participation rate, which measures the proportion of the working age population employed or seeking employment, rose to 68.1 percent from 68 percent in the third quarter, matching analysts’ median expectation.
Full-time employment fell by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustment. Part-time employment was unchanged. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add up to the total change in employment.
The rising unemployment rate removes pressure on employers to pay higher wages and eases inflation. Wages for non- government workers rose 1.5 percent in the fourth quarter from a year earlier, the slowest pace in nine years, the statistics agency said this week.
The jobless rate rose to 7.3 percent in the fourth quarter from 6.5 percent in the previous three months, Statistics New Zealand said in Wellington today. The median of 10 estimates in a Bloomberg News survey was for 6.8 percent.
Unemployment now exceeds the peak forecast by both Finance Minister Bill English and Reserve Bank Governor Alan Bollard as the economy battles to emerge from its worst recession in three decades. The currency dropped to the lowest in more than four months as investors bet Bollard may keep the official cash rate at a record-low of 2.5 percent until the second half of the year.
“The weakness in today’s data raises the real possibility that the Reserve Bank waits beyond June to begin hiking,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland.
Bollard said last week he expected to raise borrowing costs “around the middle of 2010.”
New Zealand’s dollar fell to 69.82 U.S. cents at 12:05 p.m. in Wellington from 70.61 cents immediately before the release. The currency is its lowest since Sep. 14.
Exporters Struggle
Exporters such as Cedenco Foods Ltd. and Winstone Pulp International Ltd. closed plants last year, citing increasing costs and the affect of the rising currency on returns. In July, Cedenco said it would shut a vegetable processing plant in Gisborne at a cost of 125 jobs. In October, Winstone said it couldn’t keep a South Island lumber mill open, leaving 110 workers out of jobs.
New Zealand’s immigration growth in 2009 was the highest in more than five years, Statistics New Zealand said in a second report today. The surge in net immigration has been boosted by fewer New Zealanders heading abroad. About 41,600 citizens left last year, the lowest calendar year tally since 2003.
The Reserve Bank on Dec. 10 forecast a peak jobless rate of 6.7 percent in the second quarter. Bollard said last week he didn’t expect to raise the benchmark interest rate until the middle of 2010 because business spending remained weak.
English, who expected the jobless rate would rise to about 7 percent, said this week any subsequent decline may be gradual because companies will give existing employees more hours rather than hire extra workers.
Hours Reduced
Total actual hours worked per week declined for a sixth quarter, dropping 0.4 percent to the lowest level in more than five years, today’s report showed.
Companies such as Fisher & Paykel Appliances Holdings Ltd., the nation’s largest maker of refrigerators and washing machines, last year took advantage of government subsidies to work a nine- day fortnight and save about 60 jobs.
The jobless rate has risen from 5 percent in the first quarter last year, which signaled the end of the nation’s worst recession in three decades.
“As most economists will tell you, employment almost always lags behind economic growth, but we’re not out of the woods yet,” Employment Minister Paula Bennett said in an e- mailed statement.
Companies are optimistic about the economy’s recovery in the next six months, although most expect profits will fall in the first quarter, according to a New Zealand Institute of Economic Research Inc. survey published last month.
The number of firms expecting to hire workers in the first quarter barely exceeded the number planning to reduce staff, the Wellington-based institute said.
Growth Forecast
The Reserve Bank expects the economy will grow 3.1 percent this year after contracting 1.4 percent in 2009. Employment may increase about 0.6 percent this year, it said.
Employment declined 0.1 percent or about 2,000 jobs in the fourth quarter, matching economists’ median expectation, today’s report showed. Employment shrank 2.4 percent from a year earlier.
The number of people out of work rose 18,000 from the third quarter to a 16-year high of 168,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce.
The surge in unemployment reflects more people looking for jobs but unable to find them, the statistics agency said.
The participation rate, which measures the proportion of the working age population employed or seeking employment, rose to 68.1 percent from 68 percent in the third quarter, matching analysts’ median expectation.
Full-time employment fell by 6,000 jobs, or 0.3 percent, in the fourth quarter after seasonal adjustment. Part-time employment was unchanged. Statistics New Zealand adjusts the full-time and part-time employment figures separately, which means they may not add up to the total change in employment.
The rising unemployment rate removes pressure on employers to pay higher wages and eases inflation. Wages for non- government workers rose 1.5 percent in the fourth quarter from a year earlier, the slowest pace in nine years, the statistics agency said this week.
Friday, January 29, 2010
Bankers in favour of paying global fee
Published: January 30 2010 00:02 | Last updated: January 30 2010 00:02
Some of the world’s most prominent bankers have come out in favour of a global bank wind-down fund, a concession from the industry after weeks of fighting proposals for new taxes in the US and Europe.
Government rescue packages for banksJosef Ackermann, chief executive of Deutsche Bank, told the Financial Times on Friday : “To help solve the too-big-to-fail problem I’m advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks to a large degree.”
Bob Diamond, president of Barclays , also supported the idea of a global levy, which could see banks contribute tens or even hundreds of billions of dollars over a period of years.
“I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure,” he told the FT at the World Economic Forum in Davos. “A co-ordinated global system is preferable to an unlevel playing field.”
Support has been growing among regulators and politicians for an insurance levy as the best way to ensure that the burden of big bank collapses would not fall on taxpayers. But until now bankers have resisted the idea. They say the impetus for considering a global levy came from President Barack Obama’s $90bn balance sheet levy, which will tax banks in the US to recover the cost of an earlier bail-out programme.
In practice, any new levy would be more like the proposed US “resolution fund”, which is currently before the Senate.
The House of Representatives approved a bill in December that creates a resolution fund for winding down big companies without the taxpayer expense of the AIG rescue or the damage to markets of the uncontrolled Lehman bankruptcy.
The Senate is considering whether to approve the House’s version, which levies an up-front fee on big banks, or to follow the Treasury in advocating that banks reimburse the taxpayer after any wind-down.
Regulators will be encouraged by the support of Mr Ackermann and Mr Diamond for a global levy. Jaime Caruana, head of the Bank for International Settlements, the umbrella body for global regulation, told the FT the most realistic way to institute a global levy would be to begin with Europe.
Some of the world’s most prominent bankers have come out in favour of a global bank wind-down fund, a concession from the industry after weeks of fighting proposals for new taxes in the US and Europe.
Government rescue packages for banksJosef Ackermann, chief executive of Deutsche Bank, told the Financial Times on Friday : “To help solve the too-big-to-fail problem I’m advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks to a large degree.”
Bob Diamond, president of Barclays , also supported the idea of a global levy, which could see banks contribute tens or even hundreds of billions of dollars over a period of years.
“I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure,” he told the FT at the World Economic Forum in Davos. “A co-ordinated global system is preferable to an unlevel playing field.”
Support has been growing among regulators and politicians for an insurance levy as the best way to ensure that the burden of big bank collapses would not fall on taxpayers. But until now bankers have resisted the idea. They say the impetus for considering a global levy came from President Barack Obama’s $90bn balance sheet levy, which will tax banks in the US to recover the cost of an earlier bail-out programme.
In practice, any new levy would be more like the proposed US “resolution fund”, which is currently before the Senate.
The House of Representatives approved a bill in December that creates a resolution fund for winding down big companies without the taxpayer expense of the AIG rescue or the damage to markets of the uncontrolled Lehman bankruptcy.
The Senate is considering whether to approve the House’s version, which levies an up-front fee on big banks, or to follow the Treasury in advocating that banks reimburse the taxpayer after any wind-down.
Regulators will be encouraged by the support of Mr Ackermann and Mr Diamond for a global levy. Jaime Caruana, head of the Bank for International Settlements, the umbrella body for global regulation, told the FT the most realistic way to institute a global levy would be to begin with Europe.
Subbarao Seeks to Assure Investors on Prices, Aid India Rebound
Jan. 30 (Bloomberg) -- India’s central bank Governor Duvvuri Subbarao sought to assure investors that he will restrain inflation, while refraining from raising interest rates to support a rebound in Asia’s third-largest economy.
The Reserve Bank of India yesterday left benchmark rates unchanged and instead boosted the ratio of deposits lenders must hold in reserve by more than forecast, to 5.75 percent. The step is part of a gradual tightening of monetary policy that will lead to higher borrowing costs in coming months, said Rajeev Malik, a regional economist at Macquarie Group Ltd.
The goal is to secure a recovery in economic growth toward 8 percent this year while containing a surge in inflation that would impoverish households and drive up longer-term bond yields. Subbarao, 60, is emulating a course taken across the region, with nations from China to the Philippines taking steps toward higher borrowing costs without rushing to raise rates.
“The Reserve Bank of India has embarked on a handle-with- care monetary exit,” said Singapore-based Malik. “While inflation has become more important, it has not taken its eyes off growth dynamics.”
Malik expects the central bank to raise interest rates by between 1 and 1.5 percentage points over the next year, starting in either March or April.
India’s generic 10-year government bond yields reached 7.71 percent on Jan. 13, the highest level since November 2008, and closed at 7.58 percent yesterday in Mumbai.
‘Keeping a Vigil’
“Bond yields haven’t reacted much and are likely to remain stable,” said Jayesh Mehta, country treasurer and head of fixed income at Bank of America Corp. in India. “The RBI has been keeping a vigil on inflation and had announced its intentions several months back.”
India’s benchmark stock index gained 0.3 percent yesterday, reversing earlier losses, after the central bank predicted faster growth. The rupee gained 0.4 percent to 46.18 against the dollar from 46.36.
Subbarao expects India’s economy to grow 7.5 percent in the year to March 31 from the 6 percent forecast earlier as demand for manufactured goods and services rise. He also raised the bank’s inflation forecast to 8.5 percent by March 31 from 6.5 percent.
As a result, the cash reserve ratio was raised from 5 percent while the benchmark reverse repurchase rate was kept unchanged at 3.25 percent and the repurchase rate at 4.75 percent yesterday.
Currency Gains
Analysts anticipate currency gains as strengthening economies force central banks to act. The rupee may gain almost 8 percent by year-end to 43 per dollar, according to the median forecast in Bloomberg survey. China’s yuan and Malaysia’s ringgit are estimated to advance 3.7 percent.
China, Malaysia and the Philippines moved closer to raising interest rates in January.
In China, the central bank ordered some banks to pare lending, raised the ratio for deposits banks must set aside as reserves and guided bill yields higher this month after loan growth surged.
Malaysia kept borrowing costs unchanged on Jan. 26, while warning that rates cannot be kept “too low” for too long because of the need to prevent a build-up of “financial imbalances.” The Philippines increased its so-called rediscounting rate, one of the interest rates it charges lenders for borrowing money from the central bank.
Robust Growth
“The growth in emerging-market economies such as China and India is expected to be robust,” Subbarao said yesterday. He said India could sustain 7.5 percent growth in the next financial year starting April 1.
The International Monetary Fund on Jan. 26 boosted its 2010 gross domestic product growth projection for India to 7.7 percent from the 6.4 percent forecast in October.
India’s growth prospects are luring investments. Bridgestone Corp. said Jan. 29 that a subsidiary in India will begin production of radial tires for buses and trucks in the first half of 2011 to tap growing demand in the country. The Tokyo-based company will invest 3.3 billion yen ($36 million), for daily production of 400 units, it said.
Cisco Systems Inc. Chief Executive Officer John Chambers told CNBC in Davos Jan. 29 that he would be “not surprised” if China and India grew between 7 percent and 10 percent in 2010.
Subbarao said his objective is to “anchor” inflation expectations without hurting growth.
“The central bank has to balance growth versus inflation because in a country like India, inflation is sometimes more important than growth,” said Anil Singhvi, vice chairman of Reliance Natural Resources Ltd., a unit of India’s third-largest utility.
Inflation is politically sensitive in India as it hurts the poor the most. The Food & Agriculture Organization says 231 million people in the country are undernourished, more than in Sub-Saharan Africa. Prime Minister Manmohan Singh’s government is under pressure to tame inflation after opposition parties stepped up their criticism of his administration for failing to curb price gains.
The Reserve Bank of India yesterday left benchmark rates unchanged and instead boosted the ratio of deposits lenders must hold in reserve by more than forecast, to 5.75 percent. The step is part of a gradual tightening of monetary policy that will lead to higher borrowing costs in coming months, said Rajeev Malik, a regional economist at Macquarie Group Ltd.
The goal is to secure a recovery in economic growth toward 8 percent this year while containing a surge in inflation that would impoverish households and drive up longer-term bond yields. Subbarao, 60, is emulating a course taken across the region, with nations from China to the Philippines taking steps toward higher borrowing costs without rushing to raise rates.
“The Reserve Bank of India has embarked on a handle-with- care monetary exit,” said Singapore-based Malik. “While inflation has become more important, it has not taken its eyes off growth dynamics.”
Malik expects the central bank to raise interest rates by between 1 and 1.5 percentage points over the next year, starting in either March or April.
India’s generic 10-year government bond yields reached 7.71 percent on Jan. 13, the highest level since November 2008, and closed at 7.58 percent yesterday in Mumbai.
‘Keeping a Vigil’
“Bond yields haven’t reacted much and are likely to remain stable,” said Jayesh Mehta, country treasurer and head of fixed income at Bank of America Corp. in India. “The RBI has been keeping a vigil on inflation and had announced its intentions several months back.”
India’s benchmark stock index gained 0.3 percent yesterday, reversing earlier losses, after the central bank predicted faster growth. The rupee gained 0.4 percent to 46.18 against the dollar from 46.36.
Subbarao expects India’s economy to grow 7.5 percent in the year to March 31 from the 6 percent forecast earlier as demand for manufactured goods and services rise. He also raised the bank’s inflation forecast to 8.5 percent by March 31 from 6.5 percent.
As a result, the cash reserve ratio was raised from 5 percent while the benchmark reverse repurchase rate was kept unchanged at 3.25 percent and the repurchase rate at 4.75 percent yesterday.
Currency Gains
Analysts anticipate currency gains as strengthening economies force central banks to act. The rupee may gain almost 8 percent by year-end to 43 per dollar, according to the median forecast in Bloomberg survey. China’s yuan and Malaysia’s ringgit are estimated to advance 3.7 percent.
China, Malaysia and the Philippines moved closer to raising interest rates in January.
In China, the central bank ordered some banks to pare lending, raised the ratio for deposits banks must set aside as reserves and guided bill yields higher this month after loan growth surged.
Malaysia kept borrowing costs unchanged on Jan. 26, while warning that rates cannot be kept “too low” for too long because of the need to prevent a build-up of “financial imbalances.” The Philippines increased its so-called rediscounting rate, one of the interest rates it charges lenders for borrowing money from the central bank.
Robust Growth
“The growth in emerging-market economies such as China and India is expected to be robust,” Subbarao said yesterday. He said India could sustain 7.5 percent growth in the next financial year starting April 1.
The International Monetary Fund on Jan. 26 boosted its 2010 gross domestic product growth projection for India to 7.7 percent from the 6.4 percent forecast in October.
India’s growth prospects are luring investments. Bridgestone Corp. said Jan. 29 that a subsidiary in India will begin production of radial tires for buses and trucks in the first half of 2011 to tap growing demand in the country. The Tokyo-based company will invest 3.3 billion yen ($36 million), for daily production of 400 units, it said.
Cisco Systems Inc. Chief Executive Officer John Chambers told CNBC in Davos Jan. 29 that he would be “not surprised” if China and India grew between 7 percent and 10 percent in 2010.
Subbarao said his objective is to “anchor” inflation expectations without hurting growth.
“The central bank has to balance growth versus inflation because in a country like India, inflation is sometimes more important than growth,” said Anil Singhvi, vice chairman of Reliance Natural Resources Ltd., a unit of India’s third-largest utility.
Inflation is politically sensitive in India as it hurts the poor the most. The Food & Agriculture Organization says 231 million people in the country are undernourished, more than in Sub-Saharan Africa. Prime Minister Manmohan Singh’s government is under pressure to tame inflation after opposition parties stepped up their criticism of his administration for failing to curb price gains.
Thursday, January 28, 2010
Japan Factory Production Rose, Unemployment Fell in December
Jan. 29 (Bloomberg) -- Japan’s industrial production rose and unemployment rate fell in December, signaling a continued recovery, while central bankers considered the threat to the economy from exchange rates, reports showed today.
Factory output increased 2.2 percent from the previous month, less than economists had projected, Trade Ministry figures showed today in Tokyo. The unemployment rate dropped to 5.1 percent from 5.2 percent, according to a separate release.
While the gains in production and jobs may reduce the danger of a return to recession, declines in consumer prices and an appreciating yen are forcing policy makers to remain open to further stimulus. Bank of Japan officials highlighted concern that the yen’s rise to a 14-year high would undermine business sentiment, minutes of their meetings last month showed today.
“This confirms that the worst is over,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “But these are very, very small improvements, and the jobs recovery ahead is going to be extremely slow, too.”
Bond futures rose, and headed for a three-week advance, as the evidence of continued deflation underpinned demand for the relative safety of government debt. Yields on benchmark 10-year bonds fell to 1.305 percent, matching the lowest level since Jan. 4, at Japan Bond Trading Co. The yen rose 0.3 percent to 89.66 per dollar.
A separate government report today showed household spending rose 2.1 percent in December from a year before, more than forecast and capping a fifth straight advance. The figures contrasted with data earlier this week showing retail sales tumbled 0.3 percent from a year ago.
More Work
The economy added 130,000 jobs in December, the biggest increase in four months. People found more work in medical, welfare and education sectors, while there were fewer jobs and manufacturing and retail industries, according to unadjusted figures in the report.
“Unemployment has improved a little bit but I don’t think we can be optimistic at all because the number is still more than 5 percent,” Prime Minister Yukio Hatoyama told reporters today in Tokyo. “The situation remains where many people want to work but cannot find a job.”
Japan’s Diet yesterday approved a 7.2 trillion yen ($80 billion) economic package aimed at bolstering the recovery from the nation’s worst postwar recession.
“At least the worst is over,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “But I’m concerned unemployment is going to stay stuck at this high level for some time.”
Cutting Staff
Some companies are still slashing jobs to rein in costs. Promise Co., Japan’s second-largest consumer lender, said yesterday it will cut 1,600 staff, or a third of its workforce, by the end of March 2011. The Tokyo-based company’s net income slumped 23 percent in the six months ended Sept. 30. Japan Airlines Corp., which filed for bankruptcy this month, will slash about 15,700 jobs by the end of March 2013.
The job-to-applicant ratio rose for a fourth month to 0.46, meaning there are 46 positions for every 100 candidates, the Labor Ministry said today. The same report showed there were 87 newly advertised jobs in December for every 100 people who started looking for work that month, the most since January. Economists regard the gauge as a leading indicator of employment.
Exports rose for the first time in 15 months in December, fueling production gains and may also be encouraging companies to increase overtime or hiring. Toyota Motor Corp. and Sumitomo Pipe & Tube Co. are among companies increasing production to meet growing demand in China.
Toyota, Nissan Motor Co. and Honda Motor Co. increased global production in December as automobile demand surged in China and U.S. sales recovered. Output at Toyota rose 33 percent from a year earlier, while Honda increased production 3.4 percent and Nissan’s surged 54 percent.
The manufacturers plan to increase production 1.3 percent this month and 0.3 percent in February, the government said today.
Factory output increased 2.2 percent from the previous month, less than economists had projected, Trade Ministry figures showed today in Tokyo. The unemployment rate dropped to 5.1 percent from 5.2 percent, according to a separate release.
While the gains in production and jobs may reduce the danger of a return to recession, declines in consumer prices and an appreciating yen are forcing policy makers to remain open to further stimulus. Bank of Japan officials highlighted concern that the yen’s rise to a 14-year high would undermine business sentiment, minutes of their meetings last month showed today.
“This confirms that the worst is over,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “But these are very, very small improvements, and the jobs recovery ahead is going to be extremely slow, too.”
Bond futures rose, and headed for a three-week advance, as the evidence of continued deflation underpinned demand for the relative safety of government debt. Yields on benchmark 10-year bonds fell to 1.305 percent, matching the lowest level since Jan. 4, at Japan Bond Trading Co. The yen rose 0.3 percent to 89.66 per dollar.
A separate government report today showed household spending rose 2.1 percent in December from a year before, more than forecast and capping a fifth straight advance. The figures contrasted with data earlier this week showing retail sales tumbled 0.3 percent from a year ago.
More Work
The economy added 130,000 jobs in December, the biggest increase in four months. People found more work in medical, welfare and education sectors, while there were fewer jobs and manufacturing and retail industries, according to unadjusted figures in the report.
“Unemployment has improved a little bit but I don’t think we can be optimistic at all because the number is still more than 5 percent,” Prime Minister Yukio Hatoyama told reporters today in Tokyo. “The situation remains where many people want to work but cannot find a job.”
Japan’s Diet yesterday approved a 7.2 trillion yen ($80 billion) economic package aimed at bolstering the recovery from the nation’s worst postwar recession.
“At least the worst is over,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “But I’m concerned unemployment is going to stay stuck at this high level for some time.”
Cutting Staff
Some companies are still slashing jobs to rein in costs. Promise Co., Japan’s second-largest consumer lender, said yesterday it will cut 1,600 staff, or a third of its workforce, by the end of March 2011. The Tokyo-based company’s net income slumped 23 percent in the six months ended Sept. 30. Japan Airlines Corp., which filed for bankruptcy this month, will slash about 15,700 jobs by the end of March 2013.
The job-to-applicant ratio rose for a fourth month to 0.46, meaning there are 46 positions for every 100 candidates, the Labor Ministry said today. The same report showed there were 87 newly advertised jobs in December for every 100 people who started looking for work that month, the most since January. Economists regard the gauge as a leading indicator of employment.
Exports rose for the first time in 15 months in December, fueling production gains and may also be encouraging companies to increase overtime or hiring. Toyota Motor Corp. and Sumitomo Pipe & Tube Co. are among companies increasing production to meet growing demand in China.
Toyota, Nissan Motor Co. and Honda Motor Co. increased global production in December as automobile demand surged in China and U.S. sales recovered. Output at Toyota rose 33 percent from a year earlier, while Honda increased production 3.4 percent and Nissan’s surged 54 percent.
The manufacturers plan to increase production 1.3 percent this month and 0.3 percent in February, the government said today.
India May Debate Rate Increase, Tell Banks to Boost Reserves
Jan. 29 (Bloomberg) -- India’s central bank may debate whether to start raising interest rates today and will probably ask banks to set aside more cash to temper inflation as the second-fastest growing major economy accelerates.
The Reserve Bank of India may raise the cash reserve ratio to 5.5 percent from 5 percent, the first increase since 2008, according to the median forecast of 25 economists in a Bloomberg News survey. Seven respondents said the benchmark reverse repurchase rate may rise to 3.5 percent from 3.25 percent, while the rest see no change.
Governor Duvvuri Subbarao’s task is to head off a surge in inflation that would undermine purchasing power in the nation of 1.2 billion people. India is forecast to follow China this month in tightening monetary policy; part of a global withdrawal of stimulus measures that’s led to a decline in stock prices.
“Subbarao has to walk a tightrope,” said Sanjay Mathur, a Singapore-based economist at Royal Bank of Scotland Group Plc. “He has to be careful not to jeopardize India’s nascent growth while attempting to tame inflation.”
The bank is scheduled to release its monetary policy decision at 11:15 a.m. in Mumbai today.
Investors have already begun to anticipate the central bank taking its biggest step yet to rein in monetary stimulus. India’s generic 10-year government bond yields reached 7.71 percent this month, the highest level since November 2008, and closed at 7.56 percent yesterday in Mumbai. The benchmark stock index yesterday reached its lowest level since November, while the rupee has dropped about 2 percent since Jan. 11.
Inflation Concern
Inflation has emerged as a “major concern,” the central bank said in a report yesterday. The bank said economic recovery has coincided with “significant” build-up of price pressures. Subbarao said last week that he wants to support the recovery without “compromising” price stability.
India’s benchmark wholesale-price inflation accelerated to 7.3 percent in December, the fastest pace since November 2008. The RBI in October forecast price gains would reach 6.5 percent by March 31. Manufacturing inflation surged to 5.2 percent in December from 1.6 percent in October.
Industrial production rose 11.7 percent in November, the fastest pace in two years, as sales at companies including Hindustan Unilever Ltd. and Hero Honda Motors Ltd. surged.
Corporate Profits
Hindustan Unilever, India’s biggest maker of household products, said this week profit grew in the three months through December for the first time in three quarters. Hero Honda, the nation’s biggest motorcycle maker, reported a better-than- estimated 79 percent increase in third-quarter net income.
“What we’ve seen in India is a fairly strong recovery in domestic demand,” Jorg Decressin, deputy director of the International Monetary Fund’s monetary and capital markets office, told reporters in Washington this week. “It’s one of the countries where we’re pretty bullish.”
The IMF three days ago boosted its gross domestic product growth projection for India to 7.7 percent from 6.4 percent in October.
China, whose economy expanded the most since 2007 in the fourth quarter, is also acting to rein in price pressures. The People’s Bank of China has ordered some banks to pare lending, raised the ratio for deposits banks must set aside as reserves and guided bill yields higher this month after lending surged in January.
Commercial Loans
India’s credit growth has been more subdued. Commercial loans, which rose 13.7 percent in the two weeks ended Jan. 1 from a year earlier, are growing near the slowest pace in six years.
Most of the nation’s inflation is due to food costs, which shot up after deficient rains last year. They accounted for 80 percent of December’s inflation reading, government data showed.
“Policy makers should avoid any tightening of monetary policy to contain food-price inflation,” said Harsh Pati Singhania, president of the Federation of Indian Chambers of Commerce and Industry in New Delhi. “It will derail the growth momentum.”
India’s central bank prepares monetary policy in consultation with the finance ministry, which has faced criticism from opposition political parties in the past two months for failing to check surging prices.
Subbarao cut the cash reserve ratio in late 2008 to inject cash into the banking system and protect the Indian economy from the global recession. He has kept the reverse repurchase rate and the repurchase rate at a record low of 3.25 percent and 4.75 percent, respectively, since April.
Asset Sales
The Indian central bank may also delay raising interest rates to avoid “spooking” the markets before the government’s asset sales program, said Rohini Malkani, a Mumbai-based economist at Citigroup Inc.
The government plans to sell as much as 250 billion rupees ($5.4 billion) of stakes in companies including NMDC Ltd., the nation’s largest iron-ore producer, by the end of March as it tries to trim its budget deficit projected at a 16-year high.
“Monetary tightening will be incremental,” said Sashi Krishnan, chief investment officer at Bajaj Allianz Life Insurance Co., India’s second-largest private insurer. “The economy is just returning to growth and the central bank may not want to cap that.” Krishnan expects interest rates to rise as much as 1.25 percentage points in 2010.
The Reserve Bank of India may raise the cash reserve ratio to 5.5 percent from 5 percent, the first increase since 2008, according to the median forecast of 25 economists in a Bloomberg News survey. Seven respondents said the benchmark reverse repurchase rate may rise to 3.5 percent from 3.25 percent, while the rest see no change.
Governor Duvvuri Subbarao’s task is to head off a surge in inflation that would undermine purchasing power in the nation of 1.2 billion people. India is forecast to follow China this month in tightening monetary policy; part of a global withdrawal of stimulus measures that’s led to a decline in stock prices.
“Subbarao has to walk a tightrope,” said Sanjay Mathur, a Singapore-based economist at Royal Bank of Scotland Group Plc. “He has to be careful not to jeopardize India’s nascent growth while attempting to tame inflation.”
The bank is scheduled to release its monetary policy decision at 11:15 a.m. in Mumbai today.
Investors have already begun to anticipate the central bank taking its biggest step yet to rein in monetary stimulus. India’s generic 10-year government bond yields reached 7.71 percent this month, the highest level since November 2008, and closed at 7.56 percent yesterday in Mumbai. The benchmark stock index yesterday reached its lowest level since November, while the rupee has dropped about 2 percent since Jan. 11.
Inflation Concern
Inflation has emerged as a “major concern,” the central bank said in a report yesterday. The bank said economic recovery has coincided with “significant” build-up of price pressures. Subbarao said last week that he wants to support the recovery without “compromising” price stability.
India’s benchmark wholesale-price inflation accelerated to 7.3 percent in December, the fastest pace since November 2008. The RBI in October forecast price gains would reach 6.5 percent by March 31. Manufacturing inflation surged to 5.2 percent in December from 1.6 percent in October.
Industrial production rose 11.7 percent in November, the fastest pace in two years, as sales at companies including Hindustan Unilever Ltd. and Hero Honda Motors Ltd. surged.
Corporate Profits
Hindustan Unilever, India’s biggest maker of household products, said this week profit grew in the three months through December for the first time in three quarters. Hero Honda, the nation’s biggest motorcycle maker, reported a better-than- estimated 79 percent increase in third-quarter net income.
“What we’ve seen in India is a fairly strong recovery in domestic demand,” Jorg Decressin, deputy director of the International Monetary Fund’s monetary and capital markets office, told reporters in Washington this week. “It’s one of the countries where we’re pretty bullish.”
The IMF three days ago boosted its gross domestic product growth projection for India to 7.7 percent from 6.4 percent in October.
China, whose economy expanded the most since 2007 in the fourth quarter, is also acting to rein in price pressures. The People’s Bank of China has ordered some banks to pare lending, raised the ratio for deposits banks must set aside as reserves and guided bill yields higher this month after lending surged in January.
Commercial Loans
India’s credit growth has been more subdued. Commercial loans, which rose 13.7 percent in the two weeks ended Jan. 1 from a year earlier, are growing near the slowest pace in six years.
Most of the nation’s inflation is due to food costs, which shot up after deficient rains last year. They accounted for 80 percent of December’s inflation reading, government data showed.
“Policy makers should avoid any tightening of monetary policy to contain food-price inflation,” said Harsh Pati Singhania, president of the Federation of Indian Chambers of Commerce and Industry in New Delhi. “It will derail the growth momentum.”
India’s central bank prepares monetary policy in consultation with the finance ministry, which has faced criticism from opposition political parties in the past two months for failing to check surging prices.
Subbarao cut the cash reserve ratio in late 2008 to inject cash into the banking system and protect the Indian economy from the global recession. He has kept the reverse repurchase rate and the repurchase rate at a record low of 3.25 percent and 4.75 percent, respectively, since April.
Asset Sales
The Indian central bank may also delay raising interest rates to avoid “spooking” the markets before the government’s asset sales program, said Rohini Malkani, a Mumbai-based economist at Citigroup Inc.
The government plans to sell as much as 250 billion rupees ($5.4 billion) of stakes in companies including NMDC Ltd., the nation’s largest iron-ore producer, by the end of March as it tries to trim its budget deficit projected at a 16-year high.
“Monetary tightening will be incremental,” said Sashi Krishnan, chief investment officer at Bajaj Allianz Life Insurance Co., India’s second-largest private insurer. “The economy is just returning to growth and the central bank may not want to cap that.” Krishnan expects interest rates to rise as much as 1.25 percentage points in 2010.
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