June 28 (Bloomberg) -- Iranian President Mahmoud Ahmadinejad vowed to take a tougher approach toward the West during his second term, saying the Obama administration’s criticism of his crackdown on dissent after the June 12 election shows its offer of talks on Iran’s nuclear program isn’t genuine.
“If they think the government will be influenced, they’re wrong,” Ahmadinejad told judiciary officials at a conference yesterday in Tehran, in comments aired on state television. “The government will have a more powerful and decisive approach in the new term.” He called Western leaders “the arrogants.”
President Barack Obama and German Chancellor Angela Merkel urged Iran two days ago to halt the violence against protesters who say the election was rigged. They also said Iran must be blocked from obtaining a nuclear weapon. Obama dismissed Ahmadinejad’s demand for an apology for “interfering” in Iran’s affairs.
Obama and Merkel spoke after leading Iranian cleric Ahmad Khatami urged authorities to punish demonstration organizers “harshly and cruelly” to deter the opposition from seeking to annul the vote.
Protesters who use weapons should be executed, Khatami told followers at Friday prayers in Tehran. He is a member of the Assembly of Experts, which elects and can remove the Shiite Muslim-led nation’s supreme leader.
‘Ruthlessness’
“A government that treats its own citizens with that kind of ruthlessness and violence and that cannot deal with peaceful protesters who are trying to have their voices heard in an equally peaceful way I think has moved outside of universal norms,” Obama said at a June 26 news conference with Merkel.
The German chancellor said the Iranian people have a right “to have their votes be counted” and to see that the election results are substantiated.
“I’m surprised at Obama,” Ahmadinejad said. “He said he wanted to speak to Iran, and we said we are ready, but with this rhetoric? The mask is now dropped and the Iranian people, the world’s people, know they are the same. There is no change.”
Obama and Merkel said the U.S. and Europe, with Russia and China, must continue pressing to bring Iran into negotiations to suspend its effort to enrich uranium. Iran has defied United Nations sanctions imposed over its refusal to stop enrichment, saying the material is for power plants and not for weapons.
“There is no doubt that any direct dialogue or diplomacy with Iran is going to be affected by the events of the last several weeks,” Obama said. The U.S. and other nations can’t assume there will be a “huge shift” in Iran’s stance in international relations as a result of the protests, he said.
Clubs, Tear Gas
Protesters who defied a ban on opposition rallies since the election have been met with water cannon, tear gas and clubs as security forces tried to disperse crowds. Independent confirmation of the events has been limited, with foreign journalists expelled or ordered to remain in their offices.
The government said 13 protesters and eight Basij militiamen died, with hundreds of demonstrators arrested. Iran’s leadership has accused the U.S., the U.K. and Israel of instigating the violence that followed the announcement that Ahmadinejad would be president for another four-year term.
The courts will determine within the next week whether to continue holding those protesters who have been arrested for minor offenses, Alireza Avaei, a Tehran judiciary official, was cited as saying yesterday by the state-run Mehr news agency.
Social Networking
Iranians circumventing government disruption of the Internet and mobile phone networks have used social-networking Web sites to allege that dozens of protesters were killed by police and the militia. The subjects of the postings include Neda Agha Soltan, a young woman whose death from gunshot wounds was captured in a video shown around the world.
Ahmadinejad’s main challenger on the ballot, former Prime Minister Mir Hossein Mousavi, has demanded the election result be scrapped due to vote-rigging and urged demonstrators to continue the protests, saying they are legal under the constitution. He later said he will comply with a requirement to seek permission for rallies. His previous requests have been turned down or are still pending.
Ahmadinejad won 63 percent of the vote to 34 percent for Mousavi, according to the official tally. The date for his inauguration and the approval of his new Cabinet will take place between July 26 and Aug. 19, the Iranian Labor News Agency said.
The Guardian Council, which supervises elections in Iran, will set up a commission to oversee a recount of 10 percent of the presidential votes and issue a public report on the findings, the state-run Iranian Students News Agency said. The media will be able to attend the recount by the commission, which will include former Foreign Minister Ali Akbar Velayati, ex- parliament Speaker Gholam-Ali Hadad Adel and Prosecutor General Qorban-Ali Najaf-Abadi.
Independent Review Sought
Mousavi doesn’t support the recount proposed by the Guardian Council and would like to see a review of the election by an independent arbitration committee, according to a letter to the council posted yesterday on his Web site. The large number of irregularities suggests that the election should be annulled and a new one held, Mousavi said in the letter.
The Expediency Council, headed by former President Ali Akbar Hashemi Rafsanjani, said yesterday that the “unique participation” of the voters was a display of Iran’s religious democracy, according to the students news agency. The council, which resolves legislative issues on which parliament and the Guardian Council fail to agree, urged the candidates to cooperate with the Guardian Council as it ratifies the election tally and provide it with evidence for any complaints.
‘Healthiest Election’
“None of Mousavi’s claims were right and we’ve had the healthiest election,” Guardian Council spokesman Abbas Ali Kadkhodaei was cited as saying by the Khabar newspaper on its Web site. “Except for small breaches that are seen in every election, no major violation has been committed. I can firmly say that no election fraud has been committed.”
During the campaign, Ahmadinejad accused Rafsanjani of rallying support within the religious establishment for Mousavi. Security forces on June 20 detained five members of Rafsanjani’s family, including his daughter Faezeh Hashemi who encouraged protesters during a rally address. They were held briefly.
Mohsen Rezai, one of the other candidates for president, said Mousavi and the fourth challenger, Mehdi Karrubi, should cooperate with the Guardian Council’s commission. Mousavi and Karrubi have rejected any proposals for partial recounts, saying a new election should be held.
Saturday, June 27, 2009
Unemployment Probably Rose at Slower Pace: U.S. Economy Preview
June 28 (Bloomberg) -- Unemployment in the U.S. probably rose at a slower pace and the manufacturing slump eased this month as evidence mounted that the end of recession is in view, economists said before reports this week.
The jobless rate rose 0.2 percentage point to 9.6 percent, the highest level in 26 years, according to the median of 58 estimates in a Bloomberg News survey. The gain would be the smallest since November 2008. A survey of purchasing managers may show manufacturing shrank at the mildest pace in 10 months.
Government efforts to stabilize housing and consumer spending are only now starting to pay off, indicating it will take months before a recovery develops. The job market will remain one of the biggest threats to the emerging rebound as companies from General Motors Corp. to Kimberly-Clark Corp. focus on cutting costs by trimming payrolls.
“We need more improvement in the labor market for the recovery theme to play out,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “We’ve seen an inflection point in employment, with the rate of declines diminishing. The numbers will get better in the second half.”
The Labor Department’s employment report is due July 2. The figures may also show employers cut 350,000 workers from payrolls in June compared with 345,000 in May, according to the Bloomberg survey median. The economy lost about 691,000 jobs a month on average in the first quarter.
Employers have eliminated 6 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era.
10 Percent
By the end of the year, unemployment may reach 10 percent, a separate Bloomberg survey showed this month.
The payrolls report may also show manufacturers slashed workers this month. The job reductions and plant shutdowns may persist, reflecting the fallout from the bankruptcies of GM and Chrysler LLC.
Outside of autos, the downturn may be easing. A July 1 report from the Tempe, Arizona-based Institute for Supply Management may show its manufacturing index rose to 44.5 in June, the highest level since last August, from 42.8 in May, according to the Bloomberg survey median. Readings below 50 signal contraction.
Factory orders, to be released by the Commerce Department on July 2, probably rose in May for the third time in four months, economists predicted.
Job Cuts
Companies such as Kimberly-Clark, the maker of Huggies diapers and Kleenex tissues, are trimming costs. The Dallas- based company, whose net income has fallen for six straight quarters, will cut 1,600 jobs worldwide by year-end.
The “demanding economic environment” prompted the move, Chief Executive Officer Tom Falk said in a June 25 statement.
The economy shrank at a 5.5 percent annual pace in the first quarter, capping the worst six-month performance in half a century, according to revised government figures.
Expectations that the U.S. will start growing again in the second half of this year are helping lift Americans’ moods. Economists in the Bloomberg survey predict consumer confidence in June probably rose to the highest level since September 2008. The Conference Board will issue its report on June 30.
The Standard & Poor’s 500 Stock Index has gained 36 percent since March 9, when it hit 676.53, the lowest level in more than 12 years, amid signs the economy may start growing again this year. The index closed at 918.90 on June 26 in New York.
Housing data this week may signal stabilization. The National Association of Realtors report on July 1 may show more Americans signed contracts to buy previously owned homes in May for the fourth straight month, the longest string of gains since 2004.
A report from S&P/Case-Shiller June 30 may show declines in home prices are steadying.
The jobless rate rose 0.2 percentage point to 9.6 percent, the highest level in 26 years, according to the median of 58 estimates in a Bloomberg News survey. The gain would be the smallest since November 2008. A survey of purchasing managers may show manufacturing shrank at the mildest pace in 10 months.
Government efforts to stabilize housing and consumer spending are only now starting to pay off, indicating it will take months before a recovery develops. The job market will remain one of the biggest threats to the emerging rebound as companies from General Motors Corp. to Kimberly-Clark Corp. focus on cutting costs by trimming payrolls.
“We need more improvement in the labor market for the recovery theme to play out,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “We’ve seen an inflection point in employment, with the rate of declines diminishing. The numbers will get better in the second half.”
The Labor Department’s employment report is due July 2. The figures may also show employers cut 350,000 workers from payrolls in June compared with 345,000 in May, according to the Bloomberg survey median. The economy lost about 691,000 jobs a month on average in the first quarter.
Employers have eliminated 6 million jobs since the recession began in December 2007, the most of any economic slump in the post-World War II era.
10 Percent
By the end of the year, unemployment may reach 10 percent, a separate Bloomberg survey showed this month.
The payrolls report may also show manufacturers slashed workers this month. The job reductions and plant shutdowns may persist, reflecting the fallout from the bankruptcies of GM and Chrysler LLC.
Outside of autos, the downturn may be easing. A July 1 report from the Tempe, Arizona-based Institute for Supply Management may show its manufacturing index rose to 44.5 in June, the highest level since last August, from 42.8 in May, according to the Bloomberg survey median. Readings below 50 signal contraction.
Factory orders, to be released by the Commerce Department on July 2, probably rose in May for the third time in four months, economists predicted.
Job Cuts
Companies such as Kimberly-Clark, the maker of Huggies diapers and Kleenex tissues, are trimming costs. The Dallas- based company, whose net income has fallen for six straight quarters, will cut 1,600 jobs worldwide by year-end.
The “demanding economic environment” prompted the move, Chief Executive Officer Tom Falk said in a June 25 statement.
The economy shrank at a 5.5 percent annual pace in the first quarter, capping the worst six-month performance in half a century, according to revised government figures.
Expectations that the U.S. will start growing again in the second half of this year are helping lift Americans’ moods. Economists in the Bloomberg survey predict consumer confidence in June probably rose to the highest level since September 2008. The Conference Board will issue its report on June 30.
The Standard & Poor’s 500 Stock Index has gained 36 percent since March 9, when it hit 676.53, the lowest level in more than 12 years, amid signs the economy may start growing again this year. The index closed at 918.90 on June 26 in New York.
Housing data this week may signal stabilization. The National Association of Realtors report on July 1 may show more Americans signed contracts to buy previously owned homes in May for the fourth straight month, the longest string of gains since 2004.
A report from S&P/Case-Shiller June 30 may show declines in home prices are steadying.
FSB’s Draghi Sees Signs of Improvement in Economy
June 27 (Bloomberg) -- The world economy is showing “convincing signs of recovery,” Mario Draghi, chairman of the newly created Financial Stability Board, said today after its first meeting.
“We observe signs of improvement here and there,” Draghi, who is also a member of the European Central Bank council and governor of the Bank of Italy, said in Basel, Switzerland. “Still, the fragilities of the economy and the financial system are there.”
The Basel-based board, which succeeds the Financial Stability Forum, will look at risks to financial markets and ensure that regulators in each country act upon them. Its members represent economies from Argentina to the United States and institutions such as the European Central Bank and the International Monetary Fund.
The global recession is showing signs of easing as financial markets thaw. Government reports this week showed that Europe’s manufacturing and service industries contracted at the slowest pace in nine months in June, while U.S. consumer spending rose in May. The Organization for Economic Cooperation and Development raised its forecast for the economy of its 30 member nations for the first time in two years this week.
The Financial Stability Board “noted signs of improvement in the global macroeconomic outlook and in some financial markets,” Draghi said. “Banks have raised capital from the private sector, but the process of restructuring and strengthening bank balance sheets is not yet completed. Corporate bond markets continue to see strong primary issuance.”
$1.4 Trillion of Losses
Financial institutions around the world have amassed losses of more than $1.4 trillion during the financial crisis, data compiled by Bloomberg show. In Europe, governments and central banks are on the hook for more than 3.7 trillion euros ($5.2 trillion) of guarantees and funding. UBS AG, the European bank with the biggest losses from the credit crisis, said on June 25 it expects a second-quarter loss.
In response, governments and central banks are tightening banking rules to strengthen the global financial system. U.S. President Barack Obama this month proposed new rules to tighten oversight, while European leaders agreed on a sweeping overhaul of their regulations.
The Basel Committee on Banking Supervision, a member of the Financial Stability Board, will “make an integrated proposal to strengthen the capital and liquidity regime by end-2009,” Draghi said, including requirements to address systemic risk.
Leverage Ratios
The Swiss National Bank on June 18 said UBS and Credit Suisse Group AG must increase the amount of capital they hold in relation to assets to withstand any further losses. The banks should aim for a so-called leverage ratio of at least 5 percent once the crisis is over, the SNB said, meaning the capital base should account for at least 5 percent of the balance sheet total. UBS’s ratio was 2.56 percent at the end of March.
Draghi said as a complement to the risk-weighted leverage ratios of the Basel 2 banking framework, regulators should consider a simpler figure.
“Basel 2 is a very sophisticated way of determining a leverage ratio,” he said. “In the end you come up with a leverage ratio but it’s the product of many different assessments of risk for different categories of assets under different markets conditions. What we are seeing is that markets have a simpler view. They want to look at some number.”
“We observe signs of improvement here and there,” Draghi, who is also a member of the European Central Bank council and governor of the Bank of Italy, said in Basel, Switzerland. “Still, the fragilities of the economy and the financial system are there.”
The Basel-based board, which succeeds the Financial Stability Forum, will look at risks to financial markets and ensure that regulators in each country act upon them. Its members represent economies from Argentina to the United States and institutions such as the European Central Bank and the International Monetary Fund.
The global recession is showing signs of easing as financial markets thaw. Government reports this week showed that Europe’s manufacturing and service industries contracted at the slowest pace in nine months in June, while U.S. consumer spending rose in May. The Organization for Economic Cooperation and Development raised its forecast for the economy of its 30 member nations for the first time in two years this week.
The Financial Stability Board “noted signs of improvement in the global macroeconomic outlook and in some financial markets,” Draghi said. “Banks have raised capital from the private sector, but the process of restructuring and strengthening bank balance sheets is not yet completed. Corporate bond markets continue to see strong primary issuance.”
$1.4 Trillion of Losses
Financial institutions around the world have amassed losses of more than $1.4 trillion during the financial crisis, data compiled by Bloomberg show. In Europe, governments and central banks are on the hook for more than 3.7 trillion euros ($5.2 trillion) of guarantees and funding. UBS AG, the European bank with the biggest losses from the credit crisis, said on June 25 it expects a second-quarter loss.
In response, governments and central banks are tightening banking rules to strengthen the global financial system. U.S. President Barack Obama this month proposed new rules to tighten oversight, while European leaders agreed on a sweeping overhaul of their regulations.
The Basel Committee on Banking Supervision, a member of the Financial Stability Board, will “make an integrated proposal to strengthen the capital and liquidity regime by end-2009,” Draghi said, including requirements to address systemic risk.
Leverage Ratios
The Swiss National Bank on June 18 said UBS and Credit Suisse Group AG must increase the amount of capital they hold in relation to assets to withstand any further losses. The banks should aim for a so-called leverage ratio of at least 5 percent once the crisis is over, the SNB said, meaning the capital base should account for at least 5 percent of the balance sheet total. UBS’s ratio was 2.56 percent at the end of March.
Draghi said as a complement to the risk-weighted leverage ratios of the Basel 2 banking framework, regulators should consider a simpler figure.
“Basel 2 is a very sophisticated way of determining a leverage ratio,” he said. “In the end you come up with a leverage ratio but it’s the product of many different assessments of risk for different categories of assets under different markets conditions. What we are seeing is that markets have a simpler view. They want to look at some number.”
Friday, June 26, 2009
Japanese Bonds Complete 2nd Weekly Gain as Deflation Deepens
June 27 (Bloomberg) -- Japan’s bonds gained for a second week as a government report showed consumer prices fell at a record pace, adding to signs deflation will hamper the economic recovery and boost the value of the fixed payments of debt.
Ten-year yields touched the lowest in almost three months after the statistics bureau said yesterday prices excluding fresh food fell 1.1 percent in May from a year ago. Bank of Japan Governor Masaaki Shirakawa said last week price declines will accelerate through the middle of the fiscal year as demand slackens and crude oil trades lower than last year’s record.
“The drop in consumer prices may accelerate to about 2 percent in the summer,” said Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co., Japan’s third-largest life insurer. “The 10-year yield may decline to 1.3 percent or below as the market needs to prepare for deeper deflation.”
The yield on the benchmark 10-year note fell five basis points this week to 1.395 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. It fell to 1.37 percent yesterday, the lowest since April 2. The price of the 1.5 percent debt due June 2019 gained 0.439 yen to 100.919 yen this week. A basis point is 0.01 percentage point.
Ten-year bond futures for September delivery rose 0.74 to 137.66 at the Tokyo Stock Exchange this week.
‘Extreme’ Drop
Worldwide inflation is easing as energy costs retreat and the worst global recession since the Great Depression prompts companies to discount. Consumer prices failed to rise in the euro area for the first time in at least a decade in May, and in the U.S. they fell 1.3 percent, the most since 1950. Deflation increases the value of the fixed payments on bonds.
An “extreme” slump in demand and production are causing the drop in prices, Finance Minister Kaoru Yosano said yesterday. “We continue to monitor developments in prices and need to carefully manage the economy to avoid a deflationary spiral.”
The Organization for Economic Cooperation and Development this week urged the Bank of Japan to keep pumping cash into the economy “until underlying inflation is firmly positive.” Since it cut the key interest rate to 0.1 percent in December, the central bank has been buying corporate debt and increased government bond purchases from lenders to revive growth.
Daily Loss
“Deepening deflation will support the view in the market that the super-loose monetary policy by the Bank of Japan will be sustained,” said Yasunari Ueno, chief market economist in Tokyo at Mizuho Securities Co. “I won’t change my projection that the 10-year yield will drop toward 1 percent.”
Still, 10-year bonds fell for a second day yesterday before a government report next week that economists said will show industrial output rose for a third month in May.
“The bond market may undergo a correction next week as forthcoming data may enhance economic optimism,” said Norikazu Hasegawa, a manager of the treasury division at Chiba Bank Ltd. in Tokyo. “The stable movement of stock prices indicates that the euphoria about the economy remains intact.”
The Nikkei 225 Stock Average rose 0.9 percent this week and the MSCI Asia Pacific Index of regional shares added 1.8 percent.
Industrial production rose 7 percent last month, following a 5.9 percent gain in April, according to a Bloomberg News survey of economists before the June 29 report.
Demand for bonds was also limited before a key survey of business confidence. The Bank of Japan’s Tankan index of sentiment among large manufacturers rose to minus 43 in June, from minus 58 in March, according to a separate Bloomberg survey of economists before the report is released on July 1.
Debt Sales
“It is now certain that Japan’s economy already bottomed out of the recent recession and it is now recovering,” said Taro Saito, a senior economist in Tokyo at NLI Research Institute Ltd., a unit of Japan’s biggest life insurer. “Yields may gradually trend higher.”
The Ministry of Finance will sell 2.1 trillion yen ($21.9 billion) in 10-year bonds on July 2, up from this month’s 1.9 trillion yen auction. The ministry in April said it would boost bond sales by 15 percent to 130.2 trillion yen this fiscal year.
“Given the potential risk of rising debt sales across the globe, Japan’s 10-year yield may reach 1.7 percent,” said Mitsumaru Kumagai, senior economist in Tokyo at Daiwa Institute of Research Ltd., a unit of Japan’s second-largest securities brokerage. “The Japanese economy may avoid slipping into a deflationary spiral.”
Ten-year yields touched the lowest in almost three months after the statistics bureau said yesterday prices excluding fresh food fell 1.1 percent in May from a year ago. Bank of Japan Governor Masaaki Shirakawa said last week price declines will accelerate through the middle of the fiscal year as demand slackens and crude oil trades lower than last year’s record.
“The drop in consumer prices may accelerate to about 2 percent in the summer,” said Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co., Japan’s third-largest life insurer. “The 10-year yield may decline to 1.3 percent or below as the market needs to prepare for deeper deflation.”
The yield on the benchmark 10-year note fell five basis points this week to 1.395 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. It fell to 1.37 percent yesterday, the lowest since April 2. The price of the 1.5 percent debt due June 2019 gained 0.439 yen to 100.919 yen this week. A basis point is 0.01 percentage point.
Ten-year bond futures for September delivery rose 0.74 to 137.66 at the Tokyo Stock Exchange this week.
‘Extreme’ Drop
Worldwide inflation is easing as energy costs retreat and the worst global recession since the Great Depression prompts companies to discount. Consumer prices failed to rise in the euro area for the first time in at least a decade in May, and in the U.S. they fell 1.3 percent, the most since 1950. Deflation increases the value of the fixed payments on bonds.
An “extreme” slump in demand and production are causing the drop in prices, Finance Minister Kaoru Yosano said yesterday. “We continue to monitor developments in prices and need to carefully manage the economy to avoid a deflationary spiral.”
The Organization for Economic Cooperation and Development this week urged the Bank of Japan to keep pumping cash into the economy “until underlying inflation is firmly positive.” Since it cut the key interest rate to 0.1 percent in December, the central bank has been buying corporate debt and increased government bond purchases from lenders to revive growth.
Daily Loss
“Deepening deflation will support the view in the market that the super-loose monetary policy by the Bank of Japan will be sustained,” said Yasunari Ueno, chief market economist in Tokyo at Mizuho Securities Co. “I won’t change my projection that the 10-year yield will drop toward 1 percent.”
Still, 10-year bonds fell for a second day yesterday before a government report next week that economists said will show industrial output rose for a third month in May.
“The bond market may undergo a correction next week as forthcoming data may enhance economic optimism,” said Norikazu Hasegawa, a manager of the treasury division at Chiba Bank Ltd. in Tokyo. “The stable movement of stock prices indicates that the euphoria about the economy remains intact.”
The Nikkei 225 Stock Average rose 0.9 percent this week and the MSCI Asia Pacific Index of regional shares added 1.8 percent.
Industrial production rose 7 percent last month, following a 5.9 percent gain in April, according to a Bloomberg News survey of economists before the June 29 report.
Demand for bonds was also limited before a key survey of business confidence. The Bank of Japan’s Tankan index of sentiment among large manufacturers rose to minus 43 in June, from minus 58 in March, according to a separate Bloomberg survey of economists before the report is released on July 1.
Debt Sales
“It is now certain that Japan’s economy already bottomed out of the recent recession and it is now recovering,” said Taro Saito, a senior economist in Tokyo at NLI Research Institute Ltd., a unit of Japan’s biggest life insurer. “Yields may gradually trend higher.”
The Ministry of Finance will sell 2.1 trillion yen ($21.9 billion) in 10-year bonds on July 2, up from this month’s 1.9 trillion yen auction. The ministry in April said it would boost bond sales by 15 percent to 130.2 trillion yen this fiscal year.
“Given the potential risk of rising debt sales across the globe, Japan’s 10-year yield may reach 1.7 percent,” said Mitsumaru Kumagai, senior economist in Tokyo at Daiwa Institute of Research Ltd., a unit of Japan’s second-largest securities brokerage. “The Japanese economy may avoid slipping into a deflationary spiral.”
Asian Currencies: Rupiah, Peso Lead Weekly Gains on Fed, Stocks
June 27 (Bloomberg) -- Indonesia’s rupiah and the Philippine peso had a weekly gain on optimism overseas investors will buy Asian bonds and stocks after the Federal Reserve signaled U.S. interest rates will be kept at near zero.
The rupiah was the biggest gainer this week among Asia’s 10 most-active currencies outside Japan as its 10-year bond yielded 7.6 percentage points more than similar-dated U.S. debt, near the highest in a month. U.S. policy makers said on June 24 they will keep the benchmark interest rate at “exceptionally low levels” for an “extended period.” The peso rose this week after the central bank said the Fed’s decision gives it scope to keep its “accommodative stance.”
“Investors are finally buying back Indonesian assets and that helps the rupiah,” said Mika Martumpal, a currency analyst at PT Bank Commonwealth in Jakarta. “The real interest rate is still competitive and is still more attractive than the U.S. dollar.”
The rupiah climbed 1.8 percent this week to 10,220 a dollar in Jakarta yesterday, according to data compiled by Bloomberg. The peso rose 0.2 percent to 48.305 in Manila, according to Tullett Prebon Plc. The Thai baht rose 0.3 percent to 34.07.
In the coming week, Bank Indonesia will hold its monthly meeting on policy rates. South Korea and Thailand will both report industrial production data and exports.
Payments Surplus
The Indonesian currency strengthened as overseas investors added to their holdings of the nation’s shares following an eight-day run of net sales, according to stock exchange data. Foreign holdings of Indonesian local-currency bonds were at 85.9 trillion rupiah as of June 25 ($8.4 billion) compared with 85.8 trillion rupiah at the end of last week, the Ministry of Finance posted on its Web site.
The peso halted two weeks of declines as central bank Governor Amando Tetangco said on June 25 the Fed’s policy stance “will benefit emerging markets such as the Philippines.” The central bank, which has lowered its overnight borrowing rate in all five meetings since December to 4.25 percent, will hold its next policy meeting on July 9. The Philippine Stock Exchange Index gained a third day, posting a weekly advance.
“The peso’s stronger opening relates to expected improvement in equities,” said Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila.
Commodities Climb
Malaysia’s ringgit rose this week on speculation export earnings will improve as prices of crude oil and palm oil climb. The commodities together accounted for 10 percent of Malaysia’s overseas sales in the first four months of this year, government statistics showed. The Kuala Lumpur Composite Index of stocks advanced 1.4 percent this week.
“The ringgit is benefiting from the risk-appetite rally in stocks,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur. “Higher commodity prices may be a sign of a better recovery outlook but the question remains whether the trend is sustainable.”
The ringgit climbed 0.1 percent this week to 3.5335 in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.5255, the strongest level since June 18.
Crude oil has risen almost 60 percent this year, while palm oil has climbed about 39 percent.
Elsewhere, the Korean won fell 1.2 percent this week to 1,284.25 and Taiwan’s dollar dropped 0.1 percent to NT$32.925 against the U.S. currency. The Vietnamese dong was barely changed at 17,802 and Singapore’s dollar was little changed at S$1.4542.
The rupiah was the biggest gainer this week among Asia’s 10 most-active currencies outside Japan as its 10-year bond yielded 7.6 percentage points more than similar-dated U.S. debt, near the highest in a month. U.S. policy makers said on June 24 they will keep the benchmark interest rate at “exceptionally low levels” for an “extended period.” The peso rose this week after the central bank said the Fed’s decision gives it scope to keep its “accommodative stance.”
“Investors are finally buying back Indonesian assets and that helps the rupiah,” said Mika Martumpal, a currency analyst at PT Bank Commonwealth in Jakarta. “The real interest rate is still competitive and is still more attractive than the U.S. dollar.”
The rupiah climbed 1.8 percent this week to 10,220 a dollar in Jakarta yesterday, according to data compiled by Bloomberg. The peso rose 0.2 percent to 48.305 in Manila, according to Tullett Prebon Plc. The Thai baht rose 0.3 percent to 34.07.
In the coming week, Bank Indonesia will hold its monthly meeting on policy rates. South Korea and Thailand will both report industrial production data and exports.
Payments Surplus
The Indonesian currency strengthened as overseas investors added to their holdings of the nation’s shares following an eight-day run of net sales, according to stock exchange data. Foreign holdings of Indonesian local-currency bonds were at 85.9 trillion rupiah as of June 25 ($8.4 billion) compared with 85.8 trillion rupiah at the end of last week, the Ministry of Finance posted on its Web site.
The peso halted two weeks of declines as central bank Governor Amando Tetangco said on June 25 the Fed’s policy stance “will benefit emerging markets such as the Philippines.” The central bank, which has lowered its overnight borrowing rate in all five meetings since December to 4.25 percent, will hold its next policy meeting on July 9. The Philippine Stock Exchange Index gained a third day, posting a weekly advance.
“The peso’s stronger opening relates to expected improvement in equities,” said Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila.
Commodities Climb
Malaysia’s ringgit rose this week on speculation export earnings will improve as prices of crude oil and palm oil climb. The commodities together accounted for 10 percent of Malaysia’s overseas sales in the first four months of this year, government statistics showed. The Kuala Lumpur Composite Index of stocks advanced 1.4 percent this week.
“The ringgit is benefiting from the risk-appetite rally in stocks,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur. “Higher commodity prices may be a sign of a better recovery outlook but the question remains whether the trend is sustainable.”
The ringgit climbed 0.1 percent this week to 3.5335 in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.5255, the strongest level since June 18.
Crude oil has risen almost 60 percent this year, while palm oil has climbed about 39 percent.
Elsewhere, the Korean won fell 1.2 percent this week to 1,284.25 and Taiwan’s dollar dropped 0.1 percent to NT$32.925 against the U.S. currency. The Vietnamese dong was barely changed at 17,802 and Singapore’s dollar was little changed at S$1.4542.
Thursday, June 25, 2009
New Zealand Economy Shrinks 1%, Extending Recession
June 26 (Bloomberg) -- New Zealand’s economy shrank for a fifth straight quarter as consumers and businesses cut spending, extending the worst recession in more than three decades.
Gross domestic product fell 1 percent in the three months to March 31, matching the revised fourth-quarter decline, Statistics New Zealand said in Wellington today. The drop exceeds the 0.7 percent median estimate in a Bloomberg survey of 11 economists.
New Zealand’s economy began contracting in the first quarter of last year and is unlikely to grow until the final three months of 2009 as the worst global slump since the Great Depression curbs exports and damps investment, Reserve Bank Governor Alan Bollard said June 11. Interest rates may stay at record lows until late next year to kick-start spending, he said.
“The world was a hostile environment for growth,” said Bernard Doyle, economist at Goldman Sachs JBWere Ltd. in Auckland. “We doubt today’s print will markedly change the Reserve Bank’s view of where the economy sits.”
New Zealand’s dollar traded at 64.44 U.S. cents at 12.35 p.m. in Wellington from 64.55 cents before the report was released.
The currency has gained 12 percent in the past three months, which “risks derailing” the economy’s recovery because it is cutting export income, Prime Minister John Key said this week.
The 1 percent contractions in the past two quarters are the largest in 18 years, the statistics agency said.
‘Multiple Blows’
The economy shrank 2.7 percent from a year earlier. In the year ended March 31, gross domestic product declined 1 percent, the first annual-average contraction since 1992.
New Zealand’s economy began shrinking last year as Bollard raised interest rates to counter a housing boom and consumer spending that was being fanned by excessive borrowing.
The economy then faced “multiple blows” from collapsing world trade and tight credit conditions, the Organization for Economic Cooperation and Development said in a report this week.
Business investment slumped, companies began firing workers, exports slowed and tourist arrivals declined. Exports make up about 30 percent of the economy and the tourism industry contributes another 10 percent.
New Zealand’s economy will probably contract 2.9 percent this year before growing 0.6 percent in 2010, the OECD said. The jobless rate, which was 5 percent in the first quarter, may surge beyond 8 percent by next year, it said.
Household Spending
Households are constrained by high debt and workers are worried they may lose their jobs. A net 28 percent of consumers expect the economy will worsen this year, according to a Westpac Banking Corp./McDermott Miller survey published on June 24. The net figure subtracts optimists from pessimists and has fallen from 57 percent in the first quarter.
Household spending, which makes up 60 percent of the economy, fell 1.4 percent in the first quarter, the most in 18 years, today’s report showed. Purchases of durable items such as cars, furniture and home appliances dropped 2.5 percent while spending on services also decreased. Sales of food and other so- called non-durable goods gained.
Retailer Smiths City Group yesterday said net income fell 72 percent profit in the year ended April 30 as demand dropped at its appliance and furniture stores. Furniture and carpet sales have declined every month since January 2008, Chairman Craig Boyce said in a statement sent to the stock exchange.
Warehouse Group Ltd., New Zealand’s biggest discount retailer, said last month sales in the three months to April 26 dropped 2.8 percent as the recession slashed demand for office goods and the company shut liquor and food outlets.
Business Investment
Business investment plunged 7.3 percent as companies purchased fewer vehicles, plant and machinery, the statistics agency said today. Commercial construction fell.
Business confidence slumped to a record low in the first quarter, according to a survey by the New Zealand Institute of Economic Research Inc. Investment intentions fell to the lowest on record, the Wellington-based institute said.
Contact Energy Ltd., the nation’s biggest publicly traded electricity company, last month said it will delay a new geothermal power station investment amid declining demand and increased funding costs.
Total investment fell 6.1 percent led by business spending. Investment in new housing, dropped 0.3 percent in the first quarter, the seventh straight decline. Inventories decreased.
Exports of goods and services increased 0.6 percent in the quarter amid rising shipments of dairy products. Import volumes slumped 8.6 percent led by machinery and passenger cars.
Output from goods-producing industries slipped, led by a 7.2 percent drop in manufacturing. Primary production was unchanged as increased output from mining offset declines by logging and fishing. Service industries output fell 0.1 percent led by transport, while real estate activity increased.
The GDP deflator, a measure of prices, rose 2.6 percent in the year ended March 31.
Gross domestic product fell 1 percent in the three months to March 31, matching the revised fourth-quarter decline, Statistics New Zealand said in Wellington today. The drop exceeds the 0.7 percent median estimate in a Bloomberg survey of 11 economists.
New Zealand’s economy began contracting in the first quarter of last year and is unlikely to grow until the final three months of 2009 as the worst global slump since the Great Depression curbs exports and damps investment, Reserve Bank Governor Alan Bollard said June 11. Interest rates may stay at record lows until late next year to kick-start spending, he said.
“The world was a hostile environment for growth,” said Bernard Doyle, economist at Goldman Sachs JBWere Ltd. in Auckland. “We doubt today’s print will markedly change the Reserve Bank’s view of where the economy sits.”
New Zealand’s dollar traded at 64.44 U.S. cents at 12.35 p.m. in Wellington from 64.55 cents before the report was released.
The currency has gained 12 percent in the past three months, which “risks derailing” the economy’s recovery because it is cutting export income, Prime Minister John Key said this week.
The 1 percent contractions in the past two quarters are the largest in 18 years, the statistics agency said.
‘Multiple Blows’
The economy shrank 2.7 percent from a year earlier. In the year ended March 31, gross domestic product declined 1 percent, the first annual-average contraction since 1992.
New Zealand’s economy began shrinking last year as Bollard raised interest rates to counter a housing boom and consumer spending that was being fanned by excessive borrowing.
The economy then faced “multiple blows” from collapsing world trade and tight credit conditions, the Organization for Economic Cooperation and Development said in a report this week.
Business investment slumped, companies began firing workers, exports slowed and tourist arrivals declined. Exports make up about 30 percent of the economy and the tourism industry contributes another 10 percent.
New Zealand’s economy will probably contract 2.9 percent this year before growing 0.6 percent in 2010, the OECD said. The jobless rate, which was 5 percent in the first quarter, may surge beyond 8 percent by next year, it said.
Household Spending
Households are constrained by high debt and workers are worried they may lose their jobs. A net 28 percent of consumers expect the economy will worsen this year, according to a Westpac Banking Corp./McDermott Miller survey published on June 24. The net figure subtracts optimists from pessimists and has fallen from 57 percent in the first quarter.
Household spending, which makes up 60 percent of the economy, fell 1.4 percent in the first quarter, the most in 18 years, today’s report showed. Purchases of durable items such as cars, furniture and home appliances dropped 2.5 percent while spending on services also decreased. Sales of food and other so- called non-durable goods gained.
Retailer Smiths City Group yesterday said net income fell 72 percent profit in the year ended April 30 as demand dropped at its appliance and furniture stores. Furniture and carpet sales have declined every month since January 2008, Chairman Craig Boyce said in a statement sent to the stock exchange.
Warehouse Group Ltd., New Zealand’s biggest discount retailer, said last month sales in the three months to April 26 dropped 2.8 percent as the recession slashed demand for office goods and the company shut liquor and food outlets.
Business Investment
Business investment plunged 7.3 percent as companies purchased fewer vehicles, plant and machinery, the statistics agency said today. Commercial construction fell.
Business confidence slumped to a record low in the first quarter, according to a survey by the New Zealand Institute of Economic Research Inc. Investment intentions fell to the lowest on record, the Wellington-based institute said.
Contact Energy Ltd., the nation’s biggest publicly traded electricity company, last month said it will delay a new geothermal power station investment amid declining demand and increased funding costs.
Total investment fell 6.1 percent led by business spending. Investment in new housing, dropped 0.3 percent in the first quarter, the seventh straight decline. Inventories decreased.
Exports of goods and services increased 0.6 percent in the quarter amid rising shipments of dairy products. Import volumes slumped 8.6 percent led by machinery and passenger cars.
Output from goods-producing industries slipped, led by a 7.2 percent drop in manufacturing. Primary production was unchanged as increased output from mining offset declines by logging and fishing. Service industries output fell 0.1 percent led by transport, while real estate activity increased.
The GDP deflator, a measure of prices, rose 2.6 percent in the year ended March 31.
India’s Sensex to Rise 14% in 12 Months, Nomura Says
June 26 (Bloomberg) -- Indian stocks are “fairly valued” after a 49 percent advance this year and further gains depend on government policies to boost economic growth and pare a budget deficit, Nomura Holdings Inc. said.
The benchmark Bombay Stock Exchange Sensitive Index may rise to 16,400 in the next 12 months, a “muted” 14 percent gain from yesterday’s close, Nomura analysts led by Prabhat Awasthi said in a report today. Investors should own a mix of so-called defensive and domestic cyclical shares, they added.
The rally this year has helped India post the sixth-best performance among the 89 markets tracked by Bloomberg News globally. Valuations have also climbed, with the Sensex now valued at 16 times reported earnings, double November’s low of 8.1 times.
“The relative outperformance and the strong move in the market post the elections have now priced in improving economic fundamentals,” the analysts wrote in the report. “The upcoming budget next month will be very important for the overall direction of the market.”
India has announced three stimulus packages since December, lowering retail fuel prices, cutting taxes on consumer products and injecting capital into state-run banks, to shield the economy from the global crisis.
Finance Minister Pranab Mukherjee will disclose the projected fiscal deficit for the year ending March 31 in his budget on July 26. The government in February said the deficit may be 5.5 percent of gross domestic product.
Nomura recommends that investors buy shares in industries including automobiles, financials, so-called fast-moving consumer goods, technology services, media, pharmaceuticals and power. Its recommended portfolio is “underweight” in energy, metals and cement companies following a jump in their valuations, according to the report.
The benchmark Bombay Stock Exchange Sensitive Index may rise to 16,400 in the next 12 months, a “muted” 14 percent gain from yesterday’s close, Nomura analysts led by Prabhat Awasthi said in a report today. Investors should own a mix of so-called defensive and domestic cyclical shares, they added.
The rally this year has helped India post the sixth-best performance among the 89 markets tracked by Bloomberg News globally. Valuations have also climbed, with the Sensex now valued at 16 times reported earnings, double November’s low of 8.1 times.
“The relative outperformance and the strong move in the market post the elections have now priced in improving economic fundamentals,” the analysts wrote in the report. “The upcoming budget next month will be very important for the overall direction of the market.”
India has announced three stimulus packages since December, lowering retail fuel prices, cutting taxes on consumer products and injecting capital into state-run banks, to shield the economy from the global crisis.
Finance Minister Pranab Mukherjee will disclose the projected fiscal deficit for the year ending March 31 in his budget on July 26. The government in February said the deficit may be 5.5 percent of gross domestic product.
Nomura recommends that investors buy shares in industries including automobiles, financials, so-called fast-moving consumer goods, technology services, media, pharmaceuticals and power. Its recommended portfolio is “underweight” in energy, metals and cement companies following a jump in their valuations, according to the report.
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