Nov. 8 (Bloomberg) -- European central bankers should begin reversing expansionary monetary policies before governments roll back their economic stimulus measures, according to a study by Allianz SE, Europe’s biggest insurer.
“Given the long time-lag of monetary policy, an exit from monetary-policy expansion should begin earlier than for fiscal policies,” the authors said in the study, which was released in conjunction with Brussels-based research group Lisbon Council. “If exit strategies are delayed too long, we risk entering a new boom-bust cycle.”
European Central Bank President Jean-Claude Trichet said on Nov. 5 that the ECB will withdraw some liquidity operations after evidence mounted that the region’s economy is pulling out of the recession. The Bank of England on the same day slowed the pace of bond purchases. Both central banks kept their benchmark interest rates at record lows.
“We must make sure that the progress we see will lead to sustainable growth, not more financially fueled growth,” Michael Heise, chief economist of Munich-based Allianz and principal author of the study, said in a statement. “We must learn the lessons of the past, and not allow another bubble to develop.”
Governments have committed billions of euros to boost the economy, while the ECB is lending banks as much money as they want for up to a year and purchasing covered bonds in an effort to get credit flowing again. The banking industry “remains fragile” and further losses at financial institutions may total 400 billion euros ($596 billion) through next year, the European Commission said last week.
‘Active Consolidation’
The Allianz study forecasts the euro-area economy will expand 2 percent next year, compared with the 0.7 percent growth projected by the commission. Both see a 1.5 percent increase in gross domestic product in 2011.
The authors of the study call for “active consolidation of government expenses” beginning in 2011. Starting that year, state spending “should be held 2 percentage points below nominal GDP growth,” according to the study.
Saturday, November 7, 2009
IMF Says Dollar Funding ‘Carry Trade,’ May Be Still Overvalued
Nov. 8 (Bloomberg) -- The International Monetary Fund said traders are probably using the dollar to fund “carry trades” around the world and the currency may still be overvalued even after its slide this year.
“There are indications that the U.S. dollar is now serving as the funding currency for carry trades,” the IMF said in a report published yesterday. “These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.” While the dollar “has moved closer to medium-run equilibrium,” it is still “on the strong side.”
With investors able to borrow at near-zero interest rates in the U.S., some economists are concerned that markets may become distorted as traders plow those funds into riskier assets. Nouriel Roubini, the economist who forecast the financial crisis in 2006, said Nov. 4 that investors are milking the “mother of all carry trades.”
“U.S. interest rates look to remain near zero through the first half of 2010 at the very least, which provides traders plenty of time to continue with carry trades,” said Boris Schlossberg, director of currency research at the online currency trader GFT Forex in New York. “Labor-market conditions are still very challenging in the U.S., and the rest of the world is improving faster. The dollar remains the weakest link.”
Dollar’s Slide
The dollar has dropped about 13 percent against a basket of currencies from its major trading partners in the past seven months. Meanwhile, the MSCI All-Countries World Index of global equities has gained about two-thirds since March and sugar has soared 90 percent this year.
U.S. Federal Reserve policymakers, at the end of a two-day policy meeting on Nov. 4, reiterated their intention to keep interest rates “exceptionally low” for “an extended period.”
Speculation that the Fed will keep rates on hold into next year was further fueled by U.S. Labor Department figures on Nov. 6 that showed the nation’s unemployment rate jumped to 10.2 percent in October, exceeding 10 percent for the first time since 1983.
In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets. Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 7 percent in South Africa and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.
Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York, said the dollar carry trade is likely to continue in coming months, and he expects the U.S. currency will decline further.
Risk Appetite
“The key wildcard to dollar carry trades is whether people continue to show an appetite for risk,” Chandler said. “That’ll weigh on the dollar.”
The euro’s exchange rate “is on the strong side of its equilibrium,” the Washington-based IMF said.
The fund, which published the report as officials from the Group of 20 nations gathered in St. Andrews, Scotland, also said that China’s yuan is “significantly undervalued.”
The Chinese currency “has depreciated in real effective terms in tandem with the U.S. dollar and remains significantly undervalued from a medium-term perspective,” the IMF said.
China has kept the exchange rate at about 6.83 to the dollar since July 2008, after letting the currency strengthen 21 percent in the previous three years. Appreciation was halted to help sustain exports amid a global recession.
Chinese central bank Governor Zhou Xiaochuan told Bloomberg News on Nov. 6 that “the pressure from the international community to allow yuan appreciation is not that big,” deflecting calls from Europe and Japan to let it rise.
Since President Barack Obama took office this year, “the U.S. hasn’t been as vocal” about the Chinese currency as it was previously, Brown Brothers’ Chandler said.
“There are indications that the U.S. dollar is now serving as the funding currency for carry trades,” the IMF said in a report published yesterday. “These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.” While the dollar “has moved closer to medium-run equilibrium,” it is still “on the strong side.”
With investors able to borrow at near-zero interest rates in the U.S., some economists are concerned that markets may become distorted as traders plow those funds into riskier assets. Nouriel Roubini, the economist who forecast the financial crisis in 2006, said Nov. 4 that investors are milking the “mother of all carry trades.”
“U.S. interest rates look to remain near zero through the first half of 2010 at the very least, which provides traders plenty of time to continue with carry trades,” said Boris Schlossberg, director of currency research at the online currency trader GFT Forex in New York. “Labor-market conditions are still very challenging in the U.S., and the rest of the world is improving faster. The dollar remains the weakest link.”
Dollar’s Slide
The dollar has dropped about 13 percent against a basket of currencies from its major trading partners in the past seven months. Meanwhile, the MSCI All-Countries World Index of global equities has gained about two-thirds since March and sugar has soared 90 percent this year.
U.S. Federal Reserve policymakers, at the end of a two-day policy meeting on Nov. 4, reiterated their intention to keep interest rates “exceptionally low” for “an extended period.”
Speculation that the Fed will keep rates on hold into next year was further fueled by U.S. Labor Department figures on Nov. 6 that showed the nation’s unemployment rate jumped to 10.2 percent in October, exceeding 10 percent for the first time since 1983.
In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets. Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 7 percent in South Africa and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.
Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York, said the dollar carry trade is likely to continue in coming months, and he expects the U.S. currency will decline further.
Risk Appetite
“The key wildcard to dollar carry trades is whether people continue to show an appetite for risk,” Chandler said. “That’ll weigh on the dollar.”
The euro’s exchange rate “is on the strong side of its equilibrium,” the Washington-based IMF said.
The fund, which published the report as officials from the Group of 20 nations gathered in St. Andrews, Scotland, also said that China’s yuan is “significantly undervalued.”
The Chinese currency “has depreciated in real effective terms in tandem with the U.S. dollar and remains significantly undervalued from a medium-term perspective,” the IMF said.
China has kept the exchange rate at about 6.83 to the dollar since July 2008, after letting the currency strengthen 21 percent in the previous three years. Appreciation was halted to help sustain exports amid a global recession.
Chinese central bank Governor Zhou Xiaochuan told Bloomberg News on Nov. 6 that “the pressure from the international community to allow yuan appreciation is not that big,” deflecting calls from Europe and Japan to let it rise.
Since President Barack Obama took office this year, “the U.S. hasn’t been as vocal” about the Chinese currency as it was previously, Brown Brothers’ Chandler said.
Brown Says G-20 Should Consider Tax on Speculation
Nov. 7 (Bloomberg) -- U.K. Prime Minister Gordon Brown said the Group of 20 nations should consider measures such as taxing financial transactions to penalize excessive risk taking and limit the burden on taxpayers of bank failures.
“It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Brown told G-20 finance ministers and central bankers at a meeting today in St. Andrews, Scotland. Tighter capital rules and pooled bank resolution funds could also be considered, he said.
The comments add momentum to a global debate on how governments should rein in markets after bad bets almost toppled the global financial system, triggering a worldwide recession and a string of government bailouts. French President Nicolas Sarkozy and Adair Turner, chairman of the U.K.’s Financial Services Authority, have both supported a so-called Tobin tax.
Brown, who didn’t say whether he’d endorse a levy, said any policy would need to be implemented by all financial centers including those in the Middle East, Asia and Switzerland. He also acknowledged the “enormous and difficult” issues that need to be overcome to set up a “globally cohesive system.”
The debate over whether to implement a global levy on speculation has mounted in recent months with the G-20 asking the International Monetary Fund in September to study it. Twelve nations including Britain, France, Germany and Brazil agreed last month to set up a panel of economists to research its feasibility.
Currency Trading
Their inspiration is a 1971 proposal by U.S. economist James Tobin to tax currency trading to deter speculation in the wake of the collapse of the Bretton Woods system of pegging exchange rates. Tobin, who died in 2002, won the 1981 Nobel Prize for his work on financial markets.
For Brown, who is trailing in polls less than seven months before the next U.K. election is due, the comments are designed to open a divide with the Conservative opposition. While the Conservatives say the biggest risk to the economy is the government’s record budget deficit, Brown has stepped up his attacks on banks.
Brown and Chancellor of the Exchequer Alistair Darling say loose oversight of the banking industry allowed institutions to take on too much risk, destabilizing the financial system by the time the subprime crisis dried up credit in 2007.
Social Contract
“There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards,” Brown said today. “We need a better economic and social contract to reflect the global responsibilities of financial institutions to society.”
Some G-20 members are already acting alone on trading taxes. Brazil last month imposed a 2 percent tax on foreign purchases of equities and fixed-income securities in a bid to fend off excess speculation.
“Various countries have discussed the measure and are even thinking of adopting it,” Brazilian Finance Minister Guido Mantega said in a Nov. 5 interview with Bloomberg Television.
G-20 finance ministers and central bankers are meeting in the so-called home of golf to hammer out policies that will cement a recovery from the worst global recession since World War II and prevent a repeat of the financial crisis. After channelling more than $500 billion to bail out banks such as Royal Bank of Scotland Group Plc and Citigroup Inc., they’re also looking to impose tougher banking regulations.
Banking Mess
Brown’s speech “clearly opens the door for a financial transactions tax to make the bankers pay for the mess they’ve caused,” said Max Lawson, a policy adviser at aid organization Oxfam International. “There is a real rage against the banks which the prime minister is speaking to. There are big obstacles for such a tax, but this is a big moment.”
A tax of 0.05 percent on financial transactions may raise up to $700 billion a year, according to the WWF, a global environmental pressure group.
The British Bankers’ Association issued a statement saying that regulatory changes must be “properly costed” and the “timetable for change clearly set out.”
Economists are divided over whether any tax on financial transactions could work.
Former European Central Bank Chief Economist Otmar Issing said Oct. 26 that talk of such a measure is “like the Loch Ness monster; it appears once or twice a year, then goes away,” arguing it could never be imposed across borders and investors would circumnavigate it.
French officials including Sarkozy have suggested a levy on speculation for most of this decade without success.
“It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Brown told G-20 finance ministers and central bankers at a meeting today in St. Andrews, Scotland. Tighter capital rules and pooled bank resolution funds could also be considered, he said.
The comments add momentum to a global debate on how governments should rein in markets after bad bets almost toppled the global financial system, triggering a worldwide recession and a string of government bailouts. French President Nicolas Sarkozy and Adair Turner, chairman of the U.K.’s Financial Services Authority, have both supported a so-called Tobin tax.
Brown, who didn’t say whether he’d endorse a levy, said any policy would need to be implemented by all financial centers including those in the Middle East, Asia and Switzerland. He also acknowledged the “enormous and difficult” issues that need to be overcome to set up a “globally cohesive system.”
The debate over whether to implement a global levy on speculation has mounted in recent months with the G-20 asking the International Monetary Fund in September to study it. Twelve nations including Britain, France, Germany and Brazil agreed last month to set up a panel of economists to research its feasibility.
Currency Trading
Their inspiration is a 1971 proposal by U.S. economist James Tobin to tax currency trading to deter speculation in the wake of the collapse of the Bretton Woods system of pegging exchange rates. Tobin, who died in 2002, won the 1981 Nobel Prize for his work on financial markets.
For Brown, who is trailing in polls less than seven months before the next U.K. election is due, the comments are designed to open a divide with the Conservative opposition. While the Conservatives say the biggest risk to the economy is the government’s record budget deficit, Brown has stepped up his attacks on banks.
Brown and Chancellor of the Exchequer Alistair Darling say loose oversight of the banking industry allowed institutions to take on too much risk, destabilizing the financial system by the time the subprime crisis dried up credit in 2007.
Social Contract
“There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards,” Brown said today. “We need a better economic and social contract to reflect the global responsibilities of financial institutions to society.”
Some G-20 members are already acting alone on trading taxes. Brazil last month imposed a 2 percent tax on foreign purchases of equities and fixed-income securities in a bid to fend off excess speculation.
“Various countries have discussed the measure and are even thinking of adopting it,” Brazilian Finance Minister Guido Mantega said in a Nov. 5 interview with Bloomberg Television.
G-20 finance ministers and central bankers are meeting in the so-called home of golf to hammer out policies that will cement a recovery from the worst global recession since World War II and prevent a repeat of the financial crisis. After channelling more than $500 billion to bail out banks such as Royal Bank of Scotland Group Plc and Citigroup Inc., they’re also looking to impose tougher banking regulations.
Banking Mess
Brown’s speech “clearly opens the door for a financial transactions tax to make the bankers pay for the mess they’ve caused,” said Max Lawson, a policy adviser at aid organization Oxfam International. “There is a real rage against the banks which the prime minister is speaking to. There are big obstacles for such a tax, but this is a big moment.”
A tax of 0.05 percent on financial transactions may raise up to $700 billion a year, according to the WWF, a global environmental pressure group.
The British Bankers’ Association issued a statement saying that regulatory changes must be “properly costed” and the “timetable for change clearly set out.”
Economists are divided over whether any tax on financial transactions could work.
Former European Central Bank Chief Economist Otmar Issing said Oct. 26 that talk of such a measure is “like the Loch Ness monster; it appears once or twice a year, then goes away,” arguing it could never be imposed across borders and investors would circumnavigate it.
French officials including Sarkozy have suggested a levy on speculation for most of this decade without success.
Friday, November 6, 2009
Asia Currencies Make Gains, Led by Won, Peso on U.S. Recovery
Nov. 7 (Bloomberg) -- Asian currencies rose this week, paced by South Korea’s won and the Philippine peso, as signs the U.S. economy is recovering from a recession spurred risk-taking.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed after data showed fewer U.S. jobless claims than economists forecast. Indonesia’s rupiah gained on speculation investors will favor higher-yielding assets after the U.S. Federal Reserve repeated it will keep interest rates near zero for “an extended period.” Bank Indonesia’s benchmark rate is 6.5 percent.
“The initial claims figure gave hope that unemployment won’t be so grim, that the fundamental picture is still showing improvement,” said David Cohen, an economist at Action Economics in Singapore. “The Fed were cautious about the risks to the sustained recovery, but so far the data from Asia, including Korea, have been encouraging.”
The won climbed 1.3 percent to 1,167.45 per dollar, according to data compiled by Bloomberg. The Philippine peso gained 0.8 percent to 47.205 and the rupiah strengthened 1.3 percent to 9,460. The Asia Dollar Index advanced 0.6 percent and the MSCI Asia-Pacific Index of shares fell 0.1 percent.
U.S. initial jobless claims dropped by 20,000 to 512,000 in the week ended Oct. 31, the fewest since January, the government reported Nov. 5. The Institute for Supply Management’s factory index rose to a three-year high last month, exceeding all 70 estimates in a Bloomberg survey of economists before the data was released Nov. 2.
Investors should buy won as Korea’s recovery gathers pace, attracting foreign investment fueled by “easy liquidity conditions,” RBC Capital Markets wrote in a note on Nov. 5.
Taiwan Dollar
Taiwan’s dollar rose after a central bank report showed foreign-exchange reserves climbed for a 12th month in October. It strengthened 0.1 percent in the week to NT$32.509.
“There’re more people selling U.S. dollars,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan. “Foreign-exchange reserves rose, which means there were fund inflows and the value of the Taiwan dollar will rise.”
Taiwan’s foreign-exchange reserves, the world’s fourth largest, rose 2.7 percent to $341.2 billion last month, the central bank reported on Nov. 5. A Nov. 9 government report will show exports fell 7.2 percent from a year earlier in October, the least in 13 months, a Bloomberg survey showed.
Overseas investors bought $10.8 billion more Taiwan shares than they sold this year, helping lift the Taiex stock index 63 percent and the local currency 1 percent. The economy may return to growth in the October-to-December period after contracting for five straight quarters, the statistics bureau said in August.
Philippine Peso
The Philippine peso yesterday rose to its highest level in more than a week after the Standard & Poor’s 500 index climbed for a fourth day.
“With Wall Street’s rally, clearly, it seems the market’s preference for riskier assets is there,” said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc. “There is no reason for the dollar to remain strong.”
Elsewhere, the Malaysian ringgit strengthened 0.4 percent this week to 3.402 per dollar and the Thai baht rose 0.2 percent to 33.37. China’s yuan was little changed at 6.8273 in the week versus 6.8275 on Oct. 30. India’s rupee gained 0.4 percent to 46.815.
--Judy Chen, Bob Chen. Editors: Sandy Hendry, James Regan.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, climbed after data showed fewer U.S. jobless claims than economists forecast. Indonesia’s rupiah gained on speculation investors will favor higher-yielding assets after the U.S. Federal Reserve repeated it will keep interest rates near zero for “an extended period.” Bank Indonesia’s benchmark rate is 6.5 percent.
“The initial claims figure gave hope that unemployment won’t be so grim, that the fundamental picture is still showing improvement,” said David Cohen, an economist at Action Economics in Singapore. “The Fed were cautious about the risks to the sustained recovery, but so far the data from Asia, including Korea, have been encouraging.”
The won climbed 1.3 percent to 1,167.45 per dollar, according to data compiled by Bloomberg. The Philippine peso gained 0.8 percent to 47.205 and the rupiah strengthened 1.3 percent to 9,460. The Asia Dollar Index advanced 0.6 percent and the MSCI Asia-Pacific Index of shares fell 0.1 percent.
U.S. initial jobless claims dropped by 20,000 to 512,000 in the week ended Oct. 31, the fewest since January, the government reported Nov. 5. The Institute for Supply Management’s factory index rose to a three-year high last month, exceeding all 70 estimates in a Bloomberg survey of economists before the data was released Nov. 2.
Investors should buy won as Korea’s recovery gathers pace, attracting foreign investment fueled by “easy liquidity conditions,” RBC Capital Markets wrote in a note on Nov. 5.
Taiwan Dollar
Taiwan’s dollar rose after a central bank report showed foreign-exchange reserves climbed for a 12th month in October. It strengthened 0.1 percent in the week to NT$32.509.
“There’re more people selling U.S. dollars,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan. “Foreign-exchange reserves rose, which means there were fund inflows and the value of the Taiwan dollar will rise.”
Taiwan’s foreign-exchange reserves, the world’s fourth largest, rose 2.7 percent to $341.2 billion last month, the central bank reported on Nov. 5. A Nov. 9 government report will show exports fell 7.2 percent from a year earlier in October, the least in 13 months, a Bloomberg survey showed.
Overseas investors bought $10.8 billion more Taiwan shares than they sold this year, helping lift the Taiex stock index 63 percent and the local currency 1 percent. The economy may return to growth in the October-to-December period after contracting for five straight quarters, the statistics bureau said in August.
Philippine Peso
The Philippine peso yesterday rose to its highest level in more than a week after the Standard & Poor’s 500 index climbed for a fourth day.
“With Wall Street’s rally, clearly, it seems the market’s preference for riskier assets is there,” said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc. “There is no reason for the dollar to remain strong.”
Elsewhere, the Malaysian ringgit strengthened 0.4 percent this week to 3.402 per dollar and the Thai baht rose 0.2 percent to 33.37. China’s yuan was little changed at 6.8273 in the week versus 6.8275 on Oct. 30. India’s rupee gained 0.4 percent to 46.815.
--Judy Chen, Bob Chen. Editors: Sandy Hendry, James Regan.
Thursday, November 5, 2009
Global Stocks May Fall as U.S. Yields Rise: Technical Analysis
Nov. 6 (Bloomberg) -- Global stocks may be headed for a “correction” as an increase in U.S. 10-year yields prompts a reduction of carry trades, according to Citigroup Inc.
The yield on 10-year government bonds climbed 37 basis points from a July 31 low to Aug. 8. Using that range, the resistance level stands at 3.55 percent from a low of 3.18 percent on Oct. 1, said Yutaka Yoshino, chief technical analyst at Citigroup in Tokyo, who uses the Japanese technical analysis method of “ichimoku kinko,” which looks at wave patterns and repeating trends. Yields move inversely to bond prices and 1 basis point is equal to 0.01 percentage point.
“If we pass that 3.55 level on the yield, we stop being in a rebound phase and enter into a rising trend,” said Yoshino. “Inflation concerns are starting to creep in and the Federal Reserve has no control over long-term interest rates.”
The yield on the 10-year note finished at 3.53 percent yesterday and will keep rising should it break above the resistance level, Yoshino said. Rising U.S. interest rates mean investors can’t borrow as cheaply in dollars to fund purchases of higher-yielding assets including stocks, a strategy known as a carry trade, he said.
The Dow Jones Industrial Average could decline 14 percent to as low as 8,600 and the Nikkei 225 Stock Average may slide 13 percent to 8,450, he said.
Fed officials said on Nov. 4 they’re more optimistic about the economic outlook and maintained a commitment to keeping interest rates near zero for an “extended period.” The central bank specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.
Ichimoku kinko, a strategy developed by a Japanese journalist prior to World War II, translates as “one glance equilibrium chart” because of the cloud-like patterns formed by trend lines that make it easy to understand at a glance. The style of analysis is similar to the Elliott Wave theory developed by accountant Ralph Nelson and popularized by Robert Prechter.
Technical analysts make predictions based on patterns in price charts and market data.
The yield on 10-year government bonds climbed 37 basis points from a July 31 low to Aug. 8. Using that range, the resistance level stands at 3.55 percent from a low of 3.18 percent on Oct. 1, said Yutaka Yoshino, chief technical analyst at Citigroup in Tokyo, who uses the Japanese technical analysis method of “ichimoku kinko,” which looks at wave patterns and repeating trends. Yields move inversely to bond prices and 1 basis point is equal to 0.01 percentage point.
“If we pass that 3.55 level on the yield, we stop being in a rebound phase and enter into a rising trend,” said Yoshino. “Inflation concerns are starting to creep in and the Federal Reserve has no control over long-term interest rates.”
The yield on the 10-year note finished at 3.53 percent yesterday and will keep rising should it break above the resistance level, Yoshino said. Rising U.S. interest rates mean investors can’t borrow as cheaply in dollars to fund purchases of higher-yielding assets including stocks, a strategy known as a carry trade, he said.
The Dow Jones Industrial Average could decline 14 percent to as low as 8,600 and the Nikkei 225 Stock Average may slide 13 percent to 8,450, he said.
Fed officials said on Nov. 4 they’re more optimistic about the economic outlook and maintained a commitment to keeping interest rates near zero for an “extended period.” The central bank specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.
Ichimoku kinko, a strategy developed by a Japanese journalist prior to World War II, translates as “one glance equilibrium chart” because of the cloud-like patterns formed by trend lines that make it easy to understand at a glance. The style of analysis is similar to the Elliott Wave theory developed by accountant Ralph Nelson and popularized by Robert Prechter.
Technical analysts make predictions based on patterns in price charts and market data.
RBA Says Australian GDP to Grow Faster, Rates to Rise
Nov. 6 (Bloomberg) -- Australia’s central bank said the nation’s economy will expand at more than three times the pace forecast in August, and signaled it will continue to lead the world in raising interest rates.
“A further gradual lessening of monetary stimulus is likely to be required over time,” the Reserve Bank said in Sydney today. Gross domestic product will rise 1.75 percent this year and 3.25 percent in 2010, the bank said. Three months ago, it forecast gains of 0.5 percent and 2.25 percent respectively.
Governor Glenn Stevens this week became the first central banker to raise borrowing costs twice this year, citing a rebound in consumer confidence and strengthening Chinese demand for exports, which rose in September by the most in almost a year. Most economists surveyed by Bloomberg expect Stevens will increase the benchmark rate by another quarter point next month.
The economy will continue its expansion in 2011 and 2012 as companies boost investment in resources, including Western Australia’s A$43 billion ($39 billion) Gorgon liquefied natural gas project, the bank said in today’s quarterly monetary policy statement.
“Growth in business investment and exports is expected to be strong, underpinned by the ongoing expansion of the resources sector,” the bank said. “The outlook for Australia’s terms of trade has also improved, with some increase now expected over the next year or two.”
The Australian dollar traded at 91.11 U.S. cents at 11:32 a.m. in Sydney from 91.01 cents before the statement was released. The two-year government bond yield was little changed at 4.66 percent.
Government Stimulus
Stevens and his board raised the overnight cash rate target by a quarter percentage point in October and this week to 3.5 percent, and signaled further “gradual” increases.
The economy is growing faster and generating more jobs than the government and central bank forecast earlier this year, helped by Prime Minister Kevin Rudd’s decision to distribute A$20 billion in cash to households. He is also spending another A$22 billion updating roads, railways and schools.
Core inflation is forecast to slow to 2.25 percent in 2010 from 3.25 percent in 2009, the bank said. Policy makers aim to keep inflation between 2 percent and 3 percent on average.
The headline consumer price index, which includes more volatile prices such as gasoline, will hold within that target range through to the June quarter of 2012.
Slower wages growth and falling costs for imported goods because of the recent gain in the Australian dollar “suggest that a further moderation in underlying inflation is likely over the period ahead,” today’s report said.
Currency Parity
Speculation that Stevens will continue raising borrowing costs, as counterparts in the U.S., Europe and the U.K. to keep their own benchmark rates at historic lows, has pushed Australia’s currency toward parity with the U.S. dollar.
Australia’s currency will trade for 1 U.S. dollar next year, according to forecasters at Citigroup Inc., Calyon, Barclays Capital and National Australia Bank Ltd., implying an additional 10 percent gain. Hedge funds and other large traders last month had more bets than at any time since July 15, 2008, that the rally will continue, data from the Washington-based Commodity Futures Trading Commission show.
Traders are betting there is a 60 percent chance policy makers will increase the key rate by another quarter point on Dec. 1, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 6:20 a.m. today. That would be the first time in history the bank has raised borrowing costs at three successive meetings.
Rates Low
“The cash rate remains at a low level,” today’s statement said.
GDP will rise 3.25 percent in 2011 and 3.5 percent in the year through June 30, 2012, according to today’s forecasts, which the bank said it prepared using the assumption that the benchmark lending rate “increases gradually.”
“Conditions in the global and Australian economies are significantly better than was expected when the board lowered the cash rate to 3 percent,” a half-century low, in April, today’s statement said.
‘The Australian economy is operating with less spare capacity than earlier thought likely, and the outlook for the next few years has improved,’’ the bank added.
While employment growth is expected “to be subdued” over the next couple of quarters, before accelerating in 2010, the outlook for the labor market has “improved” since the bank’s August policy statement. The bank didn’t provide specific forecasts for the unemployment rate, which unexpectedly fell in September for the first time in five months, declining to 5.7 percent from 5.8 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
“A further gradual lessening of monetary stimulus is likely to be required over time,” the Reserve Bank said in Sydney today. Gross domestic product will rise 1.75 percent this year and 3.25 percent in 2010, the bank said. Three months ago, it forecast gains of 0.5 percent and 2.25 percent respectively.
Governor Glenn Stevens this week became the first central banker to raise borrowing costs twice this year, citing a rebound in consumer confidence and strengthening Chinese demand for exports, which rose in September by the most in almost a year. Most economists surveyed by Bloomberg expect Stevens will increase the benchmark rate by another quarter point next month.
The economy will continue its expansion in 2011 and 2012 as companies boost investment in resources, including Western Australia’s A$43 billion ($39 billion) Gorgon liquefied natural gas project, the bank said in today’s quarterly monetary policy statement.
“Growth in business investment and exports is expected to be strong, underpinned by the ongoing expansion of the resources sector,” the bank said. “The outlook for Australia’s terms of trade has also improved, with some increase now expected over the next year or two.”
The Australian dollar traded at 91.11 U.S. cents at 11:32 a.m. in Sydney from 91.01 cents before the statement was released. The two-year government bond yield was little changed at 4.66 percent.
Government Stimulus
Stevens and his board raised the overnight cash rate target by a quarter percentage point in October and this week to 3.5 percent, and signaled further “gradual” increases.
The economy is growing faster and generating more jobs than the government and central bank forecast earlier this year, helped by Prime Minister Kevin Rudd’s decision to distribute A$20 billion in cash to households. He is also spending another A$22 billion updating roads, railways and schools.
Core inflation is forecast to slow to 2.25 percent in 2010 from 3.25 percent in 2009, the bank said. Policy makers aim to keep inflation between 2 percent and 3 percent on average.
The headline consumer price index, which includes more volatile prices such as gasoline, will hold within that target range through to the June quarter of 2012.
Slower wages growth and falling costs for imported goods because of the recent gain in the Australian dollar “suggest that a further moderation in underlying inflation is likely over the period ahead,” today’s report said.
Currency Parity
Speculation that Stevens will continue raising borrowing costs, as counterparts in the U.S., Europe and the U.K. to keep their own benchmark rates at historic lows, has pushed Australia’s currency toward parity with the U.S. dollar.
Australia’s currency will trade for 1 U.S. dollar next year, according to forecasters at Citigroup Inc., Calyon, Barclays Capital and National Australia Bank Ltd., implying an additional 10 percent gain. Hedge funds and other large traders last month had more bets than at any time since July 15, 2008, that the rally will continue, data from the Washington-based Commodity Futures Trading Commission show.
Traders are betting there is a 60 percent chance policy makers will increase the key rate by another quarter point on Dec. 1, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 6:20 a.m. today. That would be the first time in history the bank has raised borrowing costs at three successive meetings.
Rates Low
“The cash rate remains at a low level,” today’s statement said.
GDP will rise 3.25 percent in 2011 and 3.5 percent in the year through June 30, 2012, according to today’s forecasts, which the bank said it prepared using the assumption that the benchmark lending rate “increases gradually.”
“Conditions in the global and Australian economies are significantly better than was expected when the board lowered the cash rate to 3 percent,” a half-century low, in April, today’s statement said.
‘The Australian economy is operating with less spare capacity than earlier thought likely, and the outlook for the next few years has improved,’’ the bank added.
While employment growth is expected “to be subdued” over the next couple of quarters, before accelerating in 2010, the outlook for the labor market has “improved” since the bank’s August policy statement. The bank didn’t provide specific forecasts for the unemployment rate, which unexpectedly fell in September for the first time in five months, declining to 5.7 percent from 5.8 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
E.U. Finds Trade Barriers Rising Since Global Crisis
BRUSSELS — European exporters have faced more than 220 new and restrictive trade measures since the start of the global economic crisis, but a “protectionist worst-case scenario has been avoided,” according to a report due to be published Friday.
The document from the European Union’s trade commissioner, Catherine Ashton, says that in the 12 months since October 2008, “roughly 223” measures had been introduced by the E.U.’s trading partners or were under consideration, with Russia and Argentina responsible for the most.
However, the report says there is no sign of the spiral of protectionism that some had feared when the worldwide downturn took hold last year.
“Although, new trade-restrictive and distortive policy initiatives have been implemented since the start of the crisis,” the document says, “a widespread and systemic escalation of protectionism has been prevented.”
“Proliferation of the kind of beggar-thy-neighbor protectionist policies of the 1930s has been prevented,” adds the document, which was reviewed by the International Herald Tribune. “The current multilaterally based world trade system seems to have passed one of the most serious stress tests in its entire history.”
Global trade volumes in August 2009 were 18 percent below their 2008 peak but the report concludes that this slump was caused by the reaction to the financial crisis rather than protectionism.
The E.U. says that the commitments of Group of 20 leaders to defend free trade have sent an important signal. However, the range of restrictive measures reported include classical tariff increases, import and export bans or ceilings, non-tariff barriers and government procurement and investment measures which discriminate against foreign companies. Classical barriers alone potentially affect roughly 5 percent of E.U. exports.
And the document warns that some of the measures will remain in place as the global economy recovers — especially in countries that have not acceded to the World Trade Organization.
Russia and Belarus, which are among the nations still outside the W.T.O. framework, “are among the countries that have used border measures more widely.”
Argentina, together with Russia, has “yet again introduced the majority of new potentially trade-restrictive measures,” the document states.
Argentina and Indonesia have made much use of the “flexibility” offered by W.T.O. rules to raise applied tariffs up to their maximum levels.
Mexico, Vietnam, Paraguay, Egypt, and Brazil “have also taken advantage of this policy space but they have done so in a more ‘selective’ fashion,” the report adds.
For the United States, one potentially trade-distorting measure is listed: the Foreign Manufacturers Legal Accountability Act of 2009. The report says that this law aims to protect U.S. consumers and businesses from injuries caused by defective products manufactured abroad.
Four are listed as under consideration, including one draft bill that risks granting “unfair tax disadvantages” to subsidiaries of European companies in the United States in the insurance sector.
The document from the European Union’s trade commissioner, Catherine Ashton, says that in the 12 months since October 2008, “roughly 223” measures had been introduced by the E.U.’s trading partners or were under consideration, with Russia and Argentina responsible for the most.
However, the report says there is no sign of the spiral of protectionism that some had feared when the worldwide downturn took hold last year.
“Although, new trade-restrictive and distortive policy initiatives have been implemented since the start of the crisis,” the document says, “a widespread and systemic escalation of protectionism has been prevented.”
“Proliferation of the kind of beggar-thy-neighbor protectionist policies of the 1930s has been prevented,” adds the document, which was reviewed by the International Herald Tribune. “The current multilaterally based world trade system seems to have passed one of the most serious stress tests in its entire history.”
Global trade volumes in August 2009 were 18 percent below their 2008 peak but the report concludes that this slump was caused by the reaction to the financial crisis rather than protectionism.
The E.U. says that the commitments of Group of 20 leaders to defend free trade have sent an important signal. However, the range of restrictive measures reported include classical tariff increases, import and export bans or ceilings, non-tariff barriers and government procurement and investment measures which discriminate against foreign companies. Classical barriers alone potentially affect roughly 5 percent of E.U. exports.
And the document warns that some of the measures will remain in place as the global economy recovers — especially in countries that have not acceded to the World Trade Organization.
Russia and Belarus, which are among the nations still outside the W.T.O. framework, “are among the countries that have used border measures more widely.”
Argentina, together with Russia, has “yet again introduced the majority of new potentially trade-restrictive measures,” the document states.
Argentina and Indonesia have made much use of the “flexibility” offered by W.T.O. rules to raise applied tariffs up to their maximum levels.
Mexico, Vietnam, Paraguay, Egypt, and Brazil “have also taken advantage of this policy space but they have done so in a more ‘selective’ fashion,” the report adds.
For the United States, one potentially trade-distorting measure is listed: the Foreign Manufacturers Legal Accountability Act of 2009. The report says that this law aims to protect U.S. consumers and businesses from injuries caused by defective products manufactured abroad.
Four are listed as under consideration, including one draft bill that risks granting “unfair tax disadvantages” to subsidiaries of European companies in the United States in the insurance sector.
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