By Theresa Barraclough
July 26 (Bloomberg) -- Japan's five-year government notes completed a weekly decline for the first time since July 4 as stock indexes rallied, reducing demand for the security of debt.
Five-year yields this week reached the highest since July 9 after the Nikkei 225 Stock Average completed its biggest weekly advance in five months as crude oil prices declined. Bonds also fell after U.S. lawmakers approved a rescue plan for the nation's two largest mortgage-finance companies, easing concerns that financial-market losses will widen.
``In the first half of this week, the financial uncertainty of the financial system peaked out'' weighing on bonds, said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. in Tokyo and the top-rated debt analyst in Japan according to Nikkei Veritas. The bond ``market corresponds to the other market and in this case it's the equity market.''
The yield on the 1.3 percent note due June 2013 rose 2.5 basis points this week to 1.14 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.119 yen to 100.741 yen. The yield reached as high as 1.22 percent on July 24. Ten-year yields were unchanged at 1.57 percent on the week. A basis point is 0.01 percentage point.
The Nikkei 225 advanced 4.2 percent this week, the biggest weekly rally since Feb. 15. Crude oil futures fell by about 2 percent this week to $125.84 a barrel.
Japan's bonds often move in the opposite direction to stocks. Benchmark 10-year yields had a correlation of 0.78 with the Nikkei 225 in the past three weeks, according to data compiled by Bloomberg. A value of 1 would mean the two moved in lockstep.
Fannie, Freddie
Ten-year bonds fell for three straight days this week after U.S. lawmakers approved a bill that gives Treasury Secretary Henry Paulson authority to bail out Fannie Mae and Freddie Mac, and provides for a federal agency to insure up to $300 billion of refinanced home loans for struggling owners.
The demand for bonds was limited this week on speculation the Bank of Japan will keep interest rates on hold amid signs the global economy is slowing. Five-year yields lost 7.5 basis points to 1.14 percent yesterday.
``There is a possibility that Japan's economy will slip into a light recession,'' Bank of Japan board member Atsushi Mizuno said on July 24 at a news conference.
Japan's exports fell for the first time in more than four years as demand for cars and electronics cooled, the Finance Ministry said on July 24.
The Ifo institute's German business confidence index slipped by the most since the Sept. 11 terrorist attacks, a report showed on July 24. The National Association of Realtors said U.S. home resales dropped to a decade low.
Growth Priority
The BOJ's ``priority is given to growth,'' said Alessio Caldarera, a fixed-income strategist at BNP Paribas Securities Japan Ltd. in Tokyo. ``As corporate profits are still being squeezed, there isn't going to be a chance for the BOJ to hike in reaction to the higher CPI.''
There is an 18 percent chance the central bank will raise its target rate to 0.75 percent from 0.5 percent by Dec. 31, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. The odds were as high as 92 percent on June 11.
The drop in bonds was also driven by concern accelerating inflation will erode the value of the fixed interest debt pays.
Accelerating Inflation
Consumer prices that exclude fresh food rose 1.9 percent in June from a year earlier after climbing 1.5 percent in May, the statistics bureau said yesterday in Tokyo.
The inflation rate exceeded the benchmark 10-year yield for the first time since 1998. Ten-year yields are 33 basis points lower than the index, compared with last year's average of 170 basis points above, Bloomberg data show.
``This could be a turning point for investors and they will think that higher prices are bad for economic growth,'' said Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of the nation's largest bank by market value. ``This is the same thing as what happened in 1998, when the government introduced higher consumption tax, but this time its simply that Japanese consumer are losing purchasing power to the overseas.''
To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.
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Saturday, July 26, 2008
Asia Stocks Rise Most in Two Months; Bank Losses Cap Gains
By Richard Frost and Shani Raja
July 26 (Bloomberg) -- Asian stocks climbed the most in two months this week as commodities prices fell. Gains were capped after National Australia Bank Ltd. said credit losses may surge and Samsung Electronic Ltd.'s profit missed estimates.
Cathay Pacific Airways Ltd. rose as oil dropped for a second week. Bridgestone Corp., the world's largest tiremaker by sales, surged the most since March after rubber traded near a seven-week low. National Australia, the country's biggest bank, and Australian & New Zealand Banking Group Ltd. plunged yesterday by the most since the October 1987 stock market crash. Samsung, Asia's largest maker of flat screens, tumbled in Seoul.
``Volatility is high; one day investors feel good and the next day you get a writedown,'' said Nader Naeimi, a Sydney- based senior investment strategist at AMP Capital investors, which manages about $108 billion. ``There's a lack of trust.''
The MSCI Asia Pacific Index rose 3.0 percent to 132.98, the biggest weekly advance since the five days to May 16. Nine of the index's 10 industry groups climbed this week, except for energy shares.
Japan's Nikkei 225 Stock Average added 4.2 percent, snapping a six-week losing streak. Japan was shut on July 21 for a holiday. All other Asian benchmark indexes rose.
MSCI's Asian index rallied 5.9 percent in the first four days of the week, after closing the previous week at its lowest level since October 2006, as concerns eased that bank losses will expand and oil tumbled from a record. The gauge fell 2.5 percent yesterday, the most in six weeks, on renewed speculation losses tied to U.S. mortgages will widen after a report showed sales of previously owned homes slipped to the lowest level in a decade.
Bear Market
The benchmark index is down 15 percent this year, part of a rout that has erased more than $13 trillion from equities worldwide since October as accelerating inflation and $468 billion in writedowns and credit-related losses threaten to push the U.S. into recession.
Except for Canada, all of the 23 developed markets in the MSCI World index experienced bear market plunges of at least 20 percent this year.
Cathay Pacific, Hong Kong's biggest airline, gained 2.4 percent to HK$15.50, capping a three-week, 11 percent advance. China Southern Airlines Co., the nation's largest carrier, jumped 13 percent to HK$3.60, its biggest advance since the five days to April 25.
Oil prices declined 4.4 percent this week, after dropping as much as 16 percent below its July 11 record of $147.27, on signs of falling demand in the U.S.
Oil Producers
Woodside Petroleum Ltd., Australia's second-largest oil and gas producer, fell 5.9 percent to A$52.21, capping a 22 percent, four-week slump. The stock is still up 3.6 percent for the year, compared with a 22 percent decline on Australia's benchmark S&P/ASX 200 Index.
Inpex Holdings Inc., the biggest Japanese oil explorer, dropped 6.6 percent to 1.056 million yen.
A measure of energy stocks has lost 9.2 percent this month, the most among the 10 industry groups, as the stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption.
Bridgestone gained 6 percent to 1,809 yen, the biggest advance in four months, while Yokohama Rubber Co., Japan's second-largest tiremaker, added 9.2 percent to 519 yen, the most since April 2004, after natural rubber futures in Tokyo dropped to the lowest in seven weeks on July 24. JSR Corp., a maker of synthetic rubber, gained 4.6 percent to 1,922 yen, after saying profit increased on higher product prices.
Credit Losses
National Australia dropped 1.7 percent to A$26.56, after slumping 13 percent yesterday. The Melbourne-based company said it has set aside funds amounting to 90 percent of the value of its A$1.2 billion ($1.1 billion) of collateralized debt obligations. National Australia took a A$181 million provision in March.
Australia & New Zealand Banking, which increased bad-debt provisions by 71 percent in April, lost 2.5 percent to A$17.75, after plunging 8.7 percent yesterday.
Concern that banks may report wider credit-market losses led to a 4 percent decline in Asian financial shares yesterday. Bank stocks advanced 9 percent in the previous four days after Citigroup Inc. and JPMorgan Chase & Co. reported results that topped analyst estimates and Deutsche Bank AG said financial companies are overcoming credit losses.
Samsung lost 1 percent to 576,000 won. The stock tumbled 6.2 percent yesterday, the most since June 2004, after net income in the second quarter climbed 51 percent to 2.14 trillion won ($2.1 billion), missing the 2.36 trillion won median estimate in a Bloomberg analyst survey. Profit from chips unexpectedly fell and losses at the consumer electronics division more than doubled.
To contact the reporters for this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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July 26 (Bloomberg) -- Asian stocks climbed the most in two months this week as commodities prices fell. Gains were capped after National Australia Bank Ltd. said credit losses may surge and Samsung Electronic Ltd.'s profit missed estimates.
Cathay Pacific Airways Ltd. rose as oil dropped for a second week. Bridgestone Corp., the world's largest tiremaker by sales, surged the most since March after rubber traded near a seven-week low. National Australia, the country's biggest bank, and Australian & New Zealand Banking Group Ltd. plunged yesterday by the most since the October 1987 stock market crash. Samsung, Asia's largest maker of flat screens, tumbled in Seoul.
``Volatility is high; one day investors feel good and the next day you get a writedown,'' said Nader Naeimi, a Sydney- based senior investment strategist at AMP Capital investors, which manages about $108 billion. ``There's a lack of trust.''
The MSCI Asia Pacific Index rose 3.0 percent to 132.98, the biggest weekly advance since the five days to May 16. Nine of the index's 10 industry groups climbed this week, except for energy shares.
Japan's Nikkei 225 Stock Average added 4.2 percent, snapping a six-week losing streak. Japan was shut on July 21 for a holiday. All other Asian benchmark indexes rose.
MSCI's Asian index rallied 5.9 percent in the first four days of the week, after closing the previous week at its lowest level since October 2006, as concerns eased that bank losses will expand and oil tumbled from a record. The gauge fell 2.5 percent yesterday, the most in six weeks, on renewed speculation losses tied to U.S. mortgages will widen after a report showed sales of previously owned homes slipped to the lowest level in a decade.
Bear Market
The benchmark index is down 15 percent this year, part of a rout that has erased more than $13 trillion from equities worldwide since October as accelerating inflation and $468 billion in writedowns and credit-related losses threaten to push the U.S. into recession.
Except for Canada, all of the 23 developed markets in the MSCI World index experienced bear market plunges of at least 20 percent this year.
Cathay Pacific, Hong Kong's biggest airline, gained 2.4 percent to HK$15.50, capping a three-week, 11 percent advance. China Southern Airlines Co., the nation's largest carrier, jumped 13 percent to HK$3.60, its biggest advance since the five days to April 25.
Oil prices declined 4.4 percent this week, after dropping as much as 16 percent below its July 11 record of $147.27, on signs of falling demand in the U.S.
Oil Producers
Woodside Petroleum Ltd., Australia's second-largest oil and gas producer, fell 5.9 percent to A$52.21, capping a 22 percent, four-week slump. The stock is still up 3.6 percent for the year, compared with a 22 percent decline on Australia's benchmark S&P/ASX 200 Index.
Inpex Holdings Inc., the biggest Japanese oil explorer, dropped 6.6 percent to 1.056 million yen.
A measure of energy stocks has lost 9.2 percent this month, the most among the 10 industry groups, as the stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption.
Bridgestone gained 6 percent to 1,809 yen, the biggest advance in four months, while Yokohama Rubber Co., Japan's second-largest tiremaker, added 9.2 percent to 519 yen, the most since April 2004, after natural rubber futures in Tokyo dropped to the lowest in seven weeks on July 24. JSR Corp., a maker of synthetic rubber, gained 4.6 percent to 1,922 yen, after saying profit increased on higher product prices.
Credit Losses
National Australia dropped 1.7 percent to A$26.56, after slumping 13 percent yesterday. The Melbourne-based company said it has set aside funds amounting to 90 percent of the value of its A$1.2 billion ($1.1 billion) of collateralized debt obligations. National Australia took a A$181 million provision in March.
Australia & New Zealand Banking, which increased bad-debt provisions by 71 percent in April, lost 2.5 percent to A$17.75, after plunging 8.7 percent yesterday.
Concern that banks may report wider credit-market losses led to a 4 percent decline in Asian financial shares yesterday. Bank stocks advanced 9 percent in the previous four days after Citigroup Inc. and JPMorgan Chase & Co. reported results that topped analyst estimates and Deutsche Bank AG said financial companies are overcoming credit losses.
Samsung lost 1 percent to 576,000 won. The stock tumbled 6.2 percent yesterday, the most since June 2004, after net income in the second quarter climbed 51 percent to 2.14 trillion won ($2.1 billion), missing the 2.36 trillion won median estimate in a Bloomberg analyst survey. Profit from chips unexpectedly fell and losses at the consumer electronics division more than doubled.
To contact the reporters for this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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Malaysia Bucks Asian Trend of Raising Rates; Focuses on Growth
By Stephanie Phang
July 26 (Bloomberg) -- Malaysia's central bank broke with its Asian neighbors by keeping interest rates unchanged, putting economic growth ahead of fighting the fastest inflation in a quarter century.
Bank Negara Malaysia kept its overnight policy rate unchanged at 3.5 percent for an 18th straight meeting yesterday. The move had been predicted by seven of the 20 economists surveyed by Bloomberg News.
The decision spurred traders to bet the ringgit will weaken over the next 12 months. Malaysia has avoided following Thailand, Indonesia, India, Vietnam and the Philippines in raising borrowing costs this year as the government tries to regain public support after its worst electoral performance in March elections.
``It's a highly risky decision, a decision which could well undermine the credibility of the central bank,'' said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. ``I think the ringgit will sell off, I think bonds will sell off. They've lost credibility in not moving. That will be reflected in the markets.''
Malaysia's currency dropped to its lowest level in more than two weeks yesterday, losing 0.2 percent for the week to 3.2490 per dollar, Bloomberg data showed.
Ringgit to Weaken
Traders abandoned expectations for an appreciation in the ringgit, non-deliverable forwards contracts showed after yesterday's decision. They bet the ringgit will drop to 3.2515 per dollar in a year, versus a bet for an advance to 3.2310 before the policy decision, according to prices by Tullett Prebon Plc. The contracts are agreements in which assets are bought and sold at current prices for future delivery.
``While both the risks to higher inflation and the risks to slower growth have increased, the immediate concern is to avoid a fundamental economic slowdown,'' the central bank said in a statement in Kuala Lumpur. ``The appropriate monetary policy response will be taken'' should price increases spread beyond food and fuel.
Bank Negara yesterday raised its inflation forecast for 2008 for a second time this year, to a range of 5.5 percent to 6 percent from a June estimate of 4.2 percent and a March prediction of as much as 3 percent. The rate decision was two hours late.
It didn't say if it had revised its March forecast for a 5 percent to 6 percent expansion in the $151 billion economy. Growth was 6.3 percent in 2007. Governor Zeti Akhtar Aziz had said earlier the central bank would review the economic growth target yesterday.
`Behind the Curve'
Malaysia's delay in raising borrowing costs risks fueling inflation further, says Lye Thim Loong, who helps oversee about $500 million at Avenue Invest Bhd. in Kuala Lumpur.
``They will really be behind the curve,'' he said. ``At the end of this year they will have wage pressure, and the impact on the economy is far-reaching. They have to do something to cool it off a bit.''
Concerns that inflation will hurt growth and erode investors' returns have added to a slump in Southeast Asia's stocks and bonds. Philippine and Indonesian bonds have lost the most this year among 10 Asian markets tracked by an HSBC Holdings Plc index. Vietnam's key stock index is the world's worst performer in 2008.
Asian central banks need ``decisive tightening'' of monetary policies to combat inflation, and many are too slow to raise borrowing costs, the Asian Development Bank said this week. The Philippine central bank said it is considering further rate increases after successive moves in June and July.
U.S. Slowdown
Still, higher interest rates may cool domestic demand, which the government is relying on for growth as a U.S. slowdown hurts overseas sales.
Malaysia has tried to ease inflation through other measures, including increasing spending on agriculture to boost food supply and loosening import restrictions on steel. Oil has declined 14 percent since reaching a record $147.27 a barrel on July 11.
Inflation accelerated to 7.7 percent last month after Prime Minister Abdullah Ahmad Badawi announced a 41 percent increase in retail gasoline prices in a bid to trim government subsidies that keep pump costs artificially low. Diesel went up 63 percent, and electricity rates rose in July.
``Much of the jump in inflation of late has been due to rising food and energy costs,'' said Azrul Azwar Ahmad Tajudin, an economist at Bank Islam Malaysia Bhd. in Kuala Lumpur. ``If the current runaway inflation is expected to be a transient phenomenon without causing a generalized rise in prices, then raising rates doesn't appear to be an appropriate answer.''
The central bank's overnight policy rate is at the highest since its introduction in April 2004, and, together with Hong Kong's and Thailand's, is the second lowest in Asia according to Bloomberg data.
To contact the reporter on this story: Stephanie Phang in Singapore at sphang@bloomberg.net
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July 26 (Bloomberg) -- Malaysia's central bank broke with its Asian neighbors by keeping interest rates unchanged, putting economic growth ahead of fighting the fastest inflation in a quarter century.
Bank Negara Malaysia kept its overnight policy rate unchanged at 3.5 percent for an 18th straight meeting yesterday. The move had been predicted by seven of the 20 economists surveyed by Bloomberg News.
The decision spurred traders to bet the ringgit will weaken over the next 12 months. Malaysia has avoided following Thailand, Indonesia, India, Vietnam and the Philippines in raising borrowing costs this year as the government tries to regain public support after its worst electoral performance in March elections.
``It's a highly risky decision, a decision which could well undermine the credibility of the central bank,'' said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. ``I think the ringgit will sell off, I think bonds will sell off. They've lost credibility in not moving. That will be reflected in the markets.''
Malaysia's currency dropped to its lowest level in more than two weeks yesterday, losing 0.2 percent for the week to 3.2490 per dollar, Bloomberg data showed.
Ringgit to Weaken
Traders abandoned expectations for an appreciation in the ringgit, non-deliverable forwards contracts showed after yesterday's decision. They bet the ringgit will drop to 3.2515 per dollar in a year, versus a bet for an advance to 3.2310 before the policy decision, according to prices by Tullett Prebon Plc. The contracts are agreements in which assets are bought and sold at current prices for future delivery.
``While both the risks to higher inflation and the risks to slower growth have increased, the immediate concern is to avoid a fundamental economic slowdown,'' the central bank said in a statement in Kuala Lumpur. ``The appropriate monetary policy response will be taken'' should price increases spread beyond food and fuel.
Bank Negara yesterday raised its inflation forecast for 2008 for a second time this year, to a range of 5.5 percent to 6 percent from a June estimate of 4.2 percent and a March prediction of as much as 3 percent. The rate decision was two hours late.
It didn't say if it had revised its March forecast for a 5 percent to 6 percent expansion in the $151 billion economy. Growth was 6.3 percent in 2007. Governor Zeti Akhtar Aziz had said earlier the central bank would review the economic growth target yesterday.
`Behind the Curve'
Malaysia's delay in raising borrowing costs risks fueling inflation further, says Lye Thim Loong, who helps oversee about $500 million at Avenue Invest Bhd. in Kuala Lumpur.
``They will really be behind the curve,'' he said. ``At the end of this year they will have wage pressure, and the impact on the economy is far-reaching. They have to do something to cool it off a bit.''
Concerns that inflation will hurt growth and erode investors' returns have added to a slump in Southeast Asia's stocks and bonds. Philippine and Indonesian bonds have lost the most this year among 10 Asian markets tracked by an HSBC Holdings Plc index. Vietnam's key stock index is the world's worst performer in 2008.
Asian central banks need ``decisive tightening'' of monetary policies to combat inflation, and many are too slow to raise borrowing costs, the Asian Development Bank said this week. The Philippine central bank said it is considering further rate increases after successive moves in June and July.
U.S. Slowdown
Still, higher interest rates may cool domestic demand, which the government is relying on for growth as a U.S. slowdown hurts overseas sales.
Malaysia has tried to ease inflation through other measures, including increasing spending on agriculture to boost food supply and loosening import restrictions on steel. Oil has declined 14 percent since reaching a record $147.27 a barrel on July 11.
Inflation accelerated to 7.7 percent last month after Prime Minister Abdullah Ahmad Badawi announced a 41 percent increase in retail gasoline prices in a bid to trim government subsidies that keep pump costs artificially low. Diesel went up 63 percent, and electricity rates rose in July.
``Much of the jump in inflation of late has been due to rising food and energy costs,'' said Azrul Azwar Ahmad Tajudin, an economist at Bank Islam Malaysia Bhd. in Kuala Lumpur. ``If the current runaway inflation is expected to be a transient phenomenon without causing a generalized rise in prices, then raising rates doesn't appear to be an appropriate answer.''
The central bank's overnight policy rate is at the highest since its introduction in April 2004, and, together with Hong Kong's and Thailand's, is the second lowest in Asia according to Bloomberg data.
To contact the reporter on this story: Stephanie Phang in Singapore at sphang@bloomberg.net
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Asian Currencies: Indian Rupee, Peso Lead Weekly Gain on Oil
By Lilian Karunungan and Anoop Agrawal
July 26 (Bloomberg) -- The Indian rupee and the Philippine peso led a weekly advance among Asian currencies on speculation oil prices near the lowest in seven weeks will reduce demand for dollars from importers.
The rupee posted its best week in four months as exporters may have converted overseas earnings to guard against further currency gains. A stronger rupee erodes revenue from overseas shipments in local-currency terms. Crude oil in New York declined for a third week, helping lower India's import costs.
``The oil slump has been instrumental in subduing dollar demand,'' said P.V. Rao, a currency trader at IndusInd Bank Ltd. in Mumbai. ``Sentiment for the rupee is strengthening and gauging that, exporters are also probably reducing their dollar receivables.''
The rupee gained 1.2 percent this week to 42.265 per dollar in Mumbai, according to data compiled by Bloomberg. It may strengthen to 42.10 next week, Rao said. The Philippine peso rose 0.9 percent from last week to 44.07 in Manila, according to Tullett Prebon Plc.
The Indian currency rallied 1.5 percent on July 23, the biggest gain in more than a decade, on speculation the government will allow more overseas investment in the financial industry after Prime Minister Manmohan Singh survived a confidence vote in parliament the previous day.
Crude oil futures touched $123.50 a barrel on July 24, a seven-week low, down 16 percent from their all-time high of $147.27, Bloomberg data show.
Monthly Gain
The peso was poised for its first monthly gain since February, buoyed by cheaper oil and speculation the central bank will raise interest rates to keep inflation in check.
The currency jumped 1.3 percent on July 23, the most in almost seven years, after Bangko Sentral ng Pilipinas Governor Amando Tetangco said higher borrowing costs ``cannot be ruled out.'' The bank last week raised its benchmark interest rate by a half-percentage point, sparking the peso's first weekly gain in three months.
``The Bangko Sentral has been a little bit aggressive in hiking rates, surprising the market,'' said Ed Garcia, a currency trader at East West Banking Corp. in Manila. ``This week, they've been in the news, saying more aggressive rate hikes are on the table.''
Oil's Decline
Crude oil's decline also helped the peso gain, according to Garcia and Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila.
``The easing pressure on inflation in relation to lower crude prices seems to provide reason for funds to shift to higher-yielding assets,'' Biacora said.
South Korea's won advanced this week on speculation the government bought the currency to help contain inflation.
The won has gained 3.8 percent this month, the best performance among the 16 most-active major currencies as Vice Finance Minister Kim Dong Soo said July 24 that the government will monitor for ``herd behavior'' in the foreign-exchange market. A central bank report yesterday showed the economy maintained its growth in the second quarter as export gains made up for shrinking consumer spending.
``Market players are worried about strong interventions,'' said Jeff Kim, a currency dealer at Korea Exchange Bank in Seoul. ``The government is keen to keep the won stable.''
The won climbed 0.5 percent this week to 1,009.20 in Seoul, from 1,013.80 last week, according to Seoul Money Brokerage Services Ltd. It dropped 0.2 percent yesterday.
Immediate Concern
Malaysia's ringgit snapped a two-week advance as the central bank unexpectedly refrained from increasing interest rates yesterday. ``The immediate concern is to avoid a fundamental economic slowdown,'' Bank Negara Malaysia said in a statement.
Policy makers have kept the benchmark rate on hold at 3.5 percent since April 2006. The currency traded near the lowest level in two weeks after a U.S. report showed home sales fell to the least in 10 years.
The ringgit dropped 0.3 percent this week to 3.25, Bloomberg data showed.
``If you don't hike rates, the ringgit could hit 3.28 or beyond,'' Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur, said before the decision.
Elsewhere, the Singapore dollar fell 0.4 percent this week to S$1.3588 against the U.S. currency. The Taiwan dollar dropped 0.2 percent to NT$30.407 and the Thai baht declined 0.3 percent to 33.42 per dollar. Vietnam's dong was unchanged at 16,795 versus a week ago.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
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July 26 (Bloomberg) -- The Indian rupee and the Philippine peso led a weekly advance among Asian currencies on speculation oil prices near the lowest in seven weeks will reduce demand for dollars from importers.
The rupee posted its best week in four months as exporters may have converted overseas earnings to guard against further currency gains. A stronger rupee erodes revenue from overseas shipments in local-currency terms. Crude oil in New York declined for a third week, helping lower India's import costs.
``The oil slump has been instrumental in subduing dollar demand,'' said P.V. Rao, a currency trader at IndusInd Bank Ltd. in Mumbai. ``Sentiment for the rupee is strengthening and gauging that, exporters are also probably reducing their dollar receivables.''
The rupee gained 1.2 percent this week to 42.265 per dollar in Mumbai, according to data compiled by Bloomberg. It may strengthen to 42.10 next week, Rao said. The Philippine peso rose 0.9 percent from last week to 44.07 in Manila, according to Tullett Prebon Plc.
The Indian currency rallied 1.5 percent on July 23, the biggest gain in more than a decade, on speculation the government will allow more overseas investment in the financial industry after Prime Minister Manmohan Singh survived a confidence vote in parliament the previous day.
Crude oil futures touched $123.50 a barrel on July 24, a seven-week low, down 16 percent from their all-time high of $147.27, Bloomberg data show.
Monthly Gain
The peso was poised for its first monthly gain since February, buoyed by cheaper oil and speculation the central bank will raise interest rates to keep inflation in check.
The currency jumped 1.3 percent on July 23, the most in almost seven years, after Bangko Sentral ng Pilipinas Governor Amando Tetangco said higher borrowing costs ``cannot be ruled out.'' The bank last week raised its benchmark interest rate by a half-percentage point, sparking the peso's first weekly gain in three months.
``The Bangko Sentral has been a little bit aggressive in hiking rates, surprising the market,'' said Ed Garcia, a currency trader at East West Banking Corp. in Manila. ``This week, they've been in the news, saying more aggressive rate hikes are on the table.''
Oil's Decline
Crude oil's decline also helped the peso gain, according to Garcia and Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila.
``The easing pressure on inflation in relation to lower crude prices seems to provide reason for funds to shift to higher-yielding assets,'' Biacora said.
South Korea's won advanced this week on speculation the government bought the currency to help contain inflation.
The won has gained 3.8 percent this month, the best performance among the 16 most-active major currencies as Vice Finance Minister Kim Dong Soo said July 24 that the government will monitor for ``herd behavior'' in the foreign-exchange market. A central bank report yesterday showed the economy maintained its growth in the second quarter as export gains made up for shrinking consumer spending.
``Market players are worried about strong interventions,'' said Jeff Kim, a currency dealer at Korea Exchange Bank in Seoul. ``The government is keen to keep the won stable.''
The won climbed 0.5 percent this week to 1,009.20 in Seoul, from 1,013.80 last week, according to Seoul Money Brokerage Services Ltd. It dropped 0.2 percent yesterday.
Immediate Concern
Malaysia's ringgit snapped a two-week advance as the central bank unexpectedly refrained from increasing interest rates yesterday. ``The immediate concern is to avoid a fundamental economic slowdown,'' Bank Negara Malaysia said in a statement.
Policy makers have kept the benchmark rate on hold at 3.5 percent since April 2006. The currency traded near the lowest level in two weeks after a U.S. report showed home sales fell to the least in 10 years.
The ringgit dropped 0.3 percent this week to 3.25, Bloomberg data showed.
``If you don't hike rates, the ringgit could hit 3.28 or beyond,'' Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur, said before the decision.
Elsewhere, the Singapore dollar fell 0.4 percent this week to S$1.3588 against the U.S. currency. The Taiwan dollar dropped 0.2 percent to NT$30.407 and the Thai baht declined 0.3 percent to 33.42 per dollar. Vietnam's dong was unchanged at 16,795 versus a week ago.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.
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Dollar Rallies on Strong Data, but Watch Out for a Big Week
| Daily Forex Fundamentals | Written by DailyFX | Jul 25 08 20:45 GMT | | |
Dollar Rallies on Strong Data, but Watch Out for a Big Week Stronger economic data has driven the US dollar higher against many of the major currencies. New home sales, consumer confidence and durable goods were all better than the market expected, a sign that the mood of US consumers and businesses may be changing. The number of new homes sold in the month of June was more than the market expected, but the big surprise was the 50,000 unit revision to the past 3 months of data and the reduction in inventory. The numbers indicate that there is still decent activity in the housing market and even though house prices are down on an annualized basis, the median price of a home sold has increased from the prior month. The final University of Michigan consumer confidence numbers also rebounded to a 3 month high after falling to a 28 year low in June while durable goods increased 0.8 percent compared to the market's -0.3 percent forecast. Today's economic releases were almost too good to be true and for that reason, we are cautiously bullish. With that said, it is quite impressive that the US dollar has shaken off risk aversion. The divergence between the price action of the US dollar, the stock market, gold and oil prices indicate that risk aversion yesterday was limited despite the 280 point drop in the Dow. If you recall, the dollar dropped only against the Japanese Yen, and rallied against all of the other G10 currencies. Looking ahead, consumer confidence and house prices are due for release on Tuesday. Given this week's upside surprises, both reports could be dollar bullish. However second quarter GDP, non-farm payrolls and manufacturing ISM which are due at the end of the week could turn things around for the dollar. There have been no end to the layoff announcements and not only do we believe that non-farm payrolls will drop for the seventh straight month, but the job losses could be far worse than the market's -75k forecast. The ECB Has Room to Raise Interest Rates?! The Euro strengthened against the US dollar but the rally has been marginal. Unsurprisingly, inflation last month was hot with import prices rising 1.5 percent in Germany. Despite the recent deterioration in Eurozone economic data, European Central Bank officials have been revving up their degree of hawkishness which leads many people to wonder whether the ECB is digging themselves into a hole. ECB member Liebscher said this morning that the central bank has room to raise interest rates and that it is absolutely necessary to prevent any possibilities of so-called second-round effects. Unlike the Federal Reserve who needs to worry about growth as much as inflation, targeting inflation is the ECB's primary focus. In order to get their attention, we may need to start seeing negative quarterly GDP growth. The central bank only worries about growth when it has fallen below potential. Recent economic data clearly indicates that the region is slowing and if oil prices remain at $125 a barrel, the ECB's concerns about inflation will start to ease, allowing them to become more sensitive to growth. In the week ahead, retail PMI and German unemployment are the big Eurozone releases. We expect this data to continue to be Euro bearish. Meanwhile Switzerland will be releasing the UBS Consumption Index and the KoF report of leading indicators. Is the UK Headed for a Recession? GDP growth slowed in the second quarter, but the British pound managed to rally. The pace of growth has fallen from an annualized rate of 2.3 to 1.6 percent, the lowest level since the first quarter of 2002 and equaling the 15 year low. Weak consumer spending has been the primary drag on the UK economy and given the recent trend of growth, the country could be headed for a recession which is defined by 2 quarters of negative GDP growth. The pace of deterioration in the UK economy has picked up towards the end of the second quarter which implies that unless there is a serious turnaround in the UK economy, the country could be headed for a contraction in the third quarter. We are bearish British pounds and expect the currency to underperform many of the major currencies. Aside from manufacturing PMI and some housing market data, the UK economic calendar is relatively light next week. Oil Prices Continue to Fall, Taking the Canadian Dollar Lower There was no economic data released from the 3 commodity producing countries today, leaving the price action of the currencies dependent upon oil prices. Crude continues to trend lower and ended the day at $123.39 a barrel. This has weighed heavily on the Canadian, Australian and New Zealand dollars. Although oil and gold prices will continue to play a big role in the price action of the commodity currencies, there are a few pieces of key data worth watching next week. New Zealand and Australia both have trade data due for release, Australia also has retail sales while Canada will be releasing their GDP report for the month of May. Yen Crosses Rebound as Risk Appetite Stabilizes The Japanese Yen crosses rebounded today as the stock market and risk appetite stabilizes. Like the rest of the world, Japan has also been hit by inflationary pressures. The latest inflation data shows that core inflation has hit a 10 year high due to rising food and gasoline prices. This has been a huge drag on the Japanese economy and part of the reason why the trade surplus fell for the first time in 5 years last month. The deterioration in trade was significant with the surplus falling a whopping 89 percent in June. Japan is having a particularly tough time with slowing export demand and surging import prices, which is why the BoJ has turned bearish on the economy. There are a lot of Japanese economic data due next week including the jobless rate, retail sales and industrial production.
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Closing Market Recap: Treasuries Sell Off; Loonie Declines and TSX Rallies
Market Updates | Written by CEP News | Jul 25 08 21:13 GMT |
(CEP News) - A trio of better-than-expected U.S. economic data points on Friday boosted confidence and helped reverse Thursday's downtrodden sentiment. Treasuries sold off while U.S. equities are struggling to make gains. In Canada, the loonie fell nearly a half cent but resource stocks led the TSX higher.
U.S. two-year yields were up 9.7 bps to 2.70%, with five-year yields up 11.4 bps to 3.43%, 10-year yields up 9.8 bps to 4.09% and 30-year yields up 8.3 bps to 4.68%.
"The key drivers for the sell-off in North American bond markets earlier today were the surprisingly strong U.S. durable goods orders report and the better than expected print on U.S. new homes sales for June, though the surge in U.S. home foreclosures in Q2 rained somewhat on the parade," wrote Millan Mulraine, economics strategist at TD Securities
The biggest surprise in the U.S. came from the June report on orders for durable goods. Orders for big ticket items were expected to decline 0.3% but climbed 0.8% instead. Excluding the volatile automotive component, orders were up 2.0% against the -0.2% consensus estimate.
Also in June, new home sales were better than forecast, rising from a 17-year low. Sentiment also climbed, as the Reuters/University of Michigan survey for July was revised nearly 5 points higher to 61.2.
There was also a downside surprise as U.S. home foreclosures increased 14% in the second quarter, according to a report issued by RealtyTrac.
According to TradeWeb, U.S. Treasury volume was only about 60% of normal.
In Canada, the federal government announced a $500 million deficit for April and May. Yet Canada's fixed income market still outperformed, despite the possibility of increased debt issuance.
Yields on two-year Canadian government bonds were up 1.4 bps to 3.15%, with five-year yields up 3.7 bps to 3.42%, 10-year yields up 4.6 bps to 3.84% and 30-year yields up 2.8 bps to 4.16%. The Canadian 10-year note is yielding 25.5 bps less than the U.S. 10-year note.
At the Montreal Exchange, 3-month bankers' acceptance futures saw better-than-normal volume as 34,283 contract changed hands. The most active contract was for December where the yield moved up 3 basis points to 3.20%. Futures on the 10-year Government of Canada note traded at average volume with prices falling to 0.41 to 117.31.
While fixed income markets seemed to be surveying the broader economy, equities were reflecting the housing market, according to Larry Levin, president of Secrets of Traders.com.
"The housing woes are indeed the main problem of the equity markets. Because housing prices are going down, banks and investment banks are stuck with hundreds of billions of dollars worth of bad loans. Because the housing prices are dropping, non-stop spending Americans have run out of what they thought was free money," Levin said.
U.S. equities hit session highs shortly after the report on home sales but the optimism was washed away when Standard & Poor's placed Fannie Mae and Freddie Mac subordinated debt and preferred shares on creditwatch for a possible downgrade.
"Both firms face weak earnings due to rising credit expenses. The creditwatch listing on the subordinated debt, preferred stock, and risk-to-the-government ratings underscores the expected higher stress on capital and earnings these firms face during the next several quarters," said S&P credit analysts in a report.
The Dow Jones industrial average closed up 21 points to 11,371, the S&P 500 up 5 points to 1,258 and the Nasdaq up 30 points to 2,311.
Sentiment was much better in Canada where resource stocks rebounded even as crude oil fell to a seven-week low. The oil price decline came after the Organization of Petroleum Exporting Countries increased output by 200,000 barrels a day in July, according to estimates from PetroLogistics Ltd.
Toronto's S&P/TSX composite index closed up 173 points to 13,379. WTI crude oil closed down $2.23 to $123.26.
Although crude prices fell, technical analysts said the ability of the market to hold above $122 per barrel could pave the way for a rebound.
"But just how much can we draw from a drop in crude that still leaves it higher than at any point in history prior to May? Not much," wrote CIBC economist Avery Shenfeld in a note to clients.
In currency markets, the Canadian dollar spent much of the session unchanged but sold off following the deficit announcement from the federal government.
The loonie was down 0.0041 to 0.9813 against the U.S. dollar (1.0189 USD/CAD) and up 0.09 to 105.85 against the yen. On the week, the Canadian dollar fell 0.0127, or 1.3% USD.
The U.S. dollar was up 0.53 to 107.86 against the yen but the Dollar Index was down 0.077 to 72.856.
The euro was up 0.0026 to 1.5703 against the U.S. dollar, up 0.0090 to 1.6000 against the Canadian dollar, down 0.0006 to 0.7886 against the pound sterling and was higher by 1.09 to 169.37 against the yen.
The pound sterling finished the week up 0.0044 to 1.9913 against the U.S. dollar and up 0.0129 to 2.0292 against the Canadian dollar.
The front month gold contract at the Chicago Board of Trade is up $7.90 to $929.70 per ounce.
Overseas, European stock markets closed in negative territory with the Eurostoxx down 3 points to 2,857, the UK FTSE 100 down 10 points to 5353 and the German DAX down 4 points to 6,437.
In Germany, returns on two-year German bonds are down 0.9 bps to 4.42%, with five-year yields up 1.9 bps to 4.53%, 10-year yields up 3.7 bps to 4.60% and 30-year yields up 4.5 bps to 4.87%.
Yields on UK two-year bonds are up 1.5 bps to 4.98%, with five-year yields up 0.9 bps to 4.95%, 10-year yields up 1.7 bps to 4.99% and 30-year yields up 1.7 bps to 4.62%.
In the week ahead, the focus will be on the United States. Advance GDP figures for the second quarter will be released Thursday and are expected to show the economy grew by a healthy rate of 2%. But economist warn that figure has been inflated by government rebate cheques. Afterwards the focus will turn to employment figures on Friday that are expected to show the U.S. unemployment rate rising to 5.6% from 5.5%.
All data taken at 4:39 p.m. EDT.
By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - A trio of better-than-expected U.S. economic data points on Friday boosted confidence and helped reverse Thursday's downtrodden sentiment. Treasuries sold off while U.S. equities are struggling to make gains. In Canada, the loonie fell nearly a half cent but resource stocks led the TSX higher.
U.S. two-year yields were up 9.7 bps to 2.70%, with five-year yields up 11.4 bps to 3.43%, 10-year yields up 9.8 bps to 4.09% and 30-year yields up 8.3 bps to 4.68%.
"The key drivers for the sell-off in North American bond markets earlier today were the surprisingly strong U.S. durable goods orders report and the better than expected print on U.S. new homes sales for June, though the surge in U.S. home foreclosures in Q2 rained somewhat on the parade," wrote Millan Mulraine, economics strategist at TD Securities
The biggest surprise in the U.S. came from the June report on orders for durable goods. Orders for big ticket items were expected to decline 0.3% but climbed 0.8% instead. Excluding the volatile automotive component, orders were up 2.0% against the -0.2% consensus estimate.
Also in June, new home sales were better than forecast, rising from a 17-year low. Sentiment also climbed, as the Reuters/University of Michigan survey for July was revised nearly 5 points higher to 61.2.
There was also a downside surprise as U.S. home foreclosures increased 14% in the second quarter, according to a report issued by RealtyTrac.
According to TradeWeb, U.S. Treasury volume was only about 60% of normal.
In Canada, the federal government announced a $500 million deficit for April and May. Yet Canada's fixed income market still outperformed, despite the possibility of increased debt issuance.
Yields on two-year Canadian government bonds were up 1.4 bps to 3.15%, with five-year yields up 3.7 bps to 3.42%, 10-year yields up 4.6 bps to 3.84% and 30-year yields up 2.8 bps to 4.16%. The Canadian 10-year note is yielding 25.5 bps less than the U.S. 10-year note.
At the Montreal Exchange, 3-month bankers' acceptance futures saw better-than-normal volume as 34,283 contract changed hands. The most active contract was for December where the yield moved up 3 basis points to 3.20%. Futures on the 10-year Government of Canada note traded at average volume with prices falling to 0.41 to 117.31.
While fixed income markets seemed to be surveying the broader economy, equities were reflecting the housing market, according to Larry Levin, president of Secrets of Traders.com.
"The housing woes are indeed the main problem of the equity markets. Because housing prices are going down, banks and investment banks are stuck with hundreds of billions of dollars worth of bad loans. Because the housing prices are dropping, non-stop spending Americans have run out of what they thought was free money," Levin said.
U.S. equities hit session highs shortly after the report on home sales but the optimism was washed away when Standard & Poor's placed Fannie Mae and Freddie Mac subordinated debt and preferred shares on creditwatch for a possible downgrade.
"Both firms face weak earnings due to rising credit expenses. The creditwatch listing on the subordinated debt, preferred stock, and risk-to-the-government ratings underscores the expected higher stress on capital and earnings these firms face during the next several quarters," said S&P credit analysts in a report.
The Dow Jones industrial average closed up 21 points to 11,371, the S&P 500 up 5 points to 1,258 and the Nasdaq up 30 points to 2,311.
Sentiment was much better in Canada where resource stocks rebounded even as crude oil fell to a seven-week low. The oil price decline came after the Organization of Petroleum Exporting Countries increased output by 200,000 barrels a day in July, according to estimates from PetroLogistics Ltd.
Toronto's S&P/TSX composite index closed up 173 points to 13,379. WTI crude oil closed down $2.23 to $123.26.
Although crude prices fell, technical analysts said the ability of the market to hold above $122 per barrel could pave the way for a rebound.
"But just how much can we draw from a drop in crude that still leaves it higher than at any point in history prior to May? Not much," wrote CIBC economist Avery Shenfeld in a note to clients.
In currency markets, the Canadian dollar spent much of the session unchanged but sold off following the deficit announcement from the federal government.
The loonie was down 0.0041 to 0.9813 against the U.S. dollar (1.0189 USD/CAD) and up 0.09 to 105.85 against the yen. On the week, the Canadian dollar fell 0.0127, or 1.3% USD.
The U.S. dollar was up 0.53 to 107.86 against the yen but the Dollar Index was down 0.077 to 72.856.
The euro was up 0.0026 to 1.5703 against the U.S. dollar, up 0.0090 to 1.6000 against the Canadian dollar, down 0.0006 to 0.7886 against the pound sterling and was higher by 1.09 to 169.37 against the yen.
The pound sterling finished the week up 0.0044 to 1.9913 against the U.S. dollar and up 0.0129 to 2.0292 against the Canadian dollar.
The front month gold contract at the Chicago Board of Trade is up $7.90 to $929.70 per ounce.
Overseas, European stock markets closed in negative territory with the Eurostoxx down 3 points to 2,857, the UK FTSE 100 down 10 points to 5353 and the German DAX down 4 points to 6,437.
In Germany, returns on two-year German bonds are down 0.9 bps to 4.42%, with five-year yields up 1.9 bps to 4.53%, 10-year yields up 3.7 bps to 4.60% and 30-year yields up 4.5 bps to 4.87%.
Yields on UK two-year bonds are up 1.5 bps to 4.98%, with five-year yields up 0.9 bps to 4.95%, 10-year yields up 1.7 bps to 4.99% and 30-year yields up 1.7 bps to 4.62%.
In the week ahead, the focus will be on the United States. Advance GDP figures for the second quarter will be released Thursday and are expected to show the economy grew by a healthy rate of 2%. But economist warn that figure has been inflated by government rebate cheques. Afterwards the focus will turn to employment figures on Friday that are expected to show the U.S. unemployment rate rising to 5.6% from 5.5%.
All data taken at 4:39 p.m. EDT.
By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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Friday's News Recap: Optimism Returns Following U.S. Housing, Durable Goods Data
News Recap | Written by CEP News | Jul 25 08 20:52 GMT |
(CEP News) - In contrast to Thursday's downbeat releases, markets received largely positive U.S. economic data on Friday in the form of higher-than-expected home sales in June, an upside revision in the final July consumer sentiment survey from Reuters and University of Michigan and a higher-than-expected increase in durable goods sales.
New home sales came in higher than expected at 530k in June against forecasts for a 503k reading, though due to revisions in the previous month the figure represents a slight decline of 3k, or 0.6%. May sales were revised up to 533k from an initially-reported 512k, the U.S. Census Bureau reported. April's new home sales were also revised up to 542k from a previously reported 525k. The median sale price of new houses sold in June was $230,900, up from May's revised median of $227,700.
Sal Guatieri, senior economist at BMO Capital Markets, said the report "paints a brighter picture (than previously portrayed), in the new housing market anyway." Yet he cautioned against being too optimistic, as things are still getting worse but only at a slower decline than in the past two years. He said sales in both existing and new home sales appear to be stabilizing, but there's no sign yet of an actual pick-up or recovery.
U.S. durable goods excluding transportation soared by 2.0% in June in the U.S. durable goods report released Friday by the Department of Commerce. Economists, who were expecting a 0.2% monthly decline following May's upwardly revised 0.5% decline, say the unexpected jump suggests the business sector remains stable despite the broader financial turmoil, thanks in part to foreign demand from a weak U.S. dollar.
Senior rates and economics strategist Eric Lascelles from TD Securities said the release was a "real surprise to the upside," but that the U.S. business sector is not where to look to note the economic slowdown.
The final consumer sentiment survey from Reuters and the University of Michigan received a large upward revision from preliminary estimates in July, with the headline indicator coming in at 61.2 compared to the preliminary 56.6 level.
Economists had expected a small revision to 56.4. The last time the survey reached 61.2 was in May 2008. Consumer expectations were revised to 53.5 from the preliminary 48.3 level, while the current conditions index bumped up to 73.1 from the initial estimate of 69.5 for July.
On the down side, however, U.S. home foreclosures soared by 121% in second-quarter year-over-year results, according to a report issued by RealtyTrac. There were 739,714 foreclosure filings in the second quarter of 2008, a 14% quarterly increase. According to RealtyTrac, 48 of 50 states and 95 of 100 of the largest metropolitan areas experienced year-over-year increases in foreclosure activity in the second quarter.
The Canadian government reported a $500 million deficit in the first two months of the 2008-09 fiscal year, due to shrinking revenues and rising expenses. The budget shortfall was smaller than the March deficit of $1.2 billion, but a reversal from April and May of 2007, when the government reported a $2.8 billion budgetary surplus for the two months.
The federal fiscal monitor released Friday by the Department of Finance showed that the government eked out a $300 million surplus in May, but that wasn't enough to offset April's $900 million shortfall.
Speaking to reporters in Toronto, Canadian Finance Minister Jim Flaherty said the Canadian economy and budget were "on track" in anticipation of the finance ministry's fiscal update in October. The finance minister added that he agreed with the Bank of Canada's assessment that the risks to the economy were balanced.
Air Canada must form a joint committee with its workers to look at ways to minimize the impact of planned layoffs, Canada's Federal Labour Minister Jean-Pierre Blackburn said Friday. Blackburn refused to grant the airline a waiver from the group termination provisions of the Canada Labour Code. In June, Air Canada announced its plans to cut 2,000 jobs in a bid to save money in the face of rising fuel costs. The group termination provisions under the labour code require that an employer that intends to dismiss 50 or more employees in any single industrial establishment within a four-week period give notice to the Minister of Labour, union representatives and non-unionized employees at least 16 weeks before the termination date.
In overnight news, according to advance estimates from the Office for National Statistics (ONS), the UK economy grew 1.6% year-over-year as expected in the second quarter of 2008, down from the 2.3% growth rate seen in the previous quarter. In quarterly terms, UK GDP increased 0.2%, also in line with expectations, after rising 0.3% in Q1.
German import prices rose 8.9% year-over-year in June, the strongest rate since November 2000, according to data released by the Federal Statistics Office (Destatis). Economists had expected an increase of 8.4%, up from May's 7.9% rise. Month-over-month, German import price inflation cooled somewhat to 1.5%, down from the 2.4% rate observed in the previous month.
In an interview from his office in Vienna, Austria on July 24, European Central Bank Governing Council member Klaus Liebscher said that he was not surprised by the recent data pointing to deteriorating activity levels in the euro zone and stressed that the ECB still has room to maneuver regarding interest rates. "We expected a weaker second and maybe third quarter," he said.
According to data released by the Japanese Ministry of Internal Affairs and Communications on Friday, inflation in Japan rose slightly faster than expected in June, but nevertheless sharply from the previous month, with headline CPI rising 2.0% year-over-year in June, just higher than estimates for a 1.9% increase and above May's 1.3% gain.
By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca
The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.
A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.
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(CEP News) - In contrast to Thursday's downbeat releases, markets received largely positive U.S. economic data on Friday in the form of higher-than-expected home sales in June, an upside revision in the final July consumer sentiment survey from Reuters and University of Michigan and a higher-than-expected increase in durable goods sales.
New home sales came in higher than expected at 530k in June against forecasts for a 503k reading, though due to revisions in the previous month the figure represents a slight decline of 3k, or 0.6%. May sales were revised up to 533k from an initially-reported 512k, the U.S. Census Bureau reported. April's new home sales were also revised up to 542k from a previously reported 525k. The median sale price of new houses sold in June was $230,900, up from May's revised median of $227,700.
Sal Guatieri, senior economist at BMO Capital Markets, said the report "paints a brighter picture (than previously portrayed), in the new housing market anyway." Yet he cautioned against being too optimistic, as things are still getting worse but only at a slower decline than in the past two years. He said sales in both existing and new home sales appear to be stabilizing, but there's no sign yet of an actual pick-up or recovery.
U.S. durable goods excluding transportation soared by 2.0% in June in the U.S. durable goods report released Friday by the Department of Commerce. Economists, who were expecting a 0.2% monthly decline following May's upwardly revised 0.5% decline, say the unexpected jump suggests the business sector remains stable despite the broader financial turmoil, thanks in part to foreign demand from a weak U.S. dollar.
Senior rates and economics strategist Eric Lascelles from TD Securities said the release was a "real surprise to the upside," but that the U.S. business sector is not where to look to note the economic slowdown.
The final consumer sentiment survey from Reuters and the University of Michigan received a large upward revision from preliminary estimates in July, with the headline indicator coming in at 61.2 compared to the preliminary 56.6 level.
Economists had expected a small revision to 56.4. The last time the survey reached 61.2 was in May 2008. Consumer expectations were revised to 53.5 from the preliminary 48.3 level, while the current conditions index bumped up to 73.1 from the initial estimate of 69.5 for July.
On the down side, however, U.S. home foreclosures soared by 121% in second-quarter year-over-year results, according to a report issued by RealtyTrac. There were 739,714 foreclosure filings in the second quarter of 2008, a 14% quarterly increase. According to RealtyTrac, 48 of 50 states and 95 of 100 of the largest metropolitan areas experienced year-over-year increases in foreclosure activity in the second quarter.
The Canadian government reported a $500 million deficit in the first two months of the 2008-09 fiscal year, due to shrinking revenues and rising expenses. The budget shortfall was smaller than the March deficit of $1.2 billion, but a reversal from April and May of 2007, when the government reported a $2.8 billion budgetary surplus for the two months.
The federal fiscal monitor released Friday by the Department of Finance showed that the government eked out a $300 million surplus in May, but that wasn't enough to offset April's $900 million shortfall.
Speaking to reporters in Toronto, Canadian Finance Minister Jim Flaherty said the Canadian economy and budget were "on track" in anticipation of the finance ministry's fiscal update in October. The finance minister added that he agreed with the Bank of Canada's assessment that the risks to the economy were balanced.
Air Canada must form a joint committee with its workers to look at ways to minimize the impact of planned layoffs, Canada's Federal Labour Minister Jean-Pierre Blackburn said Friday. Blackburn refused to grant the airline a waiver from the group termination provisions of the Canada Labour Code. In June, Air Canada announced its plans to cut 2,000 jobs in a bid to save money in the face of rising fuel costs. The group termination provisions under the labour code require that an employer that intends to dismiss 50 or more employees in any single industrial establishment within a four-week period give notice to the Minister of Labour, union representatives and non-unionized employees at least 16 weeks before the termination date.
In overnight news, according to advance estimates from the Office for National Statistics (ONS), the UK economy grew 1.6% year-over-year as expected in the second quarter of 2008, down from the 2.3% growth rate seen in the previous quarter. In quarterly terms, UK GDP increased 0.2%, also in line with expectations, after rising 0.3% in Q1.
German import prices rose 8.9% year-over-year in June, the strongest rate since November 2000, according to data released by the Federal Statistics Office (Destatis). Economists had expected an increase of 8.4%, up from May's 7.9% rise. Month-over-month, German import price inflation cooled somewhat to 1.5%, down from the 2.4% rate observed in the previous month.
In an interview from his office in Vienna, Austria on July 24, European Central Bank Governing Council member Klaus Liebscher said that he was not surprised by the recent data pointing to deteriorating activity levels in the euro zone and stressed that the ECB still has room to maneuver regarding interest rates. "We expected a weaker second and maybe third quarter," he said.
According to data released by the Japanese Ministry of Internal Affairs and Communications on Friday, inflation in Japan rose slightly faster than expected in June, but nevertheless sharply from the previous month, with headline CPI rising 2.0% year-over-year in June, just higher than estimates for a 1.9% increase and above May's 1.3% gain.
By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it
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