Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Dec 03 09 08:15 GMT |
Previous session overview
The dollar and euro rose against the yen in Asia Thursday on the back of stronger news from the U.S. financial sector, and on speculation that the European Central Bank may signal later in the day an intention to tighten liquidity conditions.
Also likely to continue weighing on the yen for the rest of the week is the view that the Japanese government may intervene to block any future sharp gains in the currency, analysts said.
In early morning trading in Tokyo, news that Bank of America will repay USD45 billion in aid to the U.S. government brightened the outlook for the U.S. financial sector. That prompted some short-term players to buy dollars for yen, dealers said.
The purchase came as players remained cautious over the possibility of Japanese dollar-buying intervention should the yen strengthen rapidly again. Prime Minister Yukio Hatoyama said Wednesday that one sided yen gains could not be left as is.
At 0450 GMT, the dollar stood at JPY87.79 compared to JPY87.40 late Wednesday in New York. The euro was up at JPY132.45 from JPY131.48.
The Euro struggled to hold the USD1.5100 and eased back to the lower USD1.50's. US stocks came under modest profit taking pressure when the FED beige book reiterated the risks to the US economy. EURJPY made solid gains on a weak Yen after more Government jawboning overnight. October PPI was +0.2% vs. 0.0% forecast in October.
The Pound continued to rally off dips and today was no exception as BOE member Dale stated he believed the UK economy had turned and inflation was now a risk going forward. Selling close to USD1.6700 capped the rally.
The Australian dollar was slightly stronger in Asia trading Thursday, supported by solid regional share markets, a stronger gold price and broad yen-cross buying
Market expectation
EURUSD trades to USD1.5121, despite reports of decent sell interest countering the move. Stops seen above USD1.5130, some suggest stops placed all the way to USD1.5150, with offers mixed in between USD1.5140/50.
Pound strong offer at USD1.6700 reported, said to be held by a UK clearer with good amounts transacted at the level. Some traders suggest that pressure to eventually tell and lift rate above. Rate currently trades around USD1.6698.
European stocks are expected to open higher Thursday following a mainly positive afternoon session in the U.S. and a strong performance in Asia, where the Nikkei 225 closed up 3.8% at its highest level since October 30.
A U.S. Treasury spokesman confirmed that Japan's top currency diplomat met with Treasury officials this week, a move that could signal Japan may be preparing to intervene in foreign exchange markets as it seeks to tame the yen.
Investors will also be eyeing the ECB's decision on its benchmark interest rate scheduled for Thursday, as well as comments by its president, Jean-Claude Trichet, following the rate-setting meeting.
Dukascopy Swiss FX Group
Legal disclaimer and risk disclosure
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
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Thursday, December 3, 2009
Australia Retail Sales Rise 0.3% on Department Stores
By Jacob Greber
Dec. 3 (Bloomberg) -- Australian retail sales rose in October as households spent more at department stores and restaurants.
Sales climbed 0.3 percent from September, when they fell 0.2 percent, the Bureau of Statistics said in Sydney today. The result matched the median forecast of 19 economists surveyed by Bloomberg News.
Household spending is helping stoke an economic expansion forecast by the central bank to accelerate in 2010, extending 18 straight years of annual growth. Governor Glenn Stevens raised the benchmark interest rate this week by a quarter percentage point for an unprecedented third month amid a rebound in consumer confidence.
“I think we’ll have record Christmas” sales, Gerry Harvey, chairman of Australia’s biggest electronics retailer, Harvey Norman Holdings Ltd., said in an interview with Bloomberg television. “We’ve had very good sales figures in October and November and I can’t think of any reason why that won’t follow into December.”
Australia’s dollar maintained gains versus the U.S. dollar. The currency traded at 92.86 U.S. cents as of 11:49 a.m. in Sydney from 92.90 cents before the retail sales report and 92.48 cents yesterday in New York.
Spending at department stores rose 1.9 percent and restaurant sales gained 1.1 percent, today’s report showed. Consumers spent 0.2 percent less on clothing.
Consumer Confidence
Hardware store group Mitre 10 said yesterday that earnings before interest and tax of A$2.67 million ($2.47 million) in October boosted profit for the four months through Oct. 31 to A$6.44 million, compared with a loss of A$239,000 for the same period a year earlier.
Consumer confidence is close to its highest level in more than two years, boosted by an increase in employment in October and higher wages.
Central bank policy makers increased the overnight cash rate target to 3.75 percent from 3.5 percent on Dec. 1, citing evidence that the economy, which skirted the global recession, “is in a gradual recovery.”
Gross domestic product rose 1 percent in the first half of the year and is forecast by the Reserve Bank to climb 3.25 percent next year and in 2011. Third-quarter GDP figures will be published on Dec. 16.
Investors are betting there is a 46 percent chance Stevens will boost the benchmark rate by a quarter point to 4 percent at the central bank’s next meeting on Feb. 2, according to interbank futures on the Sydney Futures Exchange at 6:24 a.m.
Rate Threat
Still, some retailers say the central bank’s interest-rate increases in October, November and this month will prompt consumers to reduce spending in coming months.
This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after Prime Minister Kevin Rudd distributed more than A$20 billion in cash handouts to households.
The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after this week’s central-bank decision. A basis point is 0.01 percentage point.
Christmas trading is expected to be “subdued” in New South Wales, Australia’s largest state, according to a quarterly survey published today.
“The last quarter has been disappointing for many small businesses in New South Wales, with most of the gains made during the previous quarter negated,” said Christena Singh, author of today’s Sensis Business index report.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- Australian retail sales rose in October as households spent more at department stores and restaurants.
Sales climbed 0.3 percent from September, when they fell 0.2 percent, the Bureau of Statistics said in Sydney today. The result matched the median forecast of 19 economists surveyed by Bloomberg News.
Household spending is helping stoke an economic expansion forecast by the central bank to accelerate in 2010, extending 18 straight years of annual growth. Governor Glenn Stevens raised the benchmark interest rate this week by a quarter percentage point for an unprecedented third month amid a rebound in consumer confidence.
“I think we’ll have record Christmas” sales, Gerry Harvey, chairman of Australia’s biggest electronics retailer, Harvey Norman Holdings Ltd., said in an interview with Bloomberg television. “We’ve had very good sales figures in October and November and I can’t think of any reason why that won’t follow into December.”
Australia’s dollar maintained gains versus the U.S. dollar. The currency traded at 92.86 U.S. cents as of 11:49 a.m. in Sydney from 92.90 cents before the retail sales report and 92.48 cents yesterday in New York.
Spending at department stores rose 1.9 percent and restaurant sales gained 1.1 percent, today’s report showed. Consumers spent 0.2 percent less on clothing.
Consumer Confidence
Hardware store group Mitre 10 said yesterday that earnings before interest and tax of A$2.67 million ($2.47 million) in October boosted profit for the four months through Oct. 31 to A$6.44 million, compared with a loss of A$239,000 for the same period a year earlier.
Consumer confidence is close to its highest level in more than two years, boosted by an increase in employment in October and higher wages.
Central bank policy makers increased the overnight cash rate target to 3.75 percent from 3.5 percent on Dec. 1, citing evidence that the economy, which skirted the global recession, “is in a gradual recovery.”
Gross domestic product rose 1 percent in the first half of the year and is forecast by the Reserve Bank to climb 3.25 percent next year and in 2011. Third-quarter GDP figures will be published on Dec. 16.
Investors are betting there is a 46 percent chance Stevens will boost the benchmark rate by a quarter point to 4 percent at the central bank’s next meeting on Feb. 2, according to interbank futures on the Sydney Futures Exchange at 6:24 a.m.
Rate Threat
Still, some retailers say the central bank’s interest-rate increases in October, November and this month will prompt consumers to reduce spending in coming months.
This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after Prime Minister Kevin Rudd distributed more than A$20 billion in cash handouts to households.
The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after this week’s central-bank decision. A basis point is 0.01 percentage point.
Christmas trading is expected to be “subdued” in New South Wales, Australia’s largest state, according to a quarterly survey published today.
“The last quarter has been disappointing for many small businesses in New South Wales, with most of the gains made during the previous quarter negated,” said Christena Singh, author of today’s Sensis Business index report.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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Indonesia Keeps Key Rate Unchanged to Boost Economy
By Aloysius Unditu
Dec. 3 (Bloomberg) -- Indonesia’s central bank kept its benchmark interest rate unchanged for a fourth month, judging that the need to support growth outweighs the risk of inflation.
Bank Indonesia maintained its reference rate at 6.5 percent, the lowest level since its introduction in May 2005, according to a statement in Jakarta today. All 27 economists in a Bloomberg News survey predicted the decision.
Indonesia’s inflation unexpectedly slowed to a decade low of 2.41 percent in November, giving the central bank more time before it follows other Asian policy makers and raises borrowing costs. The Reserve Bank of Australia this week increased its benchmark rate for a third consecutive meeting and India has signaled it may need to act soon.
“Monetary policy hikes are expected from the second quarter of 2010, with history suggesting gradual rather than rapid tightening,” said Nikhilesh Bhattacharyya, an economist at Moody’s Economy.com in Sydney. “If price expectations rise rapidly, the central bank is likely to act more aggressively.”
Bank Indonesia stopped cutting rates in August after slashing borrowing costs for nine straight months to help shield Southeast Asia’s largest economy from the worst global recession since the 1930s.
Indonesia’s $514 billion economy may expand 4.3 percent this year and between 5 percent and 5.5 percent in 2010, the central bank said in a statement today.
‘Strong Resilience’
“The board of governors is of the view that Indonesia’s economy in 2009 has shown a strong resilience in responding to the global financial crisis,” the statement said.
Faster growth may help companies in Indonesia to increase sales. The Indonesian economy has fared better than its neighbors during the worldwide recession as it is less reliant on exports. Consumer spending has also been buoyed by the most stable political climate since the ouster of former dictator Suharto in 1998.
Growth accelerated in the three months to Sept. 30 for the first time in five quarters, with gross domestic product expanding 4.2 percent from a year earlier. The economy may expand faster in the fourth quarter than in the previous three months, the central bank said in November.
Car and motorcycle purchases in Indonesia are forecast to grow between 20 percent and 30 percent next year on an improving economy, said Rudyanto Somawihardja, president director of PT Sinar Mitra Sepadan Finance.
Sales at Sinar Mitra are expected to increase to 3.5 trillion rupiah in 2010 from an estimate of between 1.3 trillion rupiah and 1.5 trillion rupiah this year, Rudyanto said.
Australia, India
Inflation may accelerate to “no more” than 5 percent next year, Indonesia’s Coordinating Minister for the Economy Hatta Rajasa said on Dec. 1 in Jakarta. Gains in consumer prices this year may be “lower than” the target of 3.5 percent to 5.5 percent, the central bank said today.
Australia’s central bank on Dec. 1 raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month as evidence mounts that the nation’s economy is strengthening.
The Reserve Bank of India on Oct. 27 took the first step toward withdrawing its record monetary stimulus as inflation pressures build, ordering lenders to keep more cash in government bonds.
Indonesia is “unlikely to signal an exit strategy yet,” said Johanna Chua, head of Asian economic research at Citigroup Inc. in Hong Kong. “We do not expect Bank Indonesia to turn hawkish until the second quarter of 2010.”
To contact the reporter on this story: Aloysius Unditu in Jakarta at aunditu@blomberg.net
Read more...
Dec. 3 (Bloomberg) -- Indonesia’s central bank kept its benchmark interest rate unchanged for a fourth month, judging that the need to support growth outweighs the risk of inflation.
Bank Indonesia maintained its reference rate at 6.5 percent, the lowest level since its introduction in May 2005, according to a statement in Jakarta today. All 27 economists in a Bloomberg News survey predicted the decision.
Indonesia’s inflation unexpectedly slowed to a decade low of 2.41 percent in November, giving the central bank more time before it follows other Asian policy makers and raises borrowing costs. The Reserve Bank of Australia this week increased its benchmark rate for a third consecutive meeting and India has signaled it may need to act soon.
“Monetary policy hikes are expected from the second quarter of 2010, with history suggesting gradual rather than rapid tightening,” said Nikhilesh Bhattacharyya, an economist at Moody’s Economy.com in Sydney. “If price expectations rise rapidly, the central bank is likely to act more aggressively.”
Bank Indonesia stopped cutting rates in August after slashing borrowing costs for nine straight months to help shield Southeast Asia’s largest economy from the worst global recession since the 1930s.
Indonesia’s $514 billion economy may expand 4.3 percent this year and between 5 percent and 5.5 percent in 2010, the central bank said in a statement today.
‘Strong Resilience’
“The board of governors is of the view that Indonesia’s economy in 2009 has shown a strong resilience in responding to the global financial crisis,” the statement said.
Faster growth may help companies in Indonesia to increase sales. The Indonesian economy has fared better than its neighbors during the worldwide recession as it is less reliant on exports. Consumer spending has also been buoyed by the most stable political climate since the ouster of former dictator Suharto in 1998.
Growth accelerated in the three months to Sept. 30 for the first time in five quarters, with gross domestic product expanding 4.2 percent from a year earlier. The economy may expand faster in the fourth quarter than in the previous three months, the central bank said in November.
Car and motorcycle purchases in Indonesia are forecast to grow between 20 percent and 30 percent next year on an improving economy, said Rudyanto Somawihardja, president director of PT Sinar Mitra Sepadan Finance.
Sales at Sinar Mitra are expected to increase to 3.5 trillion rupiah in 2010 from an estimate of between 1.3 trillion rupiah and 1.5 trillion rupiah this year, Rudyanto said.
Australia, India
Inflation may accelerate to “no more” than 5 percent next year, Indonesia’s Coordinating Minister for the Economy Hatta Rajasa said on Dec. 1 in Jakarta. Gains in consumer prices this year may be “lower than” the target of 3.5 percent to 5.5 percent, the central bank said today.
Australia’s central bank on Dec. 1 raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month as evidence mounts that the nation’s economy is strengthening.
The Reserve Bank of India on Oct. 27 took the first step toward withdrawing its record monetary stimulus as inflation pressures build, ordering lenders to keep more cash in government bonds.
Indonesia is “unlikely to signal an exit strategy yet,” said Johanna Chua, head of Asian economic research at Citigroup Inc. in Hong Kong. “We do not expect Bank Indonesia to turn hawkish until the second quarter of 2010.”
To contact the reporter on this story: Aloysius Unditu in Jakarta at aunditu@blomberg.net
Read more...
Yen, Dollar Weaken on Signs of Economic Recovery, Stock Gains
By Yasuhiko Seki and Ron Harui
Dec. 3 (Bloomberg) -- The yen weakened for a third day against the euro and the dollar declined as signs the global economy is recovering boosted demand for higher-yielding assets.
Japan’s currency slid against all 16 of its most-traded counterparts tracked by Bloomberg before reports forecast to show European retail sales fell at a slower pace and U.S. service industries expanded. The euro rose on speculation the European Central Bank will announce plans to scale back emergency lending while keeping its main interest rate at a record low at a meeting today in Frankfurt.
“With the global economy recovering, risk trades will weigh on the funding currencies” such as the yen and the dollar, said Soichiro Mori, manager of foreign-exchange promotion at FXOnline Japan Co., a margin-trading company. “Higher-yielding currencies will benefit from the liquidity- driven play.”
The yen depreciated to 132.77 per euro as of 7:17 a.m. in London from 131.46 yesterday in New York, and 132.78 earlier, the weakest level since Nov. 24. Japan’s currency also fell to 87.87 per dollar from 87.38, after sliding to 87.92, the weakest level since Nov. 25. The yen rose to 84.83 to the dollar on Nov. 27, the highest since July 1995. The euro rose to $1.5112 from $1.5044.
Retail sales in the 16-nation euro region fell 2.4 percent in October from a year earlier after a 3.6 percent drop the previous month, according to a Bloomberg News survey of economists. The European Union statistics office releases its report at 11 a.m. Brussels time.
Services Report
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, rose to 51.5 in November from 50.6 in October, according to a separate Bloomberg survey before today’s report due at 10 a.m. New York time.
Futures on the Standard & Poor’s 500 Index rose 0.6 percent, the Nikkei 225 Stock Average advanced 3.8 percent, the most since May 7, and the MSCI Asia Pacific Index of regional shares climbed 1.7 percent.
“The risk trade continues,” analysts led by Hans-Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas SA, wrote in an e-mail to Bloomberg today. “Till year-end, euro-dollar continues to be a main trade.”
The euro strengthened against 10 of its 16 major counterparts. ECB President Jean-Claude Trichet will say today that its third offer of 12-month loans to banks on Dec. 15 will be the last and may signal a reduction in other lending operations, according to economists surveyed by Bloomberg.
ECB officials will leave the benchmark rate at 1 percent, according to all 54 economists polled.
‘Lead the Exit’
“There is a strong belief the ECB will lead the exit of credit-easing among the developed countries,” said Kazumasa Yamaoka, senior currency analyst in Tokyo at GCI Capital Co., a foreign-exchange margin-service company. “This perception will support the euro against the dollar and the yen.”
Benchmark rates are 0.1 percent in Japan and as low as zero in the U.S., making the countries’ currencies popular for funding so-called carry trades. In such trades, investors buy higher-yielding assets with money borrowed in nations with low interest rates. The risk is that currency market moves will erase their profit.
Japan’s currency also weakened after Vice Finance Minister Rintaro Tamaki met with U.S. Treasury officials this week in Washington, spurring speculation the two nations are discussing how to tackle the yen’s strength. Tamaki is head of international affairs, including currency policy.
‘Laissez-Faire Policy’
“Japan is shifting away from a laissez-faire policy on the rising yen,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd. “The possibility of actual intervention may strengthen if the yen reaches 83 per dollar.”
The government of Prime Minister Yukio Hatoyama should revise the Bank of Japan’s by-laws to give it a mandate to stabilize prices and expand employment, similar to that of the U.S. Federal Reserve, said Eishi Wakabayashi, a strategist who forecast the yen’s surge to an all-time high in April 1995.
Wakabayashi, head of Tokyo-based Wakabayashi FX Associates Co., said the BOJ should re-think its “fundamentalist” stance on combating inflation while neglecting measures to stimulate the economy.
To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
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Dec. 3 (Bloomberg) -- The yen weakened for a third day against the euro and the dollar declined as signs the global economy is recovering boosted demand for higher-yielding assets.
Japan’s currency slid against all 16 of its most-traded counterparts tracked by Bloomberg before reports forecast to show European retail sales fell at a slower pace and U.S. service industries expanded. The euro rose on speculation the European Central Bank will announce plans to scale back emergency lending while keeping its main interest rate at a record low at a meeting today in Frankfurt.
“With the global economy recovering, risk trades will weigh on the funding currencies” such as the yen and the dollar, said Soichiro Mori, manager of foreign-exchange promotion at FXOnline Japan Co., a margin-trading company. “Higher-yielding currencies will benefit from the liquidity- driven play.”
The yen depreciated to 132.77 per euro as of 7:17 a.m. in London from 131.46 yesterday in New York, and 132.78 earlier, the weakest level since Nov. 24. Japan’s currency also fell to 87.87 per dollar from 87.38, after sliding to 87.92, the weakest level since Nov. 25. The yen rose to 84.83 to the dollar on Nov. 27, the highest since July 1995. The euro rose to $1.5112 from $1.5044.
Retail sales in the 16-nation euro region fell 2.4 percent in October from a year earlier after a 3.6 percent drop the previous month, according to a Bloomberg News survey of economists. The European Union statistics office releases its report at 11 a.m. Brussels time.
Services Report
The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the U.S. economy, rose to 51.5 in November from 50.6 in October, according to a separate Bloomberg survey before today’s report due at 10 a.m. New York time.
Futures on the Standard & Poor’s 500 Index rose 0.6 percent, the Nikkei 225 Stock Average advanced 3.8 percent, the most since May 7, and the MSCI Asia Pacific Index of regional shares climbed 1.7 percent.
“The risk trade continues,” analysts led by Hans-Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas SA, wrote in an e-mail to Bloomberg today. “Till year-end, euro-dollar continues to be a main trade.”
The euro strengthened against 10 of its 16 major counterparts. ECB President Jean-Claude Trichet will say today that its third offer of 12-month loans to banks on Dec. 15 will be the last and may signal a reduction in other lending operations, according to economists surveyed by Bloomberg.
ECB officials will leave the benchmark rate at 1 percent, according to all 54 economists polled.
‘Lead the Exit’
“There is a strong belief the ECB will lead the exit of credit-easing among the developed countries,” said Kazumasa Yamaoka, senior currency analyst in Tokyo at GCI Capital Co., a foreign-exchange margin-service company. “This perception will support the euro against the dollar and the yen.”
Benchmark rates are 0.1 percent in Japan and as low as zero in the U.S., making the countries’ currencies popular for funding so-called carry trades. In such trades, investors buy higher-yielding assets with money borrowed in nations with low interest rates. The risk is that currency market moves will erase their profit.
Japan’s currency also weakened after Vice Finance Minister Rintaro Tamaki met with U.S. Treasury officials this week in Washington, spurring speculation the two nations are discussing how to tackle the yen’s strength. Tamaki is head of international affairs, including currency policy.
‘Laissez-Faire Policy’
“Japan is shifting away from a laissez-faire policy on the rising yen,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd. “The possibility of actual intervention may strengthen if the yen reaches 83 per dollar.”
The government of Prime Minister Yukio Hatoyama should revise the Bank of Japan’s by-laws to give it a mandate to stabilize prices and expand employment, similar to that of the U.S. Federal Reserve, said Eishi Wakabayashi, a strategist who forecast the yen’s surge to an all-time high in April 1995.
Wakabayashi, head of Tokyo-based Wakabayashi FX Associates Co., said the BOJ should re-think its “fundamentalist” stance on combating inflation while neglecting measures to stimulate the economy.
To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net
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Oil Trades Near $77 as Dollar Slips on U.S. Economic Expansion
By Yee Kai Pin
Dec. 3 (Bloomberg) -- Crude oil traded near $77 a barrel in New York as the dollar weakened, spurring investor demand for commodities as a hedge against inflation.
Oil fell 2.3 percent yesterday after U.S. government data showed an increase in stockpiles held in the world’s biggest energy consumer. The dollar pulled back against the euro before a monthly industry report that may indicate the U.S. economic revival is spreading beyond manufacturing.
“The dollar has weakened and it’s driving the oil market higher,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. “We can see some buying interest from funds.”
Crude oil for January delivery was at $76.66 a barrel, up 6 cents, in electronic trading on the New York Mercantile Exchange at 2:07 p.m. in Singapore. Yesterday, the contract fell $1.77 to settle at $76.60 a barrel. Prices have gained 72 percent this year.
An Institute for Supply Management index of non- manufacturing businesses, which make up the largest part of the U.S. economy, rose to 51.5 in November from 50.6 in October, based on a Bloomberg News survey before today’s report. The U.S. currency dropped to $1.5081 per euro at 3 p.m. in Tokyo, from $1.5044 yesterday in New York. Gold hit a record for a third day, touching $1,255.04 an ounce.
“The gold market may go higher but I don’t think crude oil will reach $80,” Hasegawa said. “Demand is still low and stockpiles are increasing -- there’s pressure on this market.”
Crude Stockpiles
Commercially held U.S. crude oil inventories rose 2.09 million barrels to 339.9 million, the highest level since August, the Energy Department report showed. Stockpiles were forecast to decline by 400,000 barrels, according to the median estimate from analysts surveyed by Bloomberg News.
Gasoline supplies climbed 4 million barrels to 214.1 million as imports hit a 14-week high, the Energy Department said. Distillate fuel inventories fell 1.17 million barrels to 165.7 million, 29.9 percent above the five-year average level.
“Demand indications for November-to-date remain firm for gasoline, greatly improved for jet, but are still very sluggish for other distillates,” analysts at Barclays Capital, led by Paul Horsnell, said in a report after the Energy Department data.
Total U.S. daily fuel demand averaged 18.5 million barrels in the four weeks ended Nov. 27, down 3.2 percent from a year earlier, the Energy Department said. Consumption slipped by 497,000 barrels a day last week.
Further Isolation
Iran announced an expansion of its nuclear program in defiance of United Nations demands, a move the Obama administration said will further isolate Tehran from the international community. Iran is the second-largest producer in the Organization of Petroleum Exporting Countries.
“We might see a little bit of Middle Eastern tension start to pick up,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “If things in Iran start to heat up a little bit, then we’ll probably get a little bit of a premium start to be built into the market.”
President Mahmoud Ahmadinejad’s Cabinet ordered the Atomic Energy Organization of Iran to begin building 10 uranium enrichment sites within two months, the official Islamic Republic News Agency reported Nov. 29.
Brent crude oil for January settlement traded at $78.20 a barrel, up 32 cents, on the London-based ICE Futures Europe exchange, at 2:08 p.m. in Singapore. The contract fell $1.47, or 1.9 percent, to end yesterday’s session at $77.88 a barrel.
To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- Crude oil traded near $77 a barrel in New York as the dollar weakened, spurring investor demand for commodities as a hedge against inflation.
Oil fell 2.3 percent yesterday after U.S. government data showed an increase in stockpiles held in the world’s biggest energy consumer. The dollar pulled back against the euro before a monthly industry report that may indicate the U.S. economic revival is spreading beyond manufacturing.
“The dollar has weakened and it’s driving the oil market higher,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. “We can see some buying interest from funds.”
Crude oil for January delivery was at $76.66 a barrel, up 6 cents, in electronic trading on the New York Mercantile Exchange at 2:07 p.m. in Singapore. Yesterday, the contract fell $1.77 to settle at $76.60 a barrel. Prices have gained 72 percent this year.
An Institute for Supply Management index of non- manufacturing businesses, which make up the largest part of the U.S. economy, rose to 51.5 in November from 50.6 in October, based on a Bloomberg News survey before today’s report. The U.S. currency dropped to $1.5081 per euro at 3 p.m. in Tokyo, from $1.5044 yesterday in New York. Gold hit a record for a third day, touching $1,255.04 an ounce.
“The gold market may go higher but I don’t think crude oil will reach $80,” Hasegawa said. “Demand is still low and stockpiles are increasing -- there’s pressure on this market.”
Crude Stockpiles
Commercially held U.S. crude oil inventories rose 2.09 million barrels to 339.9 million, the highest level since August, the Energy Department report showed. Stockpiles were forecast to decline by 400,000 barrels, according to the median estimate from analysts surveyed by Bloomberg News.
Gasoline supplies climbed 4 million barrels to 214.1 million as imports hit a 14-week high, the Energy Department said. Distillate fuel inventories fell 1.17 million barrels to 165.7 million, 29.9 percent above the five-year average level.
“Demand indications for November-to-date remain firm for gasoline, greatly improved for jet, but are still very sluggish for other distillates,” analysts at Barclays Capital, led by Paul Horsnell, said in a report after the Energy Department data.
Total U.S. daily fuel demand averaged 18.5 million barrels in the four weeks ended Nov. 27, down 3.2 percent from a year earlier, the Energy Department said. Consumption slipped by 497,000 barrels a day last week.
Further Isolation
Iran announced an expansion of its nuclear program in defiance of United Nations demands, a move the Obama administration said will further isolate Tehran from the international community. Iran is the second-largest producer in the Organization of Petroleum Exporting Countries.
“We might see a little bit of Middle Eastern tension start to pick up,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “If things in Iran start to heat up a little bit, then we’ll probably get a little bit of a premium start to be built into the market.”
President Mahmoud Ahmadinejad’s Cabinet ordered the Atomic Energy Organization of Iran to begin building 10 uranium enrichment sites within two months, the official Islamic Republic News Agency reported Nov. 29.
Brent crude oil for January settlement traded at $78.20 a barrel, up 32 cents, on the London-based ICE Futures Europe exchange, at 2:08 p.m. in Singapore. The contract fell $1.47, or 1.9 percent, to end yesterday’s session at $77.88 a barrel.
To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net
Read more...
Rubber Reaches 14-Month High as Yen Declines, Demand May Grow
By Aya Takada
Dec. 3 (Bloomberg) -- Rubber advanced to a 14-month high for a second day as a drop in the Japanese currency against the dollar raised the appeal of yen-denominated contracts and on speculation an economic recovery will boost raw material demand.
Futures in Tokyo gained as much as 2.9 percent to the highest level since Sept. 29, 2008, extending yesterday’s 2.5 percent rally. The yen weakened as signs the global economy is recovering damped demand for the relative safety of Japan’s currency. Shares of Japanese exporters soared, driving Asian stocks toward the biggest weekly gain since May, as consumer spending lifted most regional economies in the U.S.
“Investors increased purchases of risk assets on optimism global economies will keep recovering,” Hisaaki Tasaka, an analyst at commodity broker ACE Koeki Co. in Tokyo, said today by phone. “The yen’s drop was also positive to the prices of futures in Tokyo.”
Rubber for May delivery, the most-active contract, rose as much as 7.3 yen to 262.9 yen per kilogram ($2,994 a metric ton) on the Tokyo Commodity Exchange before settling at 260.7 yen. Prices gained 92 percent this year.
The yen weakened before reports today that economists said will show the decline in European retail sales slowed and U.S. service industries expanded. The world’s biggest economy expanded or improved “modestly” across the U.S. from October to mid-November as consumer spending rose in a majority of Federal Reserve districts, the central bank said yesterday in its Beige Book.
The yen lost 0.5 percent to 87.80 per dollar at 3:45 p.m. in Tokyo. Japan’s currency strengthened to 84.83 on Nov. 27, the highest since July 1995.
Hyundai Motor Co. and Nissan Motor Co. led the first monthly gain in U.S. auto sales without government stimulus in November, signaling buyers are returning to showrooms as the economy stabilizes. Nissan’s sales rose 21 percent and Seoul- based Hyundai reported a 46 percent surge, according to data from industry researcher Autodata Corp this week.
Rubber futures also increased as gold advanced to a record for a third day, boosting speculation investor demand for commodities will increase, Tasaka said.
Spot gold strengthened as much as 0.9 percent to a record $1,226.56 an ounce before trading at $1,218.64 at 3:46 p.m. Tokyo time. Prices gained as investors sought protection against the prospect of currency debasement and inflation, spurring demand for the metal as an alternative asset.
Rubber for March delivery on the Shanghai Futures Exchange added 1.1 percent to settle at 22,260 yuan ($3,261) a ton.
Read more...
Dec. 3 (Bloomberg) -- Rubber advanced to a 14-month high for a second day as a drop in the Japanese currency against the dollar raised the appeal of yen-denominated contracts and on speculation an economic recovery will boost raw material demand.
Futures in Tokyo gained as much as 2.9 percent to the highest level since Sept. 29, 2008, extending yesterday’s 2.5 percent rally. The yen weakened as signs the global economy is recovering damped demand for the relative safety of Japan’s currency. Shares of Japanese exporters soared, driving Asian stocks toward the biggest weekly gain since May, as consumer spending lifted most regional economies in the U.S.
“Investors increased purchases of risk assets on optimism global economies will keep recovering,” Hisaaki Tasaka, an analyst at commodity broker ACE Koeki Co. in Tokyo, said today by phone. “The yen’s drop was also positive to the prices of futures in Tokyo.”
Rubber for May delivery, the most-active contract, rose as much as 7.3 yen to 262.9 yen per kilogram ($2,994 a metric ton) on the Tokyo Commodity Exchange before settling at 260.7 yen. Prices gained 92 percent this year.
The yen weakened before reports today that economists said will show the decline in European retail sales slowed and U.S. service industries expanded. The world’s biggest economy expanded or improved “modestly” across the U.S. from October to mid-November as consumer spending rose in a majority of Federal Reserve districts, the central bank said yesterday in its Beige Book.
The yen lost 0.5 percent to 87.80 per dollar at 3:45 p.m. in Tokyo. Japan’s currency strengthened to 84.83 on Nov. 27, the highest since July 1995.
Hyundai Motor Co. and Nissan Motor Co. led the first monthly gain in U.S. auto sales without government stimulus in November, signaling buyers are returning to showrooms as the economy stabilizes. Nissan’s sales rose 21 percent and Seoul- based Hyundai reported a 46 percent surge, according to data from industry researcher Autodata Corp this week.
Rubber futures also increased as gold advanced to a record for a third day, boosting speculation investor demand for commodities will increase, Tasaka said.
Spot gold strengthened as much as 0.9 percent to a record $1,226.56 an ounce before trading at $1,218.64 at 3:46 p.m. Tokyo time. Prices gained as investors sought protection against the prospect of currency debasement and inflation, spurring demand for the metal as an alternative asset.
Rubber for March delivery on the Shanghai Futures Exchange added 1.1 percent to settle at 22,260 yuan ($3,261) a ton.
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Gold May Peak at $1,300 an Ounce Next Year, UBS AG Says
By Glenys Sim
Dec. 3 (Bloomberg) -- Gold may reach a peak of $1,300 an ounce next year as more investors purchase bullion to preserve wealth against a declining dollar, UBS AG said.
Central bank purchases will also support bullion prices, Dominic Schnider, head of commodities research at the bank’s Wealth Management Research, said today.
“We note the tendency that could see central banks ending up net buyers of gold, after years as net sellers,” he said. “This has changed the supply-demand balance considerably.”
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- Gold may reach a peak of $1,300 an ounce next year as more investors purchase bullion to preserve wealth against a declining dollar, UBS AG said.
Central bank purchases will also support bullion prices, Dominic Schnider, head of commodities research at the bank’s Wealth Management Research, said today.
“We note the tendency that could see central banks ending up net buyers of gold, after years as net sellers,” he said. “This has changed the supply-demand balance considerably.”
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Soybeans Advance on Speculation Demand May Pare U.S. Inventory
By Luzi Ann Javier
Dec. 3 (Bloomberg) -- Soybeans climbed on speculation the U.S. Department of Agriculture may raise its estimates on the nation’s exports of the beans and demand from crushers, lowering stockpiles at the end of the marketing year.
Soybean stockpiles may be 240 million metric tons by Aug. 31, Allendale Inc., a farm marketing adviser and brokerage said in an e-mail yesterday. That’s compares with the 270 million tons inventory forecast by the USDA on Nov. 10.
Expectations of higher demand may be pushing prices higher in early electronic trading, said Toshiro Horiguchi, assistant general manager at Agrex Asia Pte., in a phone interview today. Prices may still extend recent declines because the increase in demand has already been priced in and “we have good supply.”
January-delivery soybeans climbed as much as 1 percent to $10.44 a bushel in after-hours trading on the Chicago Board of Trade, after closing 2.4 percent lower yesterday. The contract traded at $10.4325a bushel at 1:46 p.m. Singapore time.
“Both crush and exports are running better than expected,” Joe Victor, vice president at Allendale said in an e-mail yesterday. “We look for USDA to revise those higher.” The USDA is scheduled to report its latest estimate on U.S. soybean supply and demand estimates on Dec. 10.
March-delivery corn gained as much as 0.6 percent to $4.09 a bushel in Chicago, after ending 1.9 percent lower yesterday. It traded at $4.0775 a bushel at 1:46 p.m. Singapore time.
Wheat for March delivery added as much as 0.9 percent to $5.81 a bushel, after losing 1.4 percent at close yesterday. It last traded at $5.78, up 0.4 percent.
To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- Soybeans climbed on speculation the U.S. Department of Agriculture may raise its estimates on the nation’s exports of the beans and demand from crushers, lowering stockpiles at the end of the marketing year.
Soybean stockpiles may be 240 million metric tons by Aug. 31, Allendale Inc., a farm marketing adviser and brokerage said in an e-mail yesterday. That’s compares with the 270 million tons inventory forecast by the USDA on Nov. 10.
Expectations of higher demand may be pushing prices higher in early electronic trading, said Toshiro Horiguchi, assistant general manager at Agrex Asia Pte., in a phone interview today. Prices may still extend recent declines because the increase in demand has already been priced in and “we have good supply.”
January-delivery soybeans climbed as much as 1 percent to $10.44 a bushel in after-hours trading on the Chicago Board of Trade, after closing 2.4 percent lower yesterday. The contract traded at $10.4325a bushel at 1:46 p.m. Singapore time.
“Both crush and exports are running better than expected,” Joe Victor, vice president at Allendale said in an e-mail yesterday. “We look for USDA to revise those higher.” The USDA is scheduled to report its latest estimate on U.S. soybean supply and demand estimates on Dec. 10.
March-delivery corn gained as much as 0.6 percent to $4.09 a bushel in Chicago, after ending 1.9 percent lower yesterday. It traded at $4.0775 a bushel at 1:46 p.m. Singapore time.
Wheat for March delivery added as much as 0.9 percent to $5.81 a bushel, after losing 1.4 percent at close yesterday. It last traded at $5.78, up 0.4 percent.
To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net
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China Central Banker Wary of ‘Bubble’ Assets, Apple Daily Says
By Mark Lee
Dec. 3 (Bloomberg) -- China’s central bank views gold prices as very high and will be wary of “bubble” assets, the Apple Daily reported today, citing Hu Xiaolian, a deputy governor at the People’s Bank of China.
The long-term benefits must be considered when managing the overall configuration of foreign-exchange reserves, the Hong Kong paper quoted Hu in Taipei as saying in response to a question about whether China’s central bank would buy gold. A bank spokesman declined to comment on the report when contacted by Bloomberg News.
Gold advanced to a record for a third day, reaching $1,226.33 an ounce, as investors sought protection against the prospect of currency debasement and inflation. China increased its gold reserves by 76 percent to 1,054 metric tons since 2003, the official Xinhua News Agency reported in April.
“It comes as a big surprise to me seeing central banks treating gold as a safe haven asset,” Stewart Murray, chief executive of the London Bullion Market Association, said at a conference in Shanghai. Still, “as for China, well, it clearly needs to buy some gold.”
China, the world’s largest producer of gold, has an “extremely low” percentage of bullion in its reserves, implying that it may need to buy just to maintain a constant proportion, Rozanna Wozniak, investment research manager at the World Gold Council, said Nov. 29.
The outlook for gold sparked a debate between economist Nouriel Roubini and Jim Rogers last month. Rogers, the investor who predicted the start of the commodities rally in 1999, said Roubini is wrong about the threat of bubbles in gold and emerging-market stocks. Roubini, who predicted the global economic crisis, said a forecast by the investor that gold will double to at least $2,000 an ounce is “utter nonsense.”
Bank Buying
Bullion has found support from International Monetary Fund sales to central banks. Since the end of September, India, Mauritius and Sri Lanka bought more than half of the 403.3 tons of gold that the International Monetary Fund plans to sell to bolster its balance sheet and boost lending to low-income nations.
China’s gold holdings represents less than 2 percent of its reserves, Jeffrey Rhodes, chief executive officer of INTL Commodities DMCC, said Oct. 23. That compares with the international average of 10.2 percent held by central banks worldwide. China has the world’s largest foreign-exchange reserves of $2.3 trillion.
The country overtook South Africa to become the world’s largest producer in 2007 and the World Gold Council said in July that the nation may pass India as the biggest consumer.
Reserve Boost
China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar, the China Youth Daily said Nov. 30, citing Ji Xiaonan, head of the supervisory committee at the state-owned Assets Supervision and Administration Commission.
“We recommend China increase its gold reserves to 6,000 tons within three to five years and possibly to 10,000 tons in eight to 10 years,” the paper quoted Ji as saying.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- China’s central bank views gold prices as very high and will be wary of “bubble” assets, the Apple Daily reported today, citing Hu Xiaolian, a deputy governor at the People’s Bank of China.
The long-term benefits must be considered when managing the overall configuration of foreign-exchange reserves, the Hong Kong paper quoted Hu in Taipei as saying in response to a question about whether China’s central bank would buy gold. A bank spokesman declined to comment on the report when contacted by Bloomberg News.
Gold advanced to a record for a third day, reaching $1,226.33 an ounce, as investors sought protection against the prospect of currency debasement and inflation. China increased its gold reserves by 76 percent to 1,054 metric tons since 2003, the official Xinhua News Agency reported in April.
“It comes as a big surprise to me seeing central banks treating gold as a safe haven asset,” Stewart Murray, chief executive of the London Bullion Market Association, said at a conference in Shanghai. Still, “as for China, well, it clearly needs to buy some gold.”
China, the world’s largest producer of gold, has an “extremely low” percentage of bullion in its reserves, implying that it may need to buy just to maintain a constant proportion, Rozanna Wozniak, investment research manager at the World Gold Council, said Nov. 29.
The outlook for gold sparked a debate between economist Nouriel Roubini and Jim Rogers last month. Rogers, the investor who predicted the start of the commodities rally in 1999, said Roubini is wrong about the threat of bubbles in gold and emerging-market stocks. Roubini, who predicted the global economic crisis, said a forecast by the investor that gold will double to at least $2,000 an ounce is “utter nonsense.”
Bank Buying
Bullion has found support from International Monetary Fund sales to central banks. Since the end of September, India, Mauritius and Sri Lanka bought more than half of the 403.3 tons of gold that the International Monetary Fund plans to sell to bolster its balance sheet and boost lending to low-income nations.
China’s gold holdings represents less than 2 percent of its reserves, Jeffrey Rhodes, chief executive officer of INTL Commodities DMCC, said Oct. 23. That compares with the international average of 10.2 percent held by central banks worldwide. China has the world’s largest foreign-exchange reserves of $2.3 trillion.
The country overtook South Africa to become the world’s largest producer in 2007 and the World Gold Council said in July that the nation may pass India as the biggest consumer.
Reserve Boost
China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar, the China Youth Daily said Nov. 30, citing Ji Xiaonan, head of the supervisory committee at the state-owned Assets Supervision and Administration Commission.
“We recommend China increase its gold reserves to 6,000 tons within three to five years and possibly to 10,000 tons in eight to 10 years,” the paper quoted Ji as saying.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
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ECB May Unveil Exit Plan, Keep Benchmark Rate at 1%
By Frances Robinson
Dec. 3 (Bloomberg) -- The European Central Bank may today announce plans to scale back its emergency lending while keeping interest rates at a record low to foster an economic recovery.
ECB policy makers meeting in Frankfurt will leave the benchmark interest rate at 1 percent, according to all 54 economists in a Bloomberg News survey. President Jean-Claude Trichet will say the ECB’s third offer of 12-month loans to banks on Dec. 15 will be the last and may also signal a reduction in other lending operations, economists said.
The ECB, which has been flooding banks with cheap cash to fight Europe’s worst recession since World War II, said last month it will gradually withdraw the extra liquidity to prevent inflation as the economy gathers strength. At the same time, officials don’t want to give the impression they’re moving closer to rate increases, people familiar with their discussions said. Any indication that the ECB could tighten policy sooner than the Federal Reserve may fuel further gains in the euro.
“This is going to be the big one,” said James Nixon, co- chief European economist at Societe Generale SA in London. “They need to very, very carefully set out a timetable for how liquidity will be drawn down, but they don’t want to plant expectations that the exit implies they’ll raise interest rates.”
The ECB announces its rate decision at 1:45 p.m. and Trichet holds a press conference 45 minutes later.
Global Stimulus
While Australia’s central bank has raised rates three times in as many months, the Fed and the Bank of England have signaled they’re in no rush to increase borrowing costs from record lows as their economies struggle to shake off the effects of the biggest global slump since the Great Depression. The Bank of Japan announced new measures this week, saying it will offer three-month loans to banks at 0.1 percent to combat deflation.
Trichet will today unveil the ECB’s new staff projections, including the first forecasts for 2011. Governing Council members such as Luxembourg’s Yves Mersch and Slovakia’s Ivan Sramko have said they expect the bank to revise up its outlook for the 16-nation economy, which emerged from recession in the third quarter.
In September, the central bank said it expected gross domestic product to grow 0.2 percent in 2010 after shrinking 4.1 this year. It projected inflation of 0.4 percent this year and 1.2 percent next year. The ECB aims to keep inflation just below 2 percent over the medium term.
‘Gradual Recovery’
The December projections will show “a gradual recovery and moderately positive inflation,” said Nick Matthews, an economist at Royal Bank of Scotland Group Plc in London. “They’ll be consistent with the view that the policy rate can remain low for a long time.”
The euro has gained 20 percent against the dollar since mid-February, rising above $1.51 yesterday, which is threatening to hurt European exports. Siemens AG, which today reported its first quarterly loss in a year, last month said it expects a “slow” global recovery.
Europe’s single currency climbed 0.5 percent to $1.5117 as of 8:45 a.m. in Frankfurt.
Some policy makers have expressed concern that banks are becoming too reliant on ECB cash, and are pushing for the extraordinary lending measures to be withdrawn.
“Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said on Nov. 20. “Eventually, the administration of painkillers must be stopped if patients are to get on their own two feet.”
Leaning
Trichet signaled on Nov. 5 that the ECB is unlikely to renew its 12-month loans to banks after December’s offering and promised to give details today. He’ll also say whether the ECB has decided to alter the interest rate on the loans. People familiar with the deliberations said last week that policy makers were leaning toward keeping the rate fixed at 1 percent.
The ECB may announce plans to reduce the frequency of its three-month and six-month loans, which it currently offers every month. The “first steps of a gradual phasing-out of non- standard measures” may include “a lower frequency for three- month and six-month refinancing operations,” Belgian council member Guy Quaden said Nov. 16.
Trichet could also field questions about Dubai’s decision to seek to delay debt repayments, which roiled financial markets this week, and Greece’s ballooning budget deficit. ECB Vice President Lucas Papademos met with Greek Prime Minister George Papandreou last weekend to discuss the issue.
With markets still jittery about the sustainability of the economic recovery, the ECB will be wary of upsetting the apple cart, said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. in London.
“The message Trichet wants to convey is that the ECB is well placed to remove its monetary stimulus and has a strategy for doing so, but that it’s not going to do it too quickly,” he said. “It’s a bit of a balancing act.”
To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- The European Central Bank may today announce plans to scale back its emergency lending while keeping interest rates at a record low to foster an economic recovery.
ECB policy makers meeting in Frankfurt will leave the benchmark interest rate at 1 percent, according to all 54 economists in a Bloomberg News survey. President Jean-Claude Trichet will say the ECB’s third offer of 12-month loans to banks on Dec. 15 will be the last and may also signal a reduction in other lending operations, economists said.
The ECB, which has been flooding banks with cheap cash to fight Europe’s worst recession since World War II, said last month it will gradually withdraw the extra liquidity to prevent inflation as the economy gathers strength. At the same time, officials don’t want to give the impression they’re moving closer to rate increases, people familiar with their discussions said. Any indication that the ECB could tighten policy sooner than the Federal Reserve may fuel further gains in the euro.
“This is going to be the big one,” said James Nixon, co- chief European economist at Societe Generale SA in London. “They need to very, very carefully set out a timetable for how liquidity will be drawn down, but they don’t want to plant expectations that the exit implies they’ll raise interest rates.”
The ECB announces its rate decision at 1:45 p.m. and Trichet holds a press conference 45 minutes later.
Global Stimulus
While Australia’s central bank has raised rates three times in as many months, the Fed and the Bank of England have signaled they’re in no rush to increase borrowing costs from record lows as their economies struggle to shake off the effects of the biggest global slump since the Great Depression. The Bank of Japan announced new measures this week, saying it will offer three-month loans to banks at 0.1 percent to combat deflation.
Trichet will today unveil the ECB’s new staff projections, including the first forecasts for 2011. Governing Council members such as Luxembourg’s Yves Mersch and Slovakia’s Ivan Sramko have said they expect the bank to revise up its outlook for the 16-nation economy, which emerged from recession in the third quarter.
In September, the central bank said it expected gross domestic product to grow 0.2 percent in 2010 after shrinking 4.1 this year. It projected inflation of 0.4 percent this year and 1.2 percent next year. The ECB aims to keep inflation just below 2 percent over the medium term.
‘Gradual Recovery’
The December projections will show “a gradual recovery and moderately positive inflation,” said Nick Matthews, an economist at Royal Bank of Scotland Group Plc in London. “They’ll be consistent with the view that the policy rate can remain low for a long time.”
The euro has gained 20 percent against the dollar since mid-February, rising above $1.51 yesterday, which is threatening to hurt European exports. Siemens AG, which today reported its first quarterly loss in a year, last month said it expects a “slow” global recovery.
Europe’s single currency climbed 0.5 percent to $1.5117 as of 8:45 a.m. in Frankfurt.
Some policy makers have expressed concern that banks are becoming too reliant on ECB cash, and are pushing for the extraordinary lending measures to be withdrawn.
“Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said on Nov. 20. “Eventually, the administration of painkillers must be stopped if patients are to get on their own two feet.”
Leaning
Trichet signaled on Nov. 5 that the ECB is unlikely to renew its 12-month loans to banks after December’s offering and promised to give details today. He’ll also say whether the ECB has decided to alter the interest rate on the loans. People familiar with the deliberations said last week that policy makers were leaning toward keeping the rate fixed at 1 percent.
The ECB may announce plans to reduce the frequency of its three-month and six-month loans, which it currently offers every month. The “first steps of a gradual phasing-out of non- standard measures” may include “a lower frequency for three- month and six-month refinancing operations,” Belgian council member Guy Quaden said Nov. 16.
Trichet could also field questions about Dubai’s decision to seek to delay debt repayments, which roiled financial markets this week, and Greece’s ballooning budget deficit. ECB Vice President Lucas Papademos met with Greek Prime Minister George Papandreou last weekend to discuss the issue.
With markets still jittery about the sustainability of the economic recovery, the ECB will be wary of upsetting the apple cart, said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. in London.
“The message Trichet wants to convey is that the ECB is well placed to remove its monetary stimulus and has a strategy for doing so, but that it’s not going to do it too quickly,” he said. “It’s a bit of a balancing act.”
To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net
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Bernanke May Defend Fed Powers in Senate Confirmation Hearing
By Craig Torres and Alison Vekshin
Dec. 3 (Bloomberg) -- Ben S. Bernanke, who led the most expansive use of the Federal Reserve’s powers in its 96-year history, may fight efforts to curtail its authority and independence during his confirmation hearing today.
Christopher Dodd, chairman of the Senate Banking Committee that oversees the Fed, wants to strip the central bank of its powers to supervise banks and protect consumers. A measure sponsored by Representative Ron Paul of Texas would subject Fed interest-rate decisions to congressional audits.
A majority of the banking panel’s members who will grill Bernanke today say they are likely to back the 55-year-old former Princeton University economist for a second term. Support for the chairman may not keep lawmakers from taking aim at the Fed itself, which many have blamed for failing to curtail the excesses that led to the financial crisis and then overstepping its powers with bailouts of firms including New York-based insurer American International Group Inc.
“Bernanke’s big mistake is that he’s veered into fiscal territory” with rescue programs, said Axel Merk, president of Merk Investments LLC, which manages $590 million in Palo Alto, California. “He has underestimated the political dimension. Being questioned all the time about all these activities erodes the credibility of the Fed.”
Weakened independence and long-lasting market-support programs could undermine the dollar and unleash inflation expectations, said Merk, whose Hard Currency Fund is positioned to shield investors from such an occurrence.
Consumer Protection
Republicans who want less government intrusion in financial markets and Democrats seeking to protect consumers have united in anti-Fed sentiment, making it more likely they will approve measures limiting the central bank’s powers, said Sarah Binder of the Brookings Institution in Washington.
“It is not unusual for members of Congress to beat up on the Fed when the economy has soured,” said Binder, a senior fellow of governance studies. “What is different is that this time it seems clearly bi-partisan.”
Dodd, calling the Fed’s record on supervision an “abysmal failure,” last month introduced legislation that would strip bank oversight from the Fed and create a single regulator. The Connecticut Democrat would also limit the central bank’s ability to lend to individual companies.
In March, 2007, four months before subprime mortgage defaults began to rock the global financial system, Bernanke told the Joint Economic Committee: “The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”
‘Core Functions’
“I am trying to get them back to more of their core functions,” Dodd told reporters on Dec. 1. “It isn’t about being punitive.” In August, Dodd said that while he’s had “serious differences” with the Fed, reappointing Bernanke is “probably the right choice.”
Dodd would also remove the Fed’s rule-writing powers on consumer financial products and increase political oversight of district bank presidents.
The hearing on Bernanke’s nomination to a second four-year term is set to begin at 10 a.m. in Washington. A vote hasn’t been scheduled. Senator Bernard Sanders, a Vermont Independent who’s not on the banking panel, yesterday said he would seek to block Bernanke’s confirmation in the full Senate.
In the House, the Financial Services Committee last month approved Paul’s measure to strip the Fed of its protection from congressional audits of monetary policy. Investors say the proposal would open the door to interference by lawmakers.
“Bernanke must be the standard-bearer of Fed independence,” said Mark Spindel, chief investment officer of Potomac River Capital LLC, which specializes in inflation-linked bonds and manages more than $200 million in Washington.
Economic Stability
“A number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions,” Bernanke wrote in a Nov. 29 commentary in The Washington Post.
In October, the Fed proposed new guidelines on pay practices at banks and said it will launch a review of the 28 largest firms to ensure compensation packages don’t create incentives for the kinds of risky investments blamed for the financial crisis.
Such steps may not defuse public anger over bailouts of financial firms, which has been amplified as Wall Street banks report rising profits while average Americans cope with the loss of 7.3 million jobs since the start of the recession in December 2007. Goldman Sachs Group Inc. said Oct. 15 that third-quarter profit more than tripled to $3.19 billion from a year earlier.
$1 Trillion
Many investors credit Bernanke with averting a second Great Depression as the Fed pushed interest rates to zero, rolled out liquidity backstops for markets for asset-backed securities and commercial paper, and pumped more than $1 trillion into the economy with purchases of securities.
The economy expanded for the first time in a year in the third quarter, growing at a 2.8 percent annual rate. The Standard and Poor’s 500 Financials Index has jumped 141 percent since March 6, and the cost of three-month dollar loans in London between banks fell to 0.255 percent on Dec. 2 from 1.41 percent at the beginning of the year.
“Bernanke will be taken to task,” said Richard Schlanger, who helps oversee $14 billion in bond investments at Pioneer Investment Management Inc. in Boston. “But ultimately he will be reappointed, and one day we will look back on this and thank our lucky stars that he was at the helm.”
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net.
Read more...
Dec. 3 (Bloomberg) -- Ben S. Bernanke, who led the most expansive use of the Federal Reserve’s powers in its 96-year history, may fight efforts to curtail its authority and independence during his confirmation hearing today.
Christopher Dodd, chairman of the Senate Banking Committee that oversees the Fed, wants to strip the central bank of its powers to supervise banks and protect consumers. A measure sponsored by Representative Ron Paul of Texas would subject Fed interest-rate decisions to congressional audits.
A majority of the banking panel’s members who will grill Bernanke today say they are likely to back the 55-year-old former Princeton University economist for a second term. Support for the chairman may not keep lawmakers from taking aim at the Fed itself, which many have blamed for failing to curtail the excesses that led to the financial crisis and then overstepping its powers with bailouts of firms including New York-based insurer American International Group Inc.
“Bernanke’s big mistake is that he’s veered into fiscal territory” with rescue programs, said Axel Merk, president of Merk Investments LLC, which manages $590 million in Palo Alto, California. “He has underestimated the political dimension. Being questioned all the time about all these activities erodes the credibility of the Fed.”
Weakened independence and long-lasting market-support programs could undermine the dollar and unleash inflation expectations, said Merk, whose Hard Currency Fund is positioned to shield investors from such an occurrence.
Consumer Protection
Republicans who want less government intrusion in financial markets and Democrats seeking to protect consumers have united in anti-Fed sentiment, making it more likely they will approve measures limiting the central bank’s powers, said Sarah Binder of the Brookings Institution in Washington.
“It is not unusual for members of Congress to beat up on the Fed when the economy has soured,” said Binder, a senior fellow of governance studies. “What is different is that this time it seems clearly bi-partisan.”
Dodd, calling the Fed’s record on supervision an “abysmal failure,” last month introduced legislation that would strip bank oversight from the Fed and create a single regulator. The Connecticut Democrat would also limit the central bank’s ability to lend to individual companies.
In March, 2007, four months before subprime mortgage defaults began to rock the global financial system, Bernanke told the Joint Economic Committee: “The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”
‘Core Functions’
“I am trying to get them back to more of their core functions,” Dodd told reporters on Dec. 1. “It isn’t about being punitive.” In August, Dodd said that while he’s had “serious differences” with the Fed, reappointing Bernanke is “probably the right choice.”
Dodd would also remove the Fed’s rule-writing powers on consumer financial products and increase political oversight of district bank presidents.
The hearing on Bernanke’s nomination to a second four-year term is set to begin at 10 a.m. in Washington. A vote hasn’t been scheduled. Senator Bernard Sanders, a Vermont Independent who’s not on the banking panel, yesterday said he would seek to block Bernanke’s confirmation in the full Senate.
In the House, the Financial Services Committee last month approved Paul’s measure to strip the Fed of its protection from congressional audits of monetary policy. Investors say the proposal would open the door to interference by lawmakers.
“Bernanke must be the standard-bearer of Fed independence,” said Mark Spindel, chief investment officer of Potomac River Capital LLC, which specializes in inflation-linked bonds and manages more than $200 million in Washington.
Economic Stability
“A number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions,” Bernanke wrote in a Nov. 29 commentary in The Washington Post.
In October, the Fed proposed new guidelines on pay practices at banks and said it will launch a review of the 28 largest firms to ensure compensation packages don’t create incentives for the kinds of risky investments blamed for the financial crisis.
Such steps may not defuse public anger over bailouts of financial firms, which has been amplified as Wall Street banks report rising profits while average Americans cope with the loss of 7.3 million jobs since the start of the recession in December 2007. Goldman Sachs Group Inc. said Oct. 15 that third-quarter profit more than tripled to $3.19 billion from a year earlier.
$1 Trillion
Many investors credit Bernanke with averting a second Great Depression as the Fed pushed interest rates to zero, rolled out liquidity backstops for markets for asset-backed securities and commercial paper, and pumped more than $1 trillion into the economy with purchases of securities.
The economy expanded for the first time in a year in the third quarter, growing at a 2.8 percent annual rate. The Standard and Poor’s 500 Financials Index has jumped 141 percent since March 6, and the cost of three-month dollar loans in London between banks fell to 0.255 percent on Dec. 2 from 1.41 percent at the beginning of the year.
“Bernanke will be taken to task,” said Richard Schlanger, who helps oversee $14 billion in bond investments at Pioneer Investment Management Inc. in Boston. “But ultimately he will be reappointed, and one day we will look back on this and thank our lucky stars that he was at the helm.”
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net.
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Bank of America to Repay Bailout, Easing CEO Search
By David Mildenberg
Dec. 3 (Bloomberg) -- Bank of America Corp., the nation’s biggest lender, will repay $45 billion of U.S. government bailout funds, helping free the bank from curbs on executive pay that have hampered its search for a new leader.
The bank will repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities, according to a statement. The firm plans to increase equity by $4 billion through asset sales, and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees.
Bank of America’s two rounds of U.S. funding included $20 billion to help cushion losses tied to the takeover of Merrill Lynch & Co. The planned repayment will ease the bank’s effort to replace Chief Executive Officer Kenneth D. Lewis, who announced his departure in September.
Dilution for shareholders will be “substantial,” said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees $1 billion, including Bank of America shares. “It looks like this was done for the incoming chief executive,” he said. “You take out the compensation restrictions and everything else that went along with the government ownership.”
Bank of America, based in Charlotte, North Carolina, rose to $16.23 in German trading today, up 3.7 percent from its $15.65 close in New York yesterday. The shares have gained 11 percent this year on the New York Stock Exchange after plummeting 66 percent in 2008.
Curl, Price
The repayment was negotiated by Chief Risk Officer Greg Curl and Chief Financial Officer Joe L. Price, a person familiar with the matter said. The two executives had approval from the board to close the deal once regulators including the Treasury, the Federal Reserve and the Office of the Comptroller of the Currency agreed to it, the person said, speaking anonymously because the details of the talks aren’t public.
Bank officials have cited Curl, 61, as one of two internal candidates most likely to succeed Lewis and his role in negotiating the exit from TARP makes him the favorite, said Anthony Polini, an analyst at Raymond James Financial Inc. While the board continues the search process, the agreement enhances Curl’s prospects, said a person familiar with the process.
No decision has been made with both internal and external candidates under consideration, spokesman Robert Stickler said in an interview. “It removes the stigma we’ve had as a company,” he said.
Limits on Pay
Repaying TARP funds removes Bank of America from limits on compensation required by Kenneth Feinberg, the U.S. special compensation master, Stickler said.
“This is huge for Bank of America’s ability to attract a new CEO,” said Jaime Peters, an analyst at Morningstar Inc. “No longer will they have to say we don’t know how much we can pay you unless some guy in Washington D.C. tells us.”
At least four external candidates, including Citigroup Inc. director Michael O’Neill and Bank of New York Mellon CEO Robert Kelly, rebuffed approaches.
Ending TARP saves $3.6 billion a year in dividend payments, which may help boost earnings next year, Raymond James’s Polini said in an interview. It also means CEO Lewis, 62, can fulfill his vow to arrange the return of all bailout funds before his tenure ends at the end of the year. Lewis endured criticism from lawmakers, regulators and shareholders about his handling of the Merrill Lynch purchase.
JPMorgan Competition
“We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest,” Lewis said in the statement.
The move helps Bank of America compete with rivals including JPMorgan Chase & Co., which already repaid bailout funds, Stickler said.
Bank of America’s plan will reduce income available to common shareholders in the fourth quarter by $4.1 billion, the company said. Terms call for issuing “common equivalent securities,” and shareholders will be asked to approve an increase in authorized shares so they could be converted into common stock. The new securities have warrants to buy a total of 60 million shares of common stock at a penny a share if stockholders don’t vote to approve the increase.
‘Bitter Pill’
The asset sales, designed to boost equity, must be in contract and approved by the Federal Reserve by June 30, Bank of America said. If the sales aren’t completed by the end of 2010, the bank agreed to sell common equity.
The plan calls for the bank to buy back 1.8 million preferred shares sold to the Treasury Department. For now, the bank isn’t buying back warrants also awarded to the U.S., Bank of America said. The warrants are worth from $943 million to $2.5 billion, depending on the type of valuation used, said Linus Wilson, a finance professor at the University of Louisiana at Lafayette who has studied TARP.
Bank of America is offering the common equivalent securities because it doesn’t have stockholder authority to issue enough shares to raise the $18.8 billion of common equity, Stickler said. The sale is commencing immediately, he said.
“It’s a bitter pill, but longer term it outweighs the hit to the stock,” said Matthew McCormick, a banking analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.5 billion. “I thought it would take longer than this for Bank of America to get out of it. It shows that the government couldn’t attract anyone of substantial talent unless they paid a fair wage.”
To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- Bank of America Corp., the nation’s biggest lender, will repay $45 billion of U.S. government bailout funds, helping free the bank from curbs on executive pay that have hampered its search for a new leader.
The bank will repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities, according to a statement. The firm plans to increase equity by $4 billion through asset sales, and will issue $1.7 billion of restricted stock instead of year-end bonuses to some employees.
Bank of America’s two rounds of U.S. funding included $20 billion to help cushion losses tied to the takeover of Merrill Lynch & Co. The planned repayment will ease the bank’s effort to replace Chief Executive Officer Kenneth D. Lewis, who announced his departure in September.
Dilution for shareholders will be “substantial,” said William Fitzpatrick, an analyst at Racine, Wisconsin-based Optique Capital Management, which oversees $1 billion, including Bank of America shares. “It looks like this was done for the incoming chief executive,” he said. “You take out the compensation restrictions and everything else that went along with the government ownership.”
Bank of America, based in Charlotte, North Carolina, rose to $16.23 in German trading today, up 3.7 percent from its $15.65 close in New York yesterday. The shares have gained 11 percent this year on the New York Stock Exchange after plummeting 66 percent in 2008.
Curl, Price
The repayment was negotiated by Chief Risk Officer Greg Curl and Chief Financial Officer Joe L. Price, a person familiar with the matter said. The two executives had approval from the board to close the deal once regulators including the Treasury, the Federal Reserve and the Office of the Comptroller of the Currency agreed to it, the person said, speaking anonymously because the details of the talks aren’t public.
Bank officials have cited Curl, 61, as one of two internal candidates most likely to succeed Lewis and his role in negotiating the exit from TARP makes him the favorite, said Anthony Polini, an analyst at Raymond James Financial Inc. While the board continues the search process, the agreement enhances Curl’s prospects, said a person familiar with the process.
No decision has been made with both internal and external candidates under consideration, spokesman Robert Stickler said in an interview. “It removes the stigma we’ve had as a company,” he said.
Limits on Pay
Repaying TARP funds removes Bank of America from limits on compensation required by Kenneth Feinberg, the U.S. special compensation master, Stickler said.
“This is huge for Bank of America’s ability to attract a new CEO,” said Jaime Peters, an analyst at Morningstar Inc. “No longer will they have to say we don’t know how much we can pay you unless some guy in Washington D.C. tells us.”
At least four external candidates, including Citigroup Inc. director Michael O’Neill and Bank of New York Mellon CEO Robert Kelly, rebuffed approaches.
Ending TARP saves $3.6 billion a year in dividend payments, which may help boost earnings next year, Raymond James’s Polini said in an interview. It also means CEO Lewis, 62, can fulfill his vow to arrange the return of all bailout funds before his tenure ends at the end of the year. Lewis endured criticism from lawmakers, regulators and shareholders about his handling of the Merrill Lynch purchase.
JPMorgan Competition
“We appreciate the critical role that the U.S. government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest,” Lewis said in the statement.
The move helps Bank of America compete with rivals including JPMorgan Chase & Co., which already repaid bailout funds, Stickler said.
Bank of America’s plan will reduce income available to common shareholders in the fourth quarter by $4.1 billion, the company said. Terms call for issuing “common equivalent securities,” and shareholders will be asked to approve an increase in authorized shares so they could be converted into common stock. The new securities have warrants to buy a total of 60 million shares of common stock at a penny a share if stockholders don’t vote to approve the increase.
‘Bitter Pill’
The asset sales, designed to boost equity, must be in contract and approved by the Federal Reserve by June 30, Bank of America said. If the sales aren’t completed by the end of 2010, the bank agreed to sell common equity.
The plan calls for the bank to buy back 1.8 million preferred shares sold to the Treasury Department. For now, the bank isn’t buying back warrants also awarded to the U.S., Bank of America said. The warrants are worth from $943 million to $2.5 billion, depending on the type of valuation used, said Linus Wilson, a finance professor at the University of Louisiana at Lafayette who has studied TARP.
Bank of America is offering the common equivalent securities because it doesn’t have stockholder authority to issue enough shares to raise the $18.8 billion of common equity, Stickler said. The sale is commencing immediately, he said.
“It’s a bitter pill, but longer term it outweighs the hit to the stock,” said Matthew McCormick, a banking analyst and portfolio manager at Bahl & Gaynor Inc. in Cincinnati, which oversees $2.5 billion. “I thought it would take longer than this for Bank of America to get out of it. It shows that the government couldn’t attract anyone of substantial talent unless they paid a fair wage.”
To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net
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Pound Faces Crisis Risk From Election Tie, Lawmaker Field Says
By Jennifer Ryan
Dec. 3 (Bloomberg) -- The U.K. faces the risk of a sterling crisis and may need aid from the International Monetary Fund if no single political party wins control of Parliament at the next election, Conservative lawmaker Mark Field said.
“The more recent prospect of a hung parliament” risks “tipping sterling and the gilt market into a catastrophic state,” Field said at an event in London yesterday. He is the opposition lawmaker representing London’s finance district, known as the City.
Field’s comments go further than former Conservative finance minister Kenneth Clarke, who said last month that a minority government, known as a “hung parliament,” would be worse than a victory for the ruling Labour Party. An opinion poll published this week showed the Conservatives’ lead is insufficient to secure a majority of lawmakers.
“There’s a substantial risk of a sterling crisis, long- term interest rates would soar and the nation’s essential AAA gilt credit rating might even face a downgrade,” Field said. “If political leaders, concerned only with gaining tactical advantage, show themselves unwilling to face up to the stark facts of this long march back to fiscal balance and the economic recovery, it could even prove necessary to call in the IMF.”
Prime Minister Gordon Brown must call an election by June. The Conservative opposition’s lead over Labour fell 3 points from October to 10 points in a ComRes Ltd. survey for the Independent. Those results, if repeated in the election, would leave David Cameron’s party six seats short of a majority in Parliament, the newspaper said.
Darling Plans
Chancellor of the Exchequer Alistair Darling may signal new tax and spending plans in his pre-budget report on Dec. 9. Britain had a deficit of 11.4 billion pounds ($19 billion) in October, the most for the month since records began.
“The markets have factored in firm action in the near future,” Field said. “They risk being tipped further over the edge if further delays result from an inconclusive election.”
Field also raised the specter of Britain needing to seek aid from the IMF for the first time since 1976, when it obtained a loan from the Washington-based institution.
“A political class unwilling and unable perhaps to take responsibility or court unpopularity may be forced to bring in a neutral umpire to administer the very tough decisions on public spending,” he said.
Morgan Stanley equity strategists Graham Secker and Catharina Luebke-Detring said this week an indecisive U.K. election result next year along with a record budget deficit and an uneven economic recovery may prompt a sell-off in the British currency and bond markets. Standard & Poor’s has put its top AAA rating for the U.K. on a “negative outlook.”
‘National Crisis’
“At a time of national crisis, a hung parliament would be one of the biggest disasters we could suffer,” Clarke said Nov. 10. “You’re going to need a strong government capable of doing unpopular things.”
Field said that whichever party wins the next election, they must risk taking unpopular decisions to shore up the public finances. He suggested that voter approval of the next government’s fiscal policies may be a sign of failure.
“Any U.K. government that is regarded as popular in 2011 or 2012 is probably not administering the right medicine. To do the right thing on tax and public expenditure in the years to come will not be the politically easy option,” Field said. “There is going to be a very hard slog ahead for any U.K. political administration.”
Field spoke at event at London Metropolitan University organized by the Global Policy Institute, marking the launch of a book called “Reforming the City: Responses to the Global Financial Crisis.”
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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Dec. 3 (Bloomberg) -- The U.K. faces the risk of a sterling crisis and may need aid from the International Monetary Fund if no single political party wins control of Parliament at the next election, Conservative lawmaker Mark Field said.
“The more recent prospect of a hung parliament” risks “tipping sterling and the gilt market into a catastrophic state,” Field said at an event in London yesterday. He is the opposition lawmaker representing London’s finance district, known as the City.
Field’s comments go further than former Conservative finance minister Kenneth Clarke, who said last month that a minority government, known as a “hung parliament,” would be worse than a victory for the ruling Labour Party. An opinion poll published this week showed the Conservatives’ lead is insufficient to secure a majority of lawmakers.
“There’s a substantial risk of a sterling crisis, long- term interest rates would soar and the nation’s essential AAA gilt credit rating might even face a downgrade,” Field said. “If political leaders, concerned only with gaining tactical advantage, show themselves unwilling to face up to the stark facts of this long march back to fiscal balance and the economic recovery, it could even prove necessary to call in the IMF.”
Prime Minister Gordon Brown must call an election by June. The Conservative opposition’s lead over Labour fell 3 points from October to 10 points in a ComRes Ltd. survey for the Independent. Those results, if repeated in the election, would leave David Cameron’s party six seats short of a majority in Parliament, the newspaper said.
Darling Plans
Chancellor of the Exchequer Alistair Darling may signal new tax and spending plans in his pre-budget report on Dec. 9. Britain had a deficit of 11.4 billion pounds ($19 billion) in October, the most for the month since records began.
“The markets have factored in firm action in the near future,” Field said. “They risk being tipped further over the edge if further delays result from an inconclusive election.”
Field also raised the specter of Britain needing to seek aid from the IMF for the first time since 1976, when it obtained a loan from the Washington-based institution.
“A political class unwilling and unable perhaps to take responsibility or court unpopularity may be forced to bring in a neutral umpire to administer the very tough decisions on public spending,” he said.
Morgan Stanley equity strategists Graham Secker and Catharina Luebke-Detring said this week an indecisive U.K. election result next year along with a record budget deficit and an uneven economic recovery may prompt a sell-off in the British currency and bond markets. Standard & Poor’s has put its top AAA rating for the U.K. on a “negative outlook.”
‘National Crisis’
“At a time of national crisis, a hung parliament would be one of the biggest disasters we could suffer,” Clarke said Nov. 10. “You’re going to need a strong government capable of doing unpopular things.”
Field said that whichever party wins the next election, they must risk taking unpopular decisions to shore up the public finances. He suggested that voter approval of the next government’s fiscal policies may be a sign of failure.
“Any U.K. government that is regarded as popular in 2011 or 2012 is probably not administering the right medicine. To do the right thing on tax and public expenditure in the years to come will not be the politically easy option,” Field said. “There is going to be a very hard slog ahead for any U.K. political administration.”
Field spoke at event at London Metropolitan University organized by the Global Policy Institute, marking the launch of a book called “Reforming the City: Responses to the Global Financial Crisis.”
To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net
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Dollar Slide Will Halt on ‘Aggressive’ Fed, BT Investment Says
By Candice Zachariahs
Dec. 3 (Bloomberg) -- The U.S. dollar will extend its drop versus the euro and reach parity with Australia’s dollar in 2010 before “aggressive” interest-rate increases by the Federal Reserve boost the greenback, BT Investment Management said.
The U.S. dollar has weakened against all 16 of the most- traded currencies this year as unemployment surged to the highest since 1983 and the Federal Reserve pledged last month to keep interest rates near zero for an “extended period.” Current rates make the dollar a favorite in carry trades where low-cost funds are used to invest in higher-yielding assets.
“Given the Fed’s stance on raising rates and where the economy is at the moment, I don’t think we’ll see a real strong growth in the U.S. dollar again until mid to late next year,” said Joe Bracken, who oversees A$4 billion ($3.7 billion) as head of macro strategies at BT Investment Management in Sydney. “Once the growth really comes back, the Fed will be very, very worried indeed about this growth translating into inflation and they will very quickly raise rates.”
The Fed increased its target rate in 17 consecutive quarter-point moves between June 2004 and June 2006 in the longest series of increases without a pause or cut since the FOMC began announcing the direction of target rates in 1994. That’s the year the central bank began another series of increases that took the benchmark rate from 3 percent before the first increase in February to 6 percent a year later.
Growth Story
“The Fed will be pretty aggressive in putting rates back up, that’s what history tells us,” Bracken said. “Once they start to do that, Treasuries will get creamed and the carry trade will reverse pretty quickly.”
The U.S. dollar has fallen 16 percent against the euro over the past 12 months and traded at $1.5091 as of 12:39 p.m. in Tokyo. It has lost 30 percent versus Australia’s dollar over the same period to trade at 92.96 U.S. cents per Aussie.
Bracken said his currency portfolio has returned 15 percent over the past 12 months. The fund invests in currencies that provide “diversification benefits” including the U.S., Canadian and Australian dollars, euro, yen, pound, Brazil’s real, the Korean won and South Africa’s rand, he said.
The fund is bullish on the Australian and Canadian dollar, Brazil’s real and the Korean won, according to Bracken. It also has a so-called long position in the yen, which provides a “very good buffer” against any ebbing in risk appetite, he said. A long position profits when an asset rises.
“The growth story has some legs particularly in Southeast Asian countries,” Bracken said. “Aussie dollar as a commodity currency, as a risk currency, as a carry-trade currency continues to have a lot of legs and you’ll probably see it approach parity with the U.S. dollar. It’s a very similar story for the Canadian dollar.”
Against the U.S. dollar, the Brazilian real is the best- performer among the 16 most-traded currencies over the past 12 months followed by the Australian dollar. Korea’s won is the sixth biggest-gainer and Canada’s dollar the ninth.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- The U.S. dollar will extend its drop versus the euro and reach parity with Australia’s dollar in 2010 before “aggressive” interest-rate increases by the Federal Reserve boost the greenback, BT Investment Management said.
The U.S. dollar has weakened against all 16 of the most- traded currencies this year as unemployment surged to the highest since 1983 and the Federal Reserve pledged last month to keep interest rates near zero for an “extended period.” Current rates make the dollar a favorite in carry trades where low-cost funds are used to invest in higher-yielding assets.
“Given the Fed’s stance on raising rates and where the economy is at the moment, I don’t think we’ll see a real strong growth in the U.S. dollar again until mid to late next year,” said Joe Bracken, who oversees A$4 billion ($3.7 billion) as head of macro strategies at BT Investment Management in Sydney. “Once the growth really comes back, the Fed will be very, very worried indeed about this growth translating into inflation and they will very quickly raise rates.”
The Fed increased its target rate in 17 consecutive quarter-point moves between June 2004 and June 2006 in the longest series of increases without a pause or cut since the FOMC began announcing the direction of target rates in 1994. That’s the year the central bank began another series of increases that took the benchmark rate from 3 percent before the first increase in February to 6 percent a year later.
Growth Story
“The Fed will be pretty aggressive in putting rates back up, that’s what history tells us,” Bracken said. “Once they start to do that, Treasuries will get creamed and the carry trade will reverse pretty quickly.”
The U.S. dollar has fallen 16 percent against the euro over the past 12 months and traded at $1.5091 as of 12:39 p.m. in Tokyo. It has lost 30 percent versus Australia’s dollar over the same period to trade at 92.96 U.S. cents per Aussie.
Bracken said his currency portfolio has returned 15 percent over the past 12 months. The fund invests in currencies that provide “diversification benefits” including the U.S., Canadian and Australian dollars, euro, yen, pound, Brazil’s real, the Korean won and South Africa’s rand, he said.
The fund is bullish on the Australian and Canadian dollar, Brazil’s real and the Korean won, according to Bracken. It also has a so-called long position in the yen, which provides a “very good buffer” against any ebbing in risk appetite, he said. A long position profits when an asset rises.
“The growth story has some legs particularly in Southeast Asian countries,” Bracken said. “Aussie dollar as a commodity currency, as a risk currency, as a carry-trade currency continues to have a lot of legs and you’ll probably see it approach parity with the U.S. dollar. It’s a very similar story for the Canadian dollar.”
Against the U.S. dollar, the Brazilian real is the best- performer among the 16 most-traded currencies over the past 12 months followed by the Australian dollar. Korea’s won is the sixth biggest-gainer and Canada’s dollar the ninth.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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Banco Bilbao, NH, Telecinco, Iberdrola: Spanish Stock Preview
By Charles Penty and Javier Marquina
Dec. 3 (Bloomberg) -- The following companies may have unusual price changes in Spain and Portugal. Stock symbols are in parentheses and share prices are from the previous close.
Spain’s IBEX 35 Index rose less than 0.1 percent to 11,868.80 and Portugal’s PSI-20 Index dropped 0.3 percent to 8,359.12.
Banco Bilbao Vizcaya Argentaria SA (BBVA SM): The Spanish lender has a first deadline of Dec. 4 to exercise an option to raise its stake in China Citic Bank Co. to 15 percent from about 10.1 percent. The shares fell 0.1 percent to 12.78 euros.
Gestevision Telecinco SA (TL5 SM): The broadcaster may be active after the European Union started an investigation into Spain’s plan to help finance state-owned broadcaster RTVE by introducing a new tax on commercial broadcasters and telephone operators. The shares gained 0.5 percent to 7.76 euros.
Iberdrola SA (IBE SM): The power company was cut to “hold” from “buy” at Standard & Poor’s Equity Research. The stock rose 0.2 percent to 6.44 euros.
NH Hoteles SA (NHH SM): Spain’s largest business hotel operator will hold a shareholders’ meeting, which will vote on a plan to manage 51 hotels owned by Hesperia, its biggest shareholder. The shares fell 2.7 percent, to 3.55 euros.
Repsol YPF SA (REP SM): workers at the Argentine unit of Spain’s biggest oil company plan to strike for 24 hours today in the oil production area of the Neuquen basin to demand salary increases previously approved by both parties, union leader Manuel Arevalo said. Repsol declined 0.2 percent to 18.72 euros.
To contact the reporters on this story: Charles Penty at cpenty@bloomberg.net; Javier Marquina in Madrid at jmarquina@bloomberg.net.
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Dec. 3 (Bloomberg) -- The following companies may have unusual price changes in Spain and Portugal. Stock symbols are in parentheses and share prices are from the previous close.
Spain’s IBEX 35 Index rose less than 0.1 percent to 11,868.80 and Portugal’s PSI-20 Index dropped 0.3 percent to 8,359.12.
Banco Bilbao Vizcaya Argentaria SA (BBVA SM): The Spanish lender has a first deadline of Dec. 4 to exercise an option to raise its stake in China Citic Bank Co. to 15 percent from about 10.1 percent. The shares fell 0.1 percent to 12.78 euros.
Gestevision Telecinco SA (TL5 SM): The broadcaster may be active after the European Union started an investigation into Spain’s plan to help finance state-owned broadcaster RTVE by introducing a new tax on commercial broadcasters and telephone operators. The shares gained 0.5 percent to 7.76 euros.
Iberdrola SA (IBE SM): The power company was cut to “hold” from “buy” at Standard & Poor’s Equity Research. The stock rose 0.2 percent to 6.44 euros.
NH Hoteles SA (NHH SM): Spain’s largest business hotel operator will hold a shareholders’ meeting, which will vote on a plan to manage 51 hotels owned by Hesperia, its biggest shareholder. The shares fell 2.7 percent, to 3.55 euros.
Repsol YPF SA (REP SM): workers at the Argentine unit of Spain’s biggest oil company plan to strike for 24 hours today in the oil production area of the Neuquen basin to demand salary increases previously approved by both parties, union leader Manuel Arevalo said. Repsol declined 0.2 percent to 18.72 euros.
To contact the reporters on this story: Charles Penty at cpenty@bloomberg.net; Javier Marquina in Madrid at jmarquina@bloomberg.net.
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Asian Stocks Climb to 15-Month High on Yen, Fed Beige Book
By Shani Raja
Dec. 3 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a 15-month high, as a weaker yen boosted Japanese exporters and the Federal Reserve said the U.S. economy improved.
Sony Corp., which gets 23 percent of its sales in the U.S., surged 6 percent in Tokyo, and Honda Motor Co. added 4.2 percent. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal- Mart Stores Inc., rose 4.3 percent in Hong Kong as the Fed’s Beige Book showed the economy expanded or improved “modestly” across the U.S. from October to mid-November. Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, advanced 6.5 percent on higher freight rates.
The MSCI Asia Pacific Index rose 1.8 percent to 121.97 as of 4:36 p.m. in Tokyo, poised to close at the highest level since Sept. 1, 2008. It has gained 7.1 percent this week, headed for its steepest weekly increase since the period ended May 8. The gauge has climbed 73 percent from its lowest in more than five years on March 9 on signs government stimulus measures are reviving global growth.
“Things are normalizing,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management in Sydney. “The U.S. recovery might be more subdued than elsewhere, but it’s still a recovery. As long as there are no systemic shocks, there is no underlying, fundamental reason for things to start going backwards.”
Japan’s Nikkei 225 Stock Average climbed 3.8 percent, its steepest gain since May 7 and the biggest advance in the Asia- Pacific region today. Mitsubishi Motors Corp. soared 14 percent on speculation PSA Peugeot Citroen may buy a stake in the carmaker.
Kospi, Hang Seng
South Korea’s Kospi Index climbed 1.5 percent and Hong Kong’s Hang Seng Index rose 1.3 percent. In China, the Shanghai Composite Index lost 0.2 percent. Futures on the U.S. Standard & Poor’s 500 Index added 0.6 percent. The gauge increased for a third day yesterday after the Fed’s comments.
Japan’s exporters rose after the yen weakened against all 16 of its major counterparts and traded as low as 87.92 against the dollar today, the lowest level since Nov. 25. The yen retreated for a third day against the euro. That boosts the value of overseas earnings at Japanese companies when converted into their home currency.
Sony, an electronics maker, rose 6 percent to 2,475 yen. Pioneer Corp., a maker of car-navigation systems and audio equipment, added 5.9 percent to 268 yen. Honda, which is Japan’s second-biggest carmaker and gets 42 percent of its revenue from North America, climbed 4.2 percent to 2,985 yen. Nissan Motor Co. rose 6.8 percent to 706 yen.
Lowest Return
The yen climbed to a 14-year high against the dollar last week and has averaged 93.89 this year, the strongest since currencies began trading freely in 1971. That has weighed on the Topix, making its 3.4 percent gain in 2009 the lowest return among the world’s 40 largest stock markets.
“The current level of the yen is creating a sense of security among investors,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc., which manages the equivalent of $9.1 billion. “It’s a good opportunity for foreign companies to buy Japanese shares.”
Exporters also rose on optimism demand for their products will rise in the U.S. Eight regions “indicated some pickup in activity or improvement in conditions,” while the other four said conditions were little changed or mixed, the Fed said in its Beige Book survey. Policy makers last month repeated their pledge to keep interest rates low for an “extended period” to reduce unemployment.
Li & Fung rose 4.3 percent to HK$34.10, the third-biggest gain on the Hang Seng Index. James Hardie Industries NV, the top seller of home siding in the U.S., gained 3.2 percent to A$8.50 in Sydney.
‘Sense Of Security’
In Seoul, LG Electronics Inc. surged 8.2 percent to 112,500 won. The company, Asia’s second-largest handset maker, gets 32 percent its revenue from North America.
“The Beige Book confirmed that the economy is on an upward trend, spreading a sense of security,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “People are expecting fundamentals to improve.”
Some mining companies surged as copper futures in Shanghai advanced for a fourth day to the highest level in 15 months on optimism demand for the metal used in construction and automobiles will improve as the global economy recovers.
BHP Billiton Ltd., the world’s largest mining company, rose 1.3 percent to A$42.47 in Sydney, the highest level since July 2, 2008. PanAust Ltd., owner of the second-largest copper mine in Laos, climbed 4.5 percent to 58.5 Australian cents. Jiangxi Copper Co. added 1 percent to HK$20.30 in Hong Kong.
Dubai Losses
The MSCI Asia Pacific Index’s gain this week has come amid optimism the region’s companies will be sheltered from losses related to Dubai World, which last week sought to restructure its debt. Dubai World is seeking to delay payments on less than half its liabilities, easing the potential damage to banks recovering from $1.7 trillion of losses and writedowns from the global crisis.
“The biggest contributor to the severe contraction last year was the fact that credit markets froze,” said Platypus’ Patkar. “It now looks as though things have returned to normal.”
The MSCI Asia Pacific Index’s rally from its March low has outpaced gains of 64 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI benchmark are valued at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx 600.
Shipping Lines
Kawasaki Kisen advanced 6.5 percent to 263 yen. The Baltic Dry Index, a measure of rates for shipping commodities, rose 2.1 percent yesterday, its first gain in nine sessions. Nippon Yusen K.K., Japan’s largest shipping line, added 2 percent to 259 yen. Mitsui O.S.K. Lines Ltd. gained 4.2 percent to 497 yen.
Mitsubishi Motors jumped 14 percent to 135 yen after a trading halt was lifted, the steepest increase in the Nikkei 225. Paris-based Peugeot said it has begun talks with Mitsubishi on a “strategic partnership.” The Japanese automaker said an equity tie-up with Peugeot is one of several options it’s considering.
In Singapore, Parkway Holdings Ltd., Asia’s biggest hospital operator, added 5 percent to S$2.94 after Deutsche Bank AG raised its rating on the stock to “buy” from “hold,” citing a recovery in demand for health-care services.
Green Cross Corp., a developer of vaccines, rose 2.8 percent to 129,000 won in Seoul after Shinhan Investment Corp. upgraded the stock to “buy” from “hold.”
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
Read more...
Dec. 3 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a 15-month high, as a weaker yen boosted Japanese exporters and the Federal Reserve said the U.S. economy improved.
Sony Corp., which gets 23 percent of its sales in the U.S., surged 6 percent in Tokyo, and Honda Motor Co. added 4.2 percent. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal- Mart Stores Inc., rose 4.3 percent in Hong Kong as the Fed’s Beige Book showed the economy expanded or improved “modestly” across the U.S. from October to mid-November. Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipping line, advanced 6.5 percent on higher freight rates.
The MSCI Asia Pacific Index rose 1.8 percent to 121.97 as of 4:36 p.m. in Tokyo, poised to close at the highest level since Sept. 1, 2008. It has gained 7.1 percent this week, headed for its steepest weekly increase since the period ended May 8. The gauge has climbed 73 percent from its lowest in more than five years on March 9 on signs government stimulus measures are reviving global growth.
“Things are normalizing,” said Prasad Patkar, who helps manage about $1.7 billion at Platypus Asset Management in Sydney. “The U.S. recovery might be more subdued than elsewhere, but it’s still a recovery. As long as there are no systemic shocks, there is no underlying, fundamental reason for things to start going backwards.”
Japan’s Nikkei 225 Stock Average climbed 3.8 percent, its steepest gain since May 7 and the biggest advance in the Asia- Pacific region today. Mitsubishi Motors Corp. soared 14 percent on speculation PSA Peugeot Citroen may buy a stake in the carmaker.
Kospi, Hang Seng
South Korea’s Kospi Index climbed 1.5 percent and Hong Kong’s Hang Seng Index rose 1.3 percent. In China, the Shanghai Composite Index lost 0.2 percent. Futures on the U.S. Standard & Poor’s 500 Index added 0.6 percent. The gauge increased for a third day yesterday after the Fed’s comments.
Japan’s exporters rose after the yen weakened against all 16 of its major counterparts and traded as low as 87.92 against the dollar today, the lowest level since Nov. 25. The yen retreated for a third day against the euro. That boosts the value of overseas earnings at Japanese companies when converted into their home currency.
Sony, an electronics maker, rose 6 percent to 2,475 yen. Pioneer Corp., a maker of car-navigation systems and audio equipment, added 5.9 percent to 268 yen. Honda, which is Japan’s second-biggest carmaker and gets 42 percent of its revenue from North America, climbed 4.2 percent to 2,985 yen. Nissan Motor Co. rose 6.8 percent to 706 yen.
Lowest Return
The yen climbed to a 14-year high against the dollar last week and has averaged 93.89 this year, the strongest since currencies began trading freely in 1971. That has weighed on the Topix, making its 3.4 percent gain in 2009 the lowest return among the world’s 40 largest stock markets.
“The current level of the yen is creating a sense of security among investors,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc., which manages the equivalent of $9.1 billion. “It’s a good opportunity for foreign companies to buy Japanese shares.”
Exporters also rose on optimism demand for their products will rise in the U.S. Eight regions “indicated some pickup in activity or improvement in conditions,” while the other four said conditions were little changed or mixed, the Fed said in its Beige Book survey. Policy makers last month repeated their pledge to keep interest rates low for an “extended period” to reduce unemployment.
Li & Fung rose 4.3 percent to HK$34.10, the third-biggest gain on the Hang Seng Index. James Hardie Industries NV, the top seller of home siding in the U.S., gained 3.2 percent to A$8.50 in Sydney.
‘Sense Of Security’
In Seoul, LG Electronics Inc. surged 8.2 percent to 112,500 won. The company, Asia’s second-largest handset maker, gets 32 percent its revenue from North America.
“The Beige Book confirmed that the economy is on an upward trend, spreading a sense of security,” said Mitsushige Akino, who oversees the equivalent of $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “People are expecting fundamentals to improve.”
Some mining companies surged as copper futures in Shanghai advanced for a fourth day to the highest level in 15 months on optimism demand for the metal used in construction and automobiles will improve as the global economy recovers.
BHP Billiton Ltd., the world’s largest mining company, rose 1.3 percent to A$42.47 in Sydney, the highest level since July 2, 2008. PanAust Ltd., owner of the second-largest copper mine in Laos, climbed 4.5 percent to 58.5 Australian cents. Jiangxi Copper Co. added 1 percent to HK$20.30 in Hong Kong.
Dubai Losses
The MSCI Asia Pacific Index’s gain this week has come amid optimism the region’s companies will be sheltered from losses related to Dubai World, which last week sought to restructure its debt. Dubai World is seeking to delay payments on less than half its liabilities, easing the potential damage to banks recovering from $1.7 trillion of losses and writedowns from the global crisis.
“The biggest contributor to the severe contraction last year was the fact that credit markets froze,” said Platypus’ Patkar. “It now looks as though things have returned to normal.”
The MSCI Asia Pacific Index’s rally from its March low has outpaced gains of 64 percent by the S&P 500 and 56 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI benchmark are valued at 22 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx 600.
Shipping Lines
Kawasaki Kisen advanced 6.5 percent to 263 yen. The Baltic Dry Index, a measure of rates for shipping commodities, rose 2.1 percent yesterday, its first gain in nine sessions. Nippon Yusen K.K., Japan’s largest shipping line, added 2 percent to 259 yen. Mitsui O.S.K. Lines Ltd. gained 4.2 percent to 497 yen.
Mitsubishi Motors jumped 14 percent to 135 yen after a trading halt was lifted, the steepest increase in the Nikkei 225. Paris-based Peugeot said it has begun talks with Mitsubishi on a “strategic partnership.” The Japanese automaker said an equity tie-up with Peugeot is one of several options it’s considering.
In Singapore, Parkway Holdings Ltd., Asia’s biggest hospital operator, added 5 percent to S$2.94 after Deutsche Bank AG raised its rating on the stock to “buy” from “hold,” citing a recovery in demand for health-care services.
Green Cross Corp., a developer of vaccines, rose 2.8 percent to 129,000 won in Seoul after Shinhan Investment Corp. upgraded the stock to “buy” from “hold.”
To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.
Read more...
European, U.S. Stock-Index Futures Advance; Asian Shares Gain
By Adria Cimino
Dec. 3 (Bloomberg) -- European stock-index futures advanced as Bank of America Corp. said it will repay $45 billion of government bailout funds and the Federal Reserve said the U.S. economy improved. Asian shares and U.S. futures rose.
Heineken NV, the world’s third-largest brewer, may gain after CA Cheuvreux lifted its recommendation on the stock. Siemens AG, Europe’s biggest engineering company, may be active after reporting its first quarterly loss in a year. Sony Corp., which gets 23 percent of its sales in the U.S., surged 6 percent in Tokyo as a weaker yen boosted Japanese exporters.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 1 percent at 7:23 a.m. in London. The U.K.’s FTSE 100 Index may increase 25, according to Cantor Index, a betting firm.
Most U.S. stocks rose yesterday after the Fed said the economy expanded or improved “modestly” from October to mid- November. Eight regions “indicated some pickup in activity or improvement in conditions,” while the other four said conditions were little changed or mixed, the Fed said in its Beige Book business survey.
Standard & Poor’s 500 Index futures advanced 0.6 percent today as Bank of America, the nation’s biggest lender, said it will repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities.
The MSCI Asia Pacific Index advanced 1.7 percent, helped by the weaker yen.
Emergency Lending
The European Central Bank may today announce plans to scale back its emergency lending while keeping interest rates at a record low to foster an economic recovery. ECB policy makers will leave the benchmark interest rate at 1 percent, according to all 54 economists in a Bloomberg News survey. A report on gross domestic product in the countries sharing the euro currency also is expected today.
The Stoxx 600 has rallied 24 percent this year amid signs government spending and record-low interest rates are helping to drag the economy out of recession.
Heineken may gain. The brewer was upgraded to “outperform” from “underperform” by Cheuvreux, which set a new price estimate of 38 euros.
Siemens reported its first quarterly loss in a year as writedowns at the telephone network venture with Nokia Oyj eclipsed profitable energy and health-care units. The net loss in the fiscal fourth quarter narrowed to 1.13 billion euros ($1.7 billion) from a loss of 2.47 billion a year earlier, Siemens said. Fourth-quarter sector profit was 1.92 billion, surpassing analysts’ estimates of 1.57 billion euros.
Japanese Exporters
Japan’s exporters rose after the yen weakened against all 16 of its major counterparts and traded as low as 87.78 against the dollar, the lowest level since Nov. 25. That boosts the value of overseas earnings at Japanese companies when converted into their home currency. Sony, an electronics maker, rose 6 percent to 2,475 yen.
Ericsson AB and STMicroelectronics NV may be active. ST- Ericsson, the semiconductor joint venture between the two companies, announced a new cost savings plan which will involve the review of 600 jobs. The company said it would target yearly savings of $115 million to come from reductions in operating costs and more efficient research and development.
Unilever NV may move. The world’s second-largest maker of consumer products is considering selling its Italian frozen food business in a deal valued at up to 800 million euros, the Financial Times reported, without attribution.
HeidelbergCement AG may gain. Germany’s biggest cement maker was rated “buy” in new coverage at BofA Merrill Lynch Global Research.
Kingfisher Plc might advance. Europe’s largest home- improvement retailer said third-quarter profit rose 28 percent as improving house prices drove sales of kitchens and barbecues.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
Read more...
Dec. 3 (Bloomberg) -- European stock-index futures advanced as Bank of America Corp. said it will repay $45 billion of government bailout funds and the Federal Reserve said the U.S. economy improved. Asian shares and U.S. futures rose.
Heineken NV, the world’s third-largest brewer, may gain after CA Cheuvreux lifted its recommendation on the stock. Siemens AG, Europe’s biggest engineering company, may be active after reporting its first quarterly loss in a year. Sony Corp., which gets 23 percent of its sales in the U.S., surged 6 percent in Tokyo as a weaker yen boosted Japanese exporters.
Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 1 percent at 7:23 a.m. in London. The U.K.’s FTSE 100 Index may increase 25, according to Cantor Index, a betting firm.
Most U.S. stocks rose yesterday after the Fed said the economy expanded or improved “modestly” from October to mid- November. Eight regions “indicated some pickup in activity or improvement in conditions,” while the other four said conditions were little changed or mixed, the Fed said in its Beige Book business survey.
Standard & Poor’s 500 Index futures advanced 0.6 percent today as Bank of America, the nation’s biggest lender, said it will repay the Troubled Asset Relief Program using $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities.
The MSCI Asia Pacific Index advanced 1.7 percent, helped by the weaker yen.
Emergency Lending
The European Central Bank may today announce plans to scale back its emergency lending while keeping interest rates at a record low to foster an economic recovery. ECB policy makers will leave the benchmark interest rate at 1 percent, according to all 54 economists in a Bloomberg News survey. A report on gross domestic product in the countries sharing the euro currency also is expected today.
The Stoxx 600 has rallied 24 percent this year amid signs government spending and record-low interest rates are helping to drag the economy out of recession.
Heineken may gain. The brewer was upgraded to “outperform” from “underperform” by Cheuvreux, which set a new price estimate of 38 euros.
Siemens reported its first quarterly loss in a year as writedowns at the telephone network venture with Nokia Oyj eclipsed profitable energy and health-care units. The net loss in the fiscal fourth quarter narrowed to 1.13 billion euros ($1.7 billion) from a loss of 2.47 billion a year earlier, Siemens said. Fourth-quarter sector profit was 1.92 billion, surpassing analysts’ estimates of 1.57 billion euros.
Japanese Exporters
Japan’s exporters rose after the yen weakened against all 16 of its major counterparts and traded as low as 87.78 against the dollar, the lowest level since Nov. 25. That boosts the value of overseas earnings at Japanese companies when converted into their home currency. Sony, an electronics maker, rose 6 percent to 2,475 yen.
Ericsson AB and STMicroelectronics NV may be active. ST- Ericsson, the semiconductor joint venture between the two companies, announced a new cost savings plan which will involve the review of 600 jobs. The company said it would target yearly savings of $115 million to come from reductions in operating costs and more efficient research and development.
Unilever NV may move. The world’s second-largest maker of consumer products is considering selling its Italian frozen food business in a deal valued at up to 800 million euros, the Financial Times reported, without attribution.
HeidelbergCement AG may gain. Germany’s biggest cement maker was rated “buy” in new coverage at BofA Merrill Lynch Global Research.
Kingfisher Plc might advance. Europe’s largest home- improvement retailer said third-quarter profit rose 28 percent as improving house prices drove sales of kitchens and barbecues.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
Read more...
Bank of America, Sigma Designs, Synopsys: U.S. Equity Preview
By Lu Wang
Dec. 3 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.
Bank of America Corp. (BAC US): The biggest nation’s lender will repay $45 billion of U.S. government bailout funds, helping free the bank from curbs on executive pay that have hampered its search for a new leader.
Collective Brands Inc. (PSS US): The owner of the Payless ShoeSource chain reported profit excluding some items of 61 cents a share in the third quarter, 23 percent higher than the average analyst estimate, according to Bloomberg data.
Comcast Corp. (CMCSA US): The largest U.S. cable operator may announce a deal to form an entertainment venture with General Electric Co.’s (GE US) NBC Universal as early as today, according to a person familiar with the matter.
SeaChange International Inc. (SEAC US): The provider of digital video systems said that, excluding some items, it expects to earn at least 9 cents a share in the fourth quarter. That exceeded the 8-cent average estimate from analysts in a Bloomberg survey.
Sigma Designs Inc. (SIGM US): The maker of processors for Internet television set-top boxes and Blu-ray video players posted earnings excluding some items of 9 cents a share in the third quarter, missing the average analyst estimate by 53 percent, according to Bloomberg data.
Synopsys Inc. (SNPS US): The maker of programs that help engineers design semiconductors forecast profit excluding some items of as much as 40 cents a share in the fiscal first quarter. That’s short of the 41-cent average estimate from analysts in a Bloomberg survey.
Vertex Pharmaceuticals Inc. (VRTX US): The drugmaker said it plans to sell 10 million shares in a public offering managed by Goldman Sachs Group Inc.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
Read more...
Dec. 3 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.
Bank of America Corp. (BAC US): The biggest nation’s lender will repay $45 billion of U.S. government bailout funds, helping free the bank from curbs on executive pay that have hampered its search for a new leader.
Collective Brands Inc. (PSS US): The owner of the Payless ShoeSource chain reported profit excluding some items of 61 cents a share in the third quarter, 23 percent higher than the average analyst estimate, according to Bloomberg data.
Comcast Corp. (CMCSA US): The largest U.S. cable operator may announce a deal to form an entertainment venture with General Electric Co.’s (GE US) NBC Universal as early as today, according to a person familiar with the matter.
SeaChange International Inc. (SEAC US): The provider of digital video systems said that, excluding some items, it expects to earn at least 9 cents a share in the fourth quarter. That exceeded the 8-cent average estimate from analysts in a Bloomberg survey.
Sigma Designs Inc. (SIGM US): The maker of processors for Internet television set-top boxes and Blu-ray video players posted earnings excluding some items of 9 cents a share in the third quarter, missing the average analyst estimate by 53 percent, according to Bloomberg data.
Synopsys Inc. (SNPS US): The maker of programs that help engineers design semiconductors forecast profit excluding some items of as much as 40 cents a share in the fiscal first quarter. That’s short of the 41-cent average estimate from analysts in a Bloomberg survey.
Vertex Pharmaceuticals Inc. (VRTX US): The drugmaker said it plans to sell 10 million shares in a public offering managed by Goldman Sachs Group Inc.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
Read more...
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