Economic Calendar

Monday, July 9, 2012

Japan’s Current-Account Surplus Slides as Orders Point to Slump

By Keiko Ujikane - Jul 9, 2012 7:40 AM GMT+0700

Japan’s current-account surplus was the smallest in May since at least 1996 and machinery orders fell the most in more than five years, adding to signs a slump in demand is threatening the nation’s rebound.

The excess in the widest measure of the nation’s trade shrank 62.6 percent from a year earlier to 215.1 billion yen ($2.7 billion), the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for a surplus of 493.1 billion yen. Machinery orders, an indicator of capital spending, fell 14.8 percent in May from the previous month, the Cabinet Office said, the biggest drop since comparable data were made available in 2005.

Yoshihiko Noda, Japan's prime minister, gave approval for a restart of reactors at the Ohi nuclear plant. Photographer: Haruyoshi Yamaguchi/Bloomberg

The Bank of Japan raised its economic evaluation of all regions for the first time in more than two years. Photographer: Tomohiro Ohsumi/Bloomberg

Japan’s trade position has weakened due to growing energy imports after last year’s earthquake and nuclear meltdown and also the yen’s gain of 4.9 percent against the dollar since mid- March. Prime Minister Yoshihiko Noda gave approval for a restart of reactors at the Ohi nuclear plant, which resumed power generation last week, to avoid power shortages and rolling blackouts over the summer.

“The restart of a Ohi nuclear reactor itself will only have limited impact on energy imports,” unless there will be more developments on a restart of other nuclear plants, Itochu’s Maruyama said.

Trade Deficit

Japan posted an 4.4 trillion yen trade deficit in the fiscal year that ended March 31 as energy imports rose and exports fell due to the yen’s gains and weak demand in Europe and Asia. Income from investment abroad, which includes interest payments and dividends on equities and debt securities, has served as a buffer against a deficit in the current account balance.

The economy grew at an annualized 4.7 percent pace in the first three months of this year, a pace which probably cooled to 2 percent in the second quarter and about 1.5 percent in the last 6 months of 2012, according to a Bloomberg survey of economists.

The Bank of Japan (8301) raised its economic evaluation of all regions for the first time in more than two years, citing improvements in consumer spending and rebuilding demand from last year’s earthquake, it said in a report released last week.

Kansai Electric Power Co. (9503), the nation’s second-biggest generator, resumed electricity generation at its No. 3 reactor at the Ohi plant in central Japan on July 5. That ended a two- month period in which all 50 of the country’s reactors were off- line.

To contact the reporter on this story: Keiko Ujikane in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at


Franco-German Amity Needed for Strengthened Euro, Leaders Say

By Gregory Viscusi and Tony Czuczka - Jul 9, 2012 5:01 AM GMT+0700

French President Francois Hollande and German Chancellor Angela Merkel said friendship between their nations is critical to saving the common currency, putting aside until today their differences on solving the euro debt crisis.

The leaders of the European Union’s two biggest economies met yesterday in the eastern French city of Reims to celebrate the moment 50 years ago when their predecessors, Charles de Gaulle and Konrad Adenauer, signed a reconciliation treaty and buried the enmity that had sparked three wars in 90 years.

Resolving divisions between the two countries will be at the heart of euro-area finance ministers’ talks in Brussels today and during a subsequent gathering on July 20. The two meetings follow clashes between Hollande and Merkel at the June 28-29 European summit, where the German chancellor faced pressure from France, Italy and Spain to agree greater burden sharing for the currency zone’s debt burden.

“At each step of European construction, the German-French friendship was the base,” Hollande said outside Reims cathedral yesterday as he stood alongside Merkel under rainy skies. “I propose to you that we open a new door to even tighter friendship.”

European Union leaders agreed at the June summit to ease the way to direct financing for troubled banks, to start work on Europe-wide bank supervision, and to ease access to the EU’s bailout mechanisms. Finance ministers have been asked to hammer out the details.

Spanish Yields Rise

Yields on Spanish 10-year bonds fell to a three-week low of 6.17 percent after the summit, before rising three consecutive days to end last week at 6.87 percent. The dollar rallied to $1.2291 per euro in New York on July 6, its biggest jump against the common currency since the five days ending Sept. 9.

“The European economic and currency union, as founded 20 years ago, has proved itself not strong enough yet,” Merkel said yesterday at the ceremony. “Our generation has to draw the right lessons from that.”

European sovereign debt yields are a concern and euro area finance ministers should act to counter them, Italy’s Prime Minister Mario Monti said yesterday. Wide spreads were also “a concern for the financial stability of the euro zone” and “for the efficient transmission of monetary policy,” he said during a meeting in Aix-en-Provence, France.

Spanish Prime Minister Mariano Rajoy July 7 pleaded with other euro-area countries to make good on the June summit pledges, which include the option of government bond purchases by Europe’s rescue funds for countries meeting the euro’s existing debt and deficit rules.

‘Words to Deeds’

“It’s time to go from words to deeds,” he said during a speech in Navacerrada near Madrid. “Europe must comply as quickly as possible with the agreements its leaders reached in Brussels. The European project is at stake,” he said.

“Last week’s EU summit delivered measures to manage the euro-area crisis while signaling limited but important progress toward regional integration and burden sharing,” Bruce Kasman, chief economist at JPMorgan Chase & Co., wrote in a note to clients on July 7. “However, this week showed participants interpreting the agreement in widely different ways. These tensions will be evident at the eurogroup meeting.”

Troubled Banks

Among the issues finance ministers will have to tackle today is how to start funneling as much as 100 billion euros ($123 billion) in aid to troubled Spanish banks without boosting the government’s debt load. Ministers are likely to initially channel the money via a Spanish state agency because the 500 billion-euro European Stability Mechanism won’t be operational until a still-unspecified date in the summer, an EU official told reporters in Brussels on July 6 on condition of anonymity.

Direct capital injections by the ESM into banks are unlikely to be authorized before two waves of Spanish recapitalizations are completed by the middle of next year, by when the ECB should have created a Europe-wide bank supervisor, the official said.

French Finance Minister Pierre Moscovici said in an interview with Figaro on July 1 that the French government sees jointly issued bonds as a solution to the crisis, while adding, “I understand that for the moment it’s a red line that our German friends can’t cross.”

Those differences were hidden yesterday in Reims, whose cathedral was badly damaged by German shelling in World War I and where Supreme Allied Commander Dwight D. Eisenhower received the German surrender in World War II.

Flag Waving

Merkel and Hollande greeted crowds waving French and German flags before attending a ceremony at the cathedral where Catholic Archbishop Thierry Jordan read a message in both languages. The leaders opened a museum and then lunched at the town hall after their public addresses.

Hollande and Merkel now face a challenge that concerns not just their countries but Europe and its place in the world, Jordan said at the ceremony.

Hollande mentioned the euro crisis in his speech, saying that the proposed banking union agreed at the EU summit was the “first step to a budgetary union, which will open the way to stability, growth, and tighter ties.”

He said France and Germany must defend the euro with “strict rules, powerful instruments and common policies.”

Merkel’s pursuit of policies opposed by the three other big euro members may be paying off with German voters, who go to the polls in the fall of 2013. Her approval rating rose to 66 percent, the highest since December 2009, in a poll taken after she fended off joint euro-area bonds at the European summit, broadcaster ARD said on July 6.

Greek Plea

France’s Moscovici said yesterday that he expects “tangible progress” at the Brussels meeting, which will also tackle Greece’s plea for a relaxation of its bailout terms and Cyprus’s call for banking aid.

Finance ministers are also expected to fill a vacancy on the European Central Bank’s Executive Board, in a contest between Yves Mersch of Luxembourg and Antonio Sainz de Vicuna of Spain, the official said.

The ECB slot, empty since June 1, has to be filled before the ministers tackle two other sensitive appointments. Luxembourg Prime Minister Jean-Claude Juncker’s term as chairman of euro finance meetings expires on July 17, and the ESM permanent bailout fund requires a head. Germany has nominated Klaus Regling, head of the temporary bailout fund, to manage the permanent one as well.

Moscovici said yesterday that France favors Juncker staying on in the euro group post.

To contact the reporters on this story: Gregory Viscusi in Paris at; Tony Czuczka in Berlin at

To contact the editor responsible for this story: James Hertling at


Federer’s Seventh Wimbledon Title Gives Oxfam $158,000 Bet Bonus

By James Cone - Jul 9, 2012 6:45 AM GMT+0700

Roger Federer’s record-tying seventh Wimbledon tennis title will earn charity Oxfam 101,840 pounds ($158,000) from a bet it didn’t even make.

Oxfam, which aims to fight poverty worldwide, was bequeathed the bet along with the entire estate of Nick Newlife, who died at age 59 in 2009. Newlife staked a 1,520-pound bet in 2003, at odds of 66-1, that before 2020 Federer would win the championship at the All England Club on seven occasions, bookmaker William Hill Plc (WMH) said in a statement.

Newlife “sadly did not live to see Roger land perhaps the most spectacular bet we have ever taken on tennis,” William Hill spokesman Graham Sharpe said in the statement.

Switzerland’s Federer recovered from losing the opening set to beat Britain’s Murray 4-6, 7-5, 6-3, 6-4 on Centre Court yesterday and tie Pete Sampras and William Renshaw with a record seven titles at the All England Club in London.

It was Federer’s first Grand Slam title since the 2010 Australian Open and returns him to the No. 1 ranking.

To contact the reporter on this story: James Cone in London at

To contact the editor responsible for this story: Christopher Elser at


Asia Stocks Drop as U.S., Japan Data Fuels Growth Concern

By Adam Haigh - Jul 9, 2012 8:09 AM GMT+0700

Asian stocks fell for a third day amid concern slower growth is damaging earnings after Premier Wen Jiabao said China’s economy faces “relatively large” downward pressure and Japanese machinery orders fell more than expected following a disappointing U.S. jobs report.

Komatsu Ltd. (6301), a Japanese maker of construction equipment, lost 3.1 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, slid 1.6 percent as metals prices dropped. Iluka Resources Ltd. (ILU) tumbled 18 percent after the Australian miner said revenue will miss estimates. Chinese developers traded in Hong Kong may be active after Wen pledged to stabilize home prices.

The MSCI Asia-Pacific declined 0.7 percent to 117.75 as of 9:10 a.m. in Tokyo. Photographer: Kiyoshi Ota/Bloomberg

Komatsu Ltd., a Japanese maker of construction equipment, lost 2.5 percent. Photographer: Tomohiro Ohsumi/Bloomberg

The MSCI Asia Pacific Index (MXAP) declined 0.8 percent to 117.68 as of 9:40 a.m. in Tokyo before markets in China and Hong Kong opened. Four stocks dropped for each that rose. The gauge has fallen 8.8 percent from this year’s high in February amid concern economic expansion is faltering in China and the U.S. as Europe’s debt crisis deepens.

“Long-term growth issues remain,” said Masahiko Ejiri, a senior fund manager in Tokyo at Mizuho Asset Management Co., which oversees $39 billion. “I’m negative on the macro-economic environment and I’m staying defensively positioned. There needs to be more stimulus from authorities to address slowing growth.”

The MSCI Asia-Pacific declined 8.8 percent from this year’s highest level in February through July 6 amid concern economies in China and the U.S. are slowing as Europe’s debt crisis deepens. Still, the gauge has risen 4.2 percent in 2012 through July 6, compared with a 7.7 percent advance on the S&P 500 and a 4 percent increase on the Stoxx Europe 600 Index. Asian shares advanced last week on anticipation central banks would ease monetary policy to spur growth.

Relative Value

Stocks in the Asian benchmark are valued at 12 times estimated earnings on average, compared with 13 times for the S&P 500 and 10.6 times for the Stoxx 600.

Japan’s Nikkei 255 Stock Average slid 1 percent and the broader Topix Index lost 0.9 percent. South Korea’s Kospi declined 1.2 percent and Australia’s S&P/ASX 200 Index retreated 1 percent.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today. The underlying gauge slid 0.6 percent last week. American employers hired fewer workers than forecast in June and the unemployment rate held at 8.2 percent, a June 6 report showed.

Earnings Season

Alcoa Inc. (AA) is due to posts results today, the first Dow Jones Industrial Average company in the U.S. to release earnings. Analysts project a 1.8 percent decline in profits for S&P 500 companies in the April-June period, which would mark the first year-over-year decrease since 2009.

Wen Jiabao, speaking four days after China’s central bank announced the second interest-rate cut in a month, said downward pressure on the economy is still “relatively large.” The government will intensify fine-tuning of policies even as measures taken since April are helping to stabilize a slowdown, he said, the official Xinhua News Agency reported yesterday.

“We must unswervingly continue to implement all manner of controls in the property market to allow prices to return to reasonable levels,” the reported Wen as saying. “We cannot allow prices to rebound.”

Japanese machinery orders, an indicator of capital spending, fell 14.8 percent in May from the previous month, the Cabinet Office said. Economists expected a 2.6 percent decline.

To contact the reporter on this story: Adam Haigh in Sydney at

To contact the editor responsible for this story: Nick Gentle at


Euro Touches 2-Year Low Before Finance Ministers Meet

By Kristine Aquino - Jul 9, 2012 7:20 AM GMT+0700

The euro touched its lowest level in two years before regional finance ministers gather in Brussels today to discuss crisis-fighting measures adopted by heads of government at a summit last month.

The 17-nation currency weakened versus most of its 16 major counterparts before a bill sale in Italy this week. The yen advanced against all of its most-traded peers after Japan released trade data for May and as Asian stocks extended losses in global equity markets from last week, boosting demand for haven assets. Australia’s dollar fell for a second day after Chinese Premier Wen Jiabao said downward pressure on the economy is still “relatively large.”

The euro earlier slid to as low as $1.2251, the weakest since July 2010. Photographer: Chris Ratcliffe/Bloomberg

July 8 (Bloomberg) -- Italian Prime Minister Mario Monti discusses the current level of yield spreads on European sovereign debt. He talks with Bloomberg Television's Caroline Connan in Aix-en-Provence, France. (Source: Bloomberg)

July 8 (Bloomberg) -- French Finance Minister Pierre Moscovici talks with reporters in Aix-en-Provence, France, about the need to implement debt-crisis measures agreed by heads of government on June 29. (Source: Bloomberg)

July 6 (Bloomberg) -- Robert Parker, senior adviser at Credit Suisse Asset Management, talks about European Central Bank longer-term refinancing operations and Barclays Plc's libor-fixing scandal. Speaking with Linzie Janis on Bloomberg Television's "On the Move," he also discusses investment strategy and the outlook for the U.S. and German economies. (Source: Bloomberg)

July 7 (Bloomberg) -- New York University Professor Nouriel Roubini discusses "greedy" bankers, the euro-zone crisis and risks facing the global economy in 2013. He speaks in Aix-en-Provence, France, with Bloomberg Television's Caroline Connan. (Source: Bloomberg)

“The risk around the finance ministers’ meeting is that we see more cracks appearing in European unity and perhaps a delay in implementation of the measures agreed on at the summit,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “That’s taking some toll on the euro.”

The euro earlier slid to as low as $1.2251, the weakest since July 2010, before trading at $1.2281 as of 9:12 a.m. in Tokyo, 0.1 percent lower than the close on July 6. The shared currency lost 0.3 percent to 97.65 yen. The yen gained 0.2 percent to 79.52 per dollar. The so-called Aussie declined 0.1 percent to $1.0205.

The MSCI Asia Pacific Index (MXAP) of shares dropped 0.7 percent.

At a summit in June, euro-region leaders agreed to relax conditions on emergency loans for Spanish banks.

“We have to move quickly on banking supervision and we have to move quickly on the direct recapitalization of Spanish banks,” French Finance Minister Pierre Moscovici said yesterday.

Japan’s current-account surplus was 215.1 billion yen ($2.7 billion) in May, the Ministry of Finance said in Tokyo today. That compares with a median estimate for an excess of 493.1 billion yen in a Bloomberg News survey of economists.

To contact the reporter on this story: Kristine Aquino in Singapore at

To contact the editor responsible for this story: Rocky Swift at