A High Risk CADJPY Range Must Come With A Sound Setup And High Reward

Daily Forex Technicals | Written by DailyFX | Jan 15 09 01:53 GMT |

Why Would CADJPY Hold A Range? Levels to Watch: Range Top: 70.90 (Range Low) Range Bottom: 75.50 (Fib, Pivot, SMA) With CADJPY and other yen crosses testing the lows of their prominent ranges, there is substantial risk in trading a range with volatility high across the currency market. For a fundamental driver, this pair is highly sensitive to the shifts in risk sentiment. Should fears that the global recession is accelerating or major defaults are looming rise, this pair will see a sharp drop - and at this level, it wouldn't an event so severe to force a break. Technically, this is a precarious position as well. While the range of support around 70.60/95 looks rather stable, we are at the very bottom of historical range. What's more, Wednesday's close has set a new official low for the exchange rate. Shifting momentum is clearly a necessity in calling a bottom on an otherwise steady bear trend. Suggested Strategy Short: Far reduced entry orders will be set at 71.35 to take advantage of the range of lows. Stop: An initial stop at 70.15 covers previous tails, but won't hold up a burst in volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits. Target: The first objective equals risk (120) at 72.55. The second target will be 74.05. Trading Tip - Market conditions are still highly unfavorable for range-based setups - especially with risk trends still on the rise. For a highly speculative position however, CADJPY offers potential compensation that could match the danger inherent. From a technical perspective, this pair is bouncing off a string of swing lows that is holding up a temporary floor at the very low of its historical range. With risk sentiment still brewing and considering the pair has not broken a six-day decline that has covered nearly 950 points, this is clearly a situation where controlled risk is a necessity. Therefore, our suggested strategy looks for ‘far-reduced' entry orders, which means the maximum loss in this setup should be set very small through position size. Beyond this, our stop is relatively wide, but not if we see sharp intraday swings (like those back in December) from current levels. There is no scheduled risk to threaten this setup, but we naturally do not want to stay in the market for too long as if a market as volatile as this one sticks near support it is likely a sign that a breakout is impending. Therefore, we will cancel all open orders in 24 hours time or should spot hit 73.50 before we are entered. Event Risk Canada And Japan Canada - Since the trade report crossed the wires this morning, there are no significant Canadian indicators scheduled for release through the rest of this week. This will leave traders to speculate on vague and tangential fundamentals for direction on the single currency. However, as the week wears on, speculative trends will take on a more singular interest - the outcome of next Tuesday's Bank of Canada rate decision. Economists are forecasting a 50 bps cut to 1.00 percent. At this rate, the Canadian monetary authority could easily match its American counterpart near zero - cutting one of advantages the loonie still holds over the dollar. Japan - There is a modest level of scheduled Japanese event risk on the docket, but that will hardly influence the yen within the time frame of our setup. The real issue with this pair is general risk trends. Looking forward, the swells in sentiment are difficult to forecast, but central bank commentary (from all central banks, since the financial crisis is clearly a global one at this point) and rate decisions could have a profound impact on the balance between risk/reward in the market. Notably, tomorrow, the ECB is expected to announce policy decision. This could inadvertently affect the yen as the European authority is considered one of the few that sees the ability to hold rates relatively high - standing as a sign of confidence that conditions will prove relatively soon. Should the central bank deliver a hearty rate cut and produce dovish commentary, it will dampen any lingering optimism in the market and may very well tip risk aversion into its next trend DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. 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South Korea’s Ruling Party Is Open to More Stimulus, Yim Says

By Heejin Koo and Sangim Han

Jan. 15 (Bloomberg) -- South Korea’s ruling Grand National Party is open to increased stimulus measures to revive an economy that may fail to meet official growth forecasts in 2009, said Yim Tae Hee, chairman of the party’s policy committee.

The government in December predicted about 3 percent growth this year and the central bank estimated an expansion of 2 percent. Goldman Sachs Group Inc. and Nomura International Ltd. in the past week forecast that Asia’s fourth-largest economy will contract for the first time since the region’s financial crisis a decade ago amid a decline in exports.

Latest indicators “show economic growth may be below 2 percent to 3 percent this year,” Yim, 52, said in an interview at his office at the National Assembly in Seoul yesterday. He said the economy may contract in the first quarter.

“Depending on the economic performance, we remain open to the possibility of further fiscal spending,” he said.

Vice Finance Minister Kim Dong Soo said today the government is prepared to undertake more stimulus to boost domestic demand and create jobs amid deepening economic fallout from the global financial crisis. South Korea already has unveiled tax cuts and spending packages worth 51 trillion won ($37 billion), coupled with 90 trillion won in liquidity injections to financial institutions.

“The government will take more steps aggressively if needed,” Kim said in Seoul. “We need to act preemptively and decisively.”

South Korea’s 10-year economic expansion has largely been driven by increased exports of ships, consumer electronics and cars to China, Europe, the U.S. and the Middle East. Overseas shipments, which are equivalent to about 50 percent of gross domestic product, slumped 17 percent in December.

Keep Spending

“Those who can spend should do so, so that this economy can function,” Yim said, citing wealthy households and large businesses among those that can afford to spend.

Since the government’s 2009 economic-growth forecast was released, reports have shown that factory production fell by the most on record in November, manufacturers’ confidence for January slumped to the lowest level ever and the number of people with jobs declined for the first time since October 2003.

The GDP outcome this year is likely to be less than “forecasts by institutions like the Bank of Korea and the International Monetary Fund,” Vice Minister Bae Kook Hwan told businesses today.

Yim said the ruling party will seek agreement from the opposition party lawmakers to implement laws that would allow business groups to own bigger stakes in Korean banks and to abolish investment caps for large companies. The legislation is due to be discussed next month.

Chaebol

The opposition has opposed the changes, saying the laws would only benefit family owned business conglomerates, known as chaebol. These groups racked up debt in the 1990s to fund expansion, helping trigger a currency collapse that forced South Korea to turn to the International Monetary Fund for a $57 billion bailout in 1997 during the Asian crisis. Several chaebol failed, including Daewoo and Hanbo.

“There is a tendency for the opposition to look at what’s big as evil and what’s little as good,” Yim said. “So according to them, large conglomerates are evil and small companies are good. We should not be discussing moralities when talking about these issues.”

Allowing business groups to own banks would enable South Korean pension funds, which are categorized as large businesses, to invest in domestic financial companies rather than overseas, he said.

The ruling party has said there are enough regulations in place to prevent chaebol owners from dictating the lending practices or financial operations of banks.

Yim also said the government should ease restrictions on real estate investment, including those that prohibit property speculation in the southern Seoul area.

“I am well aware of the sensitivity of the subject,” Yim said. “So I don’t think we will push for further deregulation at any time soon. But I believe it should be done sooner than later.”

To contact the reporters on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net; Sangim Han in Seoul at sihan@bloomberg.net.

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Australia’s Jobless Rate Climbs as Recession Looms

By Jacob Greber

Jan. 15 (Bloomberg) -- Australia’s unemployment rate rose to the highest in almost two years as mining companies, airlines, and automakers fired full-time workers, adding to signs the economy faces its first recession since 1991.

The jobless rate climbed in December to 4.5 percent from 4.4 percent as full-time employment plunged by 43,900, the statistics bureau said in Sydney today. The total number of people employed dropped 1,200, less than the 20,000 decline forecast in a Bloomberg survey of economists, as retailers hired more part-time workers for the Christmas rush.

Concern that rising unemployment will erode domestic growth may prompt central bank Governor Glenn Stevens to extend the biggest round of interest-rate cuts in almost two decades to boost business and consumer confidence. Rio Tinto Group and Australia & New Zealand Banking Group Ltd. are among companies firing workers amid mounting evidence Australia will follow the U.S., Europe, the U.K. and Japan into a recession.

“The fall in full-time employment is concerning,” said Riki Polygenis, an economist at ANZ Bank in Melbourne. “It means there is a sharper downturn ahead” and will prompt Stevens to reduce interest rates next month.

Australia’s dollar traded at 66.02 U.S. cents at 12:50 p.m. in Sydney from 65.97 cents before the figures were released. The two-year bond yield rose 1 basis point, or 0.01 percentage point, to 2.52 percent.

Part-Time Hiring

The number of part-time jobs increased 42,800 from November, today’s report showed. The Australian Retailers’ Association said this week that shoppers spent A$37 billion ($24 billion) last month after the government started distributing A$8.9 billion in handouts to pensioners and families and encouraged them to spend the cash to support the flagging economy.

“The shift to more part-time hours is because employers likely held on to staff in the expectation of a busy Christmas trading period,” said Benjamin Dinte, an economist at Macquarie Group Ltd. in Sydney. “There is a very large risk that the quantity of job cuts escalates this quarter.”

Governor Stevens and his board reduced the benchmark lending rate last year by three percentage points to a six-year low of 4.25 percent and said last month that monetary policy was now “expansionary.”

Investors have a 100 percent expectation Stevens will cut the overnight cash rate target by three quarters of a percentage point on Feb. 3, according to a Credit Suisse Group index based on swaps trading.

Companies Firing

Rio Tinto, the world’s third-largest mining company, said last month it will eliminate 14,000 jobs globally, reduce capital spending by more than half and sell “significant assets” as demand for metals wanes.

Rio said yesterday it will cut production and slow spending on a A$1.86 billion expansion of its Argyle diamond mine in Western Australia, potentially cutting as many as 200 contract positions.

Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw material, will drop significantly this year, the Reserve Bank said in a report published today.

China’s appetite for natural resources such as iron ore and copper helped stoke a jobs boom that pushed the unemployment rate to 3.9 percent in February last year, the lowest in more than three decades.

Qantas Airways Ltd., Ford Motor Co., Fairfax Media Ltd., and Telstra Corp. are among companies that have fired workers after gross domestic product expanded just 0.1 percent in the third quarter of last year from the previous three months, the weakest pace since 2000.

Worse to Come

“The 4.5 percent unemployment rate is probably a good outcome,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “We are in store for a further deterioration in the labor market, characterized by fewer jobs for new entrants rather than en masse job destruction.”

Advertisements for job vacancies slumped for an eighth month in December to levels indicating the economy will enter a recession in the next nine months, according to an ANZ Bank report published on Jan. 12.

The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65 percent in December from 65.1 percent, today’s report showed.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Foreign Direct Investment in China Falls 5.7 Percent

By Li Yanping

Jan. 15 (Bloomberg) -- Foreign direct investment in China, the world’s fastest-growing major economy, fell 5.7 percent to $5.98 billion in December from a year earlier.

The commerce ministry gave the figures at a briefing in Beijing today.

The nation’s deepening economic slowdown and a global squeeze on company credit and profits may continue to discourage investment in 2009. The CSI 300 stock index has tumbled 66 percent in the past year, house prices in the nation’s 70 major cities fell for the first time on record in December, and exports are waning because of recessions in the U.S. and Europe.

“Multinationals will become even more cautious in expanding,” said Ma Yu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing. “A lot of the foreign investment that rushed to China over the past few years to gain from a stock and property boom is leaving.”

For 2008, investment rose 23.6 percent to a record $92.4 billion, commerce ministry spokesman Yao Jian said. Non- financial outbound investment jumped 63.6 percent to $40.7 billion, with mergers and acquisitions accounting for half of that.

The number of new companies set up by U.S. investors in China fell 32 percent in the first 11 months of last year, according to government data. For European investors, the decline was 23 percent.

General Motors

General Motors Corp., the largest overseas automaker in China, said sales in the nation grew last year at the weakest pace in at least six years on waning demand and a lack of new models.

China’s economy overtook Germany’s in 2007 to become the world’s third largest, according to revised figures released yesterday by China’s statistics bureau.

Now, growth is sliding.

The economy expanded 9 percent in the three months through September last year. The fourth-quarter figure, to be announced next week, may be as low as 5.4 percent, according to Royal Bank of Scotland Plc. Exports fell in December by the most in almost a decade.

The government switched last year from trying to tame inflows of cash to cool inflation to announcing plans to pump 4 trillion yuan ($585 billion) into the economy to prop up growth amid the global recession.

The local government in Guangdong, the nation’s largest export hub, set up a 1 billion yuan fund last year to help Hong Kong and Macau manufacturers in the province through the crisis, Vice Governor Huang Longyun said this month.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net

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Japan Machinery Orders Fall by Record 16.2% as Exports Collapse

By Jason Clenfield

Jan. 15 (Bloomberg) -- Japanese machinery orders fell by a record 16.2 percent in November, twice as much as economists estimated, as businesses cut spending amid a deepening global recession.

The drop in orders, an indicator of capital spending in the next three to six months, was the biggest decline since the current survey began in 1987, the Cabinet Office said today in Tokyo. Economists surveyed predicted an 8 percent decline.

The Nikkei 225 Stock Average fell 4 percent on concern the report signals further cutbacks in spending, after companies from Toyota Motor Corp. to Sony Corp. reduced production and fired workers. The Bank of Japan has little room to spur the economy after cutting interest rates close to zero, and political wrangling is holding up Prime Minister Taro Aso’s measures aimed at spurring growth.

“Japan is heading into a deep recession,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “The report suggests the pace of declines in capital spending will accelerate in coming months.”

Fanuc Ltd., the world’s largest industrial robot maker, led declines in the Nikkei, which slid to 8,102.77 at the morning close. The yen traded at 88.93 per dollar at 11:50 a.m. in Tokyo from 89.13 before the report was published.

The world’s second-largest economy may have shrunk as much as 12 percent on an annualized basis last quarter, Barclays Capital predicts, which would be the steepest decline since 1974. Exports plunged 26.7 percent in November, the sharpest decline since comparable data were made available in 1980, and factory output dropped 8.1 percent, the most in more than a half century.

Mounting Evidence

Mounting evidence of a weakening economy prompted the Bank of Japan last month to cut interest rates to 0.1 percent from 0.3 percent. Aso has yet to get approval from the opposition-led upper house to spend 10 trillion yen ($112 billion) on financial aid for households and companies.

Weak domestic demand and falling oil prices may herald a return to the deflation that plagued Japan for almost a decade until 2005. Producer prices rose 1.1 percent in December, the slowest pace since May 2004, a central bank report today showed. Wages tumbled 1.9 percent in November and consumers have pared spending for nine consecutive months.

“Deflation will probably re-emerge as a problem for the Japanese economy in mid-2009,” said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. “It will remain difficult to forecast when the global economy will pick up and start to lift prices.”

Orders Tumble

Tokyo Electron Ltd., Japan’s largest maker of semiconductor equipment, last week said orders tumbled 81 percent as chipmakers postponed spending plans. Orders for display- production machinery and solar-panel equipment plummeted to 500 million yen from 57.3 billion yen, the company said.

“Capital expenditure is likely to suffer a heavy blow,” said Takuji Okubo, a senior economist at Merrill Lynch & Co. in Tokyo. “With the collapse in exports and industrial production, companies are likely to respond by postponing and cutting investment.”

The yen’s 18 percent gain against the dollar since September is eroding exporters’ profits, adding to their woes.

Toyota said last week it will close all of its domestic factories for 11 days. Japan’s biggest carmaker is expecting its first operating loss in seven decades for the year ending March.

Sony, which last month said it will have to shut factories and fire 16,000 workers, may also have a loss for the year, the Nikkei newspaper reported.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

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Australia Expects ‘Significant’ Drop in Coal, Iron Ore Prices

By Jesse Riseborough

Jan. 15 (Bloomberg) -- Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw materials, may drop significantly this year as slowing industrial growth curbs demand, the nation’s central bank said.

“Developments on the demand side, especially in China which accounts for close to half of global demand, will continue to have a significant influence on prices for coal and iron ore,” the Reserve Bank of Australia said in a report released in Sydney today on its Web site.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

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Tokyo Electric Power May Buy More LNG From Australia’s North

By Angela Macdonald-Smith

Jan. 15 (Bloomberg) -- Tokyo Electric Power Co., Asia’s biggest utility, may increase purchases of liquefied natural gas from Australia’s Northern Territory, the region’s Chief Minister Paul Henderson said.

Henderson met with the utility, which buys LNG from a ConocoPhillips plant in Darwin, during a trip to Tokyo and Osaka to promote investment and trade opportunities in the Territory, according to a statement e-mailed late yesterday. He also held talks with Osaka Gas Co. and Japan Oil, Gas & Metals National Corp., and will meet Tokyo Gas Co., another Darwin LNG customer.

Inpex Corp., Japan’s largest energy explorer, in September chose Darwin, the capital of the Northern Territory, as the site for its proposed $20 billion Ichthys LNG project, which will ship fuel to its home market. Inpex and partner Total SA haven’t yet named customers for the gas.

“I want to assure Japanese interests that despite the fallout from the global financial crisis the Territory is open for business,” Henderson said in the statement.

Osaka Gas, Japan’s second-biggest distributor of the fuel, owns a stake in the undeveloped Sunrise gas field off Australia’s northern coast.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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PetroChina Parent, Iran Sign $1.76 Billion Oil Pact, Mehr Says

By Wang Ying

Jan. 15 (Bloomberg) -- China National Petroleum Corp. signed a $1.76 billion contract with the National Iranian Oil Co. to develop an oil field in western Iran, the Mehr News Agency reported, citing a signing ceremony yesterday.

The North Azadegan field holds six billion barrels of oil, the news agency reported. China National, parent of PetroChina Co., will develop the field in two phases, it said.

The agency said the agreement is a blow to the U.S. government and its allies, which had been discouraging investment in the Iranian oil industry.

To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.

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Russia Proposes Energy Summit in Moscow to Resolve Gas Dispute

By Lucian Kim and Ben Farey

Jan. 15 (Bloomberg) -- Russian President Dmitry Medvedev proposed an emergency summit in Moscow to resolve a dispute with Ukraine over prices and transit fees that’s disrupted shipments to the European Union for nine days.

EU nations and Ukraine have been invited to the Jan. 17 meeting, which will also seek to prevent a repeat of the crisis that’s disrupted supplies to the 27-nation bloc and caused power shortages in the Balkans, Medvedev told state television.

Natural gas rose and the ruble declined as the continent endured a second week without transit gas supplies from Ukraine. OAO Gazprom, Russia’s gas exporter, declared force majeure on deliveries through Ukraine, allowing it to renege on supply contracts, after halting flows last week.

“It’s a disaster,” said Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, adding southeast Europe is facing a humanitarian crisis. “We have got to get gas to them so they can keep warm, cook food and generate power.”

Russia is prepared to compensate Ukraine should it agree to ship gas to Europe from underground storage reservoirs near its western border, Medvedev said. Russia is also ready, together with the EU, to provide Ukraine with loans to pay for gas “at market prices,” he said.

Medvedev made the proposal at a meeting with the prime ministers of Slovakia, Moldova and Bulgaria, nations hit hardest by the supply cutoff.

Domestic Supplies

NAK Naftogaz Ukrainy, the state energy company, said yesterday it was unable to meet a Russian request to pump gas across its borders without jeopardizing domestic supplies.

U.K. gas for delivery next month increased 2.5 percent to 60.25 pence a therm yesterday, according to broker Spectron Group Ltd. Prices, which surged 24 percent last week after Gazprom turned off the taps, also gained after Qatar halted production at its Qatargas-1 plant because of a mechanical fault.

The ruble slid as low as 31.9066 per dollar in Moscow, the lowest in six years, compared with 31.3087 on Jan. 13.

Ukrainian Prime Minister Yulia Timoshenko said she expects to talk with Russian Prime Minister Vladimir Putin by telephone tomorrow in an attempt to resume Russian gas flows via Ukraine to Europe, and is also prepared to meet with him.

“Gazprom is making every attempt to discredit Ukraine,” Timoshenko said. “Ukraine is a hostage in this situation, just like other European consumers.” She said she supported the proposal for a meeting of Russian, Ukrainian and EU leaders and said it should be held in a country not involved in the dispute.

Flows Stopped

The European Commission, the EU’s executive arm, declined to comment on the Russian proposal for a Moscow summit. “We need to have more information on the details and format of the meeting,” Commission spokesman Johannes Laitenberger said by phone from Brussels.

Russia stopped flows through Ukraine on Jan. 7 after negotiations over a supply deal broke down. Russia complained that its western neighbor was diverting gas bound for Europe and had closed down its pipelines, charges denied by Ukraine. Gazprom estimates it has lost $1.1 billion in export revenue since the start of the year.

The EU threatened to urge companies in the 27-nation bloc to seek legal remedies if a settlement isn’t reached. The cutoff has already led to renewed calls for region to diversify its sources of energy away from Russia.

‘Technical Difficulty’

“Instead of just saying ‘we want our gas’, the Europeans need to do something to change the dynamics,” Andrew Neff, senior energy analyst at Global Insight, said from Ankara.

The actions of Russia and Ukraine suggest both are incapable of delivering on their commitments to the EU, European Commission President Jose Barroso said.

“We’ll see very soon whether there is a technical difficulty or whether there is no political intention to honor the agreement,” Barroso said yesterday in Strasbourg, France. “It will be clear if indeed there is or not the political will to fulfill the commitments.”

Gazprom said Naftogaz once more refused to accept gas from Russia for shipment to European consumers.

“No transit country has the right to abuse its status,” Putin said after meeting his counterparts from Moldova, Slovakia and Bulgaria. He accused Ukraine of holding European consumers to ransom.

Export Route

Ukraine demanded 1.5 billion cubic meters of gas for free in the first three months of the year to resume transit to Europe, Gazprom Chief Executive Officer Alexei Miller said on state television. That volume of gas would amount to giving Ukraine a $700 million present, Miller said.

Naftogaz said it would have been forced to curtail domestic gas supplies if it had agreed to transport gas through an export route requested by Gazprom yesterday.

“They want to pump gas diagonally across our territory,” interfering with domestic supplies, Naftogaz spokesman Valentyn Zemlyanskyi said in a phone interview.

The Russian company had proposed sending 98.8 million cubic meters of gas yesterday through Ukraine, via the Sudzha pumping station. Naftogaz wanted Russian flows to be sent to the Valuyki and Pisarevka stations.

Naftogaz would be prepared to pay for “transit gas” needed to operate the pipeline system, when an accord is reached, CEO Oleh Dubina told a news conference in Kiev.

Slovakia is using imports and backup generators to avoid a blackout following the supply cut. Timoshenko yesterday rejected her Slovak counterpart Robert Fico’s request to deliver gas to Slovakia from storage, saying Ukraine can barely meet domestic demand.

Gas Rationing

Bulgaria has slashed daily consumption by more than half, using gas from reserves to meet demand, shut 72 factories and rationed gas for heating utilities and 150 other companies. Moldova has also imposed curbs on gas use.

The EU should step in and pay for the 140 million cubic meters of gas Gazprom accuses Ukraine of having diverted, the Oxford Institute’s Stern said.

He said it would cost the EU about $63 million to buy 140 million cubic meters of gas to replace the volume Gazprom says has vanished from the pipeline system. “The EU should give Russia that money,” Stern said.

Gazprom’s overall deliveries to Europe fell by about 60 percent when it halted transit flows and supplies to Ukraine’s domestic market were suspended Jan. 1.

In 2006, Russia turned off gas exports to Ukraine for three days, causing volumes to fall in the EU, and also cut shipments by 50 percent last March during a debt spat.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.netEduard Gismatullin in London at egismatullin@bloomberg.net

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Korean Won Drops, Approaches One-Month Low, as Stocks Tumble

By Kim Kyoungwha

Jan. 15 (Bloomberg) -- South Korea’s won fell, approaching the lowest level in a month, as U.S. and local stocks slumped on signs the global slowdown is getting worse.

The currency snapped a two-day gain after Vice Finance Minister Bae Kook Hwan said the nation’s economic growth in 2009 is likely to fall short of central bank and International Monetary Fund predictions. Oversea investors dumped Korean shares today after U.S. retail sales declined more than economists expected, causing the biggest loss in the Standard & Poor’s index since Dec. 1.

“A tumble on Wall Street is unnerving investors globally again, spurring sentiment for a flight to quality,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “Demand for dollars is seen intensifying further.”

The won fell 1.5 percent to 1,368 per dollar as of 9:41 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency lost 7.9 percent this month, the worst among the 10 most-traded Asian currencies outside of Japan.

Korea’s Kospi index of shares dropped 3.9 percent today, the most since Dec. 12.

Gross domestic product growth this year is likely to be less than the 2 percent forecast by Bank of Korea and the IMF,” Bae said in notes for a speech to be delivered to businesses in Seoul today. At a separate gathering, Vice Finance Minister Kim Dong Soo said the economy is being hurt by global financial turmoil.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

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Malaysian Ringgit Falls to One-Month Low as Export Outlook Dims

By David Yong

Jan. 15 (Bloomberg) -- Malaysia’s ringgit dropped to its weakest level in more than a month against the dollar on concern deepening recessions in the U.S. and Japan will hurt exports.

The currency fell after U.S. retail sales in December plunged at twice the pace forecast by economists and machinery orders in Japan posted a record decline for November. The MSCI Asia Pacific Index of regional shares fell to a one-month low, with benchmarks sliding across regional markets open for trading.

“Any news that impacts Malaysia’s export outlook will have a bearing on the ringgit,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur. “While most of the bad news is already out, it doesn’t mean that emerging markets cannot continue to sell off.”

The ringgit dropped 0.7 percent to 3.5938 per dollar as of 9:27 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.5945, the lowest since Dec. 11, and is down 3.9 percent so far this year.

Malaysia’s exports slumped 4.9 percent in November, the first drop since July 2007. Singapore, the U.S. and Japan, which together accounted for 38 percent of Malaysia’s overseas sales in 2008, are all in the midst of recessions.

Malaysia’s economy will contract for a second quarter in the three months to March 31, pushing it into a technical recession, Citigroup Inc. said this week. The economy last slipped into a recession in the final quarter of 1998.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

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Asian Currencies Drop, Led by Won, Rupiah, on Global Slowdown

By Kim Kyoungwha and David Yong

Jan. 15 (Bloomberg) -- Asian currencies fell, led by South Korea’s won and Indonesia’s rupiah, as regional stocks dropped and reports showed the global economic slowdown is deepening.

The Malaysian ringgit and the Taiwan dollar also weakened after reports showed a slump in U.S. retail sales and Japanese machinery orders, signaling a worsening recession in the world’s two-biggest economies. South Korea’s currency snapped a two-day gain after Vice Finance Minister Bae Kook Hwan said 2009 growth is likely to fall short of central bank predictions.

“We haven’t seen the worst reports yet, they’re accumulating,” said Marcelo Ayes, senior vice president for treasury at Rizal Commercial Banking Corp. in Manila. “That’s what’s driving the fear.”

The won fell 1.3 percent to 1,365 per dollar as of 10:49 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency lost 7.7 percent this month, the worst among the 10 most-traded Asian currencies outside of Japan. The rupiah declined 1 percent to 11,188, the ringgit dropped 0.7 percent to 3.5938 per dollar and the Taiwan dollar weakened 0.2 percent to NT$33.32. The peso declined 0.5 percent to 47.33.

The MSCI Asia Pacific Index of regional shares fell to a one-month low. Korea’s Kospi index of shares dropped 3.9 percent today, the most since Dec. 12, following a decline in U.S. equities. The Philippine Stock Exchange Index slid 1.9 percent.

Flight to Quality

“A tumble on Wall Street is unnerving investors globally again, spurring sentiment for a flight to quality,” said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. “Demand for dollars is seen intensifying further.”

Gross domestic product growth this year is likely to be less than the 2 percent forecast by Bank of Korea, Bae said in notes for a speech to be delivered to businesses in Seoul today.

The ringgit reached 3.5945, the lowest since Dec. 11, and is down 3.9 percent so far this year. Malaysia’s economy will contract for a second quarter in the three months to March 31, pushing it into a technical recession, Citigroup Inc. said this week. The economy last slipped into a recession in the final quarter of 1998.

“Any news that impacts Malaysia’s export outlook will have a bearing on the ringgit,” said Gan Kok Kim, head of treasury at OCBC Bank (Malaysia) Bhd. in Kuala Lumpur. “While most of the bad news is already out, it doesn’t mean that emerging markets cannot continue to sell off.”

Malaysia’s exports slumped 4.9 percent in November. Singapore, the U.S. and Japan, which together accounted for 38 percent of Malaysia’s overseas sales in 2008, are all in the midst of recessions.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

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N.Z. Dollar Falls to 7-Year Low to Yen; Australian Bonds Rally

By Ron Harui and Tracy Withers

Jan. 15 (Bloomberg) -- New Zealand’s dollar fell to its lowest since 2001 and Australia’s dollar dropped to the weakest in a month against the yen on concern the global slowdown will worsen, reducing demand for higher-yielding assets.

New Zealand’s currency slipped to the lowest in more than a month versus the U.S. dollar after house prices declined by the most in three years last month, adding to signs the nation’s recession is deepening. Australia’s currency slid to a four-week low and the nation’s 10-year bond yield fell to levels unseen since 1969 after a government report showed the unemployment rate rose to the highest level in almost two years.

“Investors are risk-averse, given ongoing worries over a worldwide recession,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The Japanese are pulling money out of higher-yielding currencies such as the Australian and New Zealand dollars.”

New Zealand’s dollar fell 3 percent to 47.75 yen as of 3:05 p.m. in Wellington from 49.23 yen late in Asia yesterday. It reached 47.70 yen, the lowest since September 2001. The currency also dropped 2.5 percent to 53.64 U.S. cents. It touched 53.50 cents, the weakest since Dec. 8.

Australia’s dollar declined 2.7 percent to 58.72 yen from 60.36 yen in Asia yesterday. It reached 58.51 yen, the lowest since Dec. 12. The currency also fell 2.2 percent to 65.95 U.S. cents from 67.43 cents. It touched 65.63 cents, the weakest in more than four weeks.

New Zealand’s house prices fell 7.4 percent in December from a year earlier, the biggest since the series began in 2005, Quotable Value New Zealand Ltd., the Wellington-based government valuation agency said in an e-mailed report today. A separate report showed house sales dropped 23 percent in December from a year earlier and it took longer to sell a property.

‘Negative Reaction’

The number of Australians employed dropped by 1,200, the statistics bureau said in Sydney today. Full-time employment plunged by 43,900. The median estimate of economists surveyed by Bloomberg News was for a decline of 20,000 jobs. The jobless rate rose to 4.5 percent from 4.4 percent.

“The big fall in full-time jobs suggests that these numbers are going to capture some retrenchment in the economy,” said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “These figures are seen as slightly soft, and there’s a muted negative reaction from the Aussie dollar.”

As the global economy slows, investors turned to the yen, which climbed this year against all 16 most-active currencies, including New Zealand’s and Australia’s. Benchmark interest rates are 5 percent in New Zealand and 4.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S.

Asian stocks declined, prompting investors to pare so- called carry trades. The MSCI Asia-Pacific Index of regional shares fell 3.3 percent today after the Standard & Poor’s 500 Index declined 3.4 percent yesterday.

‘Escalating Fears’

“Escalating fears about the global outlook and weak equities dominated currency markets,” said Danica Hampton, strategist at Bank of New Zealand Ltd. in Wellington. “The deteriorating global backdrop encouraged investors to ditch growth sensitive currencies like the New Zealand dollar in favor of the relative safety of U.S. dollar and yen.”

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. The risk is that currency market moves erase those profits.

Financing costs in Australia rose. The difference between the rate Australian banks charge each other for three-month loans and the overnight swap rate climbed to 67.3 basis points from 60.6 basis points yesterday. The gauge, a measure of cash scarcity, averaged 11 basis points in the five years before the credit crunch started in August 2007.

Australian 10-year bonds rose, with the yield falling 13 basis points to 3.86 percent, the lowest since at least 1969. Two-year yields dropped to 2.47 percent, the lowest since 1983.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 3.74 percent from 3.81 percent late in Asia yesterday.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.

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Euro Trades Near Five-Week Low Versus Dollar Before ECB Meeting

By Stanley White and Ron Harui

Jan. 15 (Bloomberg) -- The euro traded near a five-week low against the dollar on speculation the European Central Bank will cut interest rates by a least half a percentage point at a policy meeting today.

The yen strengthened versus the New Zealand dollar after a U.S. report showing retail sales slumped raised concern the global recession is deepening, boosting the haven appeal of the Japanese currency. The Australian dollar fell to a five-week low versus the greenback after the country’s unemployment rate rose to the highest level in almost two years.

“There’s no doubt that the ECB will cut rates by 50 basis points, with some expecting 75 and even 100 basis points,” said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank AG in Tokyo. “It’s obvious that the euro zone’s economy is worsening. There’s a downside risk for the euro.”

The euro bought $1.3169 as of 10:52 a.m. in Tokyo from $1.3191 late yesterday in New York, when it touched $1.3093, the lowest level since Dec. 11. The euro traded at 117.31 yen from 117.46 yen. It fell yesterday to 116.58 yen, the weakest level since Dec. 5. The dollar bought 89.10 yen from 89.05 yen.

Europe’s single currency may “test” yesterday’s low of $1.3093 and 116.58 yen today, Muramatsu said.

The Australian dollar declined to 65.96 U.S. cents from 66.11 cents late yesterday in New York. It fell to 65.63 cents, the lowest level since Dec. 12, after the government said Australia’s jobless rate rose to 4.5 percent in December, adding to signs the economy is facing its first recession since 1991.

Korean Won

The South Korean won weakened 1.3 percent to 1,366.20 per dollar after Vice Finance Minister Bae Kook Hwan said economic growth this year may fall short of predictions from the Bank of Korea and the International Monetary Fund.

The yen advanced to 47.81 versus the New Zealand dollar from 48.29 late yesterday in New York. The MSCI Asia Pacific Index of regional shares slid 3.2 percent after U.S. retail sales fell 2.7 percent in December, more than twice the amount economists forecast.

The yen has advanced against all major currencies this year, rising 9.5 percent versus the New Zealand’s dollar. Japan’s 0.1 percent benchmark rate compares with 5 percent in New Zealand.

“Given the intense risk aversion that’s in the market, the yen is the best looking currency in a contest of ugly currencies across the board,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Over the next six months, as the global economy slows sharply and earnings releases disappoint to the downside, that risk aversion will remain elevated and deteriorate further.”

Dollar Index

The Dollar Index traded on ICE futures, which tracks the greenback versus six major U.S. trading partners, touched 84.64 yesterday, the strongest since Dec. 11, as investors flocked from higher-yielding assets into U.S. Treasuries for safety.

The index has gained 3.8 percent this year, after losing 6 percent in December, when the Fed lowered its benchmark interest rates to a range between zero and 0.25 percent, a record low.

“The improvement in the tone of risk appetite since earlier this year had a set-back,” said Todd Elmer, a currency strategist at Citigroup Global Markets in New York. “The correlation between risk aversion and a stronger dollar is not over yet. That means continued strength in the dollar versus high-yielding assets.”

Deutsche Bank

The euro began to weaken after Deutsche Bank AG, Germany’s largest bank, reported a record loss of about 4.8 billion euros ($6.32 billion) in the fourth quarter.

A Credit Suisse Group AG gauge of probability based on overnight index swaps indicated the ECB will lower its 2.5 percent main rate by at least half a percentage point today, with 7 percent odds that the cut will be deeper. The median forecast of economists surveyed by Bloomberg is for a 0.5 percentage-point reduction.

The European currency rose 10 percent versus the dollar in December when ECB President Jean-Claude Trichet said he didn’t want to be “trapped” with borrowing costs too low. The rally reversed this month as speculation mounted that the ECB will be forced to cut interest rates again as the economic slowdown deepened. The euro lost 6 percent versus the dollar this month.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Oil Trades Little Changed After Falling on U.S. Stockpile Gain

By Christian Schmollinger

Jan. 15 (Bloomberg) -- Crude oil was little changed after falling yesterday as slowing fuel demand sent U.S. stockpiles soaring to a 16-month high.

Inventories of crude increased 1.14 million barrels to 326.6 million last week, the highest since Aug. 31, 2007, the U.S. Energy Department said yesterday. Gasoline and distillate fuel supplies also rose. Fuel demand dropped 6 percent, the largest one-week decline in almost five years, as the Federal Reserve reported the U.S. economy weakened further in the past month.

“The data continues to show that the overall demand for oil is very weak,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The inventory build shouldn’t be surprising given the weakness in consumption.”

Crude oil for February delivery was at $37 a barrel, down 28 cents, in electronic trading on the New York Mercantile Exchange at 9:29 a.m. Singapore time. Yesterday, futures fell 50 cents, or 1.3 percent, to $37.28 a barrel in New York, the lowest settlement since Dec. 24. Futures are down 60 percent from a year ago.

U.S. inventories of crude oil were forecast to rise 2.5 million barrels in the week ended Jan. 9, according to the median of 15 analyst estimates in a Bloomberg News survey. The increase last week left stockpiles 10 percent higher than the five-year average for the period, the department said.

Inventories at Cushing, Oklahoma, where oil traded on Nymex is stored, climbed 2.5 percent to 33 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.

Contango Increases

The price of oil for delivery in February 2010 is 58 percent more than for the front-month contract, allowing traders to profit if they have the ability to store crude. February 2009 crude is trading at a $7.14 discount to March, from $3.88 on Jan. 5. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

“The high levels of inventories are depressing the near- term Nymex price,” said Commonwealth Bank’s Moore. “As well, we have these concerns about the international economy.”

Frontline Ltd., the world’s biggest owner of supertankers, said about 80 million barrels of crude oil are being stored in tankers, the most in 20 years, as traders seek to take advantage of higher prices later in the year.

Fuel Stockpiles

Brent crude oil for February settlement was at $44.97 a barrel, down 11 cents, on London’s ICE Futures Europe exchange at 9:10 a.m. Singapore time. It rose 25 cents, or 0.6 percent, to settle at $45.08 yesterday. The contract expires today.

The more-active March contract was at $47.55 a barrel, down 7 cents, at 9:11 a.m. Singapore time.

The price of Brent oil in London for delivery in February is more than $7 a barrel higher than that for West Texas Intermediate oil, the grade that’s traded in New York, during the same month.

Gasoline stockpiles rose 2.07 million barrels to 213.5 million barrels, higher than the 1.85 million-barrel increase forecast in the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, surged 6.35 million barrels to 144.2 million barrels, the biggest gain since January 2004.

Gasoline futures for February delivery rose 0.23 cent to $1.17 a gallon in New York. Heating oil for February was at $1.4578 a gallon, down 0.53 cent, after dropping 3.4 percent to end the session at $1.4631 a gallon yesterday.

Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the choking-off of credit led Americans to cut back on everything from eating out to car purchases. The 2.7 percent decrease, the sixth consecutive drop, extended the longest series of declines in records going back to 1992, the Commerce Department said yesterday in Washington.

The U.S. economy weakened across almost all regions, hurt by a lack of credit and declines in retail sales, the Federal Reserve said yesterday in its regional business survey.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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Aboitiz, BHP, Pelikan, CapitaLand: Asia Ex-Japan Equity Preview

By Berni Moestafa

Jan. 15 (Bloomberg) -- The following companies may have unusual price changes today in Asia trading, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise.

South Korea automakers: Hyundai Motor Co. (005380 KS) and Kia Motors Corp. (000270 KS) had their long-term debt ratings cut to BB+ from BBB- at Fitch Ratings, the rating company said in a statement. Hyundai advanced 2,000 won, or 4.4 percent, to 48,000 and Kia rose 290 won, or 3.9 percent, to 7,790

Aboitiz Equity Ventures Inc. (AEV PM): The company with investments in energy and finance said Chairman Jon Aboitiz acquired 3.72 million shares in the open market on Jan. 9 at 5.45 pesos each. The company also said that another executive bought 415,702 shares at the same price that day. The stock lost 10 centavos, or 1.7 percent, to 5.80 pesos.

Arrow Energy Ltd. (AOE AU): The Australian company signed a preliminary agreement with Oil & Natural Gas Corp., India’s biggest exploration company, to jointly bid for coal-seam methane blocks globally. Arrow rose 12 cents, or 5.5 percent, to A$2.32.

BHP Billiton Ltd. (BHP AU): The world’s biggest mining company agreed with Pan Pacific Copper Co. to raise 2009 processing fees by about 70 percent, the first increase in three years. BHP rose 51 cents, or 1.7 percent, to A$30.94.

CapitaLand Ltd. (CAPL SP): Southeast Asia’s biggest developer said it’s seeking to reduce its utility costs by as much as S$4 million ($2.7 million) this year as part of its policy to protect the environment. CapitaLand gained 1 cent, or 0.4 percent, to S$2.84.

Fortescue Metals Group Ltd. (FMG AU): Australia’s third- largest exporter will join for the first time annual talks with Chinese steelmakers to negotiate iron ore prices, the 21st Century Business Herald reported, citing Shan Shanghua, secretary in general of China Iron and Steel Association. Fortesque advanced 12.5 cents, or 6.7 percent, to A$2.05.

Hynix Semiconductor Inc. (000660 KS): The world’s second- biggest computer-memory maker had the rating on two senior unsecured notes cut by one level to B at Standard & Poor’s. The stock lost 340 won, or 4.8 percent, to 6,730 won.

JG Summit Holdings Inc. (JGS PM): UOL Group Ltd. (UOL SP), Singapore’s fourth-largest developer by assets, said it’s offering to buy United Industrial Corp. (UIC SP), a real-estate investment company, at $1.20 a share. JG Summit, which owns 35.1 percent of UIC, rose 4 centavos, or 2 percent, to 2.02 pesos.

MBM Resources Bhd. (MBM MK): The Malaysian automobile distributor said it agreed to form a joint venture with its Federal Auto Holdings Bhd. unit to develop a 26-story office building in Kuala Lumpur. The land to be developed is owned by Federal Auto, said MBM in a statement. MBM was unchanged at 2.28 ringgit.

Pelikan International Corp. (PELI MK): The stationery maker said it agreed to buy 81 percent of Indistri S.A., a maker and distributor of office and school stationeries, for $4.25 million. Pelikan was unchanged at 1.16 ringgit.

Rio Tinto Group (RIO AU): The company suspended a $320 million iron ore port project in Uruguay because of the global economic slowdown, Steel Business Briefing reported, without saying where it got the information. Rio Tinto advanced 26 cents, or 0.6 percent, to A$40.61.

Tenaga Nasional Bhd. (TNB MK: Malaysia’s government, controller of national utility Tenaga, said it will consider cutting electricity prices earlier than planned, three days before a by-election that the ruling party has said it must win. Under an earlier plan, the government was due to review electricity prices in June, the energy ministry said in a statement. Tenaga fell 5 sen, or 0.8 percent, to 6.40 ringgit.

TM International Bhd. (TI MK): The state-owned Malaysian mobile-phone operator said its group failed to win a license to sell mobile-phone services in Iran. TM said in a statement it will continue to consider other investment opportunities. TM was unchanged at 3.62 ringgit.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

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Japan Stocks Fall on Slump in Machine Orders, U.S. Retail Sales

By Masaki Kondo

Jan. 15 (Bloomberg) -- Japanese stocks declined, headed for the lowest close in more than a month, as bigger-than-estimated drops in machinery orders and U.S. retail sales fueled concern the global recession is deepening.

Fanuc Ltd., world’s largest industrial robot maker, lost 5.6 percent after the nation’s machinery orders plunged in November twice as much as anticipated. Canon Inc., which gets a third of its sales from the Americas, fell 4.8 percent after U.S. retail sales dropped last month at double the rate estimated by economists. Bridgestone Corp. led a retreat by tiremakers after Goldman Sachs Group Inc. recommended selling the stock.

“The U.S. retail report forces investors to consider the risk of a deeper global economic slump,” Juichi Wako, a strategist at Nomura Securities Co., Japan’s biggest brokerage, said in an interview with Bloomberg Television. “It’s become even harder to foresee what lies ahead.”

The Nikkei 225 Stock Average declined 364.97, or 4.3 percent, to 8,073.48 as of 9:34 a.m. in Tokyo. The broader Topix index fell 25.59, or 3.1 percent, to 793.80, with nine stocks slumping for each that rose. The gauges were set for the lowest close since Dec. 5.

Japan’s machinery orders, an indicator of capital spending in the next three to six months, fell by a record 16.2 percent in November from the previous month, the Cabinet Office said today before markets opened. Economists had estimated an 8 percent drop. The report came after the Japan Machine Tool Builders’ Association said yesterday that machine tool orders tumbled 72 percent in December from a year earlier.

U.S. Sales

Fanuc lost 5.6 percent to 5,580 yen, set for the lowest close since Dec. 12, and Komatsu Ltd., the world’s second- biggest maker of earthmoving equipment, dived 4.8 percent to 1,085 yen. Closest domestic rival Hitachi Construction Machinery Co. sank 6.8 percent to 1,031 yen.

Canon, the world’s biggest maker of digital cameras, retreated 4.8 percent to 2,805 yen, while Sony Corp., which gets a quarter of its sales from the U.S., slid 3.8 percent to 2,010 yen. Electronics makers weighed the most on the Topix.

U.S. retail sales dropped for a sixth month with a 2.7 percent slump in December, the longest stretch of declines since the tallies began in 1992, the Commerce Department said yesterday. Economists had estimated a 1.2 percent fall.

Bridgestone tumbled 7.1 percent to 1,240 yen, and Yokohama Rubber Co. declined 9.8 percent to 367 yen. Sumitomo Rubber Industries Ltd. fell 8.5 percent to 639 yen. Goldman slashed its ratings on the tiremakers to “sell,” citing a “clear decline” in demand.

Nikkei futures expiring in March retreated 3.5 percent to 8,080 in Osaka and slumped 3.9 percent to 8,070 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Asian Stocks Tumble as Japan Machinery Orders, U.S. Sales Drop

By Patrick Rial and Masaki Kondo

Jan. 15 (Bloomberg) -- Asian stocks fell, dragging the regional stock benchmark to the lowest in five weeks, after Japanese machinery orders and U.S. retail sales dropped at more than double the pace economists expected.

Fanuc Ltd., the world’s largest maker of industrial robots, lost 5.8 percent after Japan’s orders for machines sank 16.2 percent, the most on record. Samsung Electronics Co., the world’s largest television maker, fell 5.8 percent after U.S. retail sales declined 2.7 percent last month. KB Financial Group Inc., which operates South Korea’s largest bank, plunged 6.5 percent after Deutsche Bank AG reported a record loss and the Korean won neared a one-month low.

“Waning demand is pushing electronics and car makers to make huge production cuts,” said Yasuhiro Onakado, chief economist at Tokyo-based Daiwa SB Investments Ltd., which manages $53 billion. “There’s no recovery in sight.”

The MSCI Asia Pacific Index declined 3 percent to 84.25 as of 10:15 a.m. in Tokyo, set for the lowest close since Dec. 9. The benchmark has given up about a third of the gains it made since falling to a five-year low on Nov. 20. All 10 industry groups lost ground today. The cost of protecting bonds from default in the Asia-Pacific region rose.

Japan’s Nikkei 225 Stock Average tumbled 4.3 percent to 8,079.09, led by Konica Minolta Holdings Inc. after Merrill Lynch & Co. slashed its rating on the maker of film. Equity benchmarks throughout the region declined.

Growth in the global economy will slow to 2.2 percent this year, a rate “equivalent to a global recession,” the International Monetary Fund said in November. Companies in the MSCI Asia benchmark reported an aggregate 32 percent drop in profit in the latest quarter, according to data compiled by Bloomberg.

Machinery Orders

U.S. stocks retreated the most in six weeks yesterday. with the Standard & Poor’s 500 Index losing 3.4 percent. Futures on the gauge fell 0.7 percent in trading today.

The Markit iTraxx Australia index of credit-default swaps widened 10 basis points to 320 as of 11:40 a.m. in Sydney, Westpac Banking Corp. prices show. The Markit iTraxx Japan index rose 10 basis points to 304.5 at 9:55 a.m. in Tokyo, according to Credit Suisse Group AG.

Fanuc fell 5.8 percent to 5,570 yen. Hitachi Construction Machinery Co., the world’s largest maker of giant excavators, sank 6 percent to 1,040 yen. Advantest Corp., the world’s biggest maker of equipment used to test computer memory chips, suffered a 7.5 percent rout to 1,243 yen.

Japan’s machine orders, an indicator of capital spending in the next three to six months, slid 16.2 percent from October, the biggest decline since the current survey began in 1987. Economists had expected an 8 percent slump.

Retail Sales, Rio

Samsung dropped 5.8 percent to 274,000 won. Canon Inc., the world’s largest seller of digital cameras, lost 4.4 percent to 2,815 yen after Merrill Lynch lowered the stock to “underperform.”

Konica Minolta, a maker of printers and film for liquid- crystal displays, slumped 7.6 percent to 633 yen. The company’s film facilities aren’t running at full capacity as liquid-crystal display makers cut back on production during the slump, Ryohei Takahashi, an analyst at Merrill who lowered the stock to “neutral,” wrote in a report.

U.S. retail sales dropped for a sixth month with a 2.7 percent slump in December, the longest stretch of declines since the tallies began in 1992, the Commerce Department said yesterday. That’s more than twice the drop economists had estimated.

Deutsche Loss

KB Financial tumbled 6.5 percent to 36,250 won. Mizuho Financial Group Inc., Japan’s third-largest listed bank by assets, retreated 4.3 percent to 243 yen. Fubon Financial Holding Co., Taiwan’s second-largest listed financial services company by market value, declined 6.4 percent to NT$20.35.

Deutsche Bank, Germany’s biggest lender, yesterday reported a record loss in the fourth quarter because of mounting provisions for debt backed by bond insurers and cash injections into money-market funds.

South Korea’s Kospi Index lost 3.9 percent, led by financial shares as the nation’s currency approached the lowest level in a month against the dollar, raising the cost of servicing foreign- currency debt. Vice Finance Minister Bae Kook Hwan said the country’s economic growth in 2009 is likely to fall short of central bank and International Monetary Fund predictions.

Rio Tinto Group, the world’s third-largest mining company, plunged 8.5 percent to A$37.17, after appointing steel executive Jim Leng to replace Chairman Paul Skinner, and confirming that it will shut its Anglesey Aluminium Metals Ltd. venture in Wales.

Hyundai Motor Co. slid 6.3 percent, while Kia Motors Corp. lost 5 percent after South Korea’s biggest carmakers had their debt ratings cut to junk levels by Fitch Ratings as the deepening global curbs auto sales.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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U.S. Retail Sales Drops For Sixth Straight Month

Daily Forex Fundamentals | Written by DailyFX | Jan 14 09 13:57 GMT |

U.S. retail sales fell 2.7% in December which was more than double forecasts of 1.2%. It was the sixth straight monthly decline which is the longest string on record. Looking at the breakdown we see that a 15.9% drop in gasoline receipts led the drop followed by a 2.5% fall in apparel sales. Consumers have continued to retrench as the economy lost over 1 million jobs over the last two months of 2008. Although, the majority of the decline was on the back of the impact of falling oil prices on gasoline prices there were across the board declines, which was evident by a 3.1% drop in the less volatile ex-autos reading. The weakening labor market has dimmed hopes for a rebound in spending which has led President-Elect Obama to add more tax breaks to the proposed fiscal stimulus plan in hopes of reviving demand. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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