By Shobhana Chandra
Dec. 23 (Bloomberg) -- Sales of previously owned homes in the U.S. fell more than forecast in November and prices dropped by the most on record, indicating the real estate slump will extend into a fourth year and worsen the recession.
Purchases declined 8.6 percent to an annual rate of 4.49 million, from a 4.91 million rate in October that was less than previously estimated, the National Association of Realtors said today in Washington. The median price dropped 13.2 percent from a year earlier, the biggest decline since records started in 1968. Separately, the Commerce Department reported today that new-home sales fell 2.9 percent last month to a 17-year low.
Prices will plunge further as job losses sap demand, foreclosures add to the property glut and prospective buyers get turned away by mortgage lenders. The Federal Reserve this month cut its benchmark interest rate target to as low as zero and said it would take more steps to ease borrowing as the longest postwar recession looms.
“November sales just collapsed,” said Chris Low, chief economist at FTN Financial in New York. “Price declines are accelerating. As bad as this is, it’s going to be considerably worse in a month’s time.”
Resales were forecast to fall to a 4.93 million annual rate from an originally reported 4.98 million in October, according to the median estimate of 63 economists in a Bloomberg News survey. Projections ranged from 3.98 million to 5.2 million.
Sales dropped 10.6 percent compared with a year earlier. Resales averaged 5.67 million in 2007 and before today’s report, fluctuated around a 4.96 million rate this year.
The number of previously-owned unsold homes on the market at the end of November represented 11.2 months’ worth at the current sales pace, up from 10.3 months’ at the end of the prior month.
Historic Price Decline
The median price of an existing home fell to $181,300, and the percentage drop from a year ago was “probably the largest price decline since the Great Depression,” although records don’t go back that far, said NAR Chief Economist Lawrence Yun.
Foreclosures and short sales accounted for 45 percent of last month’s home purchases, Yun said.
Resales of single-family homes fell 8 percent to an annual rate of 4.02 million. Sales of condos and co-ops declined 13 percent to a 470,000 rate.
Regional Breakdown
Purchases declined in all regions of the country, led by drops of 12 percent in the Northeast and 10.9 percent in the South. Sales fell 7.4 percent in the Midwest and 4.3 percent in the West. Prices also fell throughout the country, led by a decline of 25.5 percent in the West.
Resales account for about 90 percent of the market. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.
New-home sales, recorded when a contract is signed, are considered by economists to be a more timely barometer.
The Federal Reserve on Dec. 16 cut its benchmark interest rate target to a range of zero to 0.25 percent, and said it stands ready to expand purchases of Fannie Mae, Freddie Mac and Federal Home Loan Bank debt under a program aimed at reducing mortgage costs.
The average rate on a 30-year fixed-rate loan fell to 5.18 percent in the week ended Dec. 12, the lowest in more than five years, according to the Mortgage Bankers Association.
President-elect Barack Obama on Dec. 13 said he will develop plans to limit foreclosures and “dramatically increase the number of families who can stay in their homes.” One tenth of U.S. families who own a home are in financial distress, Obama said.
Homebuilders’ Shares
The S&P Supercomposite Homebuilding Index is down a third so far this year, reflecting the plight of homebuilders.
Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., New Jersey’s biggest homebuilder, called on the government to provide an economic stimulus for the housing industry.
“If government wants to get to the root of the problem they need to fix housing first,” Hovnanian said in a conference call on Dec. 17. Hovnanian, whose company reported a fiscal fourth quarter loss, didn’t specify what type of government intervention he wants in the housing market
Tuesday, December 23, 2008
Wednesday, December 17, 2008
Australia Stocks, Japan Futures Slump on Falling Oil, Currency
By Masaki Kondo and Shani Raja
Dec. 18 (Bloomberg) -- Australia shares and Japan’s stock futures slumped after tumbling crude prices and the surging yen dimmed earnings prospects for oil explorers and automakers.
Roc Oil Co., which explores for petroleum in China, Mauritania and Angola, retreated 1.6 percent in Sydney as crude fell below $40 a barrel for the first time in more than four years even after OPEC agreed to reduce production. U.S.-traded receipts of Toyota Motor Corp. dropped 0.7 percent from the closing price in Tokyo as the yen traded at a 13-year high against the dollar. Honda Motor Co. sank 0.6 percent after cutting its annual earnings forecast by two-thirds.
Australia’s S&P/ASX 200 Index fell 0.8 percent to 3,541.90 as of 10:17 a.m. in Sydney. New Zealand’s NZX 50 Index lost 0.2 percent to 2,689.73 in Wellington. In New York, the Standard & Poor’s 500 Index swung between gains and losses at least 26 times before closing 1 percent lower.
“The oil market’s telling us that even with production cuts, demand is exceptionally weak,” said Philip Schwartz, who directly manages $750 million at International Value Equities in New York. “The concern in Japan is that the yen is strengthening way beyond any previous expectation. It’s hurting exporters tremendously.”
The Bank of New York Mellon Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 1.9 percent. Nikkei 225 Stock Average futures expiring in March closed at 8,815 in Chicago, 1.9 percent higher than 8,650 in Osaka and 1.7 percent up from 8,670 in Singapore.
Yen Climbs
Crude oil for January delivery tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, after touching $39.88. Prices have plunged 73 percent from a record on July 11.
The Organization of Petroleum Exporting Countries yesterday agreed to trim current production by 2.46 million barrels to 24.845 million barrels a day, OPEC President Chakib Khelil said after the meeting in Algeria.
The yen appreciated against the dollar to as much as 87.14, the strongest level since July 1995, from 88.76 at the close of stock trading in Tokyo yesterday. The Japanese currency traded at 111.76 against the dollar at the beginning of this year.
Honda chopped its annual operating-profit target by 67 percent to 180 billion yen ($2.06 billion) and halved its third- quarter dividend, citing the surging yen and dwindling demand. Every 1 yen gain against the dollar cuts Honda’s full-year earnings by 18 billion yen.
“Honda’s earnings revision is likely to affect shares throughout the auto sector,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management, said in an interview with Bloomberg Television.
Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, had its rating raised by UBS AG to “buy” from “neutral.” A sounder capital base allows the lender to expand lending and investment, UBS analyst Nana Otsuki wrote in a report dated yesterday.
Dec. 18 (Bloomberg) -- Australia shares and Japan’s stock futures slumped after tumbling crude prices and the surging yen dimmed earnings prospects for oil explorers and automakers.
Roc Oil Co., which explores for petroleum in China, Mauritania and Angola, retreated 1.6 percent in Sydney as crude fell below $40 a barrel for the first time in more than four years even after OPEC agreed to reduce production. U.S.-traded receipts of Toyota Motor Corp. dropped 0.7 percent from the closing price in Tokyo as the yen traded at a 13-year high against the dollar. Honda Motor Co. sank 0.6 percent after cutting its annual earnings forecast by two-thirds.
Australia’s S&P/ASX 200 Index fell 0.8 percent to 3,541.90 as of 10:17 a.m. in Sydney. New Zealand’s NZX 50 Index lost 0.2 percent to 2,689.73 in Wellington. In New York, the Standard & Poor’s 500 Index swung between gains and losses at least 26 times before closing 1 percent lower.
“The oil market’s telling us that even with production cuts, demand is exceptionally weak,” said Philip Schwartz, who directly manages $750 million at International Value Equities in New York. “The concern in Japan is that the yen is strengthening way beyond any previous expectation. It’s hurting exporters tremendously.”
The Bank of New York Mellon Japan ADR Index, which tracks American depositary receipts of Japanese companies, slid 1.9 percent. Nikkei 225 Stock Average futures expiring in March closed at 8,815 in Chicago, 1.9 percent higher than 8,650 in Osaka and 1.7 percent up from 8,670 in Singapore.
Yen Climbs
Crude oil for January delivery tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, after touching $39.88. Prices have plunged 73 percent from a record on July 11.
The Organization of Petroleum Exporting Countries yesterday agreed to trim current production by 2.46 million barrels to 24.845 million barrels a day, OPEC President Chakib Khelil said after the meeting in Algeria.
The yen appreciated against the dollar to as much as 87.14, the strongest level since July 1995, from 88.76 at the close of stock trading in Tokyo yesterday. The Japanese currency traded at 111.76 against the dollar at the beginning of this year.
Honda chopped its annual operating-profit target by 67 percent to 180 billion yen ($2.06 billion) and halved its third- quarter dividend, citing the surging yen and dwindling demand. Every 1 yen gain against the dollar cuts Honda’s full-year earnings by 18 billion yen.
“Honda’s earnings revision is likely to affect shares throughout the auto sector,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management, said in an interview with Bloomberg Television.
Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, had its rating raised by UBS AG to “buy” from “neutral.” A sounder capital base allows the lender to expand lending and investment, UBS analyst Nana Otsuki wrote in a report dated yesterday.
Friday, December 12, 2008
ECB Signals Reluctance to Cut Rates Much Further, May Pause
By Gabi Thesing
Dec. 12 (Bloomberg) -- European Central Bank policy makers signaled they’re reluctant to cut the benchmark interest rate much further after three reductions to 2.5 percent since October, and may not trim borrowing costs again next month.
“We have dealt with the economy to some extent because we took an extraordinary measure,” ECB council member Yves Mersch said in Luxembourg today. His colleague Axel Weber said last night he “would like to avoid” taking the rate below 2 percent. Both questioned whether the bank will have enough new information in January to act again on rates.
The ECB has lowered borrowing costs by an unprecedented 1.75 percentage points since the global financial crisis pushed the euro region into recession. European industrial production plunged the most in 15 years in October as orders weakened and the region’s biggest companies scaled back investment, the European Union statistics office in Luxembourg said today.
Investors are betting the deepening economic slump will force the ECB to slice another 50 basis points off the benchmark rate in January, Eonia forward contracts show.
“They will be forced to go to 1 percent or lower by June,” said Juergen Michels chief euro-area economist at Citigroup Inc in London. “The rhetoric at the moment is to justify their forecasts, which are too optimistic.”
The ECB predicted last week that the economy will contract about 0.5 percent next year before recovering to expand around 1 percent in 2010. Economists at UniCredit Group estimate gross domestic product will drop 1.3 percent next year.
Behind The Curve?
French manufacturing confidence fell to a 21-year low in November, suggesting the region’s second-largest economy will suffer a bigger contraction in the fourth quarter than previously anticipated, the Bank of France said today.
“The ECB should refrain from considering any pause in the easing cycle to avoid falling again behind the curve,” said Marco Valli, an economist at UniCredit in Milan.
Mersch said there may “not be considerable and significant information available before February, March.”
The euro rose more than half a cent to $1.3389 after the remarks as evidence mounts that some ECB policy makers are reluctant to continue easing monetary policy aggressively.
The bank last week lowered the key rate by 75 basis points, the biggest reduction in its ten-year history.
ECB Executive Board member Juergen Stark said on Dec. 10 that scope for further rate cuts is “very limited, potentially allowing for small steps only.”
While Weber and Mersch said the ECB still has “room to maneuver” on rates, Weber added: “We should be cautious when our rates approach territory we haven’t explored before. Our lowest level so far was 2 percent.”
Investors are betting the Federal Reserve will halve its benchmark rate to 0.5 percent at its Dec. 15-16 policy meeting. The Swiss National Bank made the same shift yesterday.
Dec. 12 (Bloomberg) -- European Central Bank policy makers signaled they’re reluctant to cut the benchmark interest rate much further after three reductions to 2.5 percent since October, and may not trim borrowing costs again next month.
“We have dealt with the economy to some extent because we took an extraordinary measure,” ECB council member Yves Mersch said in Luxembourg today. His colleague Axel Weber said last night he “would like to avoid” taking the rate below 2 percent. Both questioned whether the bank will have enough new information in January to act again on rates.
The ECB has lowered borrowing costs by an unprecedented 1.75 percentage points since the global financial crisis pushed the euro region into recession. European industrial production plunged the most in 15 years in October as orders weakened and the region’s biggest companies scaled back investment, the European Union statistics office in Luxembourg said today.
Investors are betting the deepening economic slump will force the ECB to slice another 50 basis points off the benchmark rate in January, Eonia forward contracts show.
“They will be forced to go to 1 percent or lower by June,” said Juergen Michels chief euro-area economist at Citigroup Inc in London. “The rhetoric at the moment is to justify their forecasts, which are too optimistic.”
The ECB predicted last week that the economy will contract about 0.5 percent next year before recovering to expand around 1 percent in 2010. Economists at UniCredit Group estimate gross domestic product will drop 1.3 percent next year.
Behind The Curve?
French manufacturing confidence fell to a 21-year low in November, suggesting the region’s second-largest economy will suffer a bigger contraction in the fourth quarter than previously anticipated, the Bank of France said today.
“The ECB should refrain from considering any pause in the easing cycle to avoid falling again behind the curve,” said Marco Valli, an economist at UniCredit in Milan.
Mersch said there may “not be considerable and significant information available before February, March.”
The euro rose more than half a cent to $1.3389 after the remarks as evidence mounts that some ECB policy makers are reluctant to continue easing monetary policy aggressively.
The bank last week lowered the key rate by 75 basis points, the biggest reduction in its ten-year history.
ECB Executive Board member Juergen Stark said on Dec. 10 that scope for further rate cuts is “very limited, potentially allowing for small steps only.”
While Weber and Mersch said the ECB still has “room to maneuver” on rates, Weber added: “We should be cautious when our rates approach territory we haven’t explored before. Our lowest level so far was 2 percent.”
Investors are betting the Federal Reserve will halve its benchmark rate to 0.5 percent at its Dec. 15-16 policy meeting. The Swiss National Bank made the same shift yesterday.
Global Stocks, Dollar Tumble as Auto Bailout Fails; GM Slumps
By Chen Shiyin and Adam Haigh
Dec. 12 (Bloomberg) -- Stocks tumbled around the world and the dollar slumped after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.
The MSCI World Index lost 1.8 percent to 876.62 as of 8:06 p.m. in New York after senators voted down a bill to provide $14 billion of emergency funds for General Motors Corp. and Chrysler LLC. GM plunged 37 percent, while Honda Motor Co. and Daimler AG sank more than 8 percent. The dollar fell to a 13-year low against the yen and the cost of protecting corporate bonds against default soared. Metals and crude oil slumped.
“The markets are in a very dire situation and are in a very risk-averse situation,” said Robert Drijkoningen, The Hague-based head of the multi-asset group at ING Investment Management, which has $488 billion under management. “The short-term is bleak,” he said on Bloomberg Television.
Standard & Poor’s 500 Index futures sank 4 percent, indicating the benchmark for U.S. equities will extend yesterday’s 2.9 percent drop. Europe’s Dow Jones Stoxx 600 Index lost 4.5 percent, while the MSCI Asia Pacific Index fell 3.7 percent.
“It’s over with,” Senate Majority Leader Harry Reid said on the Senate floor in Washington last night. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”
The dollar headed for a sixth week of declines versus the yen, while investors sought the safety of government bonds in the U.S., Europe and Japan. The cost of default protection climbed throughout the European auto industry.
‘Betrayed Again’
The MSCI Emerging Markets Index lost 3.6 percent, extending its 2008 drop to 56 percent. China’s CSI 300 Index sank 4.2 percent after a government official said growth will slow more sharply next quarter.
The MSCI World Index of 23 developed markets has slid 45 percent this year as almost $1 trillion in bank losses and writedowns froze credit markets and pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II. Spending plans by governments from the U.S. to Australia spurred a 14 percent rally in the index since Nov. 20.
The S&P 500 earlier this week had marked a technical end to a 14-month bear market, extending its rebound from an 11-year low last month to as much as 21 percent, as President-elect Barack Obama stepped up efforts to pull the economy out of a recession.
“Investors have been betrayed again by U.S. politicians,” said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. “Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship.”
GM, Ford, BMW
GM slid 37 percent to $2.65, while Ford Motor Co. lost 25 percent to $2.18 in pre-market trading in New York. Daimler sank 8.5 percent to 22.98 euros and Bayerische Motoren Werke AG fell 3.8 percent to 21.595 euros.
The U.S. is the No. 1 market for BMW and the second-biggest for Daimler’s Mercedes-Benz. Both carmakers have factories there, and while they and other German brands control about 7 percent of the American market, they compete more with each other than with GM and Ford.
A collapse of GM and Chrysler “is worrisome for the U.S. in particular, but we are in a synchronized world so it will have an impact elsewhere,” said Franz Wenzel, Paris-based deputy director for investment strategy at Axa Investment Managers, which oversees $770 billion. “It puts into question any chance of a U.S. recovery that we had expected from mid-2009 onwards.”
Nokian Renkaat Oyj slumped 13 percent to 7.99 euros. The Nordic region’s biggest tiremaker said fourth-quarter sales have been weaker than expected.
Honda, Japan’s second-largest automaker, tumbled 12 percent to 1,921 yen, the largest drop since Oct. 31. Hyundai Motor Co., South Korea’s No. 1 automaker, fell 9.3 percent to 42,000 won.
‘Potential Failure’
“A potential failure in U.S. automakers will have immediate reverberations throughout the U.S. economy, which will affect demand for Asian products and add to recessionary pressures,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which has $81 billion.
Denso Corp., the world’s biggest listed auto-parts maker, plunged 12 percent to 1,430 yen. Aisin Seiki Co., Japan’s largest maker of car transmissions, sank 13 percent to 1,116 yen.
The U.S. dollar weakened to 88.53 against the yen, the lowest since Aug. 2, 1995, before trading at 90.35 in New York. Credit-default swaps, contracts conceived to protect bondholders against default, on the Markit iTraxx Europe index of 125 companies with investment-grade ratings increased 11.5 basis points to 211, according to JPMorgan Chase & Co. prices in London. That’s up from about 50 basis points at the start of the year.
Credit-default swaps on Volkswagen AG, Europe’s biggest carmaker, climbed 81.5 basis points to 383, CMA Datavision prices show.
Platinum, Oil
Platinum, used to make catalytic converters for car and truck exhaust systems, fell as much as 3.4 percent in London, while gold slipped from its highest in more than two weeks. Crude oil dropped as much as 7.2 percent, trimming yesterday’s 10 percent rally.
Yields on 10-year Treasury notes declined to 2.48 percent, the lowest level since 1954.
“Treasuries are clearly showing signs of flight to quality as people generally expected the bailout to succeed,” said Kevin Yang, who helps oversee about $1 billion of U.S. bonds in Taipei at Shinkong Life Insurance Co. “Yields will go lower in the very short-term as stocks test new lows.”
Canon Inc., the world’s biggest digital-camera maker, declined 5.8 percent to 2,590 yen. The number of Americans filing first-time claims for unemployment benefits surged to the highest level since November 1982, a report showed yesterday.
‘Lose Your Job’
“If you lose your job, you don’t spend. If you see others lose their jobs, you don’t spend either,” said Daphne Roth, the Singapore-based head of equity research at ABN Amro Private Bank, which manages about $27 billion of Asian assets.
China’s growth will slow more sharply in the first quarter of 2009 before stabilizing and then recovering, Liu He, vice minister of the Central Leading Group on Financial and Economic Affairs said in Beijing today. China Mobile, the world’s biggest phone company by value, lost 4.7 percent to HK$78.50.
Today’s drop left the MSCI World trading at 11.4 times the earnings of its 1,694 companies, compared with this decade’s average ratio of 26.5. The worst global financial crisis since the Great Depression pushed the gauge’s value down to 10.5 times profit on Oct. 27, the cheapest in at least 13 years, data compiled by Bloomberg show.
The S&P 500 currently trades at 18.9 times earnings, while the Stoxx 600 is valued at 8.9.
Bank stocks led today’s drop in the European benchmark, losing 8.4 percent. HBOS Plc slumped 22 percent to 68.5 pence after the U.K. bank that is being taken over by Lloyds TSB Group Plc said this year’s charge for bad loans rose to 5 billion pounds ($7.5 billion), led by an increase in corporate delinquencies that was worse than analysts forecast. Lloyds decreased 17 percent to 131.8 pence.
Dec. 12 (Bloomberg) -- Stocks tumbled around the world and the dollar slumped after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.
The MSCI World Index lost 1.8 percent to 876.62 as of 8:06 p.m. in New York after senators voted down a bill to provide $14 billion of emergency funds for General Motors Corp. and Chrysler LLC. GM plunged 37 percent, while Honda Motor Co. and Daimler AG sank more than 8 percent. The dollar fell to a 13-year low against the yen and the cost of protecting corporate bonds against default soared. Metals and crude oil slumped.
“The markets are in a very dire situation and are in a very risk-averse situation,” said Robert Drijkoningen, The Hague-based head of the multi-asset group at ING Investment Management, which has $488 billion under management. “The short-term is bleak,” he said on Bloomberg Television.
Standard & Poor’s 500 Index futures sank 4 percent, indicating the benchmark for U.S. equities will extend yesterday’s 2.9 percent drop. Europe’s Dow Jones Stoxx 600 Index lost 4.5 percent, while the MSCI Asia Pacific Index fell 3.7 percent.
“It’s over with,” Senate Majority Leader Harry Reid said on the Senate floor in Washington last night. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”
The dollar headed for a sixth week of declines versus the yen, while investors sought the safety of government bonds in the U.S., Europe and Japan. The cost of default protection climbed throughout the European auto industry.
‘Betrayed Again’
The MSCI Emerging Markets Index lost 3.6 percent, extending its 2008 drop to 56 percent. China’s CSI 300 Index sank 4.2 percent after a government official said growth will slow more sharply next quarter.
The MSCI World Index of 23 developed markets has slid 45 percent this year as almost $1 trillion in bank losses and writedowns froze credit markets and pushed the U.S., Europe and Japan into the first simultaneous recessions since World War II. Spending plans by governments from the U.S. to Australia spurred a 14 percent rally in the index since Nov. 20.
The S&P 500 earlier this week had marked a technical end to a 14-month bear market, extending its rebound from an 11-year low last month to as much as 21 percent, as President-elect Barack Obama stepped up efforts to pull the economy out of a recession.
“Investors have been betrayed again by U.S. politicians,” said Yasuhiro Miyata, who helps manage about $109 billion at DIAM Co. in Tokyo. “Even with the knowledge that we are in the midst of a crisis, they were unable to come to an agreement and investors have decided to abandon ship.”
GM, Ford, BMW
GM slid 37 percent to $2.65, while Ford Motor Co. lost 25 percent to $2.18 in pre-market trading in New York. Daimler sank 8.5 percent to 22.98 euros and Bayerische Motoren Werke AG fell 3.8 percent to 21.595 euros.
The U.S. is the No. 1 market for BMW and the second-biggest for Daimler’s Mercedes-Benz. Both carmakers have factories there, and while they and other German brands control about 7 percent of the American market, they compete more with each other than with GM and Ford.
A collapse of GM and Chrysler “is worrisome for the U.S. in particular, but we are in a synchronized world so it will have an impact elsewhere,” said Franz Wenzel, Paris-based deputy director for investment strategy at Axa Investment Managers, which oversees $770 billion. “It puts into question any chance of a U.S. recovery that we had expected from mid-2009 onwards.”
Nokian Renkaat Oyj slumped 13 percent to 7.99 euros. The Nordic region’s biggest tiremaker said fourth-quarter sales have been weaker than expected.
Honda, Japan’s second-largest automaker, tumbled 12 percent to 1,921 yen, the largest drop since Oct. 31. Hyundai Motor Co., South Korea’s No. 1 automaker, fell 9.3 percent to 42,000 won.
‘Potential Failure’
“A potential failure in U.S. automakers will have immediate reverberations throughout the U.S. economy, which will affect demand for Asian products and add to recessionary pressures,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which has $81 billion.
Denso Corp., the world’s biggest listed auto-parts maker, plunged 12 percent to 1,430 yen. Aisin Seiki Co., Japan’s largest maker of car transmissions, sank 13 percent to 1,116 yen.
The U.S. dollar weakened to 88.53 against the yen, the lowest since Aug. 2, 1995, before trading at 90.35 in New York. Credit-default swaps, contracts conceived to protect bondholders against default, on the Markit iTraxx Europe index of 125 companies with investment-grade ratings increased 11.5 basis points to 211, according to JPMorgan Chase & Co. prices in London. That’s up from about 50 basis points at the start of the year.
Credit-default swaps on Volkswagen AG, Europe’s biggest carmaker, climbed 81.5 basis points to 383, CMA Datavision prices show.
Platinum, Oil
Platinum, used to make catalytic converters for car and truck exhaust systems, fell as much as 3.4 percent in London, while gold slipped from its highest in more than two weeks. Crude oil dropped as much as 7.2 percent, trimming yesterday’s 10 percent rally.
Yields on 10-year Treasury notes declined to 2.48 percent, the lowest level since 1954.
“Treasuries are clearly showing signs of flight to quality as people generally expected the bailout to succeed,” said Kevin Yang, who helps oversee about $1 billion of U.S. bonds in Taipei at Shinkong Life Insurance Co. “Yields will go lower in the very short-term as stocks test new lows.”
Canon Inc., the world’s biggest digital-camera maker, declined 5.8 percent to 2,590 yen. The number of Americans filing first-time claims for unemployment benefits surged to the highest level since November 1982, a report showed yesterday.
‘Lose Your Job’
“If you lose your job, you don’t spend. If you see others lose their jobs, you don’t spend either,” said Daphne Roth, the Singapore-based head of equity research at ABN Amro Private Bank, which manages about $27 billion of Asian assets.
China’s growth will slow more sharply in the first quarter of 2009 before stabilizing and then recovering, Liu He, vice minister of the Central Leading Group on Financial and Economic Affairs said in Beijing today. China Mobile, the world’s biggest phone company by value, lost 4.7 percent to HK$78.50.
Today’s drop left the MSCI World trading at 11.4 times the earnings of its 1,694 companies, compared with this decade’s average ratio of 26.5. The worst global financial crisis since the Great Depression pushed the gauge’s value down to 10.5 times profit on Oct. 27, the cheapest in at least 13 years, data compiled by Bloomberg show.
The S&P 500 currently trades at 18.9 times earnings, while the Stoxx 600 is valued at 8.9.
Bank stocks led today’s drop in the European benchmark, losing 8.4 percent. HBOS Plc slumped 22 percent to 68.5 pence after the U.K. bank that is being taken over by Lloyds TSB Group Plc said this year’s charge for bad loans rose to 5 billion pounds ($7.5 billion), led by an increase in corporate delinquencies that was worse than analysts forecast. Lloyds decreased 17 percent to 131.8 pence.
Wednesday, December 10, 2008
U.S. Stock Futures Gain; General Motors, Ford Climb in Europe
By Adria Cimino
Dec. 10 (Bloomberg) -- U.S. stock-index futures rose on speculation lawmakers will approve a $15 billion bailout to keep automakers afloat, the government’s latest effort to boost the economy. Asian shares climbed, while Europe’s Dow Jones Stoxx 600 Index was little changed.
General Motors Corp., the biggest U.S. carmaker, and Ford Motor Co. gained more than 2 percent in Germany. Democrats reached a tentative agreement with the Bush administration that calls for the appointment of a so-called car czar who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.
The Standard & Poor’s 500 Index this week marked a technical end to a 14-month bear market as President-elect Barack Obama stepped up efforts to pull the economy out of a recession, pledging the biggest public-works spending since the 1950s. The index has lost 43 percent from its 2007 record as the collapse of subprime mortgages curbed earnings for five straight quarters.
“Strong and radical measures by the government lead us to believe that the economy won’t be as difficult as we thought,” Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion, said in a Bloomberg television interview. “It gives the market hope.”
S&P 500 futures expiring in December added 1.5 percent to 902.4 at 12:25 p.m. in London. Dow Jones Industrial Average futures rose 1.4 percent to 8,840. Nasdaq-100 Index futures increased 1.4 percent to 1,234.5.
Rallies by Honda Motor Co. and Hyundai Motor Co. helped send the MSCI Asia Pacific Index up 3.3 percent. Europe’s Stoxx 600 added 0.1 percent as Rio Tinto Group surged on plans to eliminate 14,000 jobs and cut capital spending by more than half.
GM, Ford
GM jumped 4.9 percent to $4.93. Ford advanced 2.2 percent to $3.30. Congress will vote as early as today on the plan.
A report scheduled for 10 a.m. Washington time may show wholesale inventories in October fell 0.2 percent, according to a Bloomberg survey of economists. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan is set for release at 7 a.m.
Electronic Arts Inc. lost 8.1 percent to $17.78. The world’s second-largest maker of video games predicted fiscal 2009 revenue and profit will be lower than previously forecast because of slow holiday sales in North America and Europe. The company said it will reduce costs by making fewer games and increasing job cuts.
Praxair, Nike
Praxair Inc., the largest producer of industrial gases in the Americas, reduced its fourth-quarter profit forecast and said it will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand. The shares didn’t trade in Europe.
Nike Inc., the world’s largest athletic-shoe maker, was downgraded to “neutral” from “buy” at Bank of America Corp., which cited a slowdown in demand. The stock didn’t trade in Europe.
The 497 companies in the S&P 500 that reported third-quarter results saw an average 18.3 percent decline in profits, prompting analysts to cut estimates for next year. They now project profit growth of 8.2 percent for S&P 500 companies in 2009, about one- third of their forecast of 23 percent at the end of the third quarter, according to data compiled by Bloomberg.
The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.
Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.
Dec. 10 (Bloomberg) -- U.S. stock-index futures rose on speculation lawmakers will approve a $15 billion bailout to keep automakers afloat, the government’s latest effort to boost the economy. Asian shares climbed, while Europe’s Dow Jones Stoxx 600 Index was little changed.
General Motors Corp., the biggest U.S. carmaker, and Ford Motor Co. gained more than 2 percent in Germany. Democrats reached a tentative agreement with the Bush administration that calls for the appointment of a so-called car czar who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.
The Standard & Poor’s 500 Index this week marked a technical end to a 14-month bear market as President-elect Barack Obama stepped up efforts to pull the economy out of a recession, pledging the biggest public-works spending since the 1950s. The index has lost 43 percent from its 2007 record as the collapse of subprime mortgages curbed earnings for five straight quarters.
“Strong and radical measures by the government lead us to believe that the economy won’t be as difficult as we thought,” Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion, said in a Bloomberg television interview. “It gives the market hope.”
S&P 500 futures expiring in December added 1.5 percent to 902.4 at 12:25 p.m. in London. Dow Jones Industrial Average futures rose 1.4 percent to 8,840. Nasdaq-100 Index futures increased 1.4 percent to 1,234.5.
Rallies by Honda Motor Co. and Hyundai Motor Co. helped send the MSCI Asia Pacific Index up 3.3 percent. Europe’s Stoxx 600 added 0.1 percent as Rio Tinto Group surged on plans to eliminate 14,000 jobs and cut capital spending by more than half.
GM, Ford
GM jumped 4.9 percent to $4.93. Ford advanced 2.2 percent to $3.30. Congress will vote as early as today on the plan.
A report scheduled for 10 a.m. Washington time may show wholesale inventories in October fell 0.2 percent, according to a Bloomberg survey of economists. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan is set for release at 7 a.m.
Electronic Arts Inc. lost 8.1 percent to $17.78. The world’s second-largest maker of video games predicted fiscal 2009 revenue and profit will be lower than previously forecast because of slow holiday sales in North America and Europe. The company said it will reduce costs by making fewer games and increasing job cuts.
Praxair, Nike
Praxair Inc., the largest producer of industrial gases in the Americas, reduced its fourth-quarter profit forecast and said it will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand. The shares didn’t trade in Europe.
Nike Inc., the world’s largest athletic-shoe maker, was downgraded to “neutral” from “buy” at Bank of America Corp., which cited a slowdown in demand. The stock didn’t trade in Europe.
The 497 companies in the S&P 500 that reported third-quarter results saw an average 18.3 percent decline in profits, prompting analysts to cut estimates for next year. They now project profit growth of 8.2 percent for S&P 500 companies in 2009, about one- third of their forecast of 23 percent at the end of the third quarter, according to data compiled by Bloomberg.
The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.
Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.
Sunday, December 7, 2008
Asian Stocks Rise on U.S., India Stimulus Plans; Tata Climbs
By Chua Kong Ho and Ian C. Sayson
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Asian Stocks Rise on U.S., India Stimulus Plans; Tata Climbs
By Chua Kong Ho and Ian C. Sayson
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Dec. 8 (Bloomberg) -- Asian stocks and U.S. index futures advanced after U.S. President-elect Barack Obama pledged the biggest public works program in about 50 years and India lowered interest rates.
Komatsu Ltd., the world’s No. 2 maker of construction machinery, jumped 11 percent after Obama said he’s planning the largest spending package since President Dwight D. Eisenhower created the interstate highway system. Tata Motors Ltd., India’s biggest truckmaker, rose 9.7 percent as the government unveiled a $4 billion stimulus plan. Hong Kong Exchanges & Clearing Ltd. surged 17 percent after the financial secretary said a plan permitting Chinese to buy the city’s shares is still on track.
“Governments, not only the U.S., must spend to replace the growth that will be lost from weak consumer spending,” said Jonathan Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila, which has more than $6 billion in trust assets under management. “Investors have been waiting for this kind of stimulus to cushion the effects of a global slowdown.”
The MSCI Asia Pacific Index gained 4.5 percent to 83.13 as of 2:41 p.m. in Tokyo, the most since Nov. 5. About 17 stocks rose for each that declined. The measure fell 3.8 percent last week as commodity prices slumped amid signs the global recession is deepening. The gauge is valued at 12 times estimated profit, almost a third below its level at the start of 2008.
Japan’s Nikkei 225 Stock Average advanced 5.4 percent to 8,341.67. Mizuho Financial Group Inc. rose after loan growth at the country’s banks accelerated in November as the global credit crisis shut companies out from the bond market.
Government Support Measures
Hong Kong’s Hang Seng Index surged 7.5 percent. Australia’s S&P/ASX 200 Index jumped 4.1 percent, led by Santos Ltd., the country’s third-biggest oil and gas producer, amid takeover speculation. South Korea’s Kospi Index climbed 8 percent. Most markets open for trading in the region advanced, with Singapore, Indonesia and Malaysia closed for public holidays.
Governments worldwide have introduced measures this year to buttress their economies against the worst financial crisis since the Great Depression. Australia will start making one-time payments to families and pensioners as part of its $6.8 billion stimulus package from today, ministers said. Chinese leaders begin their annual economic conference in Beijing today.
Futures on the Standard & Poor’s 500 Index climbed 2 percent today. The stock gauge climbed 3.7 percent on Dec. 5 as insurer Hartford Financial Services Group Inc. increased its profit forecast and said it’s weathering the credit turmoil.
U.S. Stimulus
Komatsu, which counts the Americas as its biggest overseas market, jumped 11 percent to 1,007 yen, snapping a five-day, 21 percent decline. Westfield Group, the shopping center owner that derived 39 percent of its 2007 sales from the U.S., climbed 4 percent to A$13.75.
Obama said on Dec. 6 will boost investment in roads, bridges and public buildings to create and preserve 2.5 million jobs. U.S. companies cut payrolls at the fastest pace in 34 years, with the unemployment rate rising to the highest level since 1993, reports last week showed.
“At the moment governments are the only ones feeding cash into the system,” said Masaru Hamasaki, who helps oversee about $3.3 billion at Toyota Asset Management Co. in Tokyo. “It’s a fair bet to say the policies of the U.S. will support demand.”
Tata Motors added 9.7 percent to 168 rupees. Housing Development Finance Corp., India’s biggest mortgage lender, rose 5.4 percent to 1,507.05 rupees. The Reserve Bank of India on Dec. 6 cut its repurchase rate to 6.5 percent from 7.5 percent on Dec. 6. The government said yesterday it will spend an extra 200 billion rupees ($4 billion) in the year ending March 31.
China Banks
Hong Kong Exchanges, which manages Asia’s third-largest bourse, surged 17 percent to HK$71.80. China’s so-called “through train” plan that allows the country’s citizens to buy Hong Kong stocks is “something that will come,” Hong Kong Financial Secretary John Tsang said at a forum in the city.
In Japan, Mizuho Financial added 4 percent to 219,100 yen. Sumitomo Mitsui Financial Group Inc. gained 3 percent to 305,000 yen. Loans, excluding those by credit associations, rose 3.6 percent in November from a year earlier after growing 2.3 percent in October, the Bank of Japan said today.
Lenders also advanced as the cost to protect Australian and Japanese bonds against default declined. Commonwealth Bank of Australia climbed 6.2 percent to A$32.80. National Australia Bank Ltd. added 5.8 percent to A$20.96.
The Markit iTraxx Japan index fell 3 basis points to 370 in Tokyo, according to prices from Credit Suisse Group. The Markit iTraxx Australia index was quoted 10 basis points lower at 390 basis points, Citigroup Inc. data show. A hundred basis points make up one percentage point.
Santos, Woodside
Chinese banks advanced after the China Securities Journal reported on Dec. 5 that the government is considering cutting the business tax imposed on banks’ revenue to 3 percent from the current 5 percent.
Industrial & Commercial Bank of China Ltd., the nation’s largest bank, climbed 7.9 percent to HK$4.39 in Hong Kong. China Construction Bank Corp., the No. 2 lender, added 8.6 percent to HK$4.79, while Bank of China Ltd. rose 6.4 percent to HK$2.50.
Santos gained 9.1 percent to A$13.25, snapping a five-day losing streak. China National Petroleum Corp., the parent of Hong Kong-listed PetroChina Co., is considering linking with a partner to bid for Santos, the South China Morning Post reported.
Aeon Co., Japan’s largest supermarket operator, jumped 7.3 percent to 888 yen, the most since Nov. 10. Mitsubishi Corp., Japan’s biggest trading house, will purchase a stake of about 5 percent in Aeon and form an alliance to buy and distribute goods and open stores, two people familiar with the matter said Dec. 6.
Friday, December 5, 2008
Trichet Under Pressure to Outline Plan for Deflation (Update1)
By Simon Kennedy
Dec. 5 (Bloomberg) -- European Central Bank President Jean- Claude Trichet is under pressure to outline a plan to revive the euro region’s economy should he be “trapped” into pushing interest rates closer to zero.
Even as Trichet delivers the largest round of rate cuts in the ECB’s history, he hasn’t spelled out a specific approach should conventional tools fail to head off deflation. While he yesterday acknowledged for the first time that unorthodox measures are an option, economists say the lack of detail is a concern.
“The ECB should lean against the wind as deflation talk inevitably becomes widespread,” said Marco Annunziata, chief economist at Unicredit MIB in London. “This would be best achieved by taking the deflation risk seriously, and outlining a contingency plan against it.”
The absence of a public strategy leaves Trichet lagging Federal Reserve Chairman Ben S. Bernanke, who said Dec. 1 he may turn to alternative policies such as buying Treasuries after cutting the benchmark rate to 1 percent. Bank of England Governor Mervyn King conceded last month that he may have to coordinate policies with the government if U.K. rates fall to zero.
Trichet instead stresses the need to hold on to as much ammunition as possible before discussing other approaches. At 2.5 percent, the ECB’s main rate is still the highest in the Group of Seven nations even after yesterday’s 75 basis point cut.
Deflation Dismissed
“We have to beware of being trapped at nominal levels that would be much too low,” Trichet told reporters. He dismissed the likelihood of deflation and said only that buying assets was a possibility for the ECB, without elaborating further.
“We are looking at the situation as cautiously and attentively as possible,” Trichet said. “At this stage I have no further indications to give.”
That’s a concern to economists at Royal Bank of Scotland Group Plc and Goldman Sachs Group Inc. who fret that without a road map for recovery, banks may continue to limit loans to consumers and companies. Seventeen months into the financial crisis, the interbank lending market remains strained, restricting the flow of credit through the economy and stifling growth.
‘Transparency and Predictability’
“Transparency and predictability are needed from the ECB,” said Erik Nielsen, chief European economist at Goldman Sachs in London. “We need to know as much as possible about what could be done even if it’s not likely.”
One step the ECB could consider is buying commercial paper and then government debt, said Royal Bank of Scotland economist Jacques Cailloux. It could even begin buying private assets before rates approach zero, given that monetary policy is less effective when the financial system is frozen, he said.
Bernanke has already started purchasing corporate paper and said this week that the Fed could also “buy longer-term Treasury or agency securities on the open market in substantial quantities.” Fed policy makers may decide at their next meeting Dec. 15-16 on the details of such a shift, which might resemble the “quantitative easing” strategy the Bank of Japan adopted in 2001-2006 when its key rate neared zero.
New Approach
“It’s hugely important that the ECB clarifies what it can and cannot do if the crisis continues,” said Cailloux. “Doing so would send a big confidence signal to markets that the ECB is willing to use unconventional methods to help the economy.”
The purpose of buying securities would be to reduce long- term rates, making it less attractive to hoard cash and more likely that companies and consumers start to stimulate the economy by spending, said Axel Botte, a fund manager at Axa Investment Managers in Paris, which has about $800 billion in assets under management.
“When rates near zero you need to look to alternative methods to get people to spend,” he said.
Trichet and his colleagues still have more time than their counterparts in the U.S., where deflation could emerge in 2010 and interest rates are already on the cusp of zero, said Dario Perkins, an economist at ABN Amro Holding NV in London.
Deflation, or a prolonged decline in prices, is less likely in the euro region because labor market regulations and a lack of competition mean wages and prices are “sticky” and so slower to retreat than those in the U.S., he said.
One reason for not mapping out what more it could do is that the bank’s 21-member Governing Council is split, said Stuart Thomson, who helps oversee $46 billion in bonds at Resolution Investment Management Ltd. in Glasgow, Scotland.
Trichet declined to say whether yesterday’s decision to cut rates by three quarters of a percentage point had been unanimous and council member Yves Mersch said quarter-point cuts are more likely in future.
“I’d like to see the ECB take more leadership but they continue to be a lagging and reactive central bank,” said Thomson.
Dec. 5 (Bloomberg) -- European Central Bank President Jean- Claude Trichet is under pressure to outline a plan to revive the euro region’s economy should he be “trapped” into pushing interest rates closer to zero.
Even as Trichet delivers the largest round of rate cuts in the ECB’s history, he hasn’t spelled out a specific approach should conventional tools fail to head off deflation. While he yesterday acknowledged for the first time that unorthodox measures are an option, economists say the lack of detail is a concern.
“The ECB should lean against the wind as deflation talk inevitably becomes widespread,” said Marco Annunziata, chief economist at Unicredit MIB in London. “This would be best achieved by taking the deflation risk seriously, and outlining a contingency plan against it.”
The absence of a public strategy leaves Trichet lagging Federal Reserve Chairman Ben S. Bernanke, who said Dec. 1 he may turn to alternative policies such as buying Treasuries after cutting the benchmark rate to 1 percent. Bank of England Governor Mervyn King conceded last month that he may have to coordinate policies with the government if U.K. rates fall to zero.
Trichet instead stresses the need to hold on to as much ammunition as possible before discussing other approaches. At 2.5 percent, the ECB’s main rate is still the highest in the Group of Seven nations even after yesterday’s 75 basis point cut.
Deflation Dismissed
“We have to beware of being trapped at nominal levels that would be much too low,” Trichet told reporters. He dismissed the likelihood of deflation and said only that buying assets was a possibility for the ECB, without elaborating further.
“We are looking at the situation as cautiously and attentively as possible,” Trichet said. “At this stage I have no further indications to give.”
That’s a concern to economists at Royal Bank of Scotland Group Plc and Goldman Sachs Group Inc. who fret that without a road map for recovery, banks may continue to limit loans to consumers and companies. Seventeen months into the financial crisis, the interbank lending market remains strained, restricting the flow of credit through the economy and stifling growth.
‘Transparency and Predictability’
“Transparency and predictability are needed from the ECB,” said Erik Nielsen, chief European economist at Goldman Sachs in London. “We need to know as much as possible about what could be done even if it’s not likely.”
One step the ECB could consider is buying commercial paper and then government debt, said Royal Bank of Scotland economist Jacques Cailloux. It could even begin buying private assets before rates approach zero, given that monetary policy is less effective when the financial system is frozen, he said.
Bernanke has already started purchasing corporate paper and said this week that the Fed could also “buy longer-term Treasury or agency securities on the open market in substantial quantities.” Fed policy makers may decide at their next meeting Dec. 15-16 on the details of such a shift, which might resemble the “quantitative easing” strategy the Bank of Japan adopted in 2001-2006 when its key rate neared zero.
New Approach
“It’s hugely important that the ECB clarifies what it can and cannot do if the crisis continues,” said Cailloux. “Doing so would send a big confidence signal to markets that the ECB is willing to use unconventional methods to help the economy.”
The purpose of buying securities would be to reduce long- term rates, making it less attractive to hoard cash and more likely that companies and consumers start to stimulate the economy by spending, said Axel Botte, a fund manager at Axa Investment Managers in Paris, which has about $800 billion in assets under management.
“When rates near zero you need to look to alternative methods to get people to spend,” he said.
Trichet and his colleagues still have more time than their counterparts in the U.S., where deflation could emerge in 2010 and interest rates are already on the cusp of zero, said Dario Perkins, an economist at ABN Amro Holding NV in London.
Deflation, or a prolonged decline in prices, is less likely in the euro region because labor market regulations and a lack of competition mean wages and prices are “sticky” and so slower to retreat than those in the U.S., he said.
One reason for not mapping out what more it could do is that the bank’s 21-member Governing Council is split, said Stuart Thomson, who helps oversee $46 billion in bonds at Resolution Investment Management Ltd. in Glasgow, Scotland.
Trichet declined to say whether yesterday’s decision to cut rates by three quarters of a percentage point had been unanimous and council member Yves Mersch said quarter-point cuts are more likely in future.
“I’d like to see the ECB take more leadership but they continue to be a lagging and reactive central bank,” said Thomson.
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