Poker world thrilled as Professor1x2 takes huge $0.06 tournament prize. "Fame won't change me" says Professor1x2
By Special Correspondent.
PKR NEWS - Professor1x2 fought a field of 10 tough competitors to take 1st place in the PKR 10 Cent Giveaway Tournament and $0.06. "It was an incredible display", said one observer, "everyone was on the edge of their seats".
The result marks another big step in Professor1x2 's meteoric rise to poker stardom. "I predict big things from Professor1x2", said a poker insider, "all the ingredients are there; skill, determination, guts - and a slightly funny haircut."
July 2, 2010
March 11, 2010
(BN) Top Stories: Stocks
Top Stories: Stocks
2010-03-11 08:36:47.153 GMT
March 11 (Bloomberg) -- The following are the day's top stories on stocks:
European Stocks, U.S. Index Futures Drop; BHP Billiton, Lagardere Slide
European stocks declined from a seven-week high, led by basic-resource producers as growing Chinese inflation increased speculation the government will pare back stimulus measures.
U.S. futures fell and Asian shares rose. BHP Billiton Ltd., the world's largest mining company, dropped 1.3 percent in London as China's inflation reached a 16- month high. Lagardere SCA slumped the most in 10 months after France's biggest publisher reported earnings that missed analysts' estimates. The Stoxx Europe 600 Index slipped 0.2 percent to 257.77 at 8:27 a.m. in London. The gauge has soared 8.6 percent since Feb. 5 on speculation the European Union will support Greece if needed as it struggles to reduce the region's biggest budget deficit.
Mohamed A. El-Erian, whose company runs the world's biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. ``The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,''
El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is ``at present being viewed primarily -- and excessively -- through the narrow prism of Greece.''
Asian Stocks Rise on Outlook for Japanese Economy; BHP Billiton Declines
Asian stocks rose, sending the MSCI Asia Pacific Index toward a seven-week high, as speculation Japan's economy is recovering outweighed concern China will pare back measures that spurred growth. Mizuho Financial Group Inc., Japan's third-largest bank by market value, and Aeon Co., the country's No. 1 supermarket operator, climbed more than 1 percent in Tokyo after the Nikkei newspaper said the government will boost its economic outlook. BHP Billiton Ltd., the world's biggest mining company, lost 0.5 percent in Sydney, and Jiangxi Copper Co. dropped 1.1 percent after China said inflation in February reached a 16-month high. ``The economy is undoubtedly in the midst of mild recovery'' in Japan, said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. The MSCI Asia Pacific Index rose 0.3 percent to 122.94 as of 5:05 p.m. in Tokyo, with five stocks advancing for every four that dropped. The index, on course for its highest closing level since Jan. 21, fell after China reported its inflation figures, and then rebounded.
China Stock-Futures Market to Dwarf Cash Trade, History Says: Chart of Day
South Korea and Taiwan's sevenfold increases in stock-futures trading after they were introduced show the potential for China's market, expected to begin trading next month, according to China International Capital Corp. The CHART OF THE DAY shows that within a decade, stock- index trading volumes for South Korea's Kospi 200 index had grown to 757 percent more than that of the cash market by November 2009. The Taiwan Stock Exchange's futures trade was seven times larger than that of the cash market by the end of last year, data compiled by CICC show. ``The potential for Chinese stocks is substantial,'' Hao Hong, a Beijing-based equity strategist for CICC, said in a report. ``Judging from the international experiences in Taiwan and Korea, the futures markets may grow several times over the physical market.'' The first stock-index contracts, based on China's CSI 300 Index, may begin trading in mid or late April, Shang Fulin, chairman of the China Securities Regulatory Commission, said this month. The regulator said index traders will have to keep at least 500,000 yuan ($73,239) in their brokerage accounts.
Peru Left Behind as Latin America Stocks Rise to Records: Chart of the Day
Peru will be the only stock market in Latin America that fails to rise to a record this year because it has the closest relationship to metals prices that remain below all-time highs, according to Banco BTG Pactual SA. The CHART OF THE DAY shows the correlation between the Lima General Index and the Bloomberg Base Metals 3-Month Price Commodity Index climbed to
0.83 yesterday, based on percentage changes in the past 30 days. That's the second-most ever and the strongest relationship between commodities and stocks in the region, data compiled by Bloomberg show. A reading of 1 means two assets move in tandem, while zero means no relationship. Peru is the world's second-biggest producer of copper and zinc, according to Sociedad Nacional de Mineria Petroleo y Energia, and the only Latin American stock market besides Brazil that hasn't climbed to a record in 2010. The Bovespa needs to rally 5.1 percent to surpass its prior peak, less than 66 percent for Peru's measure and 32 percent for the metals gauge. ``I don't think Peru will reach record highs this year,'' said Alonso Aramburu, an equity analyst with Pactual in New York.
``Commodity prices are still well below 2007 levels.''
Baltic Trading IPO Raises $228 Million at Low End of Forecast Price Range
Baltic Trading Ltd., the New York- based shipping company formed to operate dry-bulk cargo vessels, raised $228 million in its initial public offering after selling shares at the low end of its price range. Baltic Trading, established in October by Genco Shipping & Trading Ltd. of New York, sold 16.3 million shares for $14 each yesterday, according to a filing with the Securities and Exchange Commission and Bloomberg data. The company, which asked for as much as $16, will use the proceeds to buy six ships that will transport iron ore, coal, grain and steel products. The IPO is the first of three U.S. offerings this week and comes after seven companies postponed or delayed initial sales this year. While buyers have extracted concessions in almost every deal, Baltic Trading became the second company in 2010 to price shares within its forecast range as the Standard & Poor's 500 Index rebounded from a three-month low. ``With markets being much stronger across the board, that's good momentum building for the IPO market,'' said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC and manager of the Direxion Long/Short Global IPO Fund, which started this month. ``If these companies don't price reasonably well in the market, that would absolutely be disappointing.''
Tech Stocks Pushed by Analysts a Decade After Bubble Burst: Chart of Day
Ten years after bullish analyst recommendations helped push the Nasdaq Composite Index to a record, technology stocks are the highest-rated industry group. The CHART OF THE DAY's bottom panel shows the Nasdaq peak of 5,048.62 on March 10, 2000, and its 78 percent plunge over the next two and a half years. The top panel shows analysts giving technology companies the highest average rating among nine industries, according to data compiled by Bloomberg. Stock pickers project a 14 percent gain for the group during the next 12 months, the data show. ``As value investors, 10 years ago we were finding virtually nothing in technology,'' Mark Donovan, co-chief executive officer of Robeco Investment Management, a unit of Robeco Group, which oversees about $194 billion, said in a Bloomberg Television interview from Amsterdam. ``Today there are a lot of high-quality global players in the tech area that are trading at very sensible multiples. There are hidden values that are plentiful in the group.'' Cisco Systems Inc., the world's biggest network-equipment maker, had a price-to-earnings ratio of 160 a decade ago. Now the company is trading at 23 times reported profits. IPod maker Apple Inc.'s PE ratio has dropped to 22 from 45, while the ratio for Microsoft Corp., the biggest software company, has declined to 15 from 63, according to Bloomberg data.
Swiss Market Index Falls; Zurich Financial, UBS, ABB Lead Declining Shares
Switzerland's benchmark stock index, the Swiss Market Index, fell 0.18 percent at 9:05 a.m. The index of 20 stocks traded on the Electronic Bourse System fell 12.39 to 6,861.20.
Among the stocks in the index, 6 rose, 12 fell and 2 were unchanged. Declines in the Swiss Market Index were led by Ubs, Abb and Zurich Fin. Services. About 1.70 million shares traded in the Swiss Market Index. --Editor: David Merritt.
Japan's Stocks Rise on Outlook for Economy, Iron-Ore Demand; Mitsui Climbs
Japanese stocks rose, sending the Nikkei 225 Stock Average to its highest close since Jan. 21, on speculation increased demand will boost earnings at iron-ore producers and that the nation's economy is recovering. Mitsui & Co., which owns a 15 percent stake in Vale SA's major shareholder, climbed 2.7 percent after the Nikkei newspaper reported Brazil-based Vale is seeking to increase iron-ore prices. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, rose 1.3 percent. Electric device retailer Yamada Denki Co. climbed 4 percent after the Nikkei said the government may lift its outlook on the nation's economy. ``The economy is undoubtedly in the midst of mild recovery,'' said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. ``Iron-ore producers don't think of raising prices unless demand is very strong. That could be further evidence that the global economy is improving.'' The Nikkei 225 climbed 1 percent to 10,664.95 in Tokyo, the highest close since Jan. 21. The broader Topix index rose 0.9 percent to 930.38, with almost five times as many shares advancing as falling. The gauges briefly pared gains after a Chinese government report on rising consumer prices spurred concern the country will raise interest rates to curb inflation.
Most China Stocks Drop as CPI Climbs to 16-Month High; Automakers Decline
Most Chinese stocks fell, led by automakers and developers, after inflation accelerated and new loans exceeded forecasts, boosting the prospect for higher interest rates. SAIC Motor Corp., the country's largest carmaker, lost 2.9 percent and Gemdale Corp. dropped 1.2 percent. Consumer prices climbed in February to a 16-month high and lenders extended 700.1 billion yuan ($103 billion), government reports showed today. Shanghai Pudong Development Bank Co. rose 2.7 percent after selling shares to China Mobile Ltd. ``The market's reading of the economic data points to overheating and a lot of investors believe an interest-rate increase will come soon,'' said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. in Shanghai. More than two stocks fell for each one that rose on the Shanghai Composite Index, which gained 2.36, or 0.1 percent, to 3,051.28 at the close. The gauge has lost 6.9 percent this year on concern measures to curb property price gains and rein in lending growth will slow the economy.
The CSI 300 Index slipped 0.1 percent to 3,276.71.
Buy Asian Equities to Gain Before `Lights Turn Green,' Goldman Sachs Says
Investors should buy Asian stocks outside Japan after valuations dropped and before sentiment strengthens further, Goldman Sachs Group Inc. said. ``By the time all the lights turn green, the race will already be well under way,'' Goldman Sachs analysts led by Timothy Moe wrote today. ``Sentiment and valuation will improve as the year progresses, and we would prefer to be early.'' The MSCI Asia-Pacific excluding Japan Index remains 0.5 percent lower this year, having rebounded from year-to-date losses of as much as 9.7 percent. Stocks slid earlier this year on concern that China will tighten lending to combat faster inflation and that Greece's debt crisis will spread. Analysts' earnings growth estimates for this year have climbed to 26 percent on average, near Goldman Sachs's 30 percent forecast, according to the report. The most profitable securities firm in Wall Street history is predicting a 21 percent increase in Asian corporate earnings in 2011.
For the complete stories summarized here, and for more of the day's top news, see TOP.
-0- Mar/11/2010 8:36 GMT
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2010-03-11 08:36:47.153 GMT
March 11 (Bloomberg) -- The following are the day's top stories on stocks:
European Stocks, U.S. Index Futures Drop; BHP Billiton, Lagardere Slide
European stocks declined from a seven-week high, led by basic-resource producers as growing Chinese inflation increased speculation the government will pare back stimulus measures.
U.S. futures fell and Asian shares rose. BHP Billiton Ltd., the world's largest mining company, dropped 1.3 percent in London as China's inflation reached a 16- month high. Lagardere SCA slumped the most in 10 months after France's biggest publisher reported earnings that missed analysts' estimates. The Stoxx Europe 600 Index slipped 0.2 percent to 257.77 at 8:27 a.m. in London. The gauge has soared 8.6 percent since Feb. 5 on speculation the European Union will support Greece if needed as it struggles to reduce the region's biggest budget deficit.
Mohamed A. El-Erian, whose company runs the world's biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. ``The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,''
El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is ``at present being viewed primarily -- and excessively -- through the narrow prism of Greece.''
Asian Stocks Rise on Outlook for Japanese Economy; BHP Billiton Declines
Asian stocks rose, sending the MSCI Asia Pacific Index toward a seven-week high, as speculation Japan's economy is recovering outweighed concern China will pare back measures that spurred growth. Mizuho Financial Group Inc., Japan's third-largest bank by market value, and Aeon Co., the country's No. 1 supermarket operator, climbed more than 1 percent in Tokyo after the Nikkei newspaper said the government will boost its economic outlook. BHP Billiton Ltd., the world's biggest mining company, lost 0.5 percent in Sydney, and Jiangxi Copper Co. dropped 1.1 percent after China said inflation in February reached a 16-month high. ``The economy is undoubtedly in the midst of mild recovery'' in Japan, said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. The MSCI Asia Pacific Index rose 0.3 percent to 122.94 as of 5:05 p.m. in Tokyo, with five stocks advancing for every four that dropped. The index, on course for its highest closing level since Jan. 21, fell after China reported its inflation figures, and then rebounded.
China Stock-Futures Market to Dwarf Cash Trade, History Says: Chart of Day
South Korea and Taiwan's sevenfold increases in stock-futures trading after they were introduced show the potential for China's market, expected to begin trading next month, according to China International Capital Corp. The CHART OF THE DAY shows that within a decade, stock- index trading volumes for South Korea's Kospi 200 index had grown to 757 percent more than that of the cash market by November 2009. The Taiwan Stock Exchange's futures trade was seven times larger than that of the cash market by the end of last year, data compiled by CICC show. ``The potential for Chinese stocks is substantial,'' Hao Hong, a Beijing-based equity strategist for CICC, said in a report. ``Judging from the international experiences in Taiwan and Korea, the futures markets may grow several times over the physical market.'' The first stock-index contracts, based on China's CSI 300 Index, may begin trading in mid or late April, Shang Fulin, chairman of the China Securities Regulatory Commission, said this month. The regulator said index traders will have to keep at least 500,000 yuan ($73,239) in their brokerage accounts.
Peru Left Behind as Latin America Stocks Rise to Records: Chart of the Day
Peru will be the only stock market in Latin America that fails to rise to a record this year because it has the closest relationship to metals prices that remain below all-time highs, according to Banco BTG Pactual SA. The CHART OF THE DAY shows the correlation between the Lima General Index and the Bloomberg Base Metals 3-Month Price Commodity Index climbed to
0.83 yesterday, based on percentage changes in the past 30 days. That's the second-most ever and the strongest relationship between commodities and stocks in the region, data compiled by Bloomberg show. A reading of 1 means two assets move in tandem, while zero means no relationship. Peru is the world's second-biggest producer of copper and zinc, according to Sociedad Nacional de Mineria Petroleo y Energia, and the only Latin American stock market besides Brazil that hasn't climbed to a record in 2010. The Bovespa needs to rally 5.1 percent to surpass its prior peak, less than 66 percent for Peru's measure and 32 percent for the metals gauge. ``I don't think Peru will reach record highs this year,'' said Alonso Aramburu, an equity analyst with Pactual in New York.
``Commodity prices are still well below 2007 levels.''
Baltic Trading IPO Raises $228 Million at Low End of Forecast Price Range
Baltic Trading Ltd., the New York- based shipping company formed to operate dry-bulk cargo vessels, raised $228 million in its initial public offering after selling shares at the low end of its price range. Baltic Trading, established in October by Genco Shipping & Trading Ltd. of New York, sold 16.3 million shares for $14 each yesterday, according to a filing with the Securities and Exchange Commission and Bloomberg data. The company, which asked for as much as $16, will use the proceeds to buy six ships that will transport iron ore, coal, grain and steel products. The IPO is the first of three U.S. offerings this week and comes after seven companies postponed or delayed initial sales this year. While buyers have extracted concessions in almost every deal, Baltic Trading became the second company in 2010 to price shares within its forecast range as the Standard & Poor's 500 Index rebounded from a three-month low. ``With markets being much stronger across the board, that's good momentum building for the IPO market,'' said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC and manager of the Direxion Long/Short Global IPO Fund, which started this month. ``If these companies don't price reasonably well in the market, that would absolutely be disappointing.''
Tech Stocks Pushed by Analysts a Decade After Bubble Burst: Chart of Day
Ten years after bullish analyst recommendations helped push the Nasdaq Composite Index to a record, technology stocks are the highest-rated industry group. The CHART OF THE DAY's bottom panel shows the Nasdaq peak of 5,048.62 on March 10, 2000, and its 78 percent plunge over the next two and a half years. The top panel shows analysts giving technology companies the highest average rating among nine industries, according to data compiled by Bloomberg. Stock pickers project a 14 percent gain for the group during the next 12 months, the data show. ``As value investors, 10 years ago we were finding virtually nothing in technology,'' Mark Donovan, co-chief executive officer of Robeco Investment Management, a unit of Robeco Group, which oversees about $194 billion, said in a Bloomberg Television interview from Amsterdam. ``Today there are a lot of high-quality global players in the tech area that are trading at very sensible multiples. There are hidden values that are plentiful in the group.'' Cisco Systems Inc., the world's biggest network-equipment maker, had a price-to-earnings ratio of 160 a decade ago. Now the company is trading at 23 times reported profits. IPod maker Apple Inc.'s PE ratio has dropped to 22 from 45, while the ratio for Microsoft Corp., the biggest software company, has declined to 15 from 63, according to Bloomberg data.
Swiss Market Index Falls; Zurich Financial, UBS, ABB Lead Declining Shares
Switzerland's benchmark stock index, the Swiss Market Index, fell 0.18 percent at 9:05 a.m. The index of 20 stocks traded on the Electronic Bourse System fell 12.39 to 6,861.20.
Among the stocks in the index, 6 rose, 12 fell and 2 were unchanged. Declines in the Swiss Market Index were led by Ubs, Abb and Zurich Fin. Services. About 1.70 million shares traded in the Swiss Market Index. --Editor: David Merritt.
Japan's Stocks Rise on Outlook for Economy, Iron-Ore Demand; Mitsui Climbs
Japanese stocks rose, sending the Nikkei 225 Stock Average to its highest close since Jan. 21, on speculation increased demand will boost earnings at iron-ore producers and that the nation's economy is recovering. Mitsui & Co., which owns a 15 percent stake in Vale SA's major shareholder, climbed 2.7 percent after the Nikkei newspaper reported Brazil-based Vale is seeking to increase iron-ore prices. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, rose 1.3 percent. Electric device retailer Yamada Denki Co. climbed 4 percent after the Nikkei said the government may lift its outlook on the nation's economy. ``The economy is undoubtedly in the midst of mild recovery,'' said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. ``Iron-ore producers don't think of raising prices unless demand is very strong. That could be further evidence that the global economy is improving.'' The Nikkei 225 climbed 1 percent to 10,664.95 in Tokyo, the highest close since Jan. 21. The broader Topix index rose 0.9 percent to 930.38, with almost five times as many shares advancing as falling. The gauges briefly pared gains after a Chinese government report on rising consumer prices spurred concern the country will raise interest rates to curb inflation.
Most China Stocks Drop as CPI Climbs to 16-Month High; Automakers Decline
Most Chinese stocks fell, led by automakers and developers, after inflation accelerated and new loans exceeded forecasts, boosting the prospect for higher interest rates. SAIC Motor Corp., the country's largest carmaker, lost 2.9 percent and Gemdale Corp. dropped 1.2 percent. Consumer prices climbed in February to a 16-month high and lenders extended 700.1 billion yuan ($103 billion), government reports showed today. Shanghai Pudong Development Bank Co. rose 2.7 percent after selling shares to China Mobile Ltd. ``The market's reading of the economic data points to overheating and a lot of investors believe an interest-rate increase will come soon,'' said Yan Ji, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. in Shanghai. More than two stocks fell for each one that rose on the Shanghai Composite Index, which gained 2.36, or 0.1 percent, to 3,051.28 at the close. The gauge has lost 6.9 percent this year on concern measures to curb property price gains and rein in lending growth will slow the economy.
The CSI 300 Index slipped 0.1 percent to 3,276.71.
Buy Asian Equities to Gain Before `Lights Turn Green,' Goldman Sachs Says
Investors should buy Asian stocks outside Japan after valuations dropped and before sentiment strengthens further, Goldman Sachs Group Inc. said. ``By the time all the lights turn green, the race will already be well under way,'' Goldman Sachs analysts led by Timothy Moe wrote today. ``Sentiment and valuation will improve as the year progresses, and we would prefer to be early.'' The MSCI Asia-Pacific excluding Japan Index remains 0.5 percent lower this year, having rebounded from year-to-date losses of as much as 9.7 percent. Stocks slid earlier this year on concern that China will tighten lending to combat faster inflation and that Greece's debt crisis will spread. Analysts' earnings growth estimates for this year have climbed to 26 percent on average, near Goldman Sachs's 30 percent forecast, according to the report. The most profitable securities firm in Wall Street history is predicting a 21 percent increase in Asian corporate earnings in 2011.
For the complete stories summarized here, and for more of the day's top news, see TOP
-0- Mar/11/2010 8:36 GMT
ä
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(BN) Top Stories: Bonds
+------------------------------------------------------------------------------+
Top Stories: Bonds
2010-03-11 08:29:46.274 GMT
March 11 (Bloomberg) -- The following are the day's top stories on bonds:
Treasury Two- to 30-Year Spread Near Record High Before Long Bond Auction
Treasury 30-year yields were near the highest on record compared with two-year rates as the U.S. prepared to sell $13 billion of long bonds amid signs the global recovery is gaining momentum. Investors are seeking higher interest rates on long-term loans to the government as President Barack Obama borrows record amounts to sustain the U.S. economic revival.
Yields show investors added to bets on inflation for a seventh session yesterday, the longest run in a year. ``We're facing an unprecedented level of government borrowing,'' said Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., which has the equivalent of $60.8 billion in assets. ``Investors are demanding a premium for that. Yields are going to rise a bit more.'' The 30-year bond yielded 4.69 percent as of 7:34 a.m. in London, according to data compiled by Bloomberg. The 4.625 percent security due February 2040 declined 2/32, or 63 cents per $1,000 face amount to 98 27/32.
The rate was 3.78 percentage points more than two-year yields, after increasing to 3.85 percentage points on Feb. 17, the steepest slope to the so- called yield curve since Bloomberg data tracking the figures started in 1980.
El-Erian Says World Economy Faces Threat of Deepening Sovereign Debt Shock
Mohamed A. El-Erian, whose company runs the world's biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. ``The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,''
El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is ``at present being viewed primarily -- and excessively -- through the narrow prism of Greece.'' Governments may have to raise taxes and slash spending to cope with swelling deficits after borrowing unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross. A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said. Pimco has said debt strains in Greece, Portugal and Spain underscore its view that 2010 will be a year of slower-than- average growth, and predicts there will be a shrinking global role for the U.S.
economy.
Company Bond Spreads at the Narrowest This Year Lure GMAC: Credit Markets
Corporate bond yields fell to the lowest this year relative to benchmark government securities, luring GMAC Inc. to sell its longest-maturity notes since 2004. GMAC, the Detroit-based auto and home lender bailed out by the U.S. after credit markets froze in 2007, sold $1.5 billion of 10-year, 8 percent notes, according to data compiled by Bloomberg. Its second offering in a month was priced to yield 4.532 percentage points more than similar-maturity Treasuries. The extra yield investors demand to own corporate bonds rather than government debt fell yesterday to 159 basis points, or 1.59 percentage point, the lowest this year, from as much as 174 basis points Jan. 4, the Bank of America Merrill Lynch Global Broad Market Corporate Index shows. Yields averaged 4.035 percent. The GMAC sale shows growing optimism that Greece's budget crisis will be contained and won't spread to corporate borrowers. ``The stars are aligning for a company like GMAC, which has a bit of a storied history, to do a big, longer-termed deal,'' said Sabur Moini, who helps manage $1.3 billion at Payden & Rygel Investment Management in Los Angeles. ``The market is looking past the volatility we saw in early to mid-February now that it looks like Greece is not going to default.''
Trade Deficit in U.S. Probably Widened for Third Month as Imports Climbed
The U.S. trade deficit probably widened in January for a third month as imports grew faster than exports, pointing to a rebound in global economic growth, economists said before a report today. The gap increased to $41 billion from $40.2 billion the prior month, according to the median forecast of 73 economists surveyed by Bloomberg News. Another report may show initial claims for jobless benefits fell for a second week.
Imports may keep growing as the world's largest economy improves and companies replenish depleted inventories. Emerging countries are leading a worldwide recovery that, together with a weaker dollar, is helping lift sales at companies including Cisco Systems Inc., which may prevent the deficit from deteriorating much more in coming months. ``Global trade is definitely coming back,'' said David Semmens, an economist at Standard Chartered Bank in New York. ``The U.S. will benefit from rising exports. We can expect overseas economies to improve faster than domestic growth.''
Emerging-Market Reserves Buildup Risks Return of `Imbalance': Chart of Day
Developing nations' foreign reserves are approaching levels reached two years ago, risking a return of the ``imbalances''
that helped spark the global financial crisis, Goldman Sachs Group Inc. said. The Chart of the Day shows the five largest foreign reserves holders in emerging markets excluding China boosted their stockpile by 17 percent in the past year to $1.3 trillion, while the U.S. trade deficit swelled to its widest level in a year in December. The lower panel shows China, the world's largest reserves holder, increased its stock to a record $2.4 trillion in 2009. The trend signals a return to the last global economic expansion when U.S. consumers relied on borrowing from abroad to finance their purchases, contributing to an export boom from Asia. As China and other Asian nations accumulated dollars from trade surpluses, they bought U.S.
Treasury debt and depressed global yields. Lower borrowing costs helped fuel the U.S. housing and credit booms that turned to bust in 2007. ``There's a risk the world could lapse back into a regime in which emerging markets return to export-led growth coupled with an accumulation of reserves,'' Goldman Sachs economists led by London-based Jim O'Neill wrote in a research note yesterday. ``To the extent that global imbalances are making a comeback, they need to be taken seriously. The bottom line is that the accumulation of reserves may have helped create the problem that they ultimately helped to solve.''
Senate Negotiations Said to Advance on Consumer Division Powers, Oversight
Senate negotiators closed in on a deal for strengthening consumer financial protections, giving bank regulators a role in rule-making and enforcement, two Democratic Senate aides briefed on the talks said. The talks have advanced on key sticking points, including how much control prudential regulators -- those responsible for insuring banks are financially sound -- would have over a new consumer division at the Federal Reserve, said the aides, who declined to be identified because the talks are private. ``There will be a mechanism whereby the prudential side has the ability to weigh in to ensure we don't do anything to destabilize the safety and soundness of our financial institutions,'' Senator Bob Corker, a Tennessee Republican working on the legislation, told reporters yesterday after a panel discussion at a Washington conference. Corker and Senate Banking Committee Chairman Christopher Dodd, in meetings over the past week, resolved some differences over the unit's autonomy, although no final decisions have been made. Corker said yesterday the legislation will be introduced ``very soon'' and that the goal is to get the measure through the banking committee by March 29, when the Easter recess begins.
Ex-Bank of America Executives Win Dismissal of Some SEC Claims on Appeal
Two former Bank of America Corp. executives won dismissal of claims by securities regulators that they could be held liable for allegedly false statements made to clients of the bank's Columbia Management Group unit. The U.S. Court of Appeals in Boston yesterday upheld a lower court's ruling throwing out the claims against James Tambone, former co-president of fund distribution at the bank's Columbia unit, and Robert Hussey, a former sales executive. The U.S.
Securities and Exchange Commission sued the men in 2006, claiming they gave clients literature saying Columbia's mutual funds avoided rapid mutual-fund trades, a practice known as market timing. The SEC said Tambone and Hussey knew the funds engaged in the practice, which can hurt long-term shareholders.
The panel rejected the SEC's argument that the two were liable even if the false statements were created by others because, by directing the fund sales, they implied the prospectus documents were truthful.
Naked Credit-Default Swaps Crackdown in Europe Rings Hollow Without U.S.
European politicians and regulators could initiate a continent-wide ban on speculative trading of sovereign credit-default swaps tomorrow. Making it stick without the Americans won't work. New York and London dominate swaps trading, and both have resisted greater regulation. Last year, U.S. regulators and Congress rejected a proposed ban on buying credit-default swaps without owning the underlying debt. Adair Turner, chairman of the U.K. Financial Services Authority, said yesterday that these so-called naked swaps weren't the ``key driver'' of the Greek debt crisis and it would be wrong to rush to ban them. ``You need to get the U.S. on board, otherwise the effect will be minimal because trading will simply move elsewhere,'' said Jan Hagen, head of the financial services group at the European School of Management and Technology in Berlin. ``A ban would allow European politicians to tell voters at least they're doing something.'' The European Union's top regulatory official, European Commission President Jose Barroso, said March 9 that the 27- nation bloc will consider banning ``purely speculative naked'' credit-default swaps after German Chancellor Angela Merkel and French President Nicolas Sarkozy called for a crackdown on derivatives trading to prevent a rerun of the Greek crisis.
Union Investment Favors Lebanon, South Africa Bonds on Local Bank Support
Union Investment Privatfonds, Germany's third-largest money manager, favors bonds sold by developing nations with active local investors in foreign debt on concern the global new-issues market will be ``overcrowded.'' The company with $250 billion in assets will consider purchasing notes due to be offered by Israel, Egypt and Mongolia in the coming weeks or months, said Sergey Dergachev. The Frankfurt-based investor, who helps oversee $6 billion of emerging-market debt, bought securities sold by Lebanon and South Africa this month, he said in an interview late yesterday. ``The pipeline risks being overcrowded,'' Dergachev said. ``Sovereigns with solid macroeconomic metrics, solid support from the local investor base and which aren't frequently traded, limit the sell-off risk,'' he said. Developing nations have raised $24.5 billion from overseas debt sales this year as of yesterday, according to data compiled by Bloomberg. That's the busiest start to a year since emerging- market sovereign issuers borrowed $34 billion over the same period in 2005. Iran and Poland are among at least 10 countries seeking about $7.6 billion of funding in the coming months.
Shun Spain's Bonds on `Death by 1,000 Cuts,' Invesco, Merrill Lynch Say
Investors should avoid Spain's bonds as the euro region's highest levels of joblessness stifle the country's ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.'s Merrill Lynch unit. Spanish debt isn't yielding enough to compensate investors for buying the bonds of a country with the euro region's third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 70 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 310 basis points for Greek debt. ``It's not a time to increase exposure to Spain,'' said Blase, who helps oversee the company's $423 billion in assets. ``The country is in rather serious difficulties and the risk premium on Spanish bonds isn't that attractive.'' Concern that Europe's most recession-battered nations aren't doing enough to contain their deficits sent Greek bond yields to the highest in more than a decade, and helped push the euro 4.7 percent lower against the dollar this year. While attention focused initially on Greece, Spain may take years to recover from the recession, according to Johan Jooste, a strategist at Merrill Lynch Wealth Management in London.
Latvia Elections May Hamper Austerity, Weigh On Credit Rating, Fitch Says
Latvian elections this autumn threaten to hamper government efforts to push through austerity measures vital to its international bailout, burdening the country's credit rating, Fitch Ratings said. A parliamentary election scheduled for October ``weighs on the rating, the uncertainty that comes with the election, and I think there might be resistance to removing the negative outlook because of that risk,'' Eral Yilmaz, a credit analyst at Fitch, which ranks Latvian debt as junk, said in an interview. Prime Minister Valdis Dombrovskis, who came to office a year ago amid the former Soviet state's worst economic crisis since it abandoned communism two decades ago, has pushed through the toughest austerity package in the European Union to comply with the terms of an International Monetary Fund-led rescue. Fitch, which rates Latvia's debt BB+, wants to see sustained signs of recovery before considering an upgrade, Yilmaz said. ``Cuts may become politically more difficult from now on as the public may want to see the results of the fiscal
belt- tightening in an economic recovery that results in job creation,'' she said.
Japan's 10-Year Bonds Fall, End Two-Day Gain, as Rising Stocks Sap Demand
Japan's 10-year bonds declined, snapping two days of gains, as rising stocks sapped demand for the refuge of government debt. Ten-year yields also climbed from the lowest level in more than a week after Nikkei English News reported the Japanese government is expected to upgrade its overall view of the economy for the first time since July 2009. The government sold 2.4 trillion yen ($26.5 billion) in five-year notes today.
``Market participants had a short bias because of the strong stocks,'' said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France's largest bank. The yield on the 1.4 percent security maturing in March 2020 increased two basis points, or 0.02 percentage point, to 1.32 percent as of 4:57 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.178 yen to 100.706 yen.
Japanese Bond Risk Index May Decline on Kawasaki Kisen's Exit, Mizuho Says
The Markit iTraxx Japan index of credit-default swaps, a benchmark for corporate bond risk, may fall March 23 if Kawasaki Kisen Kaisha Ltd. and Shimizu Corp. cease to be members, according to Mizuho Securities Co. Markit Group Ltd.
published a provisional list for its Series 13 of the Japanese iTraxx today, which shows companies that may join or leave the London-based data company's index. Kawasaki Kisen, the country's third-biggest shipping line by market value, and Shimizu, the biggest general contractor, may be removed, the list shows. The index may decline by ``around 8 basis points on a theoretical value basis,'' Mizuho credit analyst Seiichiro Matsumoto said in a telephone interview from Tokyo. A basis point is 0.01 percentage point. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements, and a drop shows improvement in perceptions of creditworthiness.
For the complete stories summarized here, and for more of the day's top news, see TOP.
-0- Mar/11/2010 8:29 GMT
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Top Stories: Bonds
2010-03-11 08:29:46.274 GMT
March 11 (Bloomberg) -- The following are the day's top stories on bonds:
Treasury Two- to 30-Year Spread Near Record High Before Long Bond Auction
Treasury 30-year yields were near the highest on record compared with two-year rates as the U.S. prepared to sell $13 billion of long bonds amid signs the global recovery is gaining momentum. Investors are seeking higher interest rates on long-term loans to the government as President Barack Obama borrows record amounts to sustain the U.S. economic revival.
Yields show investors added to bets on inflation for a seventh session yesterday, the longest run in a year. ``We're facing an unprecedented level of government borrowing,'' said Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., which has the equivalent of $60.8 billion in assets. ``Investors are demanding a premium for that. Yields are going to rise a bit more.'' The 30-year bond yielded 4.69 percent as of 7:34 a.m. in London, according to data compiled by Bloomberg. The 4.625 percent security due February 2040 declined 2/32, or 63 cents per $1,000 face amount to 98 27/32.
The rate was 3.78 percentage points more than two-year yields, after increasing to 3.85 percentage points on Feb. 17, the steepest slope to the so- called yield curve since Bloomberg data tracking the figures started in 1980.
El-Erian Says World Economy Faces Threat of Deepening Sovereign Debt Shock
Mohamed A. El-Erian, whose company runs the world's biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. ``The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,''
El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is ``at present being viewed primarily -- and excessively -- through the narrow prism of Greece.'' Governments may have to raise taxes and slash spending to cope with swelling deficits after borrowing unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross. A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said. Pimco has said debt strains in Greece, Portugal and Spain underscore its view that 2010 will be a year of slower-than- average growth, and predicts there will be a shrinking global role for the U.S.
economy.
Company Bond Spreads at the Narrowest This Year Lure GMAC: Credit Markets
Corporate bond yields fell to the lowest this year relative to benchmark government securities, luring GMAC Inc. to sell its longest-maturity notes since 2004. GMAC, the Detroit-based auto and home lender bailed out by the U.S. after credit markets froze in 2007, sold $1.5 billion of 10-year, 8 percent notes, according to data compiled by Bloomberg. Its second offering in a month was priced to yield 4.532 percentage points more than similar-maturity Treasuries. The extra yield investors demand to own corporate bonds rather than government debt fell yesterday to 159 basis points, or 1.59 percentage point, the lowest this year, from as much as 174 basis points Jan. 4, the Bank of America Merrill Lynch Global Broad Market Corporate Index shows. Yields averaged 4.035 percent. The GMAC sale shows growing optimism that Greece's budget crisis will be contained and won't spread to corporate borrowers. ``The stars are aligning for a company like GMAC, which has a bit of a storied history, to do a big, longer-termed deal,'' said Sabur Moini, who helps manage $1.3 billion at Payden & Rygel Investment Management in Los Angeles. ``The market is looking past the volatility we saw in early to mid-February now that it looks like Greece is not going to default.''
Trade Deficit in U.S. Probably Widened for Third Month as Imports Climbed
The U.S. trade deficit probably widened in January for a third month as imports grew faster than exports, pointing to a rebound in global economic growth, economists said before a report today. The gap increased to $41 billion from $40.2 billion the prior month, according to the median forecast of 73 economists surveyed by Bloomberg News. Another report may show initial claims for jobless benefits fell for a second week.
Imports may keep growing as the world's largest economy improves and companies replenish depleted inventories. Emerging countries are leading a worldwide recovery that, together with a weaker dollar, is helping lift sales at companies including Cisco Systems Inc., which may prevent the deficit from deteriorating much more in coming months. ``Global trade is definitely coming back,'' said David Semmens, an economist at Standard Chartered Bank in New York. ``The U.S. will benefit from rising exports. We can expect overseas economies to improve faster than domestic growth.''
Emerging-Market Reserves Buildup Risks Return of `Imbalance': Chart of Day
Developing nations' foreign reserves are approaching levels reached two years ago, risking a return of the ``imbalances''
that helped spark the global financial crisis, Goldman Sachs Group Inc. said. The Chart of the Day shows the five largest foreign reserves holders in emerging markets excluding China boosted their stockpile by 17 percent in the past year to $1.3 trillion, while the U.S. trade deficit swelled to its widest level in a year in December. The lower panel shows China, the world's largest reserves holder, increased its stock to a record $2.4 trillion in 2009. The trend signals a return to the last global economic expansion when U.S. consumers relied on borrowing from abroad to finance their purchases, contributing to an export boom from Asia. As China and other Asian nations accumulated dollars from trade surpluses, they bought U.S.
Treasury debt and depressed global yields. Lower borrowing costs helped fuel the U.S. housing and credit booms that turned to bust in 2007. ``There's a risk the world could lapse back into a regime in which emerging markets return to export-led growth coupled with an accumulation of reserves,'' Goldman Sachs economists led by London-based Jim O'Neill wrote in a research note yesterday. ``To the extent that global imbalances are making a comeback, they need to be taken seriously. The bottom line is that the accumulation of reserves may have helped create the problem that they ultimately helped to solve.''
Senate Negotiations Said to Advance on Consumer Division Powers, Oversight
Senate negotiators closed in on a deal for strengthening consumer financial protections, giving bank regulators a role in rule-making and enforcement, two Democratic Senate aides briefed on the talks said. The talks have advanced on key sticking points, including how much control prudential regulators -- those responsible for insuring banks are financially sound -- would have over a new consumer division at the Federal Reserve, said the aides, who declined to be identified because the talks are private. ``There will be a mechanism whereby the prudential side has the ability to weigh in to ensure we don't do anything to destabilize the safety and soundness of our financial institutions,'' Senator Bob Corker, a Tennessee Republican working on the legislation, told reporters yesterday after a panel discussion at a Washington conference. Corker and Senate Banking Committee Chairman Christopher Dodd, in meetings over the past week, resolved some differences over the unit's autonomy, although no final decisions have been made. Corker said yesterday the legislation will be introduced ``very soon'' and that the goal is to get the measure through the banking committee by March 29, when the Easter recess begins.
Ex-Bank of America Executives Win Dismissal of Some SEC Claims on Appeal
Two former Bank of America Corp. executives won dismissal of claims by securities regulators that they could be held liable for allegedly false statements made to clients of the bank's Columbia Management Group unit. The U.S. Court of Appeals in Boston yesterday upheld a lower court's ruling throwing out the claims against James Tambone, former co-president of fund distribution at the bank's Columbia unit, and Robert Hussey, a former sales executive. The U.S.
Securities and Exchange Commission sued the men in 2006, claiming they gave clients literature saying Columbia's mutual funds avoided rapid mutual-fund trades, a practice known as market timing. The SEC said Tambone and Hussey knew the funds engaged in the practice, which can hurt long-term shareholders.
The panel rejected the SEC's argument that the two were liable even if the false statements were created by others because, by directing the fund sales, they implied the prospectus documents were truthful.
Naked Credit-Default Swaps Crackdown in Europe Rings Hollow Without U.S.
European politicians and regulators could initiate a continent-wide ban on speculative trading of sovereign credit-default swaps tomorrow. Making it stick without the Americans won't work. New York and London dominate swaps trading, and both have resisted greater regulation. Last year, U.S. regulators and Congress rejected a proposed ban on buying credit-default swaps without owning the underlying debt. Adair Turner, chairman of the U.K. Financial Services Authority, said yesterday that these so-called naked swaps weren't the ``key driver'' of the Greek debt crisis and it would be wrong to rush to ban them. ``You need to get the U.S. on board, otherwise the effect will be minimal because trading will simply move elsewhere,'' said Jan Hagen, head of the financial services group at the European School of Management and Technology in Berlin. ``A ban would allow European politicians to tell voters at least they're doing something.'' The European Union's top regulatory official, European Commission President Jose Barroso, said March 9 that the 27- nation bloc will consider banning ``purely speculative naked'' credit-default swaps after German Chancellor Angela Merkel and French President Nicolas Sarkozy called for a crackdown on derivatives trading to prevent a rerun of the Greek crisis.
Union Investment Favors Lebanon, South Africa Bonds on Local Bank Support
Union Investment Privatfonds, Germany's third-largest money manager, favors bonds sold by developing nations with active local investors in foreign debt on concern the global new-issues market will be ``overcrowded.'' The company with $250 billion in assets will consider purchasing notes due to be offered by Israel, Egypt and Mongolia in the coming weeks or months, said Sergey Dergachev. The Frankfurt-based investor, who helps oversee $6 billion of emerging-market debt, bought securities sold by Lebanon and South Africa this month, he said in an interview late yesterday. ``The pipeline risks being overcrowded,'' Dergachev said. ``Sovereigns with solid macroeconomic metrics, solid support from the local investor base and which aren't frequently traded, limit the sell-off risk,'' he said. Developing nations have raised $24.5 billion from overseas debt sales this year as of yesterday, according to data compiled by Bloomberg. That's the busiest start to a year since emerging- market sovereign issuers borrowed $34 billion over the same period in 2005. Iran and Poland are among at least 10 countries seeking about $7.6 billion of funding in the coming months.
Shun Spain's Bonds on `Death by 1,000 Cuts,' Invesco, Merrill Lynch Say
Investors should avoid Spain's bonds as the euro region's highest levels of joblessness stifle the country's ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.'s Merrill Lynch unit. Spanish debt isn't yielding enough to compensate investors for buying the bonds of a country with the euro region's third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 70 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 310 basis points for Greek debt. ``It's not a time to increase exposure to Spain,'' said Blase, who helps oversee the company's $423 billion in assets. ``The country is in rather serious difficulties and the risk premium on Spanish bonds isn't that attractive.'' Concern that Europe's most recession-battered nations aren't doing enough to contain their deficits sent Greek bond yields to the highest in more than a decade, and helped push the euro 4.7 percent lower against the dollar this year. While attention focused initially on Greece, Spain may take years to recover from the recession, according to Johan Jooste, a strategist at Merrill Lynch Wealth Management in London.
Latvia Elections May Hamper Austerity, Weigh On Credit Rating, Fitch Says
Latvian elections this autumn threaten to hamper government efforts to push through austerity measures vital to its international bailout, burdening the country's credit rating, Fitch Ratings said. A parliamentary election scheduled for October ``weighs on the rating, the uncertainty that comes with the election, and I think there might be resistance to removing the negative outlook because of that risk,'' Eral Yilmaz, a credit analyst at Fitch, which ranks Latvian debt as junk, said in an interview. Prime Minister Valdis Dombrovskis, who came to office a year ago amid the former Soviet state's worst economic crisis since it abandoned communism two decades ago, has pushed through the toughest austerity package in the European Union to comply with the terms of an International Monetary Fund-led rescue. Fitch, which rates Latvia's debt BB+, wants to see sustained signs of recovery before considering an upgrade, Yilmaz said. ``Cuts may become politically more difficult from now on as the public may want to see the results of the fiscal
belt- tightening in an economic recovery that results in job creation,'' she said.
Japan's 10-Year Bonds Fall, End Two-Day Gain, as Rising Stocks Sap Demand
Japan's 10-year bonds declined, snapping two days of gains, as rising stocks sapped demand for the refuge of government debt. Ten-year yields also climbed from the lowest level in more than a week after Nikkei English News reported the Japanese government is expected to upgrade its overall view of the economy for the first time since July 2009. The government sold 2.4 trillion yen ($26.5 billion) in five-year notes today.
``Market participants had a short bias because of the strong stocks,'' said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France's largest bank. The yield on the 1.4 percent security maturing in March 2020 increased two basis points, or 0.02 percentage point, to 1.32 percent as of 4:57 p.m. in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.178 yen to 100.706 yen.
Japanese Bond Risk Index May Decline on Kawasaki Kisen's Exit, Mizuho Says
The Markit iTraxx Japan index of credit-default swaps, a benchmark for corporate bond risk, may fall March 23 if Kawasaki Kisen Kaisha Ltd. and Shimizu Corp. cease to be members, according to Mizuho Securities Co. Markit Group Ltd.
published a provisional list for its Series 13 of the Japanese iTraxx today, which shows companies that may join or leave the London-based data company's index. Kawasaki Kisen, the country's third-biggest shipping line by market value, and Shimizu, the biggest general contractor, may be removed, the list shows. The index may decline by ``around 8 basis points on a theoretical value basis,'' Mizuho credit analyst Seiichiro Matsumoto said in a telephone interview from Tokyo. A basis point is 0.01 percentage point. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements, and a drop shows improvement in perceptions of creditworthiness.
For the complete stories summarized here, and for more of the day's top news, see TOP
-0- Mar/11/2010 8:29 GMT
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(BN) Top Stories: Currencies
Top Stories: Currencies
2010-03-11 08:15:45.721 GMT
March 11 (Bloomberg) -- The following are the day's top stories on currencies:
Yen, Dollar Strengthen as China Inflation at 16-Month High; Kiwi Weakens
The yen and dollar rose versus their major counterparts after Chinese reports on inflation, factories and loans fueled concern the government will act to damp growth, boosting demand for the lowest-yielding currencies. Japan's currency strengthened from a two-week low against the euro after Chinese inflation reached a 16-month high and on speculation exporters brought funds home before the fiscal year ends this month. New Zealand's dollar fell for a second day versus the greenback as the central bank signaled a slower exit from stimulus measures.
South Korea's won slid on a media report the nation's largest power company purchased dollars. ``Strong inflation data should enhance pressure for tightening in China,'' said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Securities Co., unit of Japan's largest publicly traded bank by market value. ``The bias is for the yen to rise.'' The yen rose to 123.26 per euro as of 6:58 a.m. in London from 123.62 in New York yesterday, when it fell to 124.00, the weakest since Feb. 23. Japan's currency advanced to
90.38 per dollar from 90.52. The dollar climbed to $1.3636 per euro from $1.3657, and advanced to $1.4961 per pound from $1.4978.
Dollar to Keep Reserve Role If Markets Stay Sound, Standard & Poor's Says
The dollar will retain its status as the world's reserve currency as long as U.S. financial markets are sound and government spending is sustainable, Standard & Poor's said. The greenback is ``the world's most accepted currency,'' even after the global recession that began in the U.S., John Chambers, chairman of the S&P sovereign ratings committee, wrote in a report released today. The dollar supports the nation's top AAA credit ranking, improves the government's access to external financing and helps lower borrowing costs, he wrote. ``The dollar's widespread acceptance stems from the U.S. economy's fundamental strength, which in our view comes from the economy's size and the flexibility of labor and product markets,'' New York-based Chambers wrote with David Beers, global head of sovereign ratings at S&P in London. ``We view U.S. banking and capital markets to be dynamic and unfettered relative to their peers.'' Pacific Investment Management Co., the world's biggest manager of bond funds, said in its August
2009 Emerging Markets Watch report the dollar's reserve status was endangered as the government pumped ``massive'' amounts of money into the economy to stimulate growth.
Trade Deficit in U.S. Probably Widened for Third Month as Imports Climbed
The U.S. trade deficit probably widened in January for a third month as imports grew faster than exports, pointing to a rebound in global economic growth, economists said before a report today. The gap increased to $41 billion from $40.2 billion the prior month, according to the median forecast of 73 economists surveyed by Bloomberg News. Another report may show initial claims for jobless benefits fell for a second week.
Imports may keep growing as the world's largest economy improves and companies replenish depleted inventories. Emerging countries are leading a worldwide recovery that, together with a weaker dollar, is helping lift sales at companies including Cisco Systems Inc., which may prevent the deficit from deteriorating much more in coming months. ``Global trade is definitely coming back,'' said David Semmens, an economist at Standard Chartered Bank in New York. ``The U.S. will benefit from rising exports. We can expect overseas economies to improve faster than domestic growth.''
El-Erian Says World Economy May Face Disruptive Sovereign Debt Imbalances
Mohamed A. El-Erian, whose company runs the world's biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. ``The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,''
El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is ``at present being viewed primarily -- and excessively -- through the narrow prism of Greece.'' Governments may have to raise taxes and slash spending to cope with swelling deficits after borrowing unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross. A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said. Pimco has said debt strains in Greece, Portugal and Spain underscore its view that 2010 will be a year of slower-than- average growth, and predicts there will be a shrinking global role for the U.S.
economy.
Emerging-Market Reserves Buildup Risks Return of `Imbalance': Chart of Day
Developing nations' foreign reserves are approaching levels reached two years ago, risking a return of the ``imbalances''
that helped spark the global financial crisis, Goldman Sachs Group Inc. said. The Chart of the Day shows the five largest foreign reserves holders in emerging markets excluding China boosted their stockpile by 17 percent in the past year to $1.3 trillion, while the U.S. trade deficit swelled to its widest level in a year in December. The lower panel shows China, the world's largest reserves holder, increased its stock to a record $2.4 trillion in 2009. The trend signals a return to the last global economic expansion when U.S. consumers relied on borrowing from abroad to finance their purchases, contributing to an export boom from Asia. As China and other Asian nations accumulated dollars from trade surpluses, they bought U.S.
Treasury debt and depressed global yields. Lower borrowing costs helped fuel the U.S. housing and credit booms that turned to bust in 2007. ``There's a risk the world could lapse back into a regime in which emerging markets return to export-led growth coupled with an accumulation of reserves,'' Goldman Sachs economists led by London-based Jim O'Neill wrote in a research note yesterday. ``To the extent that global imbalances are making a comeback, they need to be taken seriously. The bottom line is that the accumulation of reserves may have helped create the problem that they ultimately helped to solve.''
Senate Negotiations Said to Advance on Consumer Division Powers, Oversight
Senate negotiators closed in on a deal for strengthening consumer financial protections, giving bank regulators a role in rule-making and enforcement, two Democratic Senate aides briefed on the talks said. The talks have advanced on key sticking points, including how much control prudential regulators -- those responsible for insuring banks are financially sound -- would have over a new consumer division at the Federal Reserve, said the aides, who declined to be identified because the talks are private. ``There will be a mechanism whereby the prudential side has the ability to weigh in to ensure we don't do anything to destabilize the safety and soundness of our financial institutions,'' Senator Bob Corker, a Tennessee Republican working on the legislation, told reporters yesterday after a panel discussion at a Washington conference. Corker and Senate Banking Committee Chairman Christopher Dodd, in meetings over the past week, resolved some differences over the unit's autonomy, although no final decisions have been made. Corker said yesterday the legislation will be introduced ``very soon'' and that the goal is to get the measure through the banking committee by March 29, when the Easter recess begins.
Brown Tries to `Perversely' Benefit From U.K. Relapse Risk Before Election
Gordon Brown is trying to turn the threat of a double-dip U.K. recession into an advantage. The British prime minister, whose Labour Party is narrowing the gap in opinion polls with the opposition Conservatives, is arguing that the economic recovery is too ``fragile'' to justify cutting the U.K.'s record budget deficit right away. Brown is seeking a fourth term for Labour as Britain struggles to recover from its worst slump in six decades. While jobless claims are at the highest since the party came to power in 1997, opinion polls show that Brown has made up so much ground that David Cameron's Conservatives will fail to gain a majority in the election, which must happen by June. ``A weak economy might perversely be good for Labour,'' Jonathan Loynes, an economist at Capital Economics Ltd. in London, said in a telephone interview. ``To a degree it would support the government's position that it shouldn't try to tackle the budget deficit too quickly, and at the same time undermines the Conservatives' position.''
Swiss Central Bank May Keep Key Rate Unchanged As Economy Gains Strength
The Swiss central bank may leave its benchmark interest rate near zero today to bolster a recovery from the worst recession in more than three decades. The Swiss National Bank, led by Philipp Hildebrand, will leave the three-month Libor target rate at 0.25 percent at its quarterly monetary assessment, according to all 19 economists in a Bloomberg News survey. The central bank announces the decision at 2 p.m. in Zurich. The SNB has held its main rate close to zero for a year and sold Swiss francs to keep a lid on the currency and counter the threat of deflation. While SNB board member Thomas Jordan said last month that it's too early to start raising borrowing costs, the central bank has already softened its tone on currency interventions as the economy gathers strength. ``They will continue pointing to the risks to the economy, but the statement will be on a more positive note,'' said Fabian Heller, an economist at Credit Suisse Group AG in Zurich, who sees the SNB rate unchanged until ``at least'' September.
``They will maintain their language on the currency'' though policy makers may become ``more tolerant'' of a further appreciation over time, he said.
Shun Spain's Bonds on `Death by 1,000 Cuts,' Invesco, Merrill Lynch Say
Investors should avoid Spain's bonds as the euro region's highest levels of joblessness stifle the country's ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.'s Merrill Lynch unit. Spanish debt isn't yielding enough to compensate investors for buying the bonds of a country with the euro region's third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 70 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 310 basis points for Greek debt. ``It's not a time to increase exposure to Spain,'' said Blase, who helps oversee the company's $423 billion in assets. ``The country is in rather serious difficulties and the risk premium on Spanish bonds isn't that attractive.'' Concern that Europe's most recession-battered nations aren't doing enough to contain their deficits sent Greek bond yields to the highest in more than a decade, and helped push the euro 4.7 percent lower against the dollar this year. While attention focused initially on Greece, Spain may take years to recover from the recession, according to Johan Jooste, a strategist at Merrill Lynch Wealth Management in London.
Latvia Elections May Hamper Austerity, Weigh On Credit Rating, Fitch Says
Latvian elections this autumn threaten to hamper government efforts to push through austerity measures vital to its international bailout, burdening the country's credit rating, Fitch Ratings said. A parliamentary election scheduled for October ``weighs on the rating, the uncertainty that comes with the election, and I think there might be resistance to removing the negative outlook because of that risk,'' Eral Yilmaz, a credit analyst at Fitch, which ranks Latvian debt as junk, said in an interview. Prime Minister Valdis Dombrovskis, who came to office a year ago amid the former Soviet state's worst economic crisis since it abandoned communism two decades ago, has pushed through the toughest austerity package in the European Union to comply with the terms of an International Monetary Fund-led rescue. Fitch, which rates Latvia's debt BB+, wants to see sustained signs of recovery before considering an upgrade, Yilmaz said. ``Cuts may become politically more difficult from now on as the public may want to see the results of the fiscal
belt- tightening in an economic recovery that results in job creation,'' she said.
Kiwi Slides as Bollard Signals Rate Rises; Aussie Is Near Seven-Week High
The New Zealand dollar fell against its 16 major counterparts as the central bank signaled a slower exit from stimulus measures. Australia's currency traded near a seven-month high as full-time jobs grew for a sixth month. The kiwi dropped as Reserve Bank Governor Alan Bollard kept the benchmark interest rate at a record low and said weak business spending and higher bank-funding costs may slow the pace of future rate advances. Australian employers added 11,400 full-time workers in February in the longest stretch of monthly gains since 2006, raising prospects of a rate increase in April. ``Market expectations prior to the decision had been for a 25 basis point hike in June and every meeting thereafter until the end of the year,'' said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``One of those tightenings may now be priced out of the curve, weighing on the New Zealand dollar.'' New Zealand's dollar dropped 0.4 percent to 69.93 U.S. cents as of 5:08 p.m. in Sydney from
70.21 cents yesterday in New York. It slid 0.5 percent to 63.19 yen.
For the complete stories summarized here, and for more of the day's top news, see TOP.
-0- Mar/11/2010 8:15 GMT
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2010-03-11 08:15:45.721 GMT
March 11 (Bloomberg) -- The following are the day's top stories on currencies:
Yen, Dollar Strengthen as China Inflation at 16-Month High; Kiwi Weakens
The yen and dollar rose versus their major counterparts after Chinese reports on inflation, factories and loans fueled concern the government will act to damp growth, boosting demand for the lowest-yielding currencies. Japan's currency strengthened from a two-week low against the euro after Chinese inflation reached a 16-month high and on speculation exporters brought funds home before the fiscal year ends this month. New Zealand's dollar fell for a second day versus the greenback as the central bank signaled a slower exit from stimulus measures.
South Korea's won slid on a media report the nation's largest power company purchased dollars. ``Strong inflation data should enhance pressure for tightening in China,'' said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Securities Co., unit of Japan's largest publicly traded bank by market value. ``The bias is for the yen to rise.'' The yen rose to 123.26 per euro as of 6:58 a.m. in London from 123.62 in New York yesterday, when it fell to 124.00, the weakest since Feb. 23. Japan's currency advanced to
90.38 per dollar from 90.52. The dollar climbed to $1.3636 per euro from $1.3657, and advanced to $1.4961 per pound from $1.4978.
Dollar to Keep Reserve Role If Markets Stay Sound, Standard & Poor's Says
The dollar will retain its status as the world's reserve currency as long as U.S. financial markets are sound and government spending is sustainable, Standard & Poor's said. The greenback is ``the world's most accepted currency,'' even after the global recession that began in the U.S., John Chambers, chairman of the S&P sovereign ratings committee, wrote in a report released today. The dollar supports the nation's top AAA credit ranking, improves the government's access to external financing and helps lower borrowing costs, he wrote. ``The dollar's widespread acceptance stems from the U.S. economy's fundamental strength, which in our view comes from the economy's size and the flexibility of labor and product markets,'' New York-based Chambers wrote with David Beers, global head of sovereign ratings at S&P in London. ``We view U.S. banking and capital markets to be dynamic and unfettered relative to their peers.'' Pacific Investment Management Co., the world's biggest manager of bond funds, said in its August
2009 Emerging Markets Watch report the dollar's reserve status was endangered as the government pumped ``massive'' amounts of money into the economy to stimulate growth.
Trade Deficit in U.S. Probably Widened for Third Month as Imports Climbed
The U.S. trade deficit probably widened in January for a third month as imports grew faster than exports, pointing to a rebound in global economic growth, economists said before a report today. The gap increased to $41 billion from $40.2 billion the prior month, according to the median forecast of 73 economists surveyed by Bloomberg News. Another report may show initial claims for jobless benefits fell for a second week.
Imports may keep growing as the world's largest economy improves and companies replenish depleted inventories. Emerging countries are leading a worldwide recovery that, together with a weaker dollar, is helping lift sales at companies including Cisco Systems Inc., which may prevent the deficit from deteriorating much more in coming months. ``Global trade is definitely coming back,'' said David Semmens, an economist at Standard Chartered Bank in New York. ``The U.S. will benefit from rising exports. We can expect overseas economies to improve faster than domestic growth.''
El-Erian Says World Economy May Face Disruptive Sovereign Debt Imbalances
Mohamed A. El-Erian, whose company runs the world's biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. ``The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,''
El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site. The potential damage from increased government borrowings is ``at present being viewed primarily -- and excessively -- through the narrow prism of Greece.'' Governments may have to raise taxes and slash spending to cope with swelling deficits after borrowing unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross. A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said. Pimco has said debt strains in Greece, Portugal and Spain underscore its view that 2010 will be a year of slower-than- average growth, and predicts there will be a shrinking global role for the U.S.
economy.
Emerging-Market Reserves Buildup Risks Return of `Imbalance': Chart of Day
Developing nations' foreign reserves are approaching levels reached two years ago, risking a return of the ``imbalances''
that helped spark the global financial crisis, Goldman Sachs Group Inc. said. The Chart of the Day shows the five largest foreign reserves holders in emerging markets excluding China boosted their stockpile by 17 percent in the past year to $1.3 trillion, while the U.S. trade deficit swelled to its widest level in a year in December. The lower panel shows China, the world's largest reserves holder, increased its stock to a record $2.4 trillion in 2009. The trend signals a return to the last global economic expansion when U.S. consumers relied on borrowing from abroad to finance their purchases, contributing to an export boom from Asia. As China and other Asian nations accumulated dollars from trade surpluses, they bought U.S.
Treasury debt and depressed global yields. Lower borrowing costs helped fuel the U.S. housing and credit booms that turned to bust in 2007. ``There's a risk the world could lapse back into a regime in which emerging markets return to export-led growth coupled with an accumulation of reserves,'' Goldman Sachs economists led by London-based Jim O'Neill wrote in a research note yesterday. ``To the extent that global imbalances are making a comeback, they need to be taken seriously. The bottom line is that the accumulation of reserves may have helped create the problem that they ultimately helped to solve.''
Senate Negotiations Said to Advance on Consumer Division Powers, Oversight
Senate negotiators closed in on a deal for strengthening consumer financial protections, giving bank regulators a role in rule-making and enforcement, two Democratic Senate aides briefed on the talks said. The talks have advanced on key sticking points, including how much control prudential regulators -- those responsible for insuring banks are financially sound -- would have over a new consumer division at the Federal Reserve, said the aides, who declined to be identified because the talks are private. ``There will be a mechanism whereby the prudential side has the ability to weigh in to ensure we don't do anything to destabilize the safety and soundness of our financial institutions,'' Senator Bob Corker, a Tennessee Republican working on the legislation, told reporters yesterday after a panel discussion at a Washington conference. Corker and Senate Banking Committee Chairman Christopher Dodd, in meetings over the past week, resolved some differences over the unit's autonomy, although no final decisions have been made. Corker said yesterday the legislation will be introduced ``very soon'' and that the goal is to get the measure through the banking committee by March 29, when the Easter recess begins.
Brown Tries to `Perversely' Benefit From U.K. Relapse Risk Before Election
Gordon Brown is trying to turn the threat of a double-dip U.K. recession into an advantage. The British prime minister, whose Labour Party is narrowing the gap in opinion polls with the opposition Conservatives, is arguing that the economic recovery is too ``fragile'' to justify cutting the U.K.'s record budget deficit right away. Brown is seeking a fourth term for Labour as Britain struggles to recover from its worst slump in six decades. While jobless claims are at the highest since the party came to power in 1997, opinion polls show that Brown has made up so much ground that David Cameron's Conservatives will fail to gain a majority in the election, which must happen by June. ``A weak economy might perversely be good for Labour,'' Jonathan Loynes, an economist at Capital Economics Ltd. in London, said in a telephone interview. ``To a degree it would support the government's position that it shouldn't try to tackle the budget deficit too quickly, and at the same time undermines the Conservatives' position.''
Swiss Central Bank May Keep Key Rate Unchanged As Economy Gains Strength
The Swiss central bank may leave its benchmark interest rate near zero today to bolster a recovery from the worst recession in more than three decades. The Swiss National Bank, led by Philipp Hildebrand, will leave the three-month Libor target rate at 0.25 percent at its quarterly monetary assessment, according to all 19 economists in a Bloomberg News survey. The central bank announces the decision at 2 p.m. in Zurich. The SNB has held its main rate close to zero for a year and sold Swiss francs to keep a lid on the currency and counter the threat of deflation. While SNB board member Thomas Jordan said last month that it's too early to start raising borrowing costs, the central bank has already softened its tone on currency interventions as the economy gathers strength. ``They will continue pointing to the risks to the economy, but the statement will be on a more positive note,'' said Fabian Heller, an economist at Credit Suisse Group AG in Zurich, who sees the SNB rate unchanged until ``at least'' September.
``They will maintain their language on the currency'' though policy makers may become ``more tolerant'' of a further appreciation over time, he said.
Shun Spain's Bonds on `Death by 1,000 Cuts,' Invesco, Merrill Lynch Say
Investors should avoid Spain's bonds as the euro region's highest levels of joblessness stifle the country's ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.'s Merrill Lynch unit. Spanish debt isn't yielding enough to compensate investors for buying the bonds of a country with the euro region's third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 70 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 310 basis points for Greek debt. ``It's not a time to increase exposure to Spain,'' said Blase, who helps oversee the company's $423 billion in assets. ``The country is in rather serious difficulties and the risk premium on Spanish bonds isn't that attractive.'' Concern that Europe's most recession-battered nations aren't doing enough to contain their deficits sent Greek bond yields to the highest in more than a decade, and helped push the euro 4.7 percent lower against the dollar this year. While attention focused initially on Greece, Spain may take years to recover from the recession, according to Johan Jooste, a strategist at Merrill Lynch Wealth Management in London.
Latvia Elections May Hamper Austerity, Weigh On Credit Rating, Fitch Says
Latvian elections this autumn threaten to hamper government efforts to push through austerity measures vital to its international bailout, burdening the country's credit rating, Fitch Ratings said. A parliamentary election scheduled for October ``weighs on the rating, the uncertainty that comes with the election, and I think there might be resistance to removing the negative outlook because of that risk,'' Eral Yilmaz, a credit analyst at Fitch, which ranks Latvian debt as junk, said in an interview. Prime Minister Valdis Dombrovskis, who came to office a year ago amid the former Soviet state's worst economic crisis since it abandoned communism two decades ago, has pushed through the toughest austerity package in the European Union to comply with the terms of an International Monetary Fund-led rescue. Fitch, which rates Latvia's debt BB+, wants to see sustained signs of recovery before considering an upgrade, Yilmaz said. ``Cuts may become politically more difficult from now on as the public may want to see the results of the fiscal
belt- tightening in an economic recovery that results in job creation,'' she said.
Kiwi Slides as Bollard Signals Rate Rises; Aussie Is Near Seven-Week High
The New Zealand dollar fell against its 16 major counterparts as the central bank signaled a slower exit from stimulus measures. Australia's currency traded near a seven-month high as full-time jobs grew for a sixth month. The kiwi dropped as Reserve Bank Governor Alan Bollard kept the benchmark interest rate at a record low and said weak business spending and higher bank-funding costs may slow the pace of future rate advances. Australian employers added 11,400 full-time workers in February in the longest stretch of monthly gains since 2006, raising prospects of a rate increase in April. ``Market expectations prior to the decision had been for a 25 basis point hike in June and every meeting thereafter until the end of the year,'' said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``One of those tightenings may now be priced out of the curve, weighing on the New Zealand dollar.'' New Zealand's dollar dropped 0.4 percent to 69.93 U.S. cents as of 5:08 p.m. in Sydney from
70.21 cents yesterday in New York. It slid 0.5 percent to 63.19 yen.
For the complete stories summarized here, and for more of the day's top news, see TOP
-0- Mar/11/2010 8:15 GMT
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Top Stories: Commodities
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Top Stories: Commodities
2010-03-11 08:38:30.921 GMT
March 11 (Bloomberg) -- The following are the day's top stories on commodities:
Copper May Advance to Record on Chinese Demand, Sucden's Goldwyn Forecasts
Copper may rise to a record this year, possibly surpassing $9,000 a metric ton, driven by larger- than-expected imports by China and a revival of demand in Europe and the U.S., according to Sucden Financial Ltd. Chinese demand will be ``positive''
for the metal used in construction and the country may import an average of 200,000 metric tons a month, said Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden. The West may be a ``net positive'' for copper, Goldwyn said in an interview. Copper peaked at $8,940 a ton in July 2008, two months before the collapse of Lehman Brothers Holdings Inc. helped to push the global economy into recession.
Stimulus spending by China, the largest metal user, helped to more than double prices last year and a further rally would bolster producers' profits. ``Underneath any other factors, China needs copper,'' Goldwyn said today from Shenzhen, Guangdong. ``Any commodity that China is short of is a good investment in the long term,'' said Goldwyn, who's worked in the industry for 25 years and correctly forecast in 2007 that the price would gain to a record.
El Nino May Cut Thai Rice Output, Boost Palm Oil Price as Drought Spreads
Rice production in Thailand, the world's largest exporter, may decline as drier-than-normal weather curbs yields, adding to signs that an El Nino may be hurting farm output across the region. ``Unmilled rice output in the next crop year may fall below the average production level of 31 million tons if El Nino puts off rainfall,'' Prasert Gosalvitra, head of the nation's Rice Department, said today by phone from Bangkok.
Thailand accounts for about a third of the global trade in rice. Lower production of rice from Thailand and palm oil from Malaysia caused by the dry weather may drive commodity prices higher, spurring food inflation. Asian agricultural companies including Wilmar International Ltd. may benefit from the surge, BNP Paribas SA told investors in a note today. ``We're worried that delayed rainfall will probably hurt output,'' Apichart Jongskul, secretary-general of Thailand's Office of Agricultural Economics, said today by phone. ``The impact on the next crop has yet to be evaluated,'' Apichart said.
Japan, Korea May Face Wheat Supply Disruptions From Closure of U.S. Rivers
Japan, the biggest buyer of U.S. wheat, may stockpile the grain or seek alternative supplies before the U.S. closes its largest export gateway later this year for a three-month revamp, potentially delaying shipments. Downstream lock gates on the Columbia River and the Snake River in the U.S. Pacific Northwest will be repaired from mid- December through mid-March, closing the waterways to barge traffic, said Diana Fredlund, a spokeswoman for the Army Corps of Engineers Northwestern Division in Portland, Oregon. The work will affect shipments of Western White wheat, said industry groups in Japan and South Korea. The potential supply disruption from the world's largest exporter may affect wheat prices, which have fallen 11 percent this year partly because of rising global inventories. The Columbia River is the biggest wheat and barley export gateway in the U.S. and the third-largest grain gateway in the world, according to the Web site of Pacific Northwest Waterways Association. ``Buyers are concerned that supplies of white wheat may be disrupted,'' said Park Jeong Seop, deputy general manager at the Korea Flour Mills Industrial Association. ``They are trying to work with suppliers and related parties to find ways to minimize any possible disruption.''
Cattle Speculators May Herd to Exit, Ending Rally in Prices: Chart of Day
Cattle futures may fall 6.3 percent by June as the highest prices in 16 months encourage speculators to exit positions, said Jim Stellakis, an independent analyst and former strategist at Touradji Capital Management. The CHART OF THE DAY shows net-long positions by managers of hedge and index funds were at the highest level ever in the week ended March 2, totaling 86,320 contracts on the Chicago Mercantile Exchange.
New positions on higher prices are ``late to the party,'' after cattle jumped 9.6 percent this year to 94.45 cents a pound on March 8, Stellakis said. Cattle futures may peak this month at
96 cents a pound, before dropping as low as 88 cents during May or June, based on seasonal chart patterns followed by some traders, Stellakis said. Cattle futures for April delivery closed yesterday at 93.875 cents. ``Anybody long the market between now and 96 cents should be liquidating'' their positions, Stellakis said by telephone from New York.
``Pullback toward the 89 level should be bought, if you're looking to get into the market longer term.''
Copper Drops in Shanghai, London on Concern China May Raise Interest Rates
Copper declined as inflation in China gained at the fastest pace in 16 months, fueling concern that the government and central bank may take further steps to cool the economy, potentially curbing demand for the metal. The June-delivery contract on the Shanghai Futures Exchange fell 2.2 percent to close at 59,310 yuan ($8,689) a metric ton. Copper for three-month delivery on the London Metal Exchange dropped 1 percent to $7,363 at 3:59 p.m. Shanghai time. China's consumer prices rose 2.7 percent from a year earlier and new loans exceeded forecasts, figures today showed, adding to the case for the government to cut stimulus measures. The People's Bank of China hasn't raised benchmark interest rates since December 2007, before the financial crisis deepened. ``The CPI number fueled speculation for interest rate hikes, possibly in the second quarter,'' Yang Su, an analyst at Jiangsu Suwu Futures Co., said from Nanjing today. ``That's going to damp metals demand, especially from speculators.''
China Inflation, Production Accelerate, Adding Pressure for Stimulus Exit
China's inflation reached a 16- month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the government to pare back stimulus measures.
Consumer prices rose 2.7 percent in February from a year earlier, the National Bureau of Statistics said in Beijing today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. Seasonal factors stemming from a weeklong holiday may have boosted prices.
Production rose 20.7 percent in the first two months of 2010, the most in more than five years. Premier Wen Jiabao aims to hold full-year inflation around 3 percent after banks flooded the financial system with money to drive a rebound from the global recession. Gross domestic product grew 10.7 percent last quarter and central bank Governor Zhou Xiaochuan said March 6 that anti-crisis policies, including the yuan's peg to the dollar, must end ``sooner or later.'' ``Inflation may top the 3 percent policy target by April, which is bound to trigger further monetary tightening,'' said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. He sees benchmark interest rates increasing as early as this month.
Corn Rises for First Time in Six Days as Cold Weather Delays U.S. Planting
Corn rose for the first time in six sessions on concern that cold, wet weather last month may hamper planting work in the U.S., the world's largest exporter. Corn for May delivery rose as much as 2.5 cents, or 0.7 percent, to $3.68 a bushel on the Chicago Board of Trade and traded at $3.67 at 11 a.m. Seoul time. The price fell to a one- month low yesterday after the U.S. government said inventories before this year's harvest will be bigger than forecast. ``Corn may not fall any further as investors may start buying on concern over delayed planting,'' said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. ``The focus of the market is now moving on to planting and new crop.'' Average temperatures last month were 8 degrees Fahrenheit lower than normal and rainfall in Texas was more than double the normal average, Texas AgriLife said March 9 in a report.
Silver, Platinum Drop From Seven-Week Highs; Gold Little Changed in Asia
Silver and platinum dropped from seven-week highs after China's inflation and industrial output accelerated, adding pressure on the government to pare stimulus measures. Gold was little changed. Silver for immediate delivery lost as much as
1.2 percent to $16.8150 an ounce and was at $16.9350 at 3:02 p.m. Singapore time, while platinum dropped as much as 0.8 percent. Consumer prices in China rose 2.7 percent in February from a year ago, the National Bureau of Statistics said today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. Silver prices reached $17.6525 an ounce, while platinum gained to $1,610.75 an ounce yesterday, the highest levels for both metals since Jan. 21, on optimism industrial demand will increase as the global economic recovery gains momentum. ``Unlike gold, silver, platinum and palladium have industrial uses so they are affected by economic growth,''
said Zhu Lv, research manager at Shanghai Tonglian Futures Co.
``Any signs of a possible slowdown in China will have an effect on prices of these metals.''
Crude Oil Falls on Concern China May End Stimulus Spending, Slow Demand
Crude oil fell on speculation Chinese demand will slow as the government may end stimulus programs amid an increase in inflation and concern that recent price gains outpaced demand growth in the U.S. Chinese consumer prices surged 2.7 percent in February, a 16-month high, increasing expectations the government may end policies to fight the global recession, which may slow economic growth. U.S. refinery utilization fell last week for the first time in five weeks to 80.7 percent of capacity, an Energy Department report said yesterday. ``This should be bearish because the Chinese government might tighten their monetary policy earlier than expected,'' said Clarence Chu, a trader with options dealers Hudson Capital Energy in Singapore. ``Speculators in China will cut down on their positions.'' Crude oil for April delivery dropped as much as 59 cents, or 0.7 percent, to $81.50 a barrel, in electronic trading on the New York Mercantile Exchange. It was at $81.59 at 3:58 p.m. Singapore time. Yesterday, the contract rose 60 cents, or 0.7 percent, to $82.09, the highest settlement since Jan. 11.
Vale Tells China of Plan to Drop Annual Iron Ore Pricing, UC361.com Says
Vale SA, the largest iron ore producer, told Chinese steelmakers it plans to drop a 40-year tradition of setting annual prices in favor of shorter contracts, according to Hu Kai, an analyst at research company UC361.com. The Rio de Janeiro-based company sent a note to major Chinese steelmakers, who haven't decided what their responses will be, Hu said from Shanghai, citing mills he didn't name. Vale will stand to win higher sales through regular pricing after spot market rates soared to more than double last year's contract agreement. Iron ore producers in Australia, the biggest exporter, will make $20 billion more a year by selling products at cash levels rather than on annual contracts, Goldman Sachs JBWere Pty said March 1. Vale is seeking to raise contract iron-ore prices by more than 90 percent for the second quarter of 2010 in negotiations with Japanese steelmakers, Nikkei English News reported, without saying where it obtained the information.
Rubber Drops as China Inflation Reaches 16-Month High, Stoking Rate Fears
Rubber declined for a third day after data showed China's inflation climbed to a 16-month high, raising concern that the nation may raise interest rates to cool the economy, curbing demand for the commodity used in tires. Rubber for August delivery on the Tokyo Commodity Exchange fell as much as 0.9 percent, reversing an earlier 1 percent gain, and settled 0.3 percent lower at 291 yen a kilogram ($3,217 a metric ton).
China's consumer prices rose 2.7 percent in February from a year ago, the National Bureau of Statistics said in Beijing today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg. The nation's output grew 20.7 percent in the first two months of the year, adding to the case for the government to pare back stimulus measures. ``Concern about monetary tightening in China is the largest drag on the price of rubber,'' said Hisaaki Tasaka, an analyst at ACE Koeki Co., a commodity broker in Tokyo. China has the world's largest car market and is the biggest user of rubber.
Copper Prices May Extend Advance as Stockpiles Peak: Chart of the Day
Copper, which has more than doubled in the past year, may extend its rally and trade close to a record in 2011 as production fails to meet soaring Chinese demand, sending stockpiles tumbling. The CHART OF THE DAY shows copper prices have soared even as inventories of the metal rose to the highest since 2004. Prices typically move in an inverse relationship to stockpiles, which can indicate the level of demand. Paul Cliff, a metals and mining analyst at Nomura Holdings Inc. in London, says the correlation will resume, with stockpiles shrinking as demand in China, the largest copper-using nation, keeps growing. ``A supply shortage will push prices up as inventories fall sharply through 2010 and 2011,'' Cliff said. ``We're bullish short, medium and long term.'' Nomura predicts the copper price will average $8,818 a metric ton in 2011 as stockpiles drop to equal 37 days of global consumption. Stocks slid to the equivalent of 39 days in 2006, when the price jumped 44 percent. The bank's price forecast is the highest of 15 analyst estimates compiled by Bloomberg. Demand will exceed output by 470,000 tons in 2010 and 950,000 tons in 2011, Nomura estimates.
Hebei Steel Is Planning More Acquisitions; Says Iron Ore Talks Continue
Hebei Iron & Steel Group, China's biggest steelmaker, is planning more mergers and acquisitions in China and abroad as part of a government drive to improve the country's mills. ``We want to make further progress on mergers and acquisitions,''
Chairman Wang Yifang said at a press conference in Beijing today, without identifying targets. The state-owned company is in talks to buy Shijiazhuang Iron & Steel Co., Wang said March 7. The Chinese government wants to accelerate consolidation in the steel industry to tackle overcapacity and curb pollution as output soared to a record last year. The overcapacity is depressing prices and hurting profitability, the China Iron & Steel Association said. ``In Hebei, two-thirds of the production comes from privately owned mills,'' Wang said. ``In times of favorable market conditions, they are unwilling to be merged.'' Hebei Steel is in contact with producers outside of its province for possible deals, he said.
For the complete stories summarized here, and for more of the day's top news, see TOP.
-0- Mar/11/2010 8:38 GMT
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Top Stories: Commodities
2010-03-11 08:38:30.921 GMT
March 11 (Bloomberg) -- The following are the day's top stories on commodities:
Copper May Advance to Record on Chinese Demand, Sucden's Goldwyn Forecasts
Copper may rise to a record this year, possibly surpassing $9,000 a metric ton, driven by larger- than-expected imports by China and a revival of demand in Europe and the U.S., according to Sucden Financial Ltd. Chinese demand will be ``positive''
for the metal used in construction and the country may import an average of 200,000 metric tons a month, said Jeremy Goldwyn, who oversees business development in Asia for London-based Sucden. The West may be a ``net positive'' for copper, Goldwyn said in an interview. Copper peaked at $8,940 a ton in July 2008, two months before the collapse of Lehman Brothers Holdings Inc. helped to push the global economy into recession.
Stimulus spending by China, the largest metal user, helped to more than double prices last year and a further rally would bolster producers' profits. ``Underneath any other factors, China needs copper,'' Goldwyn said today from Shenzhen, Guangdong. ``Any commodity that China is short of is a good investment in the long term,'' said Goldwyn, who's worked in the industry for 25 years and correctly forecast in 2007 that the price would gain to a record.
El Nino May Cut Thai Rice Output, Boost Palm Oil Price as Drought Spreads
Rice production in Thailand, the world's largest exporter, may decline as drier-than-normal weather curbs yields, adding to signs that an El Nino may be hurting farm output across the region. ``Unmilled rice output in the next crop year may fall below the average production level of 31 million tons if El Nino puts off rainfall,'' Prasert Gosalvitra, head of the nation's Rice Department, said today by phone from Bangkok.
Thailand accounts for about a third of the global trade in rice. Lower production of rice from Thailand and palm oil from Malaysia caused by the dry weather may drive commodity prices higher, spurring food inflation. Asian agricultural companies including Wilmar International Ltd. may benefit from the surge, BNP Paribas SA told investors in a note today. ``We're worried that delayed rainfall will probably hurt output,'' Apichart Jongskul, secretary-general of Thailand's Office of Agricultural Economics, said today by phone. ``The impact on the next crop has yet to be evaluated,'' Apichart said.
Japan, Korea May Face Wheat Supply Disruptions From Closure of U.S. Rivers
Japan, the biggest buyer of U.S. wheat, may stockpile the grain or seek alternative supplies before the U.S. closes its largest export gateway later this year for a three-month revamp, potentially delaying shipments. Downstream lock gates on the Columbia River and the Snake River in the U.S. Pacific Northwest will be repaired from mid- December through mid-March, closing the waterways to barge traffic, said Diana Fredlund, a spokeswoman for the Army Corps of Engineers Northwestern Division in Portland, Oregon. The work will affect shipments of Western White wheat, said industry groups in Japan and South Korea. The potential supply disruption from the world's largest exporter may affect wheat prices, which have fallen 11 percent this year partly because of rising global inventories. The Columbia River is the biggest wheat and barley export gateway in the U.S. and the third-largest grain gateway in the world, according to the Web site of Pacific Northwest Waterways Association. ``Buyers are concerned that supplies of white wheat may be disrupted,'' said Park Jeong Seop, deputy general manager at the Korea Flour Mills Industrial Association. ``They are trying to work with suppliers and related parties to find ways to minimize any possible disruption.''
Cattle Speculators May Herd to Exit, Ending Rally in Prices: Chart of Day
Cattle futures may fall 6.3 percent by June as the highest prices in 16 months encourage speculators to exit positions, said Jim Stellakis, an independent analyst and former strategist at Touradji Capital Management. The CHART OF THE DAY shows net-long positions by managers of hedge and index funds were at the highest level ever in the week ended March 2, totaling 86,320 contracts on the Chicago Mercantile Exchange.
New positions on higher prices are ``late to the party,'' after cattle jumped 9.6 percent this year to 94.45 cents a pound on March 8, Stellakis said. Cattle futures may peak this month at
96 cents a pound, before dropping as low as 88 cents during May or June, based on seasonal chart patterns followed by some traders, Stellakis said. Cattle futures for April delivery closed yesterday at 93.875 cents. ``Anybody long the market between now and 96 cents should be liquidating'' their positions, Stellakis said by telephone from New York.
``Pullback toward the 89 level should be bought, if you're looking to get into the market longer term.''
Copper Drops in Shanghai, London on Concern China May Raise Interest Rates
Copper declined as inflation in China gained at the fastest pace in 16 months, fueling concern that the government and central bank may take further steps to cool the economy, potentially curbing demand for the metal. The June-delivery contract on the Shanghai Futures Exchange fell 2.2 percent to close at 59,310 yuan ($8,689) a metric ton. Copper for three-month delivery on the London Metal Exchange dropped 1 percent to $7,363 at 3:59 p.m. Shanghai time. China's consumer prices rose 2.7 percent from a year earlier and new loans exceeded forecasts, figures today showed, adding to the case for the government to cut stimulus measures. The People's Bank of China hasn't raised benchmark interest rates since December 2007, before the financial crisis deepened. ``The CPI number fueled speculation for interest rate hikes, possibly in the second quarter,'' Yang Su, an analyst at Jiangsu Suwu Futures Co., said from Nanjing today. ``That's going to damp metals demand, especially from speculators.''
China Inflation, Production Accelerate, Adding Pressure for Stimulus Exit
China's inflation reached a 16- month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the government to pare back stimulus measures.
Consumer prices rose 2.7 percent in February from a year earlier, the National Bureau of Statistics said in Beijing today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. Seasonal factors stemming from a weeklong holiday may have boosted prices.
Production rose 20.7 percent in the first two months of 2010, the most in more than five years. Premier Wen Jiabao aims to hold full-year inflation around 3 percent after banks flooded the financial system with money to drive a rebound from the global recession. Gross domestic product grew 10.7 percent last quarter and central bank Governor Zhou Xiaochuan said March 6 that anti-crisis policies, including the yuan's peg to the dollar, must end ``sooner or later.'' ``Inflation may top the 3 percent policy target by April, which is bound to trigger further monetary tightening,'' said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. He sees benchmark interest rates increasing as early as this month.
Corn Rises for First Time in Six Days as Cold Weather Delays U.S. Planting
Corn rose for the first time in six sessions on concern that cold, wet weather last month may hamper planting work in the U.S., the world's largest exporter. Corn for May delivery rose as much as 2.5 cents, or 0.7 percent, to $3.68 a bushel on the Chicago Board of Trade and traded at $3.67 at 11 a.m. Seoul time. The price fell to a one- month low yesterday after the U.S. government said inventories before this year's harvest will be bigger than forecast. ``Corn may not fall any further as investors may start buying on concern over delayed planting,'' said Han Sung Min, a broker at Korea Exchange Bank Futures Co. in Seoul. ``The focus of the market is now moving on to planting and new crop.'' Average temperatures last month were 8 degrees Fahrenheit lower than normal and rainfall in Texas was more than double the normal average, Texas AgriLife said March 9 in a report.
Silver, Platinum Drop From Seven-Week Highs; Gold Little Changed in Asia
Silver and platinum dropped from seven-week highs after China's inflation and industrial output accelerated, adding pressure on the government to pare stimulus measures. Gold was little changed. Silver for immediate delivery lost as much as
1.2 percent to $16.8150 an ounce and was at $16.9350 at 3:02 p.m. Singapore time, while platinum dropped as much as 0.8 percent. Consumer prices in China rose 2.7 percent in February from a year ago, the National Bureau of Statistics said today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. Silver prices reached $17.6525 an ounce, while platinum gained to $1,610.75 an ounce yesterday, the highest levels for both metals since Jan. 21, on optimism industrial demand will increase as the global economic recovery gains momentum. ``Unlike gold, silver, platinum and palladium have industrial uses so they are affected by economic growth,''
said Zhu Lv, research manager at Shanghai Tonglian Futures Co.
``Any signs of a possible slowdown in China will have an effect on prices of these metals.''
Crude Oil Falls on Concern China May End Stimulus Spending, Slow Demand
Crude oil fell on speculation Chinese demand will slow as the government may end stimulus programs amid an increase in inflation and concern that recent price gains outpaced demand growth in the U.S. Chinese consumer prices surged 2.7 percent in February, a 16-month high, increasing expectations the government may end policies to fight the global recession, which may slow economic growth. U.S. refinery utilization fell last week for the first time in five weeks to 80.7 percent of capacity, an Energy Department report said yesterday. ``This should be bearish because the Chinese government might tighten their monetary policy earlier than expected,'' said Clarence Chu, a trader with options dealers Hudson Capital Energy in Singapore. ``Speculators in China will cut down on their positions.'' Crude oil for April delivery dropped as much as 59 cents, or 0.7 percent, to $81.50 a barrel, in electronic trading on the New York Mercantile Exchange. It was at $81.59 at 3:58 p.m. Singapore time. Yesterday, the contract rose 60 cents, or 0.7 percent, to $82.09, the highest settlement since Jan. 11.
Vale Tells China of Plan to Drop Annual Iron Ore Pricing, UC361.com Says
Vale SA, the largest iron ore producer, told Chinese steelmakers it plans to drop a 40-year tradition of setting annual prices in favor of shorter contracts, according to Hu Kai, an analyst at research company UC361.com. The Rio de Janeiro-based company sent a note to major Chinese steelmakers, who haven't decided what their responses will be, Hu said from Shanghai, citing mills he didn't name. Vale will stand to win higher sales through regular pricing after spot market rates soared to more than double last year's contract agreement. Iron ore producers in Australia, the biggest exporter, will make $20 billion more a year by selling products at cash levels rather than on annual contracts, Goldman Sachs JBWere Pty said March 1. Vale is seeking to raise contract iron-ore prices by more than 90 percent for the second quarter of 2010 in negotiations with Japanese steelmakers, Nikkei English News reported, without saying where it obtained the information.
Rubber Drops as China Inflation Reaches 16-Month High, Stoking Rate Fears
Rubber declined for a third day after data showed China's inflation climbed to a 16-month high, raising concern that the nation may raise interest rates to cool the economy, curbing demand for the commodity used in tires. Rubber for August delivery on the Tokyo Commodity Exchange fell as much as 0.9 percent, reversing an earlier 1 percent gain, and settled 0.3 percent lower at 291 yen a kilogram ($3,217 a metric ton).
China's consumer prices rose 2.7 percent in February from a year ago, the National Bureau of Statistics said in Beijing today, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg. The nation's output grew 20.7 percent in the first two months of the year, adding to the case for the government to pare back stimulus measures. ``Concern about monetary tightening in China is the largest drag on the price of rubber,'' said Hisaaki Tasaka, an analyst at ACE Koeki Co., a commodity broker in Tokyo. China has the world's largest car market and is the biggest user of rubber.
Copper Prices May Extend Advance as Stockpiles Peak: Chart of the Day
Copper, which has more than doubled in the past year, may extend its rally and trade close to a record in 2011 as production fails to meet soaring Chinese demand, sending stockpiles tumbling. The CHART OF THE DAY shows copper prices have soared even as inventories of the metal rose to the highest since 2004. Prices typically move in an inverse relationship to stockpiles, which can indicate the level of demand. Paul Cliff, a metals and mining analyst at Nomura Holdings Inc. in London, says the correlation will resume, with stockpiles shrinking as demand in China, the largest copper-using nation, keeps growing. ``A supply shortage will push prices up as inventories fall sharply through 2010 and 2011,'' Cliff said. ``We're bullish short, medium and long term.'' Nomura predicts the copper price will average $8,818 a metric ton in 2011 as stockpiles drop to equal 37 days of global consumption. Stocks slid to the equivalent of 39 days in 2006, when the price jumped 44 percent. The bank's price forecast is the highest of 15 analyst estimates compiled by Bloomberg. Demand will exceed output by 470,000 tons in 2010 and 950,000 tons in 2011, Nomura estimates.
Hebei Steel Is Planning More Acquisitions; Says Iron Ore Talks Continue
Hebei Iron & Steel Group, China's biggest steelmaker, is planning more mergers and acquisitions in China and abroad as part of a government drive to improve the country's mills. ``We want to make further progress on mergers and acquisitions,''
Chairman Wang Yifang said at a press conference in Beijing today, without identifying targets. The state-owned company is in talks to buy Shijiazhuang Iron & Steel Co., Wang said March 7. The Chinese government wants to accelerate consolidation in the steel industry to tackle overcapacity and curb pollution as output soared to a record last year. The overcapacity is depressing prices and hurting profitability, the China Iron & Steel Association said. ``In Hebei, two-thirds of the production comes from privately owned mills,'' Wang said. ``In times of favorable market conditions, they are unwilling to be merged.'' Hebei Steel is in contact with producers outside of its province for possible deals, he said.
For the complete stories summarized here, and for more of the day's top news, see TOP
-0- Mar/11/2010 8:38 GMT
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January 25, 2010
Top Stories: Stocks
Jan. 25 (Bloomberg) -- The following are the day's top stories
on stocks:
on stocks:
Asian Stocks Fall for Sixth Day on Bank Capital Raising, Profit Concerns
Asian stocks fell for a sixth day, the longest streak since
July, on concern Chinese banks need more capital and that
profit growth won't be enough to justify equity valuations.
Bank of China Ltd. lost 2.3 percent in Hong Kong on plans to
raise $5.86 billion from selling convertible bonds. Honda Motor
Co., which receives 42 percent of its sales from North America,
declined 1.7 percent on speculation U.S. measures to restrict
risk-taking at banks will derail the global recovery. BHP
Billiton Ltd., the world's largest mining company, sank 1.1
percent in Sydney as copper futures declined in London today.
The MSCI Asia Pacific Index lost 0.8 percent to 121.40 as of
4:45 p.m. in Tokyo. The index sank 4.2 percent in the past six
days on U.S. President Barack Obama's bank proposal and growing
concern China will take steps to rein in growth. Companies on
the gauge are priced at 1.6 times book value, near the highest
level since September 2008. ``Asian markets are correcting over
concerns the trajectory of growth is insufficient to justify
some valuations,'' said Tim Schroeders, who helps manage $1.1
billion at Pengana Capital Ltd. in Melbourne.
India Hit by Record Low `Buys' as Subbarao Poised to Raise Interest
Rates
Investment strategists are cutting recommendations on India
at a record pace after the country's stocks surpassed China as
the most expensive major emerging market for the first time
since 2006. The Bombay Stock Exchange Sensitive Index is valued
at 20 times estimated profits, higher than China for the first
time since November 2006 and the second-most expensive among
the 25 biggest markets after Japan, according to monthly data
compiled by Bloomberg. Even after the Sensex sank 4 percent
last week, the most in almost three months, its stocks trade
within 6.1 percent of analysts' average 12-month price
estimates. Rising valuations prompted analysts to cut ``buy''
ratings on Indian equities to a record low. Goldman Sachs Group
Inc. said the Reserve Bank of India plans its first interest
rate increase since 2006 this week to curb inflation. The last
eight times wholesale price increases climbed above their
long-term average, the Sensex posted average losses of 5.6
percent, Bloomberg data show. ``There are better opportunities
in other emerging markets,'' said Roger Groebli, the
Singapore-based head of financial market analysis at LGT
Capital Management, part of a group that oversees about $84
billion. India ``will be an underperformer for the first
quarter,'' he said.
VIX Options Show Bets on U.S. Stock Market Retreat Rising to 19-Month
High
Traders are piling into bets that the biggest sell-off in
U.S. shares since March will increase stock market volatility,
pushing call options on the VIX Index to the highest level in
19 months. Outstanding contracts speculating on an advance in
the Chicago Board Options Exchange Volatility Index climbed to
three times the number of wagers for a drop, the highest ratio
since June 2008, data compiled by Bloomberg show. The VIX,
which measures the cost of using options as insurance against
declines in the Standard & Poor's 500 Index, moves opposite to
equities more than 80 percent of the time. Investors are
doubling down after some of last week's most- traded options
rose 75 percent on Jan. 22. They're speculating President
Barack Obama's proposals to limit risk-taking by banks and
signs China will rein in growth will extend the S&P 500's drop
after it fell 5.1 percent in the last three days. ``There is
higher probability that we will see moves to the downside,''
said Tim Freeman, head of U.S. equity derivatives sales at
Capstone Global Markets LLC in New York. ``The changes that are
being proposed to the banking industry, the political
motivations and the policies that are being considered are game
changers and they will move this market in a big way.''
U.S. Stocks Fall Most Since October Amid Curbs on Bank Speculation,
China
U.S. stocks declined for a second week, sending the
Standard & Poor's 500 Index to the biggest drop since October,
as banks plunged on a White House proposal to limit financial
risk and China moved to cool economic growth. JPMorgan Chase &
Co. and Morgan Stanley slumped more than 8 percent as President
Barack Obama called for limiting speculation to prevent another
financial crisis. Exxon Mobil Corp. lost 4.4 percent and Alcoa
Inc. tumbled 14 percent on concern Chinese demand for
commodities will slow. The S&P 500 erased its 2010 gain,
retreating 3.9 percent to 1,091.76 for the week after closing
at a 15-month high on Jan. 19. The Dow Jones Industrial Average
fell 436.67 points, or 4.1 percent, to 10,172.98. The Nasdaq
Composite Index decreased 3.6 percent to 2,205.29. ``It's a
one-two punch,'' Ralph Fogel, head of investment strategy at
Fogel Neale Partners in New York, said of the curbs on Chinese
growth and Wall Street firms. ``In the end it's going to have
the same impact -- less flow of money into the marketplace.''
Decline in U.S. Stocks Pays Options Traders 75% Profit on Volatility
Bets
The biggest sell-off in the Standard & Poor's 500 Index
since March is rewarding options traders who bet on a surge in
volatility with gains of 75 percent. ``It's been a nice shift
for some people,'' said Justin Golden, a strategist at New
York-based Macro Risk Advisors LLC, which advises institutions
on equity derivatives. ``Before this week, the long options
community had been very frustrated. Volatility has been on a
downward path.'' Traders who buy options that gain in value
when the VIX rises are usually betting equities will retreat
because the volatility gauge moves in the opposite direction of
the S&P 500 more than 80 percent of the time. Financial and
technology stocks led the market lower yesterday as some
Democrats said they will oppose Ben S. Bernanke for another
term as head of the Federal Reserve and results at Google Inc.,
the Mountain View, California, owner of the world's most
popular search engine, disappointed investors. Wagers that the
Chicago Board Options Exchange Volatility Index would jump 46
percent to 32.5 were the most-active contract on Jan. 20 and
21, according to data compiled by Bloomberg. An increase to
that level corresponded with a decline of about 3 percent in
the Standard & Poor's 500 Index, said Randy Frederick, the
Austin, Texas-based director of trading and derivatives at
Charles Schwab & Co.
Canada Stocks Fall as Banks Slip on Concern Over Obama Plan; Barrick
Rises
Canadian stocks fell for a third day, completing their
biggest weekly drop since October, on concern that proposed
U.S. bank regulations will affect Canada's financial
institutions and that higher interest rates in China will slow
growth. Royal Bank of Canada, the country's largest bank,
dropped 2.4 percent a day after U.S. President Barack Obama
proposed limits on risk-taking. Nexen Inc., the energy company
that operates in Canada, Europe and Africa, decreased 4 percent
as crude oil futures sank to a one-month low. Teck Resources
Ltd., which sells coal to steel mills in China, declined 2.4
percent. ``Canada has been hit by a couple things: The
uncertainty caused by the Obama administration on its financial
plan and also, of course, we're relying so heavily on China,
there is a consideration there when rumors start heading around
they're going to stop aggressive lending practices,'' said Greg
Eckel, a money manager at Morgan Meighen & Associates Ltd. in
Toronto, which manages about C$900 million ($853.1 million).
The Standard & Poor's/TSX Composite Index tumbled 125.67
points, or 1.1 percent, to 11,343.67, its lowest close since
Nov. 6. For the week, the index lost 2.9 percent.
Global Stocks `Vulnerable to Correction' After Rally, Investor Rogers
Says
Global equities are ``vulnerable to correction'' after
rallying from their March lows and as governments around the
world withdraw stimulus measures, said investor Jim Rogers,
author of ``A Bull in China.'' The MSCI World Index climbed 67
percent from a more than 13-year low on March 9 as governments
boosted spending and central banks cut borrowing costs to pull
the global economy out of its worst recession since World War
II. The gauge has fallen 4.9 percent from a 16-month high on
Jan. 14. ``We're overdue for a correction'' said Rogers,
chairman of Rogers Holdings, said in an interview in Hong Kong.
``Stock markets around the world have been going up for the
past 10 months.'' The steepest stock market rally since the
1930s pushed worldwide valuations to six-year highs, helped by
more than $8 trillion in global spending to end the recession.
The MSCI World Index of 23 developed countries trades at more
than 28 times annual profit of its companies, near the highest
level since 2002.
European Stocks Retreat for Fourth Straight Day; U.S. Index Futures
Climb
European stocks fell for a fourth day, the longest losing
streak in two months, after U.S. shares plunged the most since
October and Ericsson AB reporting disappointing earnings. Asian
equities declined and U.S. index futures rose. Ericsson, the
world's biggest maker of wireless networks, sank the most since
November after fourth-quarter profit missed analysts'
estimates. Royal Philips Electronics NV, Europe's biggest
consumer-electronics maker, climbed 4.6 percent after posting a
third straight quarterly profit. The Dow Jones Stoxx 600 Index
lost 0.3 percent to 249.21 at 8:41 a.m. in London for the
longest stretch of declines since Nov. 20. The benchmark index
for European equities erased all of its gains for the year last
week after U.S. President Barack Obama called for a limit on
risk-taking by banks and concern mounted that China will take
measures to stem economic growth. ``The optimistic consensus at
the start of the year has been called into question,'' said
Matthieu Giuliani, a fund manager at Palatine Asset Management
in Paris, which oversees $5.7 billion. ``Growth has been weak.
We don't see a jumpstart in companies' sales figures. We need
to see a stronger rebound in economic data.''
Dubai Index Drops Most in Month on Obama Bank Plan, Oil; Leads Gulf
Lower
Dubai's index lost the most in a month, leading Gulf
markets lower, after U.S. stocks fell on a White House proposal
to limit financial risk and as China moved to cool economic
growth. Oil closed at a one-month low. Shuaa Capital PSC, the
United Arab Emirates' biggest investment bank, slumped to the
lowest level since May. United Development Co., the Qatari
developer building man-made islands off the Qatari coast,
retreated to the lowest in almost two months. The DFM General
Index fell 5 percent, the most since Dec. 9, to 1,570.09.
Qatar's gauge lost 1.6 percent. Crude closed down 2 percent at
$74.54 a barrel on Jan. 22. ``Friday's declining oil prices and
U.S. equities have had an impact, the Gulf always overreacts to
U.S. equities downside,'' said Mohamed Abu Ghoush, head of
equity brokerage at Al-Ahli Bank in Doha, Qatar. ``Markets are
still waiting for the 2009 results.'' Dubai's index has dropped
or gained more than 5 percent 16 times in the past 12 months,
that compares with twice for Abu Dhabi's measure, according to
data compiled by Bloomberg.
U.K. Stocks Cheapest on Record Versus European Peers: Chart of the Day
U.K. stocks are trading at the cheapest level on record
relative to their European peers, a sign to investors they are
worth buying even after the biggest rally in more than two
decades, according to top-ranked strategist James Montier. A
measure of valuing stocks, as used by Yale Professor of
Economics Robert Shiller, shows U.K. stocks are trading at 12.4
times earnings, compared with 17.9 for the rest of Europe.
That's the widest gap since at least 1973, according to data
from Morgan Stanley and Datastream. The CHART OF THE DAY
compares Shiller's price-to-earnings ratios for Datastream's
baskets of U.K. and other European stocks. The benchmark FTSE
100 Index has surged 51 percent from its low in March last
year, the biggest 10-month gain since 1987, raising concern
that prices have exceeded forecasts for earnings growth.
``Investors should react by remembering that valuation
matters,'' said Montier, a strategist at Grantham Mayo Van
Otterloo & Co. in London. ``The U.K. does look a little bit
cheaper.''
Japanese Stocks Decline for Second Day on Obama Proposal, Earnings
Concern
Japanese stocks fell for a second day on concern a plan by
U.S. President Barack Obama to limit risk-taking at banks will
crimp profits and as earnings reports further eroded confidence
in a global economic recovery. Kyowa Hakko Kirin Co. declined
4.3 percent, the steepest drop in the Nikkei 225 Stock Average,
after the drugmaker said profit missed its forecast. Mitsui
Chemicals Inc. sank 4.2 percent after the Nikkei newspaper said
its sales dropped. Toyota Motor Corp., the world's largest
carmaker, lost 2.1 percent after saying it's checking whether
to expand a recall. ``The fact that people are selling so much
shows the insecurity they have about the likelihood of Obama's
plan proceeding,'' said Masaru Hamasaki, chief strategist at
Tokyo- based Toyota Asset Management Co., which oversees the
equivalent of $14 billion. The Nikkei 225 fell 0.7 percent to
10,512.69 at 3 p.m. in Tokyo, its lowest close since Dec. 25.
The broader Topix index dropped 0.7 percent to 934.59, with
more than twice as many stocks declining as advancing.
Japan Price-to-Assets Makes Companies Cheapest Among International
Stocks
Not even the slowest economic growth in the industrialized
world or deflation can keep Byron Wien, David Herro and John
Alkire away from Japanese equities. Wien, the Blackstone Group
LP adviser who predicted last year's rallies in stocks and oil,
says Japan shares are his favorites. Harris Associates LP's
Herro, Morningstar Inc.'s international manager of the decade,
says stocks at the cheapest ever relative to assets will gain
even if the economy stagnates. Alkire of Morgan Stanley Asset &
Investment Management is betting low debt levels will spur an
advance that beats the U.S. Japan, the world's second-biggest
equity market, added 3.7 percent this year as measured by the
Topix index through last week, the most among the world's 10
largest economies. Overseas investors pumped almost $13 billion
into Japan during the two weeks ended Jan. 15, the most since
2004. Companies trade for an average 1.2 times book value,
almost half the valuation for the Standard & Poor's 500 Index,
according to data compiled by Bloomberg. ``My best investment
idea is Japan,'' said Wien, 76, a former market strategist at
Morgan Stanley and at hedge fund Pequot Capital Management Inc.
who predicted the end of the technology bubble in 2000. ``The
Japanese market looks relatively attractive assuming the
earnings come through, which I think they will.''
Hong Kong's Hang Seng Index Drops for Fourth Day; Completes 10%
Correction
Hong Kong stocks fell for a fourth day, dragging the
benchmark Hang Seng Index down more than 10 percent from its
high in November and giving the developed world its first
so-called correction of the year. Bank of China, the nation's
third-biggest lender, slipped 3.1 percent, extending its
decline since reaching a two-year high on Nov. 17 to 23
percent. Bank of Communications Co., China's fourth-largest
lender, dropped 2.6 percent. Angang Steel Co. and Maanshan Iron
& Steel Co. both fell on concern costs for Chinese steelmakers
will escalate due to rising iron ore prices. Petroleum stocks
declined as oil retreated today. Energy stocks have been among
the worst performers since November. The Hang Seng Index slid
0.6 percent to 20,598.55 at the close of trading in Hong Kong,
its lowest closing level since Oct. 5. The measure has tumbled
10.2 percent since closing at a high of 22,943.98 on Nov. 16.
Shares in Hong Kong have retreated more than three times as
fast as the MSCI World Index of 23 developed markets this year
as investors sold the city's banks and energy producers on
speculation China will rein in economic growth. Today's decline
marked the first 10 percent retreat in the developed world
since Greece's Athens Stock Exchange General Index lost 30
percent starting in October.
Top Stories: Bonds
Treasury Rally on Borrowed Time as Options Anticipate Fed Prone to
Tighten
January's surprise rally in Treasuries may prove fleeting,
as options traders bet on bigger price swings in bonds and
waning volatility in stocks for the first time since 2006.
Barclays Capital indexes show interest-rate volatility rose
from a six-month low in November on speculation borrowing costs
will increase as the improving economy allows the Federal
Reserve to remove the unprecedented cash it pumped into the
financial system. At the same time, confidence in the outlook
for profits helped push the Chicago Board Options Exchange
Volatility Index to an almost two-year low this month. The
correlation was negative in 2006, the last time policy makers
were increasing the target rate for overnight loans between
banks. Yields on 10-year Treasuries increased 0.75 percentage
point in the first half of that year, sparking a loss of 3.9
percent, according to Bank of America Merrill Lynch indexes,
while the Standard & Poor's 500 Index rose 1.8 percent. Fed
officials meet this week to discuss monetary policy. ``We've
probably seen the great secular bull low in yields,'' said
Mitchell Stapley, who helps oversee $13 billion of debt as
chief fixed-income officer for Fifth Third Asset Management in
Grand Rapids, Michigan. ``Earnings don't seem to be a concern
on anyone's plate right now. The level of rates, what happens
in the housing market, that's on the forefront of people's
minds and why we are getting fixed-income volatility spikes
that haven't made it over to the equity markets.''
Tighten
January's surprise rally in Treasuries may prove fleeting,
as options traders bet on bigger price swings in bonds and
waning volatility in stocks for the first time since 2006.
Barclays Capital indexes show interest-rate volatility rose
from a six-month low in November on speculation borrowing costs
will increase as the improving economy allows the Federal
Reserve to remove the unprecedented cash it pumped into the
financial system. At the same time, confidence in the outlook
for profits helped push the Chicago Board Options Exchange
Volatility Index to an almost two-year low this month. The
correlation was negative in 2006, the last time policy makers
were increasing the target rate for overnight loans between
banks. Yields on 10-year Treasuries increased 0.75 percentage
point in the first half of that year, sparking a loss of 3.9
percent, according to Bank of America Merrill Lynch indexes,
while the Standard & Poor's 500 Index rose 1.8 percent. Fed
officials meet this week to discuss monetary policy. ``We've
probably seen the great secular bull low in yields,'' said
Mitchell Stapley, who helps oversee $13 billion of debt as
chief fixed-income officer for Fifth Third Asset Management in
Grand Rapids, Michigan. ``Earnings don't seem to be a concern
on anyone's plate right now. The level of rates, what happens
in the housing market, that's on the forefront of people's
minds and why we are getting fixed-income volatility spikes
that haven't made it over to the equity markets.''
Corporate Bond Sales Cut in Half by Widening Yield Spreads: Credit
Markets
Corporate bond sales are falling and borrowing costs are
increasing for the first time in eight weeks amid investor
concerns about the pace of the economic recovery. Bond sales
worldwide fell 52 percent last week to $48 billion from $99.8
billion in the previous period, according to data compiled by
Bloomberg. So-called yield spreads widened for the first time
since the five days ended Nov. 27, based on Bank of America
Merrill Lynch's Global Broad Market Corporate Index. Reports
showed U.S. retail sales and housing starts unexpectedly
declined in December, while German investor confidence dropped
more than economists estimated this month. President Barack
Obama's plan to limit the size of banks raised investor
concerns that earnings growth may be curbed. Dallas- based
Energy Transfer Equity LP, which controls the third- largest
U.S. pipeline partnership, pulled a $1.75 billion high- yield
offering and Vietnam delayed a sale to this week. ``The market
feels as though it had lost sight of reality, with the
indiscriminate buying of risk while ignoring the economic
fundamentals,'' said Simon Ballard, the head of European credit
strategy at RBC Capital Markets in London. ``The wider
macroeconomic picture and a couple of recent events have made
investors sit back a bit and take stock.''
Treasuries Decline Before This Week's Growth Report, Three Debt Auctions
Treasuries fell, pushing yields up from a one-month low, on
speculation a U.S. report this week will show the world's
largest economy expanded in the last quarter of 2009 at the
fastest pace in almost four years. Bonds due in 30 years also
dropped as traders bet Federal Reserve Chairman Ben S. Bernanke
will win confirmation for a second term to pursue policies for
spurring the U.S. economy. The Treasury Department prepared to
auction a record-tying $118 billion of two-, five-and
seven-year notes starting tomorrow. ``The GDP figure will be a
good number,'' said Kazuaki Oh'e, a bond salesman in Tokyo at
Canadian Imperial Bank of Commerce, the nation's fifth-largest
lender. ``It's not good for long-term bonds because of
inflation fears. If the markets rise, that's a good time to set
a short position before the auctions.'' A so-called short is a
bet prices will fall. The benchmark 10-year note yield
increased two basis points to 3.63 percent as of 6:29 a.m. in
London, according to data compiled by Bloomberg. The 3.375
percent security due in November 2019 fell 5/32, or $1.56 per
$1,000 face amount, to 97 30/32. Yields declined to 3.58
percent on Jan. 22, the lowest level since Dec. 21.
U.S. Consumer's Demise May Be Offset by China, India, Nomura's Sheard
Says
Developing countries led by China and India will supplant
the American consumer as the source of ``natural growth'' for
the global economy, according to Paul Sheard of Nomura
Securities International Inc. There will be ``less exuberant
and robust consumption than we had in the past few years'' in
the U.S. because the American household will continue to
``tighten its belt,'' New-York based Sheard, global chief
economist at Nomura, said in a Bloomberg Television interview
in Hong Kong today. ``There are other parts of the world,
though, that can take up some of that slack,'' such as China
and India, he said. U.S. consumer spending, which accounts for
about 70 percent of its economy, probably dropped 0.6 percent
last year, according to the median estimate of 59 analysts
surveyed this month by Bloomberg News. The jobless rate held at
10 percent in December as discouraged workers stopped looking
for work. ``There is a legacy of all that debt, and if you
like, overconsumption that built up in the U.S. in the few
years riding up to the crisis,'' said Sheard, referring to the
collapse of the nation's housing market.
Treasury Asks Dealers About Impact of Fewer Fed Purchases of Mortgage
Debt
The U.S. Treasury Department asked bond dealers about the
potential market impact from the end of the Federal Reserve's
mortgage-backed securities purchase program, according to a
survey the department released in Washington today. The agenda
for Jan. 28 meetings shows the Treasury's effort to watch for
market disruptions and manage record borrowing. The U.S. is
braced for a second consecutive year of $1 trillion-plus budget
deficits amid debate over the federal debt limit, which stands
at $12.4 trillion and could be breached within weeks unless
lawmakers approve an increase. If Congress raises the debt
limit by $1.9 trillion, as the Senate is considering, the
Treasury would have room to borrow until early 2011, an
administration official said today. Meanwhile, debt managers
are asking whether the market expects turmoil from the end of
the Fed program, on track to happen three months after the
Treasury ended its own MBS purchases. ``The Federal Reserve has
frequently stated that its purchases of agency mortgage-backed
securities and agency debt will be executed by the end of the
first quarter of 2010,'' the Treasury told the dealers in
today's survey.
Sell Fannie Mae Mortgage Securities on Prepayment Risk, Declaration Says
Investors should bet against some Fannie Mae and Freddie
Mac securities because of the prepayment risk for those trading
above par, said Jim Shallcross, who oversees $12 billion at
Declaration Management & Research LLC. The government-supported
companies are set to buy delinquent mortgages out of the
securities at a faster pace, paying down the bonds at face
value, the 49-year-old director of portfolio management said in
a telephone interview. ``Right now, I think you're playing with
fire'' owning the securities, said Shallcross, who made $117
million for investors in two distressed-asset funds closed last
month. Securities to ``short'' with contracts to sell them in
future months include 30-year Fannie Mae mortgage bonds with
coupons of 5.5 percent, 6 percent or 6.5 percent, said
Shallcross, who is based in McLean, Virginia.
Bernanke Will Win Senate Reconfirmation, Republican Leader McConnell
Says
Ben S. Bernanke will keep his job as Federal Reserve
chairman, the White House and the Senate's senior Republican
predicted two days after wavering support among some Democrats
helped drive stock prices lower. President Barack Obama ``is
very confident that the chairman will be confirmed,'' David
Axelrod, a senior White House adviser, said on CNN's ``State of
the Union'' program. Senate Republican leader Mitch McConnell
said on NBC's ``Meet the Press'' that Bernanke will have
``bipartisan support in the Senate'' even as a number of his
party are opposed. The assurances followed declarations of
support for Bernanke from the top two Democrats in the Senate,
Nevada's Harry Reid and Richard Durbin of Illinois, who earlier
said they were undecided. John McCain, the Republican 2008
presidential nominee, and John Cornyn, who runs the party's
senate campaign committee this year, are against him. Online
traders yesterday raised the odds of approval to 92 percent
from as low as 65 percent on Jan. 22. ``We've dodged the bullet
on this one,'' said Greg Valliere, chief policy strategist at
Potomac Research Group in Washington. ``People were aghast by
what happened in the markets on Friday, and do they really want
to get angry letters from constituents who have lost money in
the stock market because of the Bernanke vote?''
Mexico Debt to Post Best Rally Since 2006 as Economic Rebound Takes Hold
Mexico's benchmark local bonds are poised for the biggest
annual rally in four years after underperforming regional debt
in 2009 as the economy recovers and the peso gains, Stone
Harbor Investment Partners said. The yield on Mexico's 10
percent peso bond due in December 2024 may plunge about 40
basis points, or 0.40 percentage point, in 2010, to 7.80
percent, said Pablo Cisilino, who manages $11.5 billion in
emerging-market assets at Stone Harbor in New York. That would
be the biggest one-year drop since 2006. Mexican domestic debt
returned 7.7 percent last year, less than the 10 percent return
posted by Latin American local bonds on average, according to
JPMorgan Chase & Co.'s ELMI+ index. The region's second-largest
economy will grow 2.95 percent in 2010 after contracting 7
percent last year, the most since 1932, the median forecast of
19 economists in a Bloomberg survey shows. ``People were too
pessimistic on the growth outlook for Mexico and very
pessimistic about the peso,'' Cisilino said. ``Things are
changing. They're starting to come around.''
U.K. Index-Linked Bond Sale to Attract `Spooked' Buyers, Threadneedle
Says
Britain's accelerating inflation is likely to spur
investors into buying 30-year index-linked bonds at a sale this
week, according to Threadneedle Asset Management. The Treasury
plans to sell an undisclosed amount of inflation-protected
bonds due in 2040 through banks as early as today, according to
the U.K. Debt Management Office. Consumer prices climbed 2.9
percent from a year earlier, 1 percentage point more than in
November, the Office for National Statistics said on Jan. 19,
the first time since May that the rate has exceeded the Bank of
England's 2 percent target. Inflation is accelerating after
policy makers printed as much as 200 billion pounds ($323
billion) to buy bonds as part of their so-called quantitative
easing policy, designed to drive down borrowing costs and lift
the economy out of the recession. ``Some investors must have
been spooked by the recent inflation data,'' said Sam Hill, a
money manager in London at Threadneedle, which oversees $94
billion. ``All evidence suggests there will be strong interest
for this bond, especially from long-term investors such as
pension funds.''
German Bunds Rise; Greek Auction This Week Stirs Peripheral Risk
Aversion
German government bonds rose as investors sought the safest
securities amid concern Greece may struggle to sell debt this
week, stirring concern about budget- financing problems for
other nations that use the euro. The gains pushed the yield on
the 10-year bund down to within two basis points of the lowest
since Dec. 21, while the two-year note yield remained within
three basis points of the lowest since Sept. 8. Greece's
national debt agency said Friday it had hired six banks to sell
at least 3 billion euros ($4.2 billion) of five-year bonds.
``Bunds gained as uncertainty in market sentiment remains
high,'' said Sean Maloney, an interest-rate strategist at
Nomura International Plc in London. ``Concern about Greece and
potential contagion effects continue to plague the euro area,
and this week's five-year syndication deal may prove to be
make- or-break for non-core markets.'' The yield on the 10-year
bund, Europe's benchmark government security, fel1 1 basis
point to 3.21 percent as of 7:39 a.m. in London. The 3.25
percent security maturing January 2020 rose 0.06, or 60 euro
cents per 1,000-euro ($1,415) face amount, to 100.35. The
two-year note yield was unchanged at 1.11 percent.
Saudi Arabia to Spend More on Boosting Economy, Keep Interest Rates Low
Saudi Arabia, the Arab world's largest economy, is in no
rush to raise interest rates and will keep plowing its oil
revenue into kick-starting growth. Central bank Governor
Muhammad al-Jasser said in a Jan. 23 interview he's not
planning to raise interest rates because inflation isn't a
concern and demand isn't strong enough to require higher
borrowing costs. Finance Minister Ibrahim al- Assaf told an
investors' conference in Riyadh yesterday that a ``continuous
stimulus'' is needed even as the economy rebounds from last
year's stagnation. Saudi Arabia's economy will grow more than 4
percent in 2010 after expanding less than 0.2 percent last
year, the finance minister said. Gross domestic product
increased 4.3 percent in 2008. The kingdom, the world's largest
oil exporter, last year announced that it would spend $400
billion on infrastructure over a five-year period to bolster
the economy, the largest stimulus package in the Group of 20
nations. The country is allocating almost $70 billion to
investments this year, a 16 percent increase on 2009. Rising
oil prices, which have rebounded to around $75 a barrel from
less than $35 in February, are also likely to boost growth this
year.
Corporate Bond Risk Increases in Europe, Credit-Default Swap Prices Show
The cost of insuring against losses on European corporate
bonds rose, according to traders of credit-default swaps.
Contracts on the Markit iTraxx Crossover Index of 50 companies
with mostly high-yield credit ratings climbed 7 basis points to
455, according to JPMorgan Chase & Co. prices at 7:25 a.m. in
London. The index is a benchmark for the cost of protecting
bonds against default and an increase signals deterioration in
perceptions of credit quality. The Markit iTraxx Europe Index
of 125 companies with investment-grade ratings rose 2 basis
point to 83.25, JPMorgan prices show. A basis point on a
credit-default swap contract protecting 10 million euros ($14.1
million) of debt from default for five years is equivalent to
1,000 euros a year.
Japan's 10-Year Bond Futures Fall as Stocks Pare Loss, Debt Supply Rises
Japanese 10-year bond futures fell after local stocks pared
losses, drawing investors away from lower-yielding government
debt. Benchmark 10-year yields also climbed on speculation
Prime Minister Yukio Hatoyama's administration will issue more
debt to pay for stimulus measures as falling prices and
unemployment threaten the economic recovery. Japan's national
debt will likely reach 973 trillion yen ($10.8 trillion) in the
fiscal year ending March 2011, according to budget-related
documents on the Finance Ministry's Web site. ``The JGB market
is being led by futures, which is following equities,'' said
Keiko Onogi, a strategist in Tokyo at Daiwa Securities SMBC Co.
``Since the equity market seems to be heading up, that's been
weighing on futures.'' Ten-year bond futures for March delivery
declined 0.15 to 139.08 at the 3 p.m. afternoon close in Tokyo.
Indian Bonds Decline Most in a Week Before Central Bank's Policy Meeting
India's 10-year bonds fell the most in almost a week on
speculation the central bank will act to curb money supply at
its policy meeting on Jan. 29 to slow inflation. Yields rose as
the Reserve Bank of India will probably ask banks to set aside
a greater proportion of their deposits as reserves, a Bloomberg
survey showed. The central bank will raise the cash reserve
ratio by 50 basis points to 5.5 percent, a median of estimates
by 16 economists showed. ``Investors are paring their positions
because bond prices have rallied a quite a bit over the past
week,'' said S. Srikumar, chief of fixed-income at state-owned
Corporation Bank. ``There will be an element of caution in the
run up to the policy meeting.'' The yield on the 6.35 percent
note due January 2020 rose two basis points to 7.57 percent as
of 10:32 a.m. in Mumbai, according to the central bank's
trading system. The price fell 0.13, or 13 paise per 100 rupee
face amount, to 91.58.
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