Asian stocks set for worst monthly drop in three years on global rout

HONG KONG - Asian shares fell on Monday and looked set for their worst monthly performance in three years after top Federal Reserve officials kept the door open for an interest rate hike in September and Chinese stock markets took a fresh tumble.

Global markets are bracing for Chinese data on Tuesday which is expected to show the world's second-largest economy is continuing to lose momentum.

A Reuters poll showed China's official factory sector activity likely fell to a 3-year low.

U.S. business surveys, factory orders, trade data and non farm payrolls will also be released this week, keeping investors on edge after one of the wildest trading weeks of the year.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.8 percent and is set to fall 10 percent this month, its worst monthly drop since May 2012.

Japan's Nikkei was down more than 1 percent and South Korea's Kospi shed 0.6 percent. Australian shares lost 1.2 percent.

Selling intensified as China markets extended declines. By midmorning, Shanghai stocks, the epicenter of this month's whip-saw action, were down 3 percent. They have plunged more than 40 percent since mid-June.

U.S. stock futures shed 1 percent, pointing to weakness on Wall Street later in the day.

"Overall sentiment towards emerging markets continue to be quite cautious," said Frances Cheung, Asia strategist at Societe Generale in Hong Kong.

"Unless we see a decisive trend forward in the trajectory of U.S. interest rates, investors will continue to be wary of emerging market assets."

U.S. Federal Reserve Vice Chairman Stanley Fischer, speaking at the central bank's conference in Wyoming, said recent volatility in global markets could ease and possibly pave the way for a rate hike.

"The release of U.S. ADP employment on Wednesday and non-farm payrolls on Friday will be key in analyzing the quantum of a September rate hike," Angus Nicholson, market analyst at trading services provider IG in Melbourne, wrote in a note to clients.

Prospects of higher interest rates and returns in the United States combined with China's slowdown have diminished the appeal of emerging markets as investors have dumped riskier assets.

Investors sold $5.9 billion of emerging market assets between Aug 20-26, a sharp increase from $1.5 billion the week earlier, according to Nomura fund flows data.

Credit markets, often a harbinger of things to come for equities, spelt further pain in store for emerging markets.

An index for Asian high-yield credit has fallen sharply compared to a relatively steady performance in the investment grade index, according to Thomson Reuters data.

The dollar eased 0.4 percent to 121.15 yen after rising to the week's high of 121.76 on Friday following the Fed officials' comments that kept prospects of a September hike alive.

The euro was up 0.5 percent at $1.12405  after touching an eight-day low of $1.1156 on Friday.

The market will watch Thursday's policy meeting to see if the European Central Bank will be inclined to ease monetary policy further in the wake of the recent global markets turmoil, though no imminent change is expected.

U.S. crude oil prices dipped early on Monday as their biggest two-day surge in quarter of a century ran its course.

U.S. crude was down 0.8 percent at $44.86 a barrel after jumping more than 6 percent on Friday on frenetic short-covering fueled by violence in Yemen, a storm in the Gulf of Mexico and refinery outages.

The contract was still down nearly 5 percent on the month, when it hit a 6-1/2-year low last week in the wake of China-led global growth fears.

source: interaksyon.com

China fears, global growth doubts grip markets

MADRID - Markets are watching for China's next move as signs of a slowdown in the world's second-largest economy stack up, raising expectations it will act to stoke growth.

A looming snap election in Greece and a closely watched conference hosted by the Federal Reserve in the United States are also likely to keep investors on their toes in the coming week, in particular as they look for hints on when the U.S. will raise interest rates.

Fears that Chinese growth is weakening, dragging down the global economy with it, are hammering commodities and stocks.

Alarm bells rang out across world markets on Monday as a 9 percent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors.

On Friday, a survey showed Chinese manufacturing slowed the most since the global financial crisis in 2009 - adding to other worrying clues about the country's health, including its falling exports.

China devalued the yuan earlier in August by pushing its official guidance rate down 2 percent. The central bank has said there was no reason for the currency to fall further, but investors are also bracing for further interest rate cuts.

"It will be all eyes on the Chinese authorities for any further policy support steps, alongside the People's Bank of China yuan fixings and trading swings," analysts at Investec Economics said in a note to clients.

China is also widely expected to relax reserve requirements ratios for its banks again in the coming months, a measure intended to spur lending by reducing the cash they need to hold. It is trying to keep its economy on course to grow 7 percent in 2015 - its slowest pace in a quarter of a century.

"We continue to expect a total of 100 basis points of reserve requirement ratio cuts by end-2015, with the first cut likely to take place within the next two weeks," economists at Standard Chartered said.

The cash reserves ratio has already been cut three times this year.

Eyes on Fed, Greece

By the end of the coming week, attention may shift away to the Rocky Mountains, where policymakers are due to gather from Aug. 27-29 for the Fed's conference of central bankers, finance ministers, academics and financial market participants in Jackson Hole.

Fed chair Janet Yellen is not expected to attend, raising the prospect that other Fed officials may be more tight-lipped about the likelihood of the first rate increase in almost a decade, some analysts said.

The prospect of an increase as soon as September is receding, however.

Last week the Fed released minutes of its July meeting, giving no clear signals as to the timing of such a move - which would affect markets across the world and could cause more pain for emerging market assets, already being hit by China's woes.

Though they were more confident about U.S. growth prospects, the minutes showed, Fed policymakers are concerned about weakness in the global economy - fears likely to have been heightened by Monday's market rout in which the dollar also fell sharply.

Further clues on both matters should be gleaned from data releases in the coming week, including second-quarter U.S. gross domestic product figures due on Thursday.

Quarter-on-quarter growth in the period is expected to be revised upwards to 3.2 percent from 2.3 percent, according to a Reuters poll.

In the euro zone, investors will be looking at an German economic sentiment survey due on Tuesday for a better idea of the scope of the bloc's recovery.

Preliminary August consumer price readings for Germany and Spain on Friday will provide further insight into how effective the European Central Bank's bond-buying efforts have been at warding off deflation.

But the spotlight will mainly fall once again on Greece, where Prime Minister Alexis Tsipras has resigned. That opens the way for early elections after he secured much-needed funds in the country's third international bailout program.

The current Greek government aims to strengthen its position in the election after accepting a rescue deal it once opposed. But that creates more uncertainty for markets already on edge over whether Greece will deliver on promised reforms and get its economy and banks back on track.

source: interaksyon.com

U.S. shares drop on Greece uncertainty, rate hike anticipation

NEW YORK - A setback in Greek debt talks pushed U.S. and European shares lower on Friday, along with investor views that positive U.S. data may accelerate the timing for a hike in interest rates.

Oil prices fell on concerns production may rise further.

The International Monetary Fund delegation left Greek debt negotiations on Friday because of "major differences" with Athens on the same day that EU officials held their first formal talks on the possibility of Greece defaulting.

"It's largely the Greek situation again, and that's been played out on a day-to-day basis where you had a huge rally followed by a decline predicated on whether they are coming closer or moving further from a resolution," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

However, the darkening Greek outlook failed to fluster Prime Minister Alexis Tsipras, who holed up with his negotiators after proclaiming optimism at an open air concert.

The euro inched higher against the dollar after Tsipras'comments even though equity and bond investors were skeptical.

"You have to question whether (the Greeks are) looking at reality," said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

U.S. Treasuries prices ended little changed, with longer-dated yields holding below seven-month highs as concerns about a Greek default supported safety demand for bonds ahead of a Federal Reserve policy meeting next week.

A U.S. consumer sentiment survey and production data, after strong retail sales data on Thursday, gave a rosy view of the U.S. economy ahead of the Federal Reserve's June 17 policy statement, which may provide clues on timing for the first U.S. rate hike in nearly a decade.

"Both of these led the market, coupled with yesterday's report, to think that the first hike from the Fed could be closer," said OakBrook's Sampson, adding that lift-off could be in the fall, ahead of her previous expectation.

The Dow Jones industrial average fell 140.53 points, or 0.78 percent, to 17,898.84, the S&P 500 lost 14.75 points, or 0.7 percent, to 2,094.11 and the Nasdaq Composite dropped 31.41 points, or 0.62 percent, to 5,051.10.

The S&P and the Dow showed slight gains for the week while the Nasdaq fell slightly.

Oil fell for a second straight day as investors took profits after Saudi Arabia said it was ready to raise production to record highs, adding to worries over global oversupply.

Brent crude settled down $1.24, or 2 percent, at $63.87. For the week, Brent ended up 0.7 percent. U.S. crude fell 81 cents, or 1.3 percent, to $59.96. It rose 1.5 percent on the week.

In the late afternoon, the dollar index was unchanged after a day of choppy trading against a basket of major currencies while the euro was essentially flat after rising earlier in the day.

MSCI's all-world country index fell 0.4 percent but was on track for its first weekly gain in four, while the pan-European FTSEurofirst 300 index fell 0.8 percent.

source: interaksyon.com

Asian shares erase gains, China factory weighs

TOKYO - An index of Asian shares erased its early gains on Tuesday after a measure of Chinese factory activity unexpectedly skidded to an 11-month low.

The flash HSBC/Markit Purchasing Managers' Index (PMI) dipped to 49.2 in March, below the 50-point level. Economists polled by Reuters had forecast a reading of 50.6, slightly weaker than February's final PMI of 50.7.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.1 percent.

The private survey signaled persistent weakness in the world's second-largest economy that is likely to add to calls for more policy easing from Beijing.

"A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers," Annabel Fiddes, an economist at Markit said.

The Shanghai Composite Index, which has recently pushed to seven-year highs, sagged 0.3 percent in early trading. Japan's Nikkei stock average slipped about 0.5 percent, pulling away from the previous session's 15-year highs.

The U.S. dollar edged slightly higher on the day, but still remained well off its recent highs as investors bet that the U.S. Federal Reserve will stay its hand on hiking interest rates in the months ahead.

Underscoring that the long-term view remains intact but the near-term is unclear, Fed Vice Chair Stanley Fischer, the central bank's second-in-command, said on Monday that the Federal Reserve is "widely expected" to begin raising interest rates this year though the policy path remains uncertain.

Fischer said the stronger dollar and weaker oil prices figure in U.S. policymaking, but said the central bank is "trying to look through those phenomena."

The dollar plunged last week after the Fed cut its inflation outlook and its growth forecast. The market consensus is that the Fed will hold off raising rates until at least September, rendering short-term directional bets difficult to make.

The dollar index, which tracks the greenback against a basket of six major rivals, edged up about 0.2 percent to 97.179 .DXY, but remained below its 12-year peak of 100.390 struck on March 13.

The dollar was up 0.1 percent on the day against its Japanese counterpart at 119.80 yen, but remained well below Friday's session high of 121.20 and levels above 122 yen touched earlier this month.

The euro stood at $1.0923, down about 0.2 percent from the previous session but still well above a 12-year nadir of $1.0457 plumbed last week before the Fed's statement.

The euro got a lift against the dollar on Monday after European Central Bank President Mario Draghi said he expected consumer prices to rise gradually by the end of the year even if they might remain very low or negative in the months ahead.

Some market participants took this as a sign that the ECB might wrap up its bond-buying scheme early, though Draghi said it intended to carry out purchases at least until end-September.

The weaker dollar lent support to dollar-denominated commodities, though some investors took profits on recent rallies. U.S. crude futures edged down about 0.4 percent to $47.28 a barrel after soaring 1.9 percent in the previous session.

Spot gold edged down about 0.2 percent after a four-day rally, to $1,187.10 an ounce.

source: interaksyon.com

Asian shares skid, but dollar regains some traction

MANILA - Asian shares stumbled on Tuesday though the dollar regained firmer footing, after disappointing data cast doubt on the strength of the U.S. economy and gave investors little reason to hope for stability in emerging markets after their recent rout.

MSCI's broadest index of Asia-Pacific shares outside Japan fell about 1.4 percent, touching its lowest level since early September at one point and flirting with its biggest one-day decline since August. But the greenback's descent took a breather, with the dollar index gaining 0.2 percent to 81.164.

Hong Kong shares, reopening on Tuesday after the Lunar New Year holiday, caught up with plunges elsewhere. Mainland Chinese markets remained shut for the holiday and will reopen on Friday.

"Experienced emerging market investors would be looking at this selldown with great interest, looking to pick up quality names on the dip, but they are still in the minority for now," said Erwin Sanft, Standard Chartered's Hong Kong-based China equity strategist.

Japan's Nikkei stock average lost 3.3 percent, extending its declines into a fourth session, breaking below the key technical 200-day moving average for the first time since November 2012 and bringing losses for this year to around 13 percent.

That makes it the worst performer among major developed markets since the start of 2014, with the S&P 500 down 5.8 percent and the pan-European FTSEurofirst 300 down 3.3 percent. The sharp drop came even after the Bank of Japan bought 123 billion yen ($1.21 billion) worth of exchange traded funds this year as of February 3 to support the equities market.

Data showing U.S. manufacturing activity slowed sharply last month dealt a heavy blow to markets already worried that the U.S. Federal Reserve's decision to taper its asset purchases would lead to capital flight from emerging markets.

"Investors should steer clear of risk assets over the short term as the turmoil does not look like it will be over anytime soon," Mitul Kotecha, the Hong Kong-based head of global foreign exchange strategy for Credit Agricole, said in a note to clients.

"A combination of tapering, a confluence of country- specific emerging market concerns and weaker growth in China provide the backdrop for a volatile few weeks, if not longer, ahead," Kotecha added.

The yield on benchmark 10-year U.S. Treasury notes stood at 2.589 in Asian trading, after falling as low as 2.582 percent on Monday, the lowest since November 1.

January's sharp fall in U.S. output activity came on the back of the biggest drop in new orders in 33 years, while construction spending barely rose in December, suggesting the U.S. economic recovery is more tenuous than some investors had believed.

The data pushed the benchmark S&P 500 index into its worst single-day drop in seven months, while the CBOE volatility index soared 16.5 percent to close at its highest level since December 2012.

That helped send the dollar as low as 100.77 yen and the euro as low as 136.37 yen, levels neither pair had touched since late November.

In Asian trading, the dollar took back some lost ground, adding about 0.3 percent to buy 101.24 yen, while the euro rose 0.1 percent on the day to 136.75 yen.

The Australian dollar rallied after the Reserve Bank of Australia dropped its easing bias in the first policy review of the year, encouraging markets to increase the chance of an interest rate hike.

The Aussie was last up 1.5 percent at $0.8877 after the RBA also toned down its rhetorical campaign for a weaker currency.

On the commodities front, U.S. oil edged up slightly to $96.62 a barrel, after plunging $1.09 on Monday, as the weaker-than-expected U.S. factory data fanned fears about demand in the world's largest economy.

March Brent crude firmed slightly to $106.04 a barrel after two straight sessions of losses.

The stock market selloff added to the safe-haven appeal of gold, with spot gold steady on the day at $1,259.15 an ounce, after gaining 1.1 percent on Monday.

But three-month copper on the London Metal Exchange edged down to $7,034.75 a tonne after earlier hitting a two-month low and on track for its tenth straight losing session.

source: interaksyon.com

Dow, S&P retreat for second day amid investor caution

NEW YORK - U.S. stocks fell on Tuesday, with the Dow and the S&P 500 retreating further from milestone levels, led by a slide in Best Buy after a disappointing outlook.

Trading remained in a tight range with U.S. Federal Reserve Chairman Ben Bernanke scheduled to speak in Washington at 7 p.m. EST. Charles Evans, the president of the Chicago Federal Reserve Bank, said earlier on Tuesday that the central bank may need to wait until next year, possibly until March, before beginning to wind down its massive bond-purchase program.

Cautious forecasts from Best Buy and Campbell Soup Co gave investors a reason to sell some stocks. Best Buy shares slid 11 percent to close at $38.78, while Campbell Soup fell 6.2 percent to $39.21.

The Dow briefly rose above 16,000 but failed to close above that level for the second day. The S&P 500 retreated further from the 1,800 level it hit on Monday. Despite the two-day decline, the S&P 500 is still up about 25 percent for the year. The benchmark index is on track for its biggest yearly gain since 2003.

"The last couple of days have been a bit choppy, signaling a top here, but the market is extremely resilient to any bad news and funds continue to flow into stocks and risky assets from bonds and fixed income," said Tim Ghriskey, who helps manage more than $1.5 billion as chief investment officer of Solaris Asset Management LLC.

The Dow Jones industrial average slipped 8.99 points, or 0.06 percent, to end at 15,967.03. The Standard & Poor's 500 Index declined 3.66 points, or 0.20 percent, to finish at 1,787.87. The Nasdaq Composite Index dropped 17.51 points, or 0.44 percent, to close at 3,931.55.

Best Buy is cutting prices for the holiday season to thwart fierce competition from Wal-Mart and other discount and online rivals, a move that it warns will hurt margins for the current quarter.

Campbell Soup, the world's largest soup maker, also cut its full-year profit forecast after a drop in demand for its soups and drinks resulted in first-quarter earnings that fell far short of analysts' estimates.

But a recovery in the U.S. housing market helped Home Depot exceed profit and sales estimates for the third quarter, prompting the No. 1 home improvement chain to raise its fiscal-year outlook for the third time this year.

The stock gained 0.9 percent to end at $80.38 after hitting a lifetime high of $82.25.

The S&P 500 has more stocks up so far this year than in almost any other year since 1980, according to Frost Investment Advisors.

"221 stocks in the index are up more than 30 percent. In fact, it has been over 530 trading days now since the stock market has seen the 10 percent correction that many predicted over the last 529 or so days," Frost Investment said in a note to clients.

On Wednesday, minutes from the Fed's October meeting are scheduled to be released. At that meeting, the Fed decided to stick with its bond-buying program. Investors have been bracing for a pullback from the stimulus program since the summer.

"I'd say there's a very low probability the Fed does anything between now and the end of the year," said Dan Veru, chief investment officer of Palisade Capital Management, which has $4.5 billion in assets and is based in Fort Lee, New Jersey.

Tesla Motors shares rose 3.7 percent to $126.09 in a volatile session. U.S. traffic safety regulators launched an investigation into the luxury electric sports car maker's Model S sedan after three car fires in six weeks.

About 5.8 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly below the five-day average closing volume of about 6.1 billion, according to BATS exchange data.

On the New York Stock Exchange, decliners beat advancers by a ratio of slightly more than 2 to 1. On the Nasdaq, nearly two stocks fell for every one that rose.

source: interaksyon.com

Asian shares sag, dollar rises on upbeat U.S. data

TOKYO - Asian shares sagged on Friday though upbeat signals on China's manufacturing activity limited losses, while the dollar pushed higher after upbeat U.S. data led some investors to price-in a less dovish stance at the U.S. Federal Reserve.

China's manufacturing sector grew at the fastest in 18 months in October, with the official Purchasing Managers' Index (PMI) rising to 51.4 last month from September's 51.1, beating economists' consensus forecast of 51.2.

The final HSBC/Markit Purchasing Managers' Index (PMI) came in at 50.9, up from 50.2 in September and unchanged from a preliminary flash estimate released last week.

MSCI's broadest index of Asia-Pacific shares outside Japan fell about 0.2 percent, while Australian shares .AXJO gave up 0.2 percent, but still remained just shy of five-year highs. Japan's Nikkei stock average erased early gains and dropped 0.6 percent.

U.S. S&P E-mini futures edged up 0.1 percent, after the S&P 500 Index closed down about 0.4 percent but still gained 4.5 percent for the month.

Later on Friday, the U.S. ISM survey of manufacturing for October could offer investors a fresh signal on the Fed's future course.

"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Data on Thursday showed the pace of business activity in the U.S. Midwest jumped more than expected in October, soothing some worries about sluggish fourth-quarter growth after last month's federal government shutdown.

A decline in new jobless claims in the latest week also added to evidence that the economy weathered the shutdown. New claims fell by 10,000 to 340,000, just above the average estimate of 339,000.

Still, not all investors or economists were convinced that the latest U.S. data heralded a shift in monetary policy expectations.

"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays wrote in a note to clients, adding that they still to expect the central bank to begin reducing its current $85 billion monthly bond purchases in March 2014.

Pressure on euro

The euro remained under pressure after plunging in the previous session as euro-zone inflation dropped to its lowest rate in nearly four years, heightening expectations that the European Central Bank will further ease its monetary policy.

The euro dropped about 0.3 percent to $1.3545, moving away from a two-year peak of $1.3833 set one week ago. On Thursday, it suffered its biggest one-day fall against the greenback in six months, tumbling 1.1 percent.

Data on Thursday showed euro-area inflation slowed to a four-year low of 0.7 percent last month, far below the ECB's target of just under 2 percent. Other data showed unemployment held at record highs in September.

The dollar index, which measures the greenback against six major currencies, was on track for a sixth session of gains, rising 0.3 percent to 80.398 after touching a two-week peak of 80.418 and pulling further away from a nine-month trough of 78.998 hit one week ago.

Against the Japanese currency, the dollar was about 0.2 percent lower on the day at 98.18 yen.

In commodities trading, gold steadied but was still trading close its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar. Spot gold edged up 0.1 percent to $1,326.53 an ounce, after sliding 1.4 percent on Thursday.

source: interaksyon.com

Asian shares cheer as deal to avert U.S. default reached

SYDNEY - Share markets from Australia to Japan staged a relief rally on Thursday after legislators produced a last-minute deal to lift the U.S. government's borrowing limit and dodge a potentially catastrophic debt default.

The agreement, crafted by U.S. Senate leaders, has been approved by Congress, leaving President Barack Obama to sign the bill into law. Obama has vowed to do so promptly and begin reopening the government "immediately.

It came just hours ahead of an October 17 deadline when the Treasury Department said it would have exhausted its borrowing authority.

MSCI's broadest index of Asia-Pacific shares outside Japan hit a fresh five-month high and was last up 0.4 percent. Tokyo's Nikkei advanced 1.2 percent to its highest in three weeks.

But in what appeared to be a buy-on-the-rumor/sell-on-the-fact move, U.S. stock index futures actually dipped on the news, having already rallied 1.3 percent overnight on hopes that a breakthrough was imminent.

The dollar index, which tracks the greenback's performance against a currency basket, also slipped a touch to 80.381, pulling back from a one-month high of 80.745.

The deal, however, does not resolve the fundamental issues of spending and deficits that divide Republicans and Democrats. It funds the government until January 15 and raises the debt limit through to February 7, so global markets face the possibility of another showdown in Washington early next year.

"The can has been kicked further down the road...the reset button has been pushed and we will go thought this all again in two months time," said Evan Lucas, market strategist at IG in Melbourne.

But Lucas expected "normal trading" to return over the coming days as the earnings season gets underway.

Still, the resolution couldn't have come at a better time for companies such as South Korean train maker Hyundai Rotem, which recently launched an initial public offering in what could be the country's biggest share sale so far this year.

Crisis over?

In the currency market, the improved risk appetite saw investors favor high-yielding currencies including the Australian dollar.

The Aussie dollar hit a 4-month high of $0.9574 and scaled a 4-1/2 month peak of 94.48 yen. It has since stepped back a notch to $0.9534 and 94.01 yen.

Against the yen, the U.S. dollar briefly reached a three-week high of 99.01, before strong selling interest knocked it back to 98.64. The euro edged up 0.1 percent to $1.3549.

Among commodities, copper slipped 0.5 percent to $7,227 a tonne (1 tonne = 1.12 metric tons), while gold traded at $1,280 an ounce -- struggling to gain momentum in the absence of safety bids. U.S. crude dithered at $102 a barrel.

Many traders are already trying to get past the fiscal drama and looking to see when a backlog of U.S. economic data, including the September payrolls, will be released when the partial government shutdown is lifted.

With the maneuvering in Washington just about over, investors will re-focus on economic news and the timeline for the U.S. Federal Reserve's tapering of its bond-buying program -- a major driver of global assets in recent months.

The Fed stunned markets last month by opting to delay the start of stimulus reduction.

"It will be some time before we are able to get a clear read on the U.S. labor market post-shutdown," said Westpac economist Elliot Clarke.

"But a logical expectation given recent events and the lack of a long-term solution is that we will see soft employment growth through the remainder of 2013 and into 2014."

That, Clarke said, is likely to see the Fed maintain a dovish tilt, adding the U.S. central bank will very likely have to downgrade its 2013 and 2014 growth forecasts given the impact of the U.S. government shutdown.

source: interaksyon.com

Window-dressing seen to prop up stock market this week

MANILA - Buying momentum from last week's trades may spill over this week on quarter-end window dressing and improved risk appetite brought about by the US Federal Reserve's move to keep the pace of its economic stimulus at least for now.

With the US central bank's decision giving equities a temporary reprieve and diminishing concerns of a military attack against Syria, markets begin the week with a relatively clean slate as the two biggest concerns that have weighed on sentiments recently were eased off the table, analysts said.

"One thing going for the local market is the approach of the end of third quarter traditionally marked by window-dressing induced increase in share prices, particularly for members of the composite measure," said Jun Calaycay of Accord Capital Equities Corp.

The final week of trades in the first and second quarters delivered gains of 2.2 percent and 5.1 percent, respectively, putting this week's upside target range between 6,560 and 6,750, Calaycay said.

"We see no reason for the index to go down in the near term now that the Fed has postponed its tapering, which has resulted in a risk-on sentiment," said BPI Asset Management in a weekly report.

However, the Philippine Stock Exchange index's may succumb to pockets of profit-taking following the local barometer's 11.96 percent rally since August 28, BPI added.

The Philippine stock market is coming off a strong week of gains, soaring 4.5 percent to close at 6,424.45 after the Fed decided to hold off the tapering of its $85-billion bond-buying program, a huge driver of stock market rallies in the past.

"As the tapering concern moves to the background, Congress and the White House are seen to get entangled in debates over the US debt ceiling. This is no different from the tiff that nearly shut down government in 2011 and, yet again, early this year...A US default, or at least the prospect of it, may once more shatter confidence in equities," Calaycay said.

The US Treasury may hit its borrowing limit by mid-October. The cap must be raised to prevent the world's largest economy from defaulting on its outstanding obligations.

Fears of a government shutdown and conflicting signals from Fed members dragged the Dow Jones industrial average to its biggest daily slide since August 15. The Dow fell 185.46 points, or 1.2 percent to 15,451.09 last Friday.

A Federal Open Market Committee (FOMC) member signaled the central bank could start reducing stimulus next month and another blasted the decision not to taper in September.

"With economic policies in place and expectations for full year economic growth set, we see no immediate factors that will influence the market to move exceedingly higher. Volatility should be expected in the coming days as the eyes of investors will remain on what happens to US in the next weeks or even month," Maria Arlysa E. Narciso of AB Capital Securities Inc.

source: interaksyon.com

US Fed surprises, sticks to stimulus as it cuts growth outlook

WASHINGTON - The U.S. Federal Reserve defied investor expectations on Wednesday by postponing the start of the wind down of its massive monetary stimulus, saying it wanted to wait for more evidence of solid economic growth.

Investors responded by propelling U.S. stocks to record highs and driving down bond yields. Yields on U.S. Treasury debt had risen over the summer on expectations the Fed would cut back its $85 billion a month in bond purchases that have been the cornerstone of its efforts to spur the economy.

Furthermore, Fed Chairman Ben Bernanke refused to commit to reducing the bond purchases this year, and instead went out of his way to stress the program was "not on a preset course." In June he had said the Fed expected to cut back before year end.

"There is no fixed calendar schedule. I really have to emphasize that," he told a news conference. "If the data confirm our basic outlook, if we gain more confidence in that outlook ... then we could move later this year."

The reaction in markets was swift and sharp. The U.S. dollar fell to a seven-month low against major currencies and the price of gold, a traditional inflation hedge, soared more than 4.0 percent.

"The Federal Reserve remains quite concerned about the overall sluggishness of the economy, preferring to take the risk of being too loose for too long as opposed to tighten prematurely," said Mohamed El-Erian, co-chief investment officer at Pimco, which manages the world's largest mutual fund.

Some economists said it was possible the Fed might not begin to wind down its bond buying until after Bernanke's term as Fed chairman expires in January. That would leave the tricky task of unwinding the stimulus to his successor, quite likely Fed Vice Chair Janet Yellen, who was identified by a White House official on Wednesday as the front-runner for the job.

Bernanke declined to comment on his future, beyond saying he hoped to have more information soon.

A Reuters poll of 17 top Wall Street bond dealers found that nine were now looking for the U.S. central bank to trim its bond purchases at a meeting in December, but few held much confidence in their forecasts. One looked for a reduction in October, while two more said the Fed would wait until next year.

Earlier this month, 13 of 18 of these so-called primary dealers polled forecast a September tapering of the purchases.

Lowers economic growth forecast

In fresh quarterly forecasts, the Fed cut its projection for 2013 economic growth to a 2.0 percent to 2.3 percent range from a June estimate of 2.3 percent to 2.6 percent. The downgrade for 2014 was even sharper.

It cited strains in the economy from tight fiscal policy and higher mortgage rates in explaining why it decided not to cut back on its asset purchases.

"The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market," the Fed said in a statement.

Nevertheless, it said the economy was still making progress despite higher tax hikes and the budget cuts in Washington that were part of the "sequester" implemented by Congress.

"Taking into account the extent of federal fiscal retrenchment, the committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy," it said.

"The (policy-setting) committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," the Fed added.

Bernanke had stated in June that officials expected to begin slowing the pace of bond purchases this year and would likely end the program by mid-2014, at which point the central bank forecast the unemployment rate would be around 7.0 percent.

In his statement on Wednesday, he said a jobless rate of 7.0 percent was not a "magic number" that would govern when the Fed would turn off the monetary spigot.

"We could begin later this year. But even if we do that, the subsequent steps will be dependent on continued progress in the economy," Bernanke said. "We don't have a fixed calendar schedule. But we do have the same basic framework that I described in June."

Fed sees first rate hike in 2015

The Fed has held overnight interest rates near zero since late 2008 and has more than tripled its balance sheet to more than $3.6 trillion through three rounds of bond buying aimed at holding borrowing costs down.

The decision not to taper bond purchases faced a single dissent. Kansas City Federal Reserve Bank President Esther George, who has dissented at every Fed policy meeting this year, repeated her concerns that the low-rate policy could lead to asset bubbles.

Fed Governor Sarah Raskin, who has been nominated to take a top job at the U.S. Treasury, did not participate in the meeting.

The central bank reiterated that it would not start to raise rates at least until the unemployment rate fell to 6.5 percent, as long as inflation did not threaten to go above 2.5 percent. The U.S. jobless rate in August was 7.3 percent.

Most policymakers, 12 out of 17, projected the first rate hike would not come until 2015, even though the forecasts suggested they could hit their threshold for considering a rate rise next year.

Following the unexpected decision, market participants pushed back their projections for the first rate hike by several months, to late January 2015, based on prices of interest rate contracts traded at the Chicago Board of Trade.

source: interaksyon.com

Stock market seen to take cue from 2Q economic growth data

MANILA - The spotlight this week will be on the Philippines' second-quarter economic growth data, as emerging markets succumb to massive fund outflows on the prospect of the US Federal Reserve scaling back its monetary stimulus later this year.

The Philippines "must prove itself" to the global investor community and post a gross domestic product (GDP) growth of at least seven percent, said Jose Vistan, head of research at AB Capital Securities Inc.

"We would want to show the world that Philippine fundamentals are solid so we can continue to merit investor attention. We are classified as an emerging market but we should be considered among the best," Vistan said.

The second-quarter GDP data will be released on Thursday. In the first quarter, growth came in at 7.8 percent, well beyond the upper end of the full-year target of 6-7 percent and the fastest in Asia.

Uncertainty over the Fed's tapering however has weighed on global markets, particularly on emerging markets. The Fed's $85-billion bond-buying program – the third tranche that has come to be called the third quantitative easing (QE3) – has been a key driver of equities rallies in the past several months.

The reduction of the Fed's stimulus relieves the downward pressure on US interest rates. Higher interest rates would attract money back to the US and out of emerging markets like the Philippines.

"The bias for fund managers is to lighten up on equities in general more so on emerging markets like the Philippines. There's nothing wrong with the Philippines. It's more of a liquidity concern," Vistan said.

"Restoring confidence on equities has been a difficult challenge as investors remain enamored with concerns over the Fed's decision on the future of QE3. While these concerns are not entirely unfounded, we believe that to a certain degree, there has been an overreaction in the context of ignoring the domestic fundamentals – as well as the positive trend in listed firms' earnings through the first six months of the year," said Jun Calaycay of Accord Capital Equities Corp.

Asian shares mostly increased Monday on fading expectations of a complete phase-out of the Fed's economic stimulus after data on new home sales dropped, raising concerns about the strength of the recovery in the US housing market. Last Friday, the Dow Jones Industrial Average rose 46.62 points, or 0.3 percent, to 15,010.36.

"The positive spin in Asian stocks that opened this week's trades should rub off on the local market which has been closed in the four of the last six days," said Calaycay.

Minutes from the Federal Open Market Committee's (FOMC) July meeting showed US central bank officials were broadly supportive of chairman Ben Bernanke's plan to start tapering its monthly asset purchases this year if the economy continues to improve in line with expectations. This prompted investors to dump equities, dragging the local market by 5.59 percent in the two-day trading week. 

"We expect the local equities market to trade with an upward bias next week. With the market down 6 percent for the last two days, we expect some bargain hunting to set in," said BPI Asset Management.

However, selling pressure on index heavyweight SM Investments Corp may continue until month-end after its weighting in the MSCI Philippine Index has been reduced from around 15 percent to approximately 7 percent, effective August 30.

Likewise, the peaceful nature of the mass action in Luneta should have "little negative effect" on the market when trades resume Tuesday.

"In fact, this should breed confidence even more as a maturing population keeps good governance and transparency alive -- a paramount concern among investors and businessmen," said Calaycay.

source: interaksyon.com

Emerging countries must be able to control capital flows -- study

JACKSON HOLE, Wyoming - Emerging market nations can be adversely affected by large swings in investment and, therefore, must develop tools to control credit flows or risk relinquishing any independent monetary policy, a study shows.

These findings were presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries, including India and Brazil, have recently experienced steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion an open flow of money between countries, regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non‐central countries," wrote Helene Rey, professor at the London Business School. "They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That, said the study, is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interest rates and credit creation from sources outside their control.

"Independent monetary policies are possible if - and only if - the capital account is managed, directly or indirectly, via macroprudential policies," Rey said. These can take many forms, including efforts to restrain credit growth in particular areas of the economy.

"Since, for a country, the most dangerous outcome of inappropriately loose global financial conditions is excessive credit growth, a sensible policy option is to monitor directly credit growth and leverage in each market," she said.

Terrence Checki, executive vice president of the Federal Reserve Bank of New York, charged with commenting on the paper, pushed back against the notion that rich-country central banks should start paying more attention to the international effects of their policies.

He said that, in keeping with conventional wisdom at the Fed, monetary policy should be aimed at domestic objectives.

"It's not clear we can control the financial cycle very well with monetary policy," Checki said.

source: interaksyon.com

Rupee, rupiah lead emerging market slide on US Fed fears

MUMBAI/JAKARTA - India's rupee crashed to a record low and the Indonesian rupiah hit a 4-year trough on Monday, as the expected withdrawal of U.S. monetary stimulus prompts investors to shun emerging markets burdened by weak external balances, slowing economies and inflation.

It followed a slide on Friday in Brazil's real, a currency that, like the rupee, has been hammered by investor doubts that actions taken by monetary authorities last week will prove effective in stemming the sell-off.

"Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, wrote in a note on the Indian currency on Monday.

Growing expectations that the U.S. Federal Reserve will start scaling back its bond purchases as early as next month, slowing the flow of cheap money into higher yielding overseas assets, have weighed on many emerging markets.

The currencies of countries already struggling with wide current account deficits, such as India and Indonesia, are seen as among the most vulnerable to sudden capital flight and have been hit hardest.

"The market is still acting on the negative current account and fiscal deficits," said Nizam Idris, a strategist with Macquarie Capital, when asked about the two Asian laggards.

The latest blow for Indonesia's currency was delivered by central bank data released late on Friday that showed the current account deficit grew to 4.4 percent of GDP in the second quarter of the year, from 2.4 percent in the previous quarter.

"Although the current level of reserves is still equivalent to a reasonably healthy 5.5 months of imports, the Bank can't continue to burn reserves at the current rate without the market worrying about a 'crisis' scenario unfolding," Credit Suisse said in a note.

Indonesia's Finance Minister Chatib Basri said he was not worried by the rupiah weakness and predicted the current account deficit, though it would remain into next year, would narrow.

'Tapering' threat

Some analysts predicted the weakness could ripple out to other Asian markets, with Malaysia's current account data due on Wednesday likely to be closely watched.

India's tumbling currency has been the worst performer in Asia since late May, when the Fed first signaled that it may begin "tapering" its monetary stimulus this year.

Indian policymakers are grappling with a record current account deficit at 4.8 percent of GDP - and market participants aren't convinced the government can reduce the gap to a targeted 3.7 percent this financial year.

The Reserve Bank of India (RBI) has been selling dollars to support the rupee and last week announced curbs on outflows from companies and individuals, denting stock and bond markets.

"Forex intervention will continue by the central bank," said Param Sarma, chief executive at Brokerage NSP Forex. "Further measures are expected from the RBI but are unlikely to be effective."

Brazil's central bank has also intervened to try and reassure investors, but could not prevent the real from sinking on Friday to its lowest level since the depths of the global financial crisis in 2009.

The real's poor record during previous bouts of market volatility and its steep gains over the past decade are some of the reasons why it is now seen as a risky trade - a "high beta" currency in the jargon of the foreign exchange markets.

Domestic concerns have also made things worse.

As with India, a previously fast-growing economy has slowed, disappointing investors. Also, like Indonesia, a cooling in China's appetite for its commodities exports has resulted in a sharp deterioration in its balance of trade.

source: interaksyon.com

Wall Street posts worst week since June with Fed in mind

NEW YORK - Stocks fell on Friday and posted their biggest weekly decline since June as investors focused on when the Federal Reserve would begin to scale back its stimulus.

All but one of the 10 S&P 500 sector indexes ended lower.

The stock of J.C. Penney Co. skidded 5.8 percent to $12.87 and ranked as the S&P 500's biggest percentage decliner. Bill Ackman, the company's top investor, urged the retailer's board on Friday to replace its chairman.

Richard Fisher, president of the Federal Reserve Bank of Dallas, reiterated late Thursday that the central bank will probably begin cutting back on its massive bond-buying stimulus next month, as long as economic data continues to improve.

The lack of clarity over the Fed's plans gave investors reason to pull a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week ended August 7, data from Thomson Reuters' Lipper service showed on Thursday.

"People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy," said Michael Sheldon, chief market strategist at RDM Financial, in Westport, Connecticut.

The Dow Jones industrial average dropped 72.81 points, or 0.47 percent, to end at 15,425.51. The Standard & Poor's 500 Index declined 6.06 points, or 0.36 percent, to 1,691.42. The Nasdaq Composite Index fell 9.02 points, or 0.25 percent, to close at 3,660.11.

For the week, stocks posted their biggest declines since mid-June. The Dow fell 1.5 percent, snapping a six-week string of gains. The S&P 500 dropped 1.1 percent for the week and the Nasdaq slid 0.8 percent.

A week ago, both the Dow and the S&P 500 ended at record closing highs.

Stocks extended losses late in the session. President Barack Obama said he will make a decision on the nomination for the Federal Reserve chairman in the fall. Fed Chairman Bernanke is expected to step down when his second four-year term ends on January 31.

Bernanke rattled markets in late May by saying the Fed would begin to ease back on its stimulus program once the economy shows some improvement.

While many investors are concerned that economic growth will stall without the Fed's help, stock prices have been supported by some strong earnings and encouraging data overseas.

The S&P 500 is up 18.6 percent for the year so far.

In China, industrial output rose more than expected, adding to a string of data that indicated the economy may be stabilizing after an extended period of tepid growth.

U.S. economic data showed wholesale inventories unexpectedly fell 0.2 percent in June, marking a second straight month of declines, versus expectations calling for a gain of 0.4 percent.

U.S.-listed shares of BlackBerry Ltd jumped 5.7 percent to $9.76 after Reuters reported that the Canadian smartphone maker was warming to the idea of going private, citing sources familiar with the situation.

Priceline.com Inc, rose 3.9 percent to $969.89 a day after the online travel company reported earnings that beat expectations and gave a strong outlook. Some analysts speculate the stock's price will cross $1,000 soon, which would be a first for a Standard & Poor's 500 stock.

Earnings season is winding down, with 446 companies in the S&P 500 having already reported. Of those, 68 percent have exceeded analysts' expectations, slightly above the 67 percent beat rate over the past four quarters, Thomson Reuters data showed.

Volume was roughly 5.3 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.36 billion this year.

Decliners slightly outnumbered advancers on the NYSE by a ratio of about 15 to 14. On the Nasdaq, about three stocks fell for every two that rose.

source: interaksyon.com

Dow, S&P slip from record highs on year's lowest volume

NEW YORK - The Dow and the S&P 500 dipped on Monday in the thinnest volume so far this year, following their record closing highs last week as a lack of major news left the market directionless.

Although about 100 companies in the S&P 500 are still scheduled to report earnings, the season is winding down sharply after last week's deluge. The week is also thin in terms of market-moving macroeconomic data.

"It was a pretty quiet day," said Paul Zemsky, head of asset allocation at ING Investment Management in New York. "We're almost done with earnings, and the quarter will remain lackluster. It's hard to disappoint, but earnings are not fantastic."

About 4.6 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, the lowest for a full day of trading so far this year. Daily volume has averaged about 6.4 billion shares this year. Last year, August posted the lowest monthly average volume on U.S. exchanges.

The technology sector was the S&P 500's best performer. A rally in Apple and Facebook shares helped the Nasdaq Composite Index finish Monday's session with a slim gain. Apple rose 1.5 percent to $469.45 after the United States overturned a ban on the sale of some older iPhones and iPads. Facebook, which was the Nasdaq's most actively traded stock, jumped 3 percent to $39.19 after a brokerage upgrade.

Data suggesting economic recovery in the UK and U.S. economies was improving showed British businesses boomed and activity at euro-zone companies expanded modestly in July, while growth in the U.S. services sector rebounded from a three-year low.

"PMIs were better than people thought, and that tells us this idea that the second half could be stronger is still valid. But right now, it's just wait and see," Zemsky said.

The Dow Jones industrial average fell 46.23 points or 0.3 percent, to end at 15,612.13. The S&P 500 slipped 2.53 points or 0.15 percent, to finish at 1,707.14. But the Nasdaq Composite Index added 3.364 points or 0.09 percent, to close at 3,692.951.

United Technologies Corp and The Travelers Companies were the Dow's biggest percentage decliners. United Technologies shares slid 1 percent to $106.64, while Travelers shares fell 1 percent to $83.15.

The Washington Post Co. shares shot up 3.8 percent after the bell following news that Amazon Inc founder Jeff Bezos has agreed to pay $250 million to buy the publishing company's newspaper assets, including its flagship paper - known for its coverage of the Watergate break-in that led to the resignation of President Richard M. Nixon in 1974.

Washington Post Co. Class B shares ended the regular session at $568.70, up 1.6 percent, after climbing to an intraday high at $576, their highest level in more than four years.

The S&P 500 has risen for five of the past six weeks, gaining more than 7 percent over that period. The index closed at an all-time high on Friday despite a mixed reading on the labor market, which showed that hiring slowed in July, but the U.S. unemployment rate ticked lower.

Friday marked the second day in a row for the Dow and the S&P 500 to end at record closing highs, with the Dow ending at 15,658.36 and the S&P 500 at 1,709.67.

The slip in the unemployment rate means that the Federal Reserve is closer to dialing back its $85 billion-a-month bond-buying program, Dallas Federal Reserve Bank President Richard Fisher said on Monday. The stimulus program is given credit for a large part of this year's rally in the U.S. stock market.

On the earnings front, shares of Tyson Foods climbed 4.1 percent to $29.69, a record closing high, after giving a full-year revenue outlook that exceeded expectations.

In contrast, U.S.-listed shares of HSBC Holdings Plc fell 4.5 percent to $55.37 after the company reported a drop in revenue, hurt by slower emerging markets.

Shares of retailer Fossil dropped 6 percent to $107.42 on three times their recent average volume after Barclays downgraded the stock to "underweight."

Of the 391 companies in the S&P 500 that have reported earnings for the second quarter, 67.8 percent have topped analysts' expectations, in line with the average beat over the past four quarters, data from Thomson Reuters showed. About 55 percent have reported revenue above estimates, more than in the past four quarters but below the historical average.

U.S.-listed shares of Compugen Ltd soared 44.5 percent to $7.89 after the company said it would enter into a cancer research partnership with Bayer AG.

Declining issues outnumbered advancers on the NYSE by a ratio of about 3 to 2. On the Nasdaq, the opposite trend prevailed, with 14 stocks rising for about every 11 that fell.

source: interaksyon.com