Tin tức ngày 18/04/2013

US stocks lower on earnings, European gloom
US stocks closed sharply lower Wednesday in the wake of disappointing earnings reports and a 5.5 per cent plunge in Apple shares, along with dreary economic sentiment in Europe.
US stocks closed sharply lower Wednesday in the wake of disappointing earnings reports and a 5.5 per cent plunge in Apple shares, along with dreary economic sentiment in Europe.
The Dow Jones Industrial Average dropped 138.19 (0.94 per cent) to 14,618.59. The broad-based S&P 500 sank 22.56 (1.43 per cent) to 1,552.01, while the Nasdaq Composite Index nose-dived 59.96 (1.84 per cent) to 3,204.67.
A disappointing earnings report from Bank of America sent it and other banking shares lower.
Apple plunged after a supplier slashed its profit guidance, suggesting, analysts said, slow iPhone and iPad sales at Apple itself.
The US retreat followed equity losses in Europe amid speculation of a German credit rating downgrade and comment by the head of the Bundesbank predicting that Europe's recovery could take a decade.
Peter Cecchini, chief macro strategist at Cantor Fitzgerald, said the market sell-off came on the heels of "fairly weak" global economic data and US economic reports that have "not been great."
Bank of America plummeted 4.7 per cent after missing earnings expectations and reporting lower revenues in its consumer and business banking unit due to the low interest-rate environment. Losses also deepened in the consumer real estate unit.
Other banks lost ground. JPMorgan Chase sank 3.5 per cent, Wells Fargo lost 1.4 per cent and Goldman Sachs slid 2.4 per cent.
Apple plummeted 5.5 per cent after Cirrus Logic forecast lower quarterly revenues. Cirrus, a supplier of audio components for iPads and iPhones, lost 15.7 per cent.
Mining and metals companies continued to suffer as copper plunged to its lowest level in more than a year. Freeport-McMoran Copper & Gold dropped 4.3 per cent while Barrick Gold fell 6.4 per cent. Newmont Mining fell 4.2 per cent.
Toy company Mattel offered a rare bit of good news, gaining 1.9 per cent after reporting a more than a four-fold increase in profits. Company chief executive Bryan Stockton touted strong results in its American Girl doll sales "across all regions, particularly Europe."
Bond prices rose. The yield on the 10-year Treasury slipped to 1.70 per cent from 1.72 per cent late Tuesday, while the 30-year yield dropped to 2.89 per cent from 2.90 per cent. Bond prices move inversely to yields.
European Stocks Decline for Fourth Day; Tesco, BHP Slide
European stocks declined for a fourth day, with the benchmark Stoxx Europe 600 Index (SXXP) falling to its lowest level this year, as commodity producers and automakers slid.
BHP Billiton Ltd. (BHP) retreated to a seven-month low after the world’s largest mining company said third-quarter iron ore production rose less than expected. Volkswagen AG and Bayerische Motoren Werke AG fell at least 2.8 percent as data showed European car sales fell 10 percent in March. Tesco Plc (TSCO) lost 3.9 percent after reporting the first annual profit drop in almost 20 years and saying it will exit the U.S.
The Stoxx Europe 600 Index fell 1.5 percent to 283.73 at the close of trading, its lowest level since Dec. 31. The gauge earlier slid amid speculation Germany’s credit rating could be downgraded, before recovering some of the losses within 15 minutes. The measure has still gained 1.5 percent this year as U.S. lawmakers agreed on a compromise budget and central banks maintained stimulus measures.
“Investors are worried that Germany’s economy isn’t holding up so strongly anymore, and German downgrade rumors are spreading more fear in the markets today,” said John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva. “Coupled with the disappointing Chinese GDP numbers from earlier this week and the plunging gold prices, we’re in the middle of a phase of uncertainty and possibly a correction -- the last thing market participants want to hear in such a period are downgrade rumors.”
Futures Surge
Some 14,000 DAX Index futures contracts expiring in June changed hands in a five-minute period about 9:50 a.m. in Frankfurt today, more than 15 times the 20-day average volume for that time of day. The index’s volatility was caused by external events, Deutsche Boerse, the exchange’s operator, said in a statement.
National benchmark indexes declined in 16 of the 18 western European markets. The U.K.’s FTSE 100 Index slipped 1 percent, Germany’s DAX Index slid 2.3 percent and France’s CAC 40 lost 2.4 percent.
“In the shorter term, we have seen a bit of nervousness linked to the poor figures out of China and the selloff in commodities -- and we’re seeing mining stocks also weighing today,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote & Cie. in Neuchatel, Switzerland, who helps manage $1.4 billion in equities.
The volume of shares changing hands in Stoxx 600 companies was 6.1 percent greater than the average of the last 30 days.
U.K. Unemployment
U.K. unemployment rose at its fastest pace in more than a year and wage increases slowed. Unemployment as measured by International Labour Organisation methods rose by 70,000 to 2.56 million in the three months through February, the most since November 2011, the Office for National Statistics said today in London. The median forecast of 27 economists in a survey was for the rate to stay unchanged.
A separate release showed that Bank of England Governor Mervyn King was defeated for a third month in a push for more stimulus. Six of the Monetary Policy Committee voted to keep the target for quantitative easing at 375 billion pounds ($575 billion) this month, the central bank said in the minutes of the April 3-4 meeting, published in London today. King, David Miles and Paul Fisher wanted to increase it by 25 billion pounds.
The Federal Reserve releases its Beige Book report at 2 p.m. New York time, which includes a summary and analysis of economic conditions in 12 U.S. districts. Fed Chairman Ben S. Bernanke said April 8 that the economy is “significantly stronger” than it was four years ago. Still, he also said conditions are “far from where we would all like them.”
Miners Slide
BHP Billiton (BLT) dropped 3.4 percent to 1,779 pence. Output of iron ore, its biggest earner, was 40.2 million metric tons in the three months to March 31, missing the median estimate of 42.3 million tons in a survey.
A gauge of European mining companies slid to its lowest level since July 2009, with Rio Tinto Group and Anglo American Plc retreating 3.6 percent to 2,854.5 pence, and 2.1 percent to 1,553 pence, respectively.
Preferred shares of Volkswagen lost 2.9 percent to 141.45 euros. BMW decreased 2.8 percent to 65 euros. European car sales are heading toward a 20-year low as registrations in March fell 10 percent, led by Germany’s auto market, which plummeted 17 percent, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today.
A measure of auto-related companies fell the most of the 19 industry groups on the Stoxx 600.
Tesco Sales
Tesco declined 3.9 percent to 369.8 pence after the U.K.’s largest retailer said it will exit the U.S. and took a 1.2 billion-pound charge to end the Fresh & Easy business. So-called trading profit fell 13 percent to 3.45 billion pounds in the 52 weeks ended Feb. 23, the company said.
BASF SE slid 3.8 percent to 65.55 euros, its lowest price in almost five months, after Nomura Holdings Inc. cut its recommendation on the world’s biggest chemicals maker to neutral, the equivalent of hold, from buy, citing above-average downside risks to consensus forecasts.
Bayer AG slipped 4.3 percent to 77.58 euros after a U.S. appeals court ruled the company’s patent on the birth control pill Yaz is invalid, ensuring Actavis Inc. and Novartis AG’s Sandoz unit can sell copies of the contraceptive.
ASML Holding NV (ASML) climbed 2.5 percent to 52.55 euros. Europe’s largest semiconductor-equipment supplier posted first- quarter sales of 892 million euros, topping the 874 million-euro analyst estimate. The company also announced a share buyback program of as much as 1 billion euros and said Chief Executive Officer Eric Meurice will step down as of July.
Asian shares track U.S. stocks lower on growth worries
Asian shares inched lower on Thursday, taking their cues from an overnight drop in U.S. and European equities on renewed concerns about global growth, which also weighed on commodities.
The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.3 percent, with Australian shares .AXJO falling 0.4 percent, hit by sinking copper prices which deepened concerns about demand for Australia's raw materials.
South Korean shares .KS11 opened down 0.4 percent.
"Cyclical large-caps are losing steam as the rate of economic recovery appears slowing in major countries such as the U.S. and China, while first-quarter earnings forecasts continue to be revised down," said Chang Jae-ho, an analyst at Daishin Securities.
Both the Standard & Poor's 500 Index .SPX and the Nasdaq Composite Index .IXIC closed down more than 1 percent on Wednesday after disappointing corporate earnings reports.
Apple Inc (AAPL.O) fell below $400 a share for the first time since late 2011 after a poor revenue forecast from key supplier Cirrus Logic (CRUS.O) while shares of Intel Corp (INTC.O), the world's largest semiconductor maker, initially fell after it forecast a sharp decline in its current-quarter revenue and trimmed its 2013 capital spending plans.
European shares fell to a 2013 low.
Japan's Nikkei average .N225 opened down 0.8 percent. .T
Commodities also fell on Wednesday, with copper, seen as a gauge for manufacturing and China-related growth, shedding over 3 percent. A 10.3 percent decline in European car sales over March weighed on copper prices as an indicator of slumping demand for metals.
Oil prices tumbled for a sixth straight session on Wednesday, with Brent crude futures falling below $98 per barrel for the first time since July as rising U.S. fuel supplies added to overall concern about global oil demand.
U.S. crude futures fell 0.5 percent to $86.29 a barrel early on Thursday, just above a four-month low of $86.06 hit earlier in the week.
In addition to growth worries, the euro zone faces renewed risk of political uncertainty as Italy's divided parliament begins voting for a new state president on Thursday, a crucial step towards resolving the stalemate since the inconclusive election in February and to carry on with fiscal reforms.
The euro steadied around $1.3032, above Wednesday's one-week low of $1.3001.
The euro fell 1.1 percent on Wednesday for its biggest daily decline against the dollar since June, weakened by talk of a euro zone interest rate cut. The dollar also drew support from signs of economic weakness in Britain and Canada.
The dollar inched down 0.2 percent against the yen at 97.89 yen after touching a low of 95.67 yen on Tuesday, while the euro fell 0.3 percent to 127.54 yen, still above Tuesday's low of 125 yen.
Data from Japan's ministry of finance showed on Thursday that buying of Japanese equities last week by foreign investors hit a record high since the ministry began collecting the numbers in 2005, reaffirming the positive view on Japan and its strong push to beat deep-rooted deflation.
The capital flows data also confirmed Japanese investors have yet to actively seek returns from overseas assets despite falling domestic yields, with Japanese investors last week selling 332 billion yen of foreign bonds.
Traders will watch the impending Group of 20 meeting in Washington for any critical remarks over the yen's continued weak trend.
Gold, which on Monday triggered the wide market sell-off and led the liquidation of assets across the board after weaker-than-expected Chinese and U.S. economic reports stoked growth concerns, remained vulnerable.
Spot gold was down 0.2 percent at $1,373.51 an ounce early on Thursday, still some $100 below Friday's close. Bullion touched its lowest in more than two years of $1,321.35 on Tuesday.
US growth at 'moderate' pace: Fed
The Federal Reserve slightly upgraded its view of the US economy Wednesday, its Beige Book report on regional activity saying that manufacturing and construction continue to grow.
The Federal Reserve slightly upgraded its view of the US economy on Wednesday, its Beige Book report on regional activity saying that manufacturing and construction continue to grow.
"Reports from the twelve Federal Reserve Districts suggest overall economic activity expanded at a moderate pace during the reporting period from late February to early April," the survey said.
The previous Beige Book, a key input for monetary policy-making, was more tentative, calling growth "modest to moderate" amid concerns of a nascent slowdown due to higher payroll taxes and a cut in government spending.
"Most districts noted increases in manufacturing activity since the previous report. Particular strength was seen in industries tied to residential construction and automobiles," the report said.
Travel and tourism business was also broadly firm across most of the regions, according to respondents to the Fed survey.
However, in a suggestion that the steep federal government "sequester" spending reductions were having an impact, it said that several districts reported "uncertainty or weakness in defence-related sectors."
Consumer spending was up only "modestly," with some evidence that the payroll tax rise, higher gasoline prices and winter weather were to blame.
The jobs situation was unchanged or "somewhat" improved with hiring firmest in manufacturing, home construction, information technology and professional services.
While not backed by data, that picture was brighter than the monthly unemployment and job creation numbers reported on April 5, which showed a paltry 88,000 net jobs generated by the economy in March.
Commercial banks around the country -- with Philadelphia an exception -- generally reported a pickup in loans to businesses and for homes and cars.
Price increases were generally subdued around the country, the Beige Book said, while the outlooks of respondents to the regular Fed survey "remained optimistic across sectors and districts."
Analysts said the report was more encouraging about March than recent data, which has suggested a slowdown.
"All in, these comments were more positive than the prior Beige Book and certainly do not add to March's lackluster payroll report," said Jennifer Lee at BMO Capital Markets.
The report was not seen as strong enough to push the majority of Fed policy makers to support reeling in its quantitative easing program.
But it will give the minority of inflation hawks more ammunition for their drive to slow QE bond purchases, said Paul Edelstein at IHS Global Insight.
"The message from this latest Beige Book report that the economy is growing modestly along with the labor market will embolden those on the Fed who advocate an early exit" from QE, he said.
G-20 Draft Affirms Commitment to Avoid Competitive Devaluations
The Group of 20 economies will affirm a commitment to avoid weakening their currencies to gain an advantage for their exports, according to a draft statement prepared for a meeting this week in Washington, g BNA reported.
The draft statement, seen by a BNA reporter, maintains a pledge made in February in Moscow to “move more rapidly toward more market-determined exchange rate systems and exchange-rate flexibility” and to refrain from competitive devaluations.
A first draft communique, prepared for meetings of finance ministers and central bankers starting today, describes the global outlook as “generally somewhat weaker and uneven” with “unbalanced” recoveries between advanced economies and emerging markets.
The maintaining of the language on currencies suggests the G-20 members will withhold direct criticism of Japan’s efforts to rally its economy from 15 years of deflation so long as it doesn’t seek to do so at their expense by driving the yen down. U.S. Treasury Secretary Jacob J. Lew and Bank of Canada Governor Mark Carney both signaled support for Japan’s stimulus push this week.
The G-20 talks will be the first since the Bank of Japan (8301) announced details of a plan for record monetary easing. The BOJ plans to purchase 7.5 trillion yen ($76.6 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said April 4.
Yen’s Slide
The yen has dropped 5.1 percent against the U.S. dollar since the day before the BOJ announcement, the biggest slide among 16 major currencies and more than three times as fast as the drop in the Australian dollar, the second-worst performer. Japan’s yen has declined by at least 2 percent against all of the more than 150 currencies tracks worldwide.
Lew yesterday urged G-20 officials to maintain a pledge to refrain from influencing exchange rates at the expense of other countries, saying Japan’s recent policies align with the pact. Carney also said that Japan’s measures are consistent with the G-20’s goals and are positive for Canada’s economy.
Also speaking in Washington ahead of the talks, Yi Gang, deputy governor of the People’s Bank of China, said the yuan’s trading band will be further widened “in the near future.”
China’s Yuan
“The exchange rate is going to be more market-oriented,” Yi said yesterday at an International Monetary Fund conference. “Last year, they increased the floating band from 0.5 percent to 1 percent. I think in the near future they’re going to increase the floating band even further.”
G-20 officials gathering in the next two days will discuss the draft statement and changes may be made before its public release.
“Fiscal drag, policy uncertainty, impaired credit intermediation, private deleveraging, and an incomplete rebalancing of global demand continue to weigh on global growth prospects,” the draft says.
The U.S. and Japan will be asked to set out “credible” plans for medium-term fiscal consolidation, while acknowledging that scope exists in the U.S. to “provide more support for economic recovery.”
Euro-zone countries will be asked to move more quickly toward a banking union.
On financial regulation, the draft text calls for further steps by G-20 members to introduce resolution regimes for winding down faltering “too-big-to-fail” banks without triggering fiscal instability or taxpayer-financed bailouts.
The text also calls on the Financial Stability Board to lead reforms concerning short-term interest-rate benchmarks and to submit a status report to the G-20 leaders’ summit in St. Petersburg in September on steps to reduce reliance on credit rating firms.
G-20 members are Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the U.K. and the U.S.
Buffett Mocking Gold Sidesteps Slump As He Bets on Stocks
Investors including hedge-fund manager John Paulson faced losses this week as gold suffered its biggest rout in three decades. Warren Buffett told them there were better places to put their money.
The billionaire chairman of Berkshire Hathaway Inc. (BRK/A) cautioned against investing in the metal in February 2012, when an ounce sold for more than $1,700, because it’s not productive like a farm or company. Gold fell 14 percent to $1,348.21 in the two trading days through April 15, the biggest decline since 1983, and wiped out almost $1 billion in Paulson’s wealth. The price rebounded to $1,374.36 at 4:20 p.m. in New York today.
 “What motivates most gold purchasers is their belief that the ranks of the fearful will grow,” Buffett wrote last year in a letter to shareholders. “During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As ‘bandwagon’ investors join any party, they create their own truth -- for a while.”
Related:The Real Cost of Owning Gold
Buffett, 82, has said his preference is to build Omaha, Nebraska-based Berkshire by investing in companies, such as chemical maker Lubrizol Corp., which he bought in 2011. Since his comments about gold, his firm has struck a deal with Jorge Paulo Lemann’s 3G Capital to take HJ Heinz Co. private, acquired more than two dozen daily newspapers, bought retailer Oriental Trading and added to its $87.7 billion stock portfolio.
Happier Shareholders
“The shareholders are probably happier that he has Lubrizol and Heinz than gold,” Andrew Kilpatrick, a Buffett biographer, said in a phone interview. “He made a very cogent argument” for why the metal was an inferior investment.
Buffett is unlikely to invest in gold after the price declines, because it doesn’t fit his investing philosophy, said Luke Sims, co-portfolio manager of the Eagle Capital Growth Fund, which counts Berkshire among its largest holdings.
“If you put your money into gold or other non-income- producing assets that are dependent on what someone else values that in the future, you’re in speculation,” he said. “You’re not into investing.” Buffett didn’t respond to a request for comment sent to an assistant.
Paulson, whose firm earned $15 billion in 2007 betting against mortgage bonds, has said gold is the best hedge against inflation and currency debasement as central banks pump money into their economies to stimulate growth. Buffett said he shares concerns about paper money losing its purchasing power. Still, he wrote, investors could get more from productive assets.
Fondling Gold
To illustrate the point, he asked readers to picture the world’s entire gold stock melded together into a cube 68 feet (21 meters) on each side valued at $9.6 trillion at then- prevailing prices. For the same amount, an investor could have purchased all the farmland in the U.S., 16 replicas of Exxon Mobil Corp., and still have about $1 trillion of “walking- around money.”
A century later, the farmland will be producing valuable crops no matter the currency, and dividends from the companies would probably added up to trillions of dollars, Buffett wrote.
The 170,000 metric tons of gold “will be unchanged in size and still incapable of producing anything,” he wrote. “You can fondle the cube, but it will not respond.”
Buffett has spent his company’s cash on stocks. He’s added to Berkshire’s more than $16 billion holding in Wells Fargo & Co. and increased the funds overseen by his deputy investment managers, Todd Combs and Ted Weschler. The two have used that money to buy stakes in companies including DirecTV and DaVita HealthCare Partners Inc.
Buffett’s Deals
Berkshire has also been making deals. Managers at the company’s more than 80 operating businesses spent $2.3 billion for 26 acquisitions in 2012, Buffett wrote last month. In February, Berkshire agreed to spend about $12 billion on the Heinz deal. The agreement includes $8 billion of preferred shares in the condiment maker that pay a 9 percent dividend.
Capital spending at Berkshire is also set to rise, led by the energy unit and railroad, Burlington Northern Santa Fe. The company spent a record $9.8 billion on plant and equipment last year, Buffett wrote in a March 1 letter.
“We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013,” he said. “Opportunities abound in America.”
Berkshire’s Class A shares fell 2.1 percent to $157,700, trimming their gain this year to 18 percent. The Standard & Poor’s 500 Index has advanced about 8.8 percent since Dec. 31.
Buffett hasn’t always been averse to investing in metals. Berkshire made a pretax gain of almost $100 million by investing in silver in 1997. He said he made the wager because bullion inventories had fallen and he expected the price would climb. The bet wasn’t predicated on inflation expectations, he wrote.
Bank of America disappoints investors
Bank of America can't leave its troubled past behind it.
The bank's first quarter results spooked investors Wednesday morning after it missed profit forecasts.
Shares of Bank of America (BAC, Fortune 500) sank nearly 6% Wednesday, erasing all of the bank's 2013 gains.
The Charlotte, N.C.-based bank generated net income of $2.6 billion, or 20 cents per share, on $23.7 billion of revenue. Analysts expected Bank of America to earn 22 cents per share, on revenue of $23.4 billion.
Wall Street has been eager to see how quickly the bank, which many feel has a bloated cost structure, can slash expenses. Bank of America's expenses in the first quarter were $1 billion a lower than a year ago, on track with what it has forecast. But there are signs that cost cutting is crimping its growth.
"I didn't think this quarter was that bad, but I don't have high hopes for Bank of America," said Paul Miller, an analyst at FBR. "It's tough to grow revenues when you are shrinking your headcount."
While profits quadrupled from a year earlier, most of the gains are related to the bank's efforts to clean up its balance sheet, leaving investors unimpressed.
Related: Goldman Sachs earnings were good. Too good?
Legal worries persist: The bank continued its housecleaning in the first quarter, but not enough to quell worries about the litigation expenses that remain.
Bank of America settled three major class action lawsuits related to Countrywide's mortgages, paying $500 million to settle with shareholders who filed lawsuits between 2005 and 2007.
On pending litigation, chief financial officer Bruce Thompson said on an analyst call: "No one will ever declare a complete victory, but we are moving through the pipeline of items in a pretty meaningful way."
But analysts are still worried that Bank of America might not have held enough in reserves to pay for future litigation expenses.
"Persistently high litigation costs are likely to reinvigorate concerns about Bank of America's remaining mortgage related loss exposures," Sandler O'Neill analysts said in a research note.
Related: Citigroup profit spikes 30%
Behind the numbers: Consumer banking is the largest division within the bank, and its revenue and profit dipped from a year earlier. Mortgage banking income also slumped from a year earlier.
Bank of America did manage to increase fees in its investment banking and wealth management division, at least partially offsetting dips in other divisions.
While investors weren't pleased, CEO Brian Moynihan tried to strike an optimistic tone. He said Bank of America is "balanced, focused and moving forward," citing growth across various business lines, including small business and middle-market lending, in addition to wealth management and investment banking.
Bank of America is the fifth major bank to report first-quarter results.
JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) disappointed the market with weaker-than-expected revenue, while Goldman Sachs (GS, Fortune 500) made investors nervous with an increase in risky bets. Only Citigroup (C, Fortune 500) got a thumbs up from investors after reporting profits and revenue that topped estimates.
Earnings from Morgan Stanley (MS, Fortune 500) are due out Thursday morning. To top of page
Wells Fargo Asks Judge to Dismiss U.S. Mortgage Loans Suit
Wells Fargo & Co. (WFC) asked a judge to dismiss a suit by the U.S. government claiming the bank made reckless mortgage loans that caused losses for a federal insurance program.
The U.S. suit alleges more than a decade of misconduct by Wells Fargo in connection with a Federal Housing Administration program. Wells Fargo argued that the government’s suit, which was filed in October, should be dismissed because it fails to adequately allege facts that would allow the case to go forward.
“The complaint tells a nice story, but they fail to connect the dots,” William Johnson, a lawyer for San Francisco- based Wells Fargo, told U.S. District Judge Jesse Furman in a hearing today in Manhattan federal court.
The U.S. claims the FHA paid hundreds of millions of dollars in insurance claims on defaulted mortgages in connection with the FHA’s Direct Endorsement Lender Program as a result of false certifications by Wells Fargo.
In the hearing today, Wells Fargo argued that the U.S. released claims against it in a settlement last year. The bank also said the government’s claims for conduct before June 25, 2006, were filed too late and that the U.S. failed to allege specific facts showing the bank engaged in fraud.
The bank claimed the government is trying to misapply a 1989 law enacted in the wake of the savings and loan crisis, the Financial Institutions Reform, Recovery and Enforcement Act.
‘No Good’
“Wells Fargo knew these loans were no good, but submitted the claims,” Assistant U.S. Attorney Jeffrey Oestericher argued at the hearing. “And that is fraud.”
The lawsuit is part of a larger effort by the U.S. government to recoup losses from defaulted mortgages that were insured by the FHA.
The Department of Housing and Urban Development’s inspector general has been reviewing loan origination practices since January 2010. An audit released in 2011 found that half of loans originated by 15 lenders didn’t meet FHA standards for verifying borrowers’ income and other underwriting standards. The agency has paid more than $37 billion in claims related to defaulted mortgages since 2008.
“These are extremely complicated and convoluted issues,” Furman told the lawyers. He didn’t say when he will rule on the motion to dismiss.
The case is U.S. v. Wells Fargo Bank N.A., 12-cv-07527, U.S. District Court, Southern District of New York (Manhattan).
Central Banks Find Stimulus Glitter in Gold Slump
The slump in gold may hand activist central bankers more reasons to pursue the easy monetary policy that helped drive up the metal’s price in the first place.
Among many explanations for the biggest drop in more than 30 years: a fourth annual global growth scare as data disappoint from China to the U.S. and investors fold long-held bets that monetary stimulus will ultimately unleash inflation. Other reasons for the drop range from a view that the price reached so-called technical levels to concerns that Cyprus could start a rush by indebted nations to sell their supplies of the metal.
The combination of growth jitters and reduced inflation anxiety boosts the case of Federal Reserve Chairman Ben S. Bernanke and counterparts elsewhere to keep pump-priming their economies in the hope they will finally secure traction. It also may help them beat back critics, including some U.S. Republican lawmakers.
“Central banks can be opportunistic and proceed with quantitative easing now the gold market is surrendering with regards to its hyperinflation fears,” said Edward Yardeni, president and chief investment strategist at Yardeni Research Inc. in New York. “They could also argue the weakness in commodity prices suggests a growth concern and so all the more reason to keep QE going.”
12-Year Surge
Gold has tumbled 27 percent to $1,387.40 yesterday from the Aug. 22, 2011, close and is now in a bear market after a 12-year surge through 2012 that was fueled partly by investors concluding faster inflation and central-bank aid would buoy the metal as a protection of wealth. Its dive has come days before international finance ministers and central bankers meet in Washington to discuss signs of slowing in the world economy.
“Investors were somewhat optimistic that the relative strength we’d seen earlier in the year would continue,” said Roberto Perli, a Washington-based managing director at International Strategy & Investment Group and a former Fed economist. “When you go through a soft patch like this, you are forced to at least think that maybe things could go in a different way than you believed.”
U.S. payrolls grew the least in nine months in March, China is suffering the weakest expansion in two decades with growth below 8 percent, and unemployment among the 17 euro nations is a record 12 percent. A Citigroup Inc. index shows data in major economies undershooting forecasts by the most since September.
Slowing Growth
In the wake of such developments, the International Monetary Fund yesterday trimmed its estimate for global growth this year to 3.3 percent from 3.5 percent in January. Such softness may help explain the selloff in gold and other commodities, said Igor Arsenin, head of emerging Asia rates strategy at Barclays Plc in Singapore. Brent crude yesterday dropped below $100 a barrel for the first time since July.
“You have a background of sluggish global growth, which weighs on commodity prices,” Arsenin said.
That gives central banks justification for their monetary easing, said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore who worked at the Fed’s division of monetary affairs from 2004 until 2008.
William C. Dudley, president of the Federal Reserve Bank of New York, and Charles Evans, president of the Chicago Fed, said yesterday in separate remarks there’s a need to continue the central bank’s $85 billion in monthly bond purchases. The Bank of Japan this month doubled its monthly bond buying to 7.5 trillion yen ($77 billion) with the aim of achieving 2 percent inflation within two years.
‘Escape Velocity’
European Central Bank President Mario Draghi said April 4 the bank stands ready to cut interest rates if the economy deteriorates further. At the Bank of England, Mark Carney, currently head of the Bank of Canada, will become governor in July having said central banks should pursue “escape velocity” for their economies.
“With the recent signs of weakness, I don’t see any likelihood of monetary stimulus being even ramped down any time soon,” Wright said. “For the fourth year in a row, the year begins with noises about the imminent exit strategy, which then fizzles out.”
The Fed, for example, will see cheaper commodities as reinforcing the need to keep buying assets through this year, said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington and a former Fed staffer.
“We haven’t recovered yet and we are not recovering fast,” he said. “In no sense are we having an adequate recovery.”
Employment Outlook
The Federal Open Market Committee in March reiterated its plan to buy $85 billion in bonds every month until the U.S. employment outlook improves “substantially.” The program is part of a strategy to reduce long-term interest rates and bolster growth in interest-rate sensitive parts of the economy, including housing and auto sales.
The odds also are increasing that the ECB becomes “more aggressive,” after previously resisting asset purchases as a way to help the economy, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. Draghi said April 4 that policy makers “will assess all the incoming data in the coming weeks, and we stand ready to act.”
The likelihood that monetary policy will be kept “exceptionally loose” means Capital Economics Ltd. doubts gold’s current weakness will be sustained, said Julian Jessop, the London-based consulting company’s chief international economist.
Aggressive Purchases
That would reinstate a trend that began accelerating in 2008 as key central banks cut interest rates and then undertook increasingly more aggressive rounds of asset purchases to bolster their economies from recession and subsequent slow recovery.
Gold’s fall suggests investors now are questioning this view as they begin to wonder whether cheap money will trigger runaway inflation, said Neil Mackinnon, a global macro strategist at VTB Capital Plc in London.
With expansions still subpar, worldwide consumer-price inflation has dropped a percentage point during the past year and soon may slow to 2 percent from 2.5 percent in the 12 months ending in February, say JPMorgan Chase & Co. economists led by New York-based Bruce Kasman. The cost of living in the U.S. declined in March for the first time in four months, according to data released yesterday.
‘Very Subdued’
“Prior to this, markets were concerned that QE means inflation, but we’re having QE, not just at the Fed but at the Bank of Japan, and yet the global economy looks more uncertain than it did three to four months ago,” said Mackinnon, a former U.K. Treasury official. “Now, whether it’s wages or CPI inflation, the general picture is that inflation is still very subdued.”
There are other theories for gold’s fall to the cheapest since January 2011. Eric Chaney, chief economist at Axa SA in Paris, said the decline may be related to concern that the Fed is starting to plot an end to its third round of quantitative easing, which is now unlimited in size and length. Several officials at the March policy meeting said the central bank should begin tapering the program later this year and stop it by year end, according to the minutes released last week.
“The big fundamental change that doesn’t favor gold is that the Fed has started to signal that QE will eventually end,” Chaney said. “First it will slow, then it will end.”
Less Useful
Investors may be selling gold because they believe “recovery is coming and therefore gold is less useful as an asset,” Marcus Grubb, managing director of investment research at the World Gold Council, told Bloomberg Television’s “The Pulse” yesterday. “That’s what’s driving this down move.”
The two-day, 13 percent plunge -- the biggest since January 1980 -- became a “panic event” that didn’t reflect fundamentals, BlackRock Inc. fund manager Catherine Raw in London said in a separate interview yesterday on Television.
Some investors were trying to raise cash to cover positions acquired with borrowed money, said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.
Goldman Sachs Group Inc. said April 10 the turn in the gold cycle was quickening and investors should sell the metal. The rout that began last week was sparked by mounting concern that Cyprus would be forced to sell gold from its reserves, “potentially reflecting a larger monetization of gold reserves across other European central banks,” the bank said in a report.
Equities Shift
The plunge also may reflect a shift into equities as the outlook for the U.S. economy appears more clear, said Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York.
Whatever the reason, there’s a silver lining for Bernanke: It may help him deflect political barbs in the U.S. that his stimulus policies would trigger an inflationary surge and collapse in the dollar.
In September 2011, House Speaker John Boehner of Ohio, Senate Republican leader Mitch McConnell of Kentucky and two other Republicans wrote the Fed chairman and asked that he “resist further extraordinary intervention in the economy,” saying further actions could “erode the already weakened U.S. dollar.”
More recently, Chairman Jeb Hensarling, a Texas Republican, warned Bernanke at a House Financial Services Committee session in February of “soaring inflation, or skyrocketing interest rates, all of which could make us look longingly and nostalgically upon the Jimmy Carter era of stagflation” if the Fed’s $3.2 trillion balance sheet isn’t unwound at the right time.
Stronger Dollar
In fact, the U.S. dollar has strengthened against most major currencies after first-quarter growth picked up. The yen has weakened 11 percent this year, the most among major currencies, while the British pound has declined 5.4 percent. The euro is unchanged.
“There were big fears aggressive central-bank policy would push up inflation or see currencies fall in value and it didn’t happen,” said Kit Juckes, global strategist at Societe Generale SA in London. “The fact we’re in the middle of 2013 and none of that’s happened has been enough to create an outsized correction in gold.”
The “goldbug/inflationista view of the world” in which buyers have sought to protect themselves from a surge in inflation “is, in fact, all wrong,” Nobel Prize-winning economist Paul Krugman said in an April 15 New York Times online posting.
“Maybe, just maybe, the gold crash will finally bring intellectual capitulation,” he wrote. “But I wouldn’t bet on it.”
G-20 Draft Affirms Commitment to Avoid Competitive Devaluations
The Group of 20 economies will affirm a commitment to avoid weakening their currencies to gain an advantage for their exports, according to a draft statement prepared for a meeting this week in Washington, BNA reported.
The draft statement, seen by a BNA reporter, maintains a pledge made in February in Moscow to “move more rapidly toward more market-determined exchange rate systems and exchange-rate flexibility” and to refrain from competitive devaluations.
A first draft communique, prepared for meetings of finance ministers and central bankers starting today, describes the global outlook as “generally somewhat weaker and uneven” with “unbalanced” recoveries between advanced economies and emerging markets.
The maintaining of the language on currencies suggests the G-20 members will withhold direct criticism of Japan’s efforts to rally its economy from 15 years of deflation so long as it doesn’t seek to do so at their expense by driving the yen down. U.S. Treasury Secretary Jacob J. Lew and Bank of Canada Governor Mark Carney both signaled support for Japan’s stimulus push this week.
The G-20 talks will be the first since the Bank of Japan (8301) announced details of a plan for record monetary easing. The BOJ plans to purchase 7.5 trillion yen ($76.6 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said April 4.
Yen’s Slide
The yen has dropped 5.1 percent against the U.S. dollar since the day before the BOJ announcement, the biggest slide among 16 major currencies and more than three times as fast as the drop in the Australian dollar, the second-worst performer. Japan’s yen has declined by at least 2 percent against all of the more than 150 currencies tracks worldwide.
Lew yesterday urged G-20 officials to maintain a pledge to refrain from influencing exchange rates at the expense of other countries, saying Japan’s recent policies align with the pact. Carney also said that Japan’s measures are consistent with the G-20’s goals and are positive for Canada’s economy.
Also speaking in Washington ahead of the talks, Yi Gang, deputy governor of the People’s Bank of China, said the yuan’s trading band will be further widened “in the near future.”
China’s Yuan
“The exchange rate is going to be more market-oriented,” Yi said yesterday at an International Monetary Fund conference. “Last year, they increased the floating band from 0.5 percent to 1 percent. I think in the near future they’re going to increase the floating band even further.”
G-20 officials gathering in the next two days will discuss the draft statement and changes may be made before its public release.
“Fiscal drag, policy uncertainty, impaired credit intermediation, private deleveraging, and an incomplete rebalancing of global demand continue to weigh on global growth prospects,” the draft says.
The U.S. and Japan will be asked to set out “credible” plans for medium-term fiscal consolidation, while acknowledging that scope exists in the U.S. to “provide more support for economic recovery.”
Euro-zone countries will be asked to move more quickly toward a banking union.
On financial regulation, the draft text calls for further steps by G-20 members to introduce resolution regimes for winding down faltering “too-big-to-fail” banks without triggering fiscal instability or taxpayer-financed bailouts.
The text also calls on the Financial Stability Board to lead reforms concerning short-term interest-rate benchmarks and to submit a status report to the G-20 leaders’ summit in St. Petersburg in September on steps to reduce reliance on credit rating firms.
G-20 members are Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the U.K. and the U.S.
Lew Urges G-20 to Avoid ‘Beggar Thy Neighbor’ Currency Plans
U.S. Treasury Secretary Jacob J. Lew urged Group of 20 officials to maintain a pledge to refrain from influencing exchange rates at the expense of other countries, saying Japan’s recent policies align with the pact.
“We will continue to press G-20 countries to avoid a downward spiral of ‘beggar thy neighbor’ policies,” Lew said today in Washington ahead of this weekend’s meetings of finance ministers starting tomorrow. “It is imperative that all G-20 countries follow through on their recent commitment not to target exchange rates for competitive purposes.”
Answering questions after the speech, Lew said the Bank of Japan (8301)’s plan for record monetary easing is in accord with G-20 agreements, adding that “we’re watching pretty closely” the effects of the policy. The yen has fallen for six straight months against the U.S. currency.
Japan has had problems with domestic demand for some time and to the extent that they are targeting their policies and encouraging domestic demand with domestic tools, we think that is very much consistent” with international pledges, Lew said.
While the G-20 made the pledge at a meeting in Moscow in February and didn’t single Japan out for allowing the yen to drop, the U.S. Treasury on April 12 urged Japan to refrain from competitive devaluation. It stopped short of declaring either Japan or China currency manipulators.
BOJ’s Surprise
The Bank of Japan surprised markets on April 4 by doubling monthly bond purchases to almost match the Federal Reserve’s monetary easing, and by setting a two-year horizon for achieving its goal of 2 percent inflation.
European Central Bank President Mario Draghi and Bank of Canada Governor Mark Carney this week signaled they back Japan’s stimulus as aimed at rallying its economy, indicating there won’t be much of a fight at the G-20.
The yen weakened today as investors speculated that Japan will escape G-20 criticism of monetary policies that have contributed to the currency’s 11.4 percent decline this year against the U.S. dollar.
Speaking about China in his prepared remarks, Lew reiterated the country needs to allow further yuan appreciation.
“We are concerned that in recent months, movement towards more currency flexibility appears to have slowed,” Lew said at Johns Hopkins University’s School of Advanced International Studies. “The pace of China’s intervention in the market has picked up.”
Lew said the world needs stronger economic growth and pointed to a need for more robust demand in Europe.
Europe must decide “how to better balance the pace of fiscal consolidation with the need for growth, and how to ensure that surplus countries contribute more to demand as deficit countries undergo adjustment,” Lew said.
Lew expressed support for a “full” euro-area banking union, with a single supervisory mechanism, resolution authority and recapitalization capacity and said the recent Cyprus crisis emphasized the need for such a framework.
France unveils plan to reach 2014 deficit target
France on Wednesday presented a plan to get its public deficit back under the EU limit by 2014, having decided to let debt grow further as it tries to jumpstart a sputtering economy.
France on Wednesday presented a plan to get its public deficit back under the EU limit by 2014, having decided to let debt grow further as it tries to jumpstart a sputtering economy.
The plan to bring the deficit below 3.0 percent of gross domestic product (GDP) is based on a broad effort that includes higher taxes along with savings within the social security system.
The "stability programme" was released by the finance ministry and based on what the government termed a "realistic" economic growth forecast of 0.1 percent this year and 1.2 percent in 2014, which it maintained would allow the public deficit to be cut to 2.9 percent of output next year.
"What I want is fiscal sobriety -- essential for debt reduction in the medium term but also for growth without which there won't be deficit reduction," President Francois Hollande said in a speech.
The growth forecasts have been questioned however both by the International Monetary Fund and a new independent French high council for public finances, with the IMF forecasting on Tuesday that the French economy would contract by 0.1 percent this year before expanding by a slight 0.3 percent in 2014.
France was initially to have cut the deficit to 3.0 percent of GDP already this year, but has asked for more time owing to weak growth which has pushed the estimated 2013 public deficit figure up to 3.7 percent, compared with 4.8 percent in 2012.
Under EU rules, eurozone members are expected to run public deficits of no more than 3.0 percent of GDP, and are supposed to work towards a balance, or even a surplus in times of economic growth.
Without an EU extension, France could trigger procedures that might result in sanctions.
The government is now pledging to bring the public deficit down to 2.9 percent next year, with Hollande having ruled out making more sharp spending cuts to reach the target this year.
Under the programme, public debt is expected to reach a record peak of 94.3 percent of GDP in 2014 before beginning to decline a year later than initially planned.
The European Commission, which will vet the plan once French lawmakers have approved it, said it would take a close look at new commitments by the French government, while German Chancellor Angela Merkel said: "We wish France success because France is key to the eurozone as a whole."
Although the government had vowed it would keep social charges at stable levels in 2014, the overall tax burden is forecast to increase to 46.3 percent of GDP this year, while public spending is expected to edge up to 56.9 percent.
"An important effort will be necessary again" in 2014, the finance ministry acknowledged.
About 70 percent of the 2014 deficit reduction effort is based on savings from reduced government spending, with the rest to come from higher revenues, including taxes and raised charges on pension programmes.
A total of five billion euros ($6.5 billion) will be saved within the social security system, of which one billion euros will come out of family benefits, one billion euros from pensions and three billion euros from health insurance benefits.
Prime Minister Jean-Marc Ayrault said only the richest 15 percent of families will have their child benefits reduced as means-testing is introduced -- a controversial first for France.
Finance Minister Pierre Moscovici insisted that "we haven't given up on anything" in its long-term fiscal goals.
"The government's target is still to return to structural balance in 2017, to achieve the strongest growth possible and to reverse the unemployment curve at the end of 2013," he said.
The government has pledged that unemployment, which hit a rate of 10.6 percent of the the workforce in the final quarter of 2012, will begin to decline by the end of this year.
However, in its latest forecasts released on Tuesday, the IMF expects France's unemployment rate to rise to 11.2 percent this year and to 11.6 percent in 2014.
The stability programme will be sent to parliament for debate on April 23-24 and then to the European Commission at the end of the month.
Russia's growth slows drastically in Q1
Russia on Wednesday reported a sharp slowdown in growth over the first three months of the year to 1.1 per cent from 4.9 per cent in the same period of 2012, amid growing alarm over the state of its economy amid a slew of poor data and falling oil prices.
Russia on Wednesday reported a sharp slowdown in growth over the first three months of the year to 1.1 per cent from 4.9 per cent in the same period of 2012, amid growing alarm over the state of its economy amid a slew of poor data and falling oil prices.
Deputy Economy Minister Andrei Klepach said the estimate came in after downward revisions for the figures for January and February -- a month in which the economy contracted by 0.4 per cent.
But he added that a stronger March helped Russia's overall performance in the first quarter.
"By our estimate, GDP grew in March by 2.3 per cent in annual terms, and we confirm our estimate of 1.1 per cent for the first quarter," the RIA Novosti news agency quoted Klepach as saying.
The estimate was released a week after Russia slashed its 2013 growth forecast to 2.4 from 3.6 per cent due to a slowdown in both industrial output and consumer demand.
Klepach spoke at the same time as Prime Minister Dmitry Medvedev was delivering an economic performance review before the lower house of parliament.
Medvedev told deputies that Russia's slowdown was caused in large part by poor economic performance among its main trading partners abroad.
"The first months of the year show that the global trend toward slower growth remains in place," Medvedev said in a speech lasting nearly two hours. "There are serious risks here."
President Vladimir Putin -- whose strong popularity ratings come from the prosperity brought by years of high prices for Russia's energy exports -- himself admitted on Monday that the world economy was in "crisis".
He then instructed Medvedev to quickly assemble a meeting of ministers and Kremlin officials that could devise a strategy for pulling the country out of its economic malaise.
Medvedev said Wednesday that the government already had a proper strategy in place.
"The government has its own vision of what must be done," he said. "But these measures must be discussed in detail with the experts and the deputies."
Economists also called Russia's economic performance worrying.
"With growth easing in most trading partners, the fact that Russia has slowed is not surprising. But the magnitude of the slowdown is becoming increasingly worrying," the London-based Capital Economics consultancy said in a research note.
It also noted that the slowdown actually began in the second half of last year after impressive growth figures for the first six months of more than four per cent.
Wednesday's report will put still more pressure on the central bank to cut the main interest rate from its current level of 8.25 per cent for the first time in nearly eight months.
"We expect interest rate cuts to start materialising around June," said chief Renaissance Capital economist Ivan Tchakarov.
"We are forecast cuts of 75 basis points by year-end, but think the risks are now slanted toward a larger reduction," he noted.
But analysts also believe that Russia's economic troubles will not be solved by monetary measures alone and will require a deep-rooted restructuring of he economy.
Russia still largely depends on its commodities exports and Renaissance Capital predicted a one-per cent hit on Russia's gross domestic product growth should oil prices decline by $10 over the course of the year. Brent crude is currently trading at less than $100 a barrel.
Medvedev told parliament he understood the problem and would continuing to focus on eliminating corruption and improving the business climate -- his two main missions when he was president in 2008-2012.
"We must use all our resources to respond to the problem in a timely manner," he said.
"We must continue work on improving the business climate and economic efficiency as well as the social sphere."
Italian Political Impasse Tested as Presidential Voting Begins
Italian lawmakers get a chance to begin breaking an eight-week political deadlock today as they consider nominations for the next head of state.
The first ballot at 10 a.m. in Rome’s Chamber of Deputies will indicate whether tensions between Pier Luigi Bersani’s Democratic Party and forces loyal to former Prime Minister Silvio Berlusconi have eased. Broad agreement on a successor to President Giorgio Napolitano could revive moribund talks on forming a new government, which have yielded only acrimony since inconclusive elections Feb. 24 and Feb. 25.
“The number of voting stages ultimately required to elect the president will have a very important signaling content,” Nick Matthews, senior European economist for Nomura International Plc in London, said yesterday in a report. “It should show whether an agreement between the center-left and the center-right was achieved.”
Competition between the Democratic Party on the left and Berlusconi on the right reduced parliament to a near-standstill and scuttled Bersani’s attempt to secure the premiership. Former Prime Ministers Giuliano Amato and Massimo D’Alema as well as ex-Senate Speaker Franco Marini and Sabino Cassese, a judge on Italy’s constitutional court, have been reported as possible compromise candidates to succeed Napolitano, whose seven-year term ends May 15.
Marini appeared to be emerging as the frontrunner last night after both Bersani and Berlusconi praised the former senator to allies, with Bersani saying that Marini had the broadest support, news agency Ansa reported.
Napolitano’s successor will become the key figure in the effort to resolve the political impasse. The head of state appoints the prime minister and, when stalemates prove intractable, dissolves parliament and calls new elections.
Political Players
Investors are relying on Bersani and Berlusconi to reach a deal that will ultimately lead to a government with enough support to pass economic stimulus and shield against the European debt crisis. The Democratic Party, known in Italy as the PD, and Berlusconi’s People of Liberty, or PDL, have been thrown together by the emergence of Beppe Grillo, whose Five Star Movement won a blocking minority in the February elections.
The president is chosen by secret ballot in a 1,007-member electoral college comprising all national lawmakers and some regional representatives. Votes are cast one at a time and then counted one by one in a process that typically allows time for two ballots a day.
“Numerous structural factors now make an agreement between the PD and PDL on a presidential candidate slightly more likely than not,” Peter Ceretti, a Eurasia Group analyst in New York, said yesterday in a research report. “However, low trust between Bersani and Berlusconi, the sheer number of veto players involved, and the possibility of surprise defections all create distinct risks.”
Yields Decline
Italian 10-year bond yields fell 6 basis points yesterday to 4.25 percent, down from 4.45 percent before the February vote.
Grillo said yesterday that his more than 150 electors would back Stefano Rodota, a university professor and former lawmaker. Grillo settled on Rodota, who finished third in an online Five Star primary, after the top two choices declined the nomination.
Bersani, who controls Italy’s lower house of parliament, needs help from forces led by Grillo or Berlusconi to secure a majority in the Senate. Last month Bersani failed to entice Grillo into an alliance while shunning a potential deal with Berlusconi, a billionaire and three-time premier.
“We hope to have an answer quickly,” Federico Ghizzoni, chief executive officer of UniCredit SpA, said yesterday of the presidential selection. “This is very important, also in order to have, soon after, a new government.”
Hollande Ministers Join French Electors in Shunning Stock Market
When it comes to stocks, French politicians mirror the population at large: they shun them.
The 38 members of the French cabinet this week were forced to disclose their assets by President Francois Hollande, who is seeking to overcome public anger over a minister who hid an overseas bank account. The declarations reveal that while the government has as many as eight millionaires, their investments like those of their compatriots show a preference for real estate, life insurance, and savings accounts.
 “They seek security, and have an aversion to risk,” said Nathalie Leaute, director of the finance department at pollster TNS Sofres, which publishes an annual survey of how the French invest their savings. “Members of the government are fairly representative of the population as a whole.”
Only 12 percent of the French own stocks or equity funds, down from 17 percent in 2010, according to a CSA poll in January 2013 that questioned 1,009 people. The poll showed that 74 percent had tax-free savings accounts, and 28 percent had life insurance contracts.
Forty-three percent said that tax-free savings accounts are the best investment, 42 percent said real estate, and only 5 percent said stocks.
In contrast, 45 percent of Americans and 43 percent of Australians are invested in equity markets, according to a 2010 study by the Australian Stock Market. The proportion stands at 18 percent for Britain and 13 percent for Germany.
‘Evil’ Capitalism
The French unease with markets was evident during the presidential election campaign last year. In a speech in January, Hollande, the Socialist Party’s candidate, said his “adversary is finance,” pledging to rein in markets.
Members of the government avoid stocks because financial markets have a bad name, said Marc Fiorentino, a partner at financial adviser Monfinancier in Paris.
“They’re afraid of the image that the stock market has with the public,” he said. “No stock market investments. Not one. As if it’s a crime. It’s as if the stock market is the manifestation of the evil of Big Capital.”
Like the French in general, property accounted for the biggest proportion on ministers’ assets.
French Prime Minister Jean-Marc Ayrault owns two houses valued at 1.2 million euros ($1.6 million). Foreign Minister Laurent Fabius has a 1.2 million-euro stake in a family business. Interior Minister Manuel Valls has artworks by his father worth 80,000 euros. Labor Minister Michel Sapin holds farmland worth 590,000 euros. Government spokeswoman Najat Vallaud-Belkacem has an Italian scooter she values at 500 euros.
Stocks Aversion
Only four members of the French government don’t own lodging.
Fifty-eight percent of the French own their home, according to state statistical institute Insee, which said 62 percent of the assets of the French are in real estate
Prime Minister Ayrault declared a net worth of about 1.5 million euros, with no equity investment.
Sapin has three houses, one apartment, various rural properties, and no equity investments.
Finance Minister Pierre Moscovici is worth just 240,000 euros, all of it in an apartment and bank accounts.
Foreign Minister Fabius has an apartment worth 2.75 million euros in Paris, a stake in a family art dealership worth 1.2 million, and just 34,000 euros in mutual funds. He had no direct investments in companies on the stock market.
The only other cabinet minister to declare assets linked to the stock market was Transport Minister Frederic Cuvillier, who said 22,000 euros of his 670,000-euro net worth in a Banque Postale mutual fund.
U.S. Comparison
In contrast, most of the members of U.S. President Barack Obama’s administration have holdings in the markets.
Secretary of State John Kerry is worth about $240 million and holds direct stakes in more than 100 companies, according to Washington D.C.-based Center for Responsive Politics.
The center estimates Treasury Secretary Jacob Lew’s assets at between $748,000 and $1.3 million, almost all of it in bond and equity mutual funds and retirement accounts. He additionally has $50,000-$100,000 in Israeli bonds.
Attorney General Eric Holder is worth at least $3.8 million, mostly in U.S. government bonds but also some mutual funds, according to the center. The $56 million in assets of Jeffrey Zients, director of The Office of Management and Budget is mostly held in a mix of equity and bond investment funds. Education Secretary Arne Duncan’s net worth of about $1.3 million, almost all in stock mutual funds.
The poorest cabinet member is Transportation Secretary Ray LaHood with a negative worth because of loans. Even he has between $31,000 and $195,000 in equity mutual funds.
Less Comfortable
“Polls have shown that French investors are much less comfortable than anglophones with stocks or any other investments seen as risky,” said Leaute at TNS-Sofres. “They don’t feel comfortable with managing risk.”
The ministers’ wealth declarations are part of a series of measures to “moralize politics” that Hollande announced after former Budget Minister Jerome Cahuzac admitted April 2 that he’d been lying for months about a secret Swiss bank account. The account was first reported last December by an online newspaper, and Cahuzac quit last month when he was placed under formal investigation.
Members of parliament will also have to announce their assets once Hollande’s measures become law. Hollande, elected 11 months ago and facing joblessness at a 15-year high, is the least popular president ever so early in his term.
The poorest member of his cabinet is women’s affairs minister and the government spokeswoman Vallaud-Belkacem, 35, with 110,000 euros, including her 500 euro Piaggio scooter.
“I’m neither proud nor ashamed,” she said yesterday in an RMC Radio interview. “It just is. We’ve all had different careers and are at different stages in our life.”
Former ECB Board Member Bini Smaghi Says Draghi Will Weaken Euro
Former European Central Bank Executive Board member Lorenzo Bini Smaghi said policy makers led by President Mario Draghi will act to weaken the euro.
“They have to find ways to avoid that the euro appreciates and actually try to make it depreciate,” Bini Smaghi said in an interview on “Surveillance” with Sara Eisen and Tom Keene today. “They will do something, I think that’s unavoidable.”
The euro fell as Bini Smaghi spoke, dropping to $1.3124 at 2 p.m. in Frankfurt from $1.3153 beforehand. The euro has climbed more than 2.5 percent against the dollar in the past three weeks as the ECB refrained from adding to stimulus while counterparts in Japan and the U.S. employed loose monetary policies to spur growth.
Europe is weaker than Japan and the U.S. so the euro should be weaker,” Bini Smaghi said. “But if we look day by day, it’s actually been strengthening, especially after what happened in Japan.”
The Bank of Japan on April 4 announced a doubling of its monthly bond purchases and set a two-year horizon for achieving its goal of 2 percent inflation, prompting the yen to slide against all of its main counterparts. The Federal Reserve is also engaged in so-called quantitative easing, buying $85 billion of government and mortgage debt each month in a bid to spur growth and boost employment.
While the ECB has pledged to buy the bonds of distressed euro-area nations if yields are unjustifiably high, it requires them to sign up to strict conditions and no governments have applied for the aid.
ECB Struggles
The Frankfurt-based ECB is struggling to find new ways to help the 17-nation euro economy shake off its second recession in four years. While Draghi signalled this month that policy makers are considering cutting interest rates further, he said they haven’t yet come up with a plan to get banks lending to small and medium-sized businesses -- something the ECB has long identified as an area of economic weakness.
Bini Smaghi said there’s no point in the ECB engaging in QE like the Fed, as that would involve it buying the sovereign bonds of countries like Germany, which already have record-low borrowing costs.
Slovenia Buys Time to Dodge Bailout With Debt Sale Win
Slovenia eased concern that it will be the next euro-area state to need a bailout as investors scooped up twice the targeted amount in a debt sale yesterday. The country’s bonds surged and its default risk tumbled.
The government sold 1.1 billion euros ($1.43 billion) of 18-month bills, compared with its 500 million-euro target, the Finance Ministry in Ljubljana said in an e-mail. The yield was 4.15 percent, compared with 3.99 percent in December 2011. It also repurchased 510.7 million euros of notes at a yield of 3.99 percent after planning to buy as much as 855 million euros.
State-controlled banks including the country’s two largest, Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d. (KBMR), signaled they would participate in the biggest auction in six months as Prime Minister Alenka Bratusek’s new government tries to convince markets Slovenia won’t follow five other euro members in seeking international assistance.
“This T-bill auction was successful and is likely to ease the pressure on Slovenian assets,” said Jaromir Sindel, an economist at Citigroup Inc. in Prague. Still, in the short-term, specific asset-sale proposals, a stability program to address the European Commission’s comments on economic imbalances and the creation of a bad bank may be more important, he said.
Slovenia’s dollar bonds due in October 2022 gained after the sale, with the yield falling 36 basis points to 5.95 percent.
CDS Tumbles
The cost to insure Slovenian government bonds against non- payment for five years using credit default swaps tumbled 30 basis points, the steepest fall among emerging-European nations, to 342. The price had jumped 141 basis points since the start of the year through April 16 on concern investors would make Slovenia the sixth euro-area country after Cyprus to seek a bailout.
“The successful debt sale is in line with what we had expected although the extent of the demand comes as a surprise,” Abbas Ameli-Renani, an emerging-markets economist at Royal Bank of Scotland Group Plc in London, wrote in a note to clients. The “auction takes pressure off the government’s finances for the coming months and possibly even until the end of the third quarter or early fourth quarter.”
French Support
The ex-Yugoslav republic, which last sold foreign debt in October and missed a target for T-bill sales by almost half at an auction on April 9, turned to local investors after a second recession since 2009 caused a banking crisis and fueled speculation the nation would follow Cyprus in seeking aid.
France has confidence in what’s started in Slovenia, which is a clean up of its budget and courageous steps to deal with the banking system and improve competitiveness” French President Francois Hollande said in Paris yesterday after meeting his Slovenian counterpart, Borut Pahor. “We should provide Slovenia with what it’s asking for, which is confidence.”
Bratusek told lawmakers yesterday that while urgent measures needed to be taken to address Slovenia’s woes, the country doesn’t need a bailout. The government will present a plan to narrow the budget gap and fix the banks within a month, a time frame agreed with European leaders in Brussels, she said.
“Banks are the priority and if they don’t start lending once their balance sheets are cleaned up, we’ll have done nothing,” she said.
Slovenia, which adopted the euro in 2007, sold 12-month notes at a yield of 2.99 percent at its last T-bill auction on April 9, up from 2.02 percent for similar bills on Feb. 12, Finance Ministry data show.
Boosting Holding
BlackRock Inc. (BLK), the world’s biggest money manager, said it would boost its holdings of Slovenian bonds if the nation successfully overhauled its troubled banks. Yesterday’s auction of 18-month securities will draw “very good” demand, said Scott Thiel, deputy chief investment officer of fixed-income securities at BlackRock in London.
Foreigners may have accounted for as much as half the demand at the auction, according to Milan Smiljanic, head of trading at Perspektiva d.d. in Ljubljana.
“The fact that the ministry accepted foreign demand and offered a slightly higher rate is a step in right direction in order to calm the markets,” he said. “After the auction, the Slovenian debt curve immediately responded with lower yields.”
Kenny Suffers Biggest Defeat as Irish Unions Reject Pay Cuts
Irish Prime Minister Enda Kenny suffered his biggest setback since taking power two years ago, as unions rejected his plans to cut pay for state employees.
The nation’s most powerful labor group, SIPTU, yesterday rejected government proposals to reduce salaries for some of the best-paid public workers by at least 5.5 percent. A wider vote of the union movement confirmed the rejection of the proposals in Dublin today, the Irish Congress of Trade Unions said, adding it would resist any unilateral imposition of pay cuts.
Ireland thus far has avoided clashes over government austerity measures compared with other crisis-hit economies such as Greece and Spain. Under Kenny, Ireland is leading the race to become the first country to exit its bailout since the euro-debt crisis erupted in Athens in late 2009.
“The rejection of the deal raises the prospect of industrial action and disruption in the public sector for the first time during this crisis,” said Owen Callan, an analyst at Danske Bank A/S (DANSKE), in Dublin.
Kenny had scored victories including winning lower interest rates on bailout loans, getting more time to repay them, as well as an agreement to ease the cost of the nation’s bank rescue. The government estimates that the rebuffed pay cuts would have generated annual savings of 1 billion euros ($1.3 billion) by 2015, as it seeks to tame the fiscal deficit.
‘Bottom Line’
Irish Public Expenditure Minister Brendan Howlin, responsible for making budget savings and negotiating the pay accord, told Dublin-based RTE yesterday he’ll have to explain the impact of the vote to the country’s bailout partners.
“The bottom line here is absolutely clear: We have to, we must and we will find 300 million euros of extra savings this year from payroll,” Kenny told lawmakers today. “That’s the challenge the government now faces.”
SIPTU rejected the proposals, which provide for at least a 5.5 percent pay cut on salaries exceeding 65,000 euros a year, with 54 percent of the votes cast. The labor union accounts for 25 percent of public-sector ballots on the accord.
“The result reflects the degree to which working people, and public-service workers in particular, are profoundly aggrieved at the way in which they have been required to shoulder the lion’s share of the burden of the adjustment while wealthy people are seen not to have contributed to the degree that they are capable of,” O’Connor told reporters.
Promissory Deal
In February, Ireland swapped so-called promissory notes used to rescue Anglo Irish Bank Corp. with 25 billion euros of long-term government bonds with maturities of as long as 40 years. As recently as last weekend, European finance ministers decided to give the nation more time to repay its bailout loans, adding to Ireland’s momentum.
The yield on Irish five-year debt was at 2.83 percent today, down from more than 17 percent in July 2011, when Moody’s Investors Service cut the nation to non-investment grade.
“There’s no question that this is a setback but it’s more like a skirmish than an event that changes everything,” said Austin Hughes, an economist at KBC Ireland in Dublin. “Ireland’s consensus model with unions has marked it out as being different from the more divisive circumstances we’ve seen in other countries pushing through austerity.”
Ireland has so far avoided the large strikes that have beset Greece and Portugal even after successive governments cut state workers’ pay by an average 14 percent since 2008.
Kenny has now to decide if he wants to take on the unions. The government has said it may legislate for across-the-board public sector pay reductions if the proposals are rejected. He told lawmakers yesterday he was “disappointed” with the outcome, with opportunities for savings “limited.”
Gerald Nash, vice chairman of the parliamentary Labour Party, which governs in coalition with Kenny’s Fine Gael, told RTE Radio today that the government needs to “scope out the potential” for tweaking the deal.
“We are in unchartered territories now in the context of setting of public sector pay and public pay agreements,” he said. “It is not a situation that we have experienced before.”
Tesco says 2012 profit slumps 95%, confirms US exit
British supermarket giant Tesco on Wednesday took a £1.2-billion ($1.8-billion, 1.4-billion-euro) hit from failed US division Fresh & Easy, sparking the first drop in annual profits in almost two decades, and confirmed its exit from the United States.
British supermarket giant Tesco on Wednesday took a £1.2-billion ($1.8-billion, 1.4-billion-euro) hit from failed US division Fresh & Easy, sparking the first drop in annual profits in almost two decades, and confirmed its exit from the United States.
Net profits slumped 95 percent to £124 million in its 2012/2013 financial year, compared with £2.806 billion last time around, Tesco said in a results statement. Revenue edged 1.4 percent higher to £64.83 billion.
Earnings dived as Britain's biggest retailer also booked a £804-million writedown on the value of its property portfolio in Britain.
In addition, the London-listed supermarket took a £495-million goodwill writedown for its operations in Poland, the Czech Republic and Turkey.
Pre-tax profits collapsed 51.5 percent to £1.96 billion in the 52 weeks to February 23, as Tesco was rocked by "deteriorating" economic conditions in Europe and regulatory restrictions in South Korea.
Tesco, which has struggled in recent times in its home market Britain and abroad, added that its performance was dented by an investment plan aimed at turning around its domestic business.
"The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today," said chief executive Philip Clarke in the statement.
He added: "We have set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders.
"The consequences are non-cash write-offs relating to the United States, from which we today confirm our decision to exit, and for UK property investments which we will not pursue because of our fundamentally different approach to space."
"We have also faced external challenges which have affected our performance, notably in Europe and Korea.
"Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns."
Tesco had already signalled its intention to exit the US in November. The company said on Wednesday that it would not retain any part of Fresh & Easy but has not yet finalised its disposal plans.
However, the group revealed that its US exit plans were "well-advanced", with interest from buyers for all or parts of the business.
In response to the gloomy numbers, Tesco's share price sank 3.40 percent to 371.75 pence on London's FTSE index of top companies, which was 0.50 percent lower at 6,273.51 points.
"The bill for the UK turnaround, US exit, goodwill impairment in Poland, the Czech Republic and Turkey, and the unwelcome surprise of the property portfolio writedown all provided significant headwinds and have eaten into profits," said equities analyst Richard Hunter at Hargreaves Lansdown stockbrokers.
"Meanwhile, the strategic return to a UK focus is progressing but will be a slow process before the company can hope to recapture its former glories."
China Home Prices Rise in Almost All Cities on Mild Local Curbs
China’s new home prices rose in all but two cities, led by major centers, as local governments announced milder-than-expected property measures and targets.
Prices in March climbed in 68 of the 70 cities the government tracks from a year earlier, the National Bureau of Statistics said in a statement today, the most since September 2011. The southern city of Guangzhou posted the biggest gain, rising 11.1 percent from the same period last year. Beijing prices jumped 8.6 percent, while they advanced 6.4 percent in Shanghai, both the most since January 2011 when the government changed its methodology for the data.
Thirty-five provincial-level cities have issued details of property curbs by an April 1 deadline, “far more benign than the market’s expectations,” according to a BNP Paribas SA report. Former Premier Wen Jiabao, in his final endeavor to make housing affordable, ordered higher down payments and interest rates for second-home loans in cities with “excessively fast” price gains and urged stricter enforcement of taxes on sales.
Most cities, including Hangzhou and Nanjing in the east, and the southern business hub of Shenzhen, pegged home-price gains at a rate less than the growth in per-capita disposable incomes. That will allow home prices to increase 7.5 percent to 13 percent this year, Centaline Group, parent of China’s biggest real estate agency, said in a report this month.
Price declined in Ningbo and Wenzhou, both in eastern Zhejiang province. Wenzhou had the biggest drop, with prices tumbling 9.2 percent from a year earlier.
Chinese bank ICBC tops Forbes Global 2000 list
Chinese bank ICBC (The Industrial and Commercial Bank of China) knocked US oil giant ExxonMobil from its perch as the world's biggest public company Wednesday, ranking number-one for the first time on the Forbes Global 2000 list.
Underscoring the power move by Chinese companies to top global rankings, China Construction Bank (CCB) leaped 11 spots from last year to the number-two spot on the Forbes list of the world's largest public companies.
"This year's list again reveals the dynamism of global business," said Scott DeCarlo, the list editor.
Forbes said that ICBC and CCB were bumped higher in the ranks by double-digit growth in both sales and profits in 2012, although annual profit growth for both banks was the slowest rate since they went public.
ICBC brought in $37.8 billion in profits on $2.8 trillion in assets last year, while CCB earned $30.6 billion on $2.2 trillion in assets.
"Most analysts don't expect a banking crisis in China, but rising defaults and shrinking loan profitability are serious threats to the country's banking system," Forbes said.
The rankings of the Forbes top 2000 are determined by an equal weighting of sales, profits, assets and market value.
Wall Street bank JPMorgan Chase, the world's biggest company in 2011, slipped from number two in 2012 to number three in 2013 as sales dipped.
US conglomerate General Electric moved down a notch to the fourth spot..
ExxonMobil, the US oil and gas giant, tumbled from its one-year reign at the top last year to the number-five spot, despite being the world's most profitable company for the second year in a row with $44.9 billion in net income, Forbes said.
Apple, which has vied over the past year with Exxon for the title of the world's most valuable company by market capitalization, was tied at number 15 with Wal-Mart Stores.
Wal-Mart reclaimed the top perch as the word's sales leader with 5.0 percent growth from Dutch-Anglo energy firm Royal Dutch Shell.
Germany's Allianz, South Korea's Samsung Electronics, and US-based AT&T joined the 25 top-ranked companies. Allianz gained the most ground, rising to 25th from 50th in last year's list.
By country, the United States, adding 19 members, continued to dominate the list with 543 members, its highest total since 2009.
Japan lost seven members, but at 251 remained the second-biggest country on the list.
For the first time since the list began in 2004, Forbes said, China did not increase the number of its companies on the list.
But it still had the third-largest presence with 136 members.
Forbes highlighted three Asian countries that showed standout overall growth in the list: Singapore, Thailand and Malaysia.
Belgium, Turkey, and the United Arab Emirates had the biggest rise in company market values, growing by double digits from a year ago.
Eleven countries had only one firm on the list, including New Zealand, the Czech Republic and Vietnam.
Exclusive: Risk ranking: China revamps anti-money laundering rules - sources
Chinese banks must rate their clients' risk of criminal conduct on a scale of 1-5 as part of the central bank's moves to curb money laundering and fraudulent transactions estimated at hundreds of billions of dollars a year.
The new rules come as some experts cite China as the world's biggest source of 'dirty' funds and as it faces growing foreign pressure to scrutinize its financial links with North Korea and block cash transfers tied to Pyongyang's nuclear ambitions.
Global Financial Integrity, a Washington-based financial watchdog, estimated in December that China accounted for almost half of the $858.8 billion of illicit funds flowing into tax havens and western banks in 2010 - more than eight times the amounts for runners-up Malaysia and Mexico.
Over an 11-year period from 2000, China was home to $3.8 trillion worth of illicit financial flows originating from corruption, crime or tax evasion, the watchdog said. The numbers cannot be verified as there are few estimates in the market.
The People's Bank of China (PBOC), the central bank, issued its new anti-money laundering rules to financial institutions in December, requiring them to rate clients' risks based on their location and the nature of their businesses, including their levels of transparency, five accountants and bankers with knowledge of the rules said.
The rules were not publicly announced, and banks and insurance firms have to implement them by December 2015, the accountants and bankers said.
A person at the central bank, which oversees China's fight against money laundering, said the changes are intended to finesse regulations and improve monitoring efficiency. "One of the main goals is to change the method of regulation. Initial regulations were very cumbersome," he said, declining to be named due to the sensitivity of the subject.
Financial institutions must now identify their riskiest clients and exercise discretion when reporting suspect deals. In the past, clients were rated against a checklist of money laundering traits without differentiating risk levels. That led financial institutions to inundate authorities with information and false leads that impeded checks, experts said.
The Financial Action Task Force (FATF), an international money-laundering watchdog, said in 2012 after a review of China that the central bank received 8 million reports in two years from financial institutions flagging possible criminal conduct.
About 87 percent of those reports were filed because they fitted a type of transaction defined in the checklist and lacked any "subjective element of suspicion", the FATF said.
"In the industry, there is a term for this. It's called vengeful reporting of data: since I don't want to be held responsible, I'll report everything to you," the central bank source said.
The PBOC had no comment when contacted for this article.
While the FATF's review praised China's "good progress" in tightening money-laundering controls in more than a dozen areas, it raised concerns about inadequate efforts to freeze what it called terrorist-related assets and comply with international agreements on terrorism financing.
The number of money-laundering convictions in China, which the FATF had previously said was too low, was shown to have improved in the review, but with qualifications. Total convictions rose to 32,510 in 2008-10, up from just 150 in 2002-06, the FATF said, noting, the increase was driven by convictions for "receiving stolen goods", not money laundering.
Article 191 of the criminal law, which covers the laundering of proceeds from smuggling, corruption, terrorism, organized crime, drug crimes, financial fraud and the disruption of financial order, was invoked 20 times in 2008-10, the FATF said.
The central bank source said this is in part because Chinese courts tend to prosecute other criminal acts underpinning money laundering, such as corruption, while opting to drop money laundering charges to avoid exhausting legal resources. That infrequent enforcement of anti-money laundering laws has prompted criticism that China is not trying hard enough.
"Anti-money laundering laws in China are a joke," said a banker at a Chinese bank, who didn't want to be named due to the sensitivity of his comments. "They only go after a few cases."
Pressure on China to tighten controls is growing.
China's banking links with North Korea have drawn increasing attention, especially after the United Nations, with China's support, tightened financial sanctions against Pyongyang last month following its third nuclear test in February.
The sanctions require governments to block cash transfers to North Korea if they are tied to its nuclear and ballistic missile programs, and China - North Korea's sole diplomatic ally and largest trade partner - says it wants sanctions fully implemented. Still, diplomats say sanctions in North Korea have not been as successful as those in Iran, and depend largely on China if they are to be effective.
Chinese financial regulators had no comment in response to a report on South Korea's Yonhap news agency last month saying Beijing had warned North Korean banks to stay within the remit of their permitted operations in China or risk penalties.
Major accounting firms say they are now advising Chinese banks on how to design their own risk assessment models, which must be submitted to the central bank by December and comply with official guidelines.
Financial institutions are required to score their customers' risk profiles according to their geography, characteristics, business and industry from 0-100, and rate their risk levels from 1-5, accountants say.
Christopher Peter Wilson, principal of Deloitte's anti-money laundering or sanctions services for China, said the risk approach mirrors those in the United States and Britain, and shows China's rules are maturing.
Western regulators made a few high-profile catches recently, with HSBC (HSBA.L) fined $1.9 billion in December after U.S. investigations into its Mexican and U.S. operations found two drug cartels had moved $881 million through the bank. And Standard Chartered Bank (STAN.L) had to pay $340 million to New York's banking regulator to settle allegations it hid transactions with Iran from authorities.
Addison Everett, a financial services partner at PwC, said global regulators are raising the bar on the effectiveness of the anti-money laundering and economic sanctions compliance processes of international banks. Besides the ballooning cost of violations, large global banks are increasingly concerned about business lost through damaged reputations, he added.
"The challenge (Chinese banks) are going to have as they expand is driving consistent risk assessment, monitoring, and reporting practices across different jurisdictions," he said.
Japan March Exports Exceed Analyst Estimates After Yen Slide
Japan’s exports exceeded estimates in March and the trade deficit narrowed from the previous month after declines in the yen made the nation’s products more competitive in overseas markets.
Overseas shipments rose 1.1 percent from a year earlier, the Finance Ministry said in Tokyo today. The median estimate of 22 economists was for a 0.2 percent increase. The trade shortfall was 362.4 billion yen ($3.7 billion) from 777.5 billion yen in February.
Better-than-forecast trade numbers add to positive signs for Japan’s economy as central bank Governor Haruhiko Kuroda rolls out unprecedented monetary stimulus to trigger a growth rebound. At the same time, declines reported today in shipments to China and the European Union highlighted limits on the likely scale of export gains this year.
“The yen’s weakness has been supporting Japan’s exports,” said Long Hanhua Wang, an economist at Royal Bank of Scotland Group Plc in Tokyo. “We are yet to see any signs that Japan’s exports are set for a full-fledged rebound.”
The yen fell about 19 percent against the dollar in the past six months, trading at 97.85 as of 9:51 a.m. in Tokyo today. Imports rose a less-than-forecast 5.5 percent, today’s report showed.
While the trade deficit narrowed from the previous month, it was four times bigger than a year earlier. The nine consecutive monthly trade shortfalls are the longest stretch since 1980. The yen’s decline is swelling Japan’s import bill as nuclear-plant shutdowns force increased inbound shipments of fossil fuels.
Trade Deficits
Japanese exports to China fell 2.5 percent from a year earlier, while those to the European Union slid 4.7 percent. Shipments to the U.S. rose 7 percent.
The Group of 20 economies will affirm a commitment to avoid weakening their currencies to gain an advantage for their exports, according to a draft statement prepared for a meeting this week in Washington, BNA reported.
The draft statement, seen by a BNA reporter, maintains a pledge made in February in Moscow to “move more rapidly toward more market-determined exchange rate systems and exchange-rate flexibility” and to refrain from competitive devaluations.
G-20 Communique
A first draft communique, prepared for meetings of finance ministers and central bankers starting today, describes the global outlook as “generally somewhat weaker and uneven” with “unbalanced” recoveries between advanced economies and emerging markets.
The maintaining of the language on currencies suggests the G-20 members will withhold direct criticism of Japan’s efforts to rally its economy from 15 years of deflation so long as it doesn’t seek to do so at their expense by driving the yen down. U.S. Treasury Secretary Jacob J. Lew and Bank of Canada Governor Mark Carney both signaled support for Japan’s stimulus push this week.
India says current account deficit could be halved in 1-2 years
Indian Finance Minister P. Chidambaram said on Wednesday he expected his country's current account deficit for the 2012/13 fiscal year that ended in March to be around 5 percent of gross domestic product and perhaps half that amount in one to two years.
Chidambaram is in the United States seeking foreign investment for India's ailing economy, the third-largest in Asia, before making his way to Washington for the annual spring meetings of the International Monetary Fund and World Bank.
The Harvard-educated Chidambaram said he is close to unveiling a new initiative to remove bottlenecks in economic development projects and help convince investors India's $1.8 trillion economy is back on a high-growth trajectory.
India is seeking foreign investment to fund its account deficit, which hit an all-time high of 6.7 percent of gross domestic product in the October-to-December period, driven by heavy imports of gold and oil and by muted exports.
"The third quarter (current account deficit) was large. The fourth quarter is likely to be better and for the overall year, probably around 5 percent, maybe a shade under 5 percent," he told reporters before meeting with investors and business representatives.
Declining oil and gold prices likely helped cut the current account deficit in the fourth quarter ended March 31. A smaller deficit means less downward pressure on its currency, the rupee, which has stabilized between 54 and 55 per U.S. dollar.
"Prudence dictates the current account deficit of any country should be roughly 2.5 percent or so. It is not an agreed number," he said.
"If exports rise sharply, if the oil prices soften more quickly, the current account deficit could be contained at 2.5 percent even by next year," he said, emphasizing there is no target date for bringing down this deficit.
Chidambaram returned as finance minister for a third time in August, and immediately launched a massive cost-cutting program.
India's gross domestic product growth hit a near four-year low of 4.5 percent in the quarter ended in December, an enviable performance when measured against the paltry growth in the developed markets.
In India's case it represented a harsh drop in GDP growth. In the fiscal year ended March 31, GDP is expected to be 5 percent versus 6.2 percent in 2011 and 9.3 percent in 2010.
"There was a massive loss of confidence among domestic investors, and among corporate investors in the Indian policymaking framework," said Jahangir Aziz, senior Asia economist at JPMorgan Chase & Co (JPM.N) in Washington.
"He squeezed spending as if there is no tomorrow in order to make sure the fiscal situation was brought under control," he said.
The IMF forecast real GDP for India in FY2013 at 5.7 percent, 6.2 percent in FY2014. Its forecast for the current account deficit is 4.9 percent in 2013 and 4.6 percent in 2014.
Chidambaram said GDP estimates for fiscal 2013/14 are in a range of 6.1 percent to 6.7 percent.
"Beyond that, it is only an aspiration. In fiscal 2014/2015, we want to go above 7 percent. Fiscal 2015/2016, we want to go back to our potential growth rate, which is above 8 percent."
Red tape and regulatory hurdles are often cited as obstacles to investing in India, and investors quizzed him on reforms.
Chidambaram told Reuters in a subsequent interview that projects were plagued by "last mile" bottlenecks in fuel supply, environment clearance, forest clearance, land acquisition.
"Now I intend to set up, after consulting with the prime minister (Manmohan Singh), some institutional mechanism for removing bottlenecks to stalled projects" in key sectors such as coal, power, steel and roads, he said.
He is working overtime to turn around perceptions that India has stagnated and to convince investors to put money to work.
"I am not looking at any number, nor am I here to sign any deals. The idea is to talk to investors. They are already invested in India," he said.
"The purpose is to make sure that they continue to remain invested in India and to increase their allocation to India."
Proposals under consideration for opening up India include raising the cap on foreign investment in rupee-denominated government debt by up to $5 billion; reducing taxes on such investments; making it easier for Indian companies to borrow abroad; and easing curbs on foreign investment in sensitive sectors such as defense, telecommunications and media.
New York investors seemed most interested in how soon the Indian parliament would pass legislation to raise the FDI cap on foreign ownership of insurance companies from 26 to 49 percent.
Other sectors up for reconsideration on foreign investment caps might include defense, print and broadcast media.
"There are many caps imposed at different points in time," Chidambaram said. A committee reviewing caps is due to make a report sometime after mid-May.
"I think many caps deserved to be either relaxed or removed."
According to Chidambaram, India's foreign direct investment inflows were $31 billion in the April 2012 to January 2013 period.
Chidambaram's push for more foreign investment, however, could make India more vulnerable to sudden reversals in capital flows.
One indication of dispirited global investors has been the net outflow from Indian-focused equity funds, which at the end of March had about $68.3 billion in assets under management.
According to Thomson Reuters Lipper service, these mutual funds and exchange-traded funds had net outflows of nearly $7 billion in calendar 2012 versus net outflows of $508 million in 2011. In 2010 there were net inflows of $1.5 billion and in 2009 $5.8 billion in net new capital was put to work in these funds.
Acknowledging the portfolio outflows, Chidambaram countered that other types of investments are counterbalancing those trends.
"Not FII's (Foreign Institutional Investment). FII's are buying," he said while drawing a picture of an upward trajectory in investment flows.
WTI Crude Drops to Four-Month Low; OPEC Says No Emergency Talks
West Texas Intermediate crude fell to the lowest level in four months as U.S. fuel use declined and production climbed to a two-decade high. OPEC said it doesn’t plan to hold an emergency meeting on prices.
Futures slipped as much as 1.2 percent in New York. U.S. gasoline and distillates consumption fell last week, while daily crude output rose to 7.2 million barrels, the highest since July 1992, Energy Information Administration data showed. The Organization of Petroleum Exporting Countries has no plans to hold emergency talks in response to oil’s plunge below $100 a barrel, according to two delegates with knowledge of the group’s policy. Brent fell as low as $96.75 a barrel.
“The market is coming back to reality that revisions in growth and gross domestic product has to translate into weaker demand,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “There are more hard times to come.”
WTI for May delivery dropped as much as $1.07 to $85.61 a barrel in electronic trading on the New York Mercantile Exchange and was at $86.07 at 12:13 p.m. Sydney time. The volume of all futures traded was 60 percent above the 100-day average. The contract slid $2.04, or 2.3 percent, to $86.68 yesterday, the lowest closing price since Dec. 13.
Brent for June settlement fell as much as 1 percent to the lowest intraday price since July 2 on the London-based ICE Futures Europe exchange. The front-month European benchmark grade was at a premium of $10.61 to WTI futures. It closed at $10.72 yesterday, the narrowest gap since Jan. 25, 2012.
Technical Breach
WTI is extending losses after settling below its 200-week moving average of $87.44 a barrel yesterday, signaling a breach of long-term technical support,. The decline may slow in the near term as the 14-day relative strength index is below 30, an indication that futures have fallen too quickly. Brent is accelerating its drop after the 50-day moving average slid below the 200-day mean, creating a “death cross” formation that typically sparks selling.
OPEC members should debate whether to hold an emergency meeting should oil prices keep falling below $100 a barrel, Rostam Qasemi, Iran’s oil minister, said in Tehran yesterday, according to state-run Press TV. There are no plans for special talks, the two OPEC delegates said, declining to be identified because such discussions are private. An official at OPEC’s Vienna headquarters declined to comment when contacted by phone today. The group’s next scheduled meeting is on May 31.
Fuel Use
U.S. daily gasoline consumption dropped for a second week to 8.38 million barrels a day, according to the EIA, the Energy Department’s statistical arm. Demand for distillate fuels, including diesel and heating oil, tumbled 5.9 percent to 3.63 million barrels a day in the week ended April 12.
Crude stockpiles decreased by 1.2 million barrels, the first drop in four weeks. Inventories were projected to increase 1.2 million barrels, according to the median estimate of 11 analysts in survey.
Gasoline supplies slid 633,000 barrels last week, the EIA report showed. They were forecast to drop 800,000 barrels, according to the survey. Distillate inventories, a category that includes heating oil and diesel, rose 2.4 million barrels, compared with a 350,000 barrel decline forecast in the survey.
The International Monetary Fund cut its global economic growth forecasts for 2013 on April 16. The projection for the U.S., the world’s biggest oil consumer, was trimmed to 1.9 percent from 2 percent. China, the second-largest crude user, was lowered to 8 percent from 8.2 percent.
Gold Snaps Two-Day Gain as ETP Outflows Counter Physical Demand
Gold slumped, snapping two days of gains, as outflows from exchange-traded products outweighed signs that prices near the lowest level in more than two years are spurring increased physical demand. Silver tumbled.
Gold for immediate fell as much as 2.8 percent to $1,337.86 an ounce and was at $1,357.70 at 10:18 a.m. in Singapore. Prices fell as much as 9.9 percent to $1,321.95 on April 16, the lowest since January 2011. Holdings in ETPs, which had record outflows in the first quarter, have contracted 3.5 percent to 2,364.901 metric tons this month.
Bullion has slumped into a bear market after 12 years of gains on growing speculation that a recovery in the U.S. will curb demand for the metal as a protection of wealth. Prices also tumbled on concern European governments may follow Cyprus in selling gold from their reserves, according to Goldman Sachs Group Inc. After the drop, coin sales from Australia’s Perth Mint have surged, while purchases climbed from India to China.
“There’s nowhere for the gold that backs the ETFs to go at the moment,” said David Lennox, an analyst at Fat Prophets in Sydney, using initials for exchange-traded funds. When that money comes out, it helps to “force the price down,” he said.
Gold for June delivery lost as much as 3.4 percent to $1,335.60 an ounce and traded at $1,350.10 on the Comex. Holdings in the SPDR Gold (GDTRGOLD) Trust, the biggest ETP backed by bullion, stood at 1,134.79 tons, the lowest level since April 2010, according to data on the fund’s website.
‘Store of Value’
“We’ve seen a significant amount of outflows in the gold product,” David Mazza, head of ETF investment strategy in the Americas at State Street Global Advisors in Boston. Television’s “Street Smart” with Adam Johnson and Trish Regan. “Over the long term, gold has served as a store of value and a medium of exchange for thousands of years.”
ETPs trade like shares, enabling investors to hold commodities without taking physical delivery. Gold holdings reached a record 2,632.5161 tons on Dec. 20. Billionaire investor George Soros cut his stake in the SPDR gold fund by 55 percent in the fourth quarter, while hedge-fund manager John Paulson kept his holding.
As spot gold slumped 14 percent in two sessions through April 15, retail sales tripled across China, the China Gold Association reported. In India, the world’s biggest buyer, demand over recent days has been the most this year, according to the All India Gems & Jewellery Trade Federation.
Daily customer traffic in Hong Kong and Macau increased as much as 25 percent April 13-16, said Chow Tai Fook Jewellery Group Ltd., the world’s largest jewelry chain.
‘Knife Edge’
“It’s balanced on a knife edge,” said Steven Dooley, head of research at brokerage Forex Capital Trading Pty Ltd. The drop is “likely to increase demand from the retail side of things, but the bulk physical buyers are going to be concerned about the big move we saw and also concerned about the big increase in supply if we do see Cyprus get into the market.”
Bullion’s slump was one of the largest corrections in modern history, according to Deutsche Bank AG. Gold is now poised to move higher as the physical market reacts after the decline, according to HSBC Holdings Plc.
Silver for immediate delivery fell as much as 3.6 percent to $22.495 an ounce and was at $22.705. The price touched $22.07 on April 16, the cheapest since October 2010.
Spot platinum lost as much as 1.3 percent to $1,405.25 an ounce, down for a second day, and was at $1,406.25. The metal dropped to $1,375.50 April 16, the cheapest since December 2011.
Palladium declined 0.8 percent to $657.60 an ounce, extending yesterday’s 2.1 percent loss. The price dropped to $647.25 on April 16, the lowest since Nov. 22.
Gold price volatility likely to continue, say market watchers
Gold rebounded slightly on Wednesday, after falling to a two-year low on Tuesday, However, market watchers said gold price volatility is likely to continue.
Gold rebounded slightly on Wednesday, after falling to a two-year low on Tuesday,
However, market watchers said gold price volatility is likely to continue.
Gold prices have suffered about 20 per cent losses since the beginning of the year, following uncertainty over the US Federal Reserve's stimulus programme and Cyprus' plan to sell bullion reserves to raise cash.
Speculation is rife that gold might continue to trade in the range of US$1,150 to US$1,500 -- off its peak of US$1,921 in 2011.
Retailers expect demand for gold jewellery to pick up in the coming months.
Charles Ho, managing director of On Cheong Jewellery, said: "Now, it's not a good season for gold buying, especially during Ching Ming.
"But it will pick up around the beginning of May, the wedding month, and I believe most Chinese couples will make use of this opportunity to start buying."
Given gold's recent fall from grace, there has been a bit of panic selling in the market. But as gold prices fall, gold jewellery becomes more attractive and experts say demand for gold jewellery will continue to be driven by Indian and Chinese customers.
The recent plunge has triggered interest in the trading of physical gold in Singapore, according to UOB -- the only bank offering gold savings accounts.
Ms Beh Hsia Wa, director of UOB Bullion and Futures, said: "Yesterday, we saw strong physical buying interest at the UOB main branch from retail customers. Buying interest continued today but was not as high as yesterday, despite a lower gold price.
"Wholesale physical customers, however, were not buying as much as they did when gold price was above US$1,500 last week. We suspect these investors are taking a wait-and-see approach."
But even if gold were to recover from its current lows over the next six to twelve months, analysts say it might be more prudent to protect against the downside with other precious metals.
Dominic Schnider, head of commodity research at UBS Wealth Management Research, said: "The sharp drop probably has damaged the reputation of gold and that means we'll see less investment demand and investment demand really pushes up the price of gold.
"One of our top calls have been platinum, since the beginning of the year. It's held up really well this year, only down three to four per cent year to date, considerably less than gold and I still think platinum will outperform, but trading below marginal production costs.
"So that gives you confidence that the downside in prices is floored. So with market in deficit, platinum has a better risk reward profile. You can buy this with ETF or normal standard vehicles. For those who can bear more risks, I would say palladium is a better choice. A market which is more in deficit than platinum but it comes with more volatility."
For now, the outlook on gold remains bearish, as the metal loses its lustre as a safe haven. 
Gold’s Worst Plunge Since 1983 Ends 12-Year Bull Run: Timeline
Gold for immediate delivery plunged the most since 1983 on April 15, deepening its slump into a bear market to show a loss of about 30 percent from its record in September 2011.
The following is a timeline from 1980 to April 15 when the price sank 9.1 percent.
1980: Gold reaches then-record $850 an ounce.
May 1999: Bank of England announces sales of gold reserves in five auctions.
August 1999: Gold falls to low of $251.95
September 1999: First Central Bank Gold Agreement announced where 15 European central banks including the European Central Bank agreed to limit collective sales to 2,000 metric tons over five years through 2004.
2003: First gold-backed exchange-traded fund started.
March 2004: Second Central Bank Gold Agreement limiting collective sales of European central banks to 2,500 tons through 2009.
November 2004: SPDR Gold Trust, world’s biggest gold-backed exchange-traded fund, created.
2005: Gold tops $500.
2006: Gold exceeds $700.
March 2008: Gold reaches $1,000 for first time.
September 2008: Lehman Brothers Holdings Inc. collapses.
October 2008: Gold drops to one-year low of $682. Investors sell gold to raise cash as equities, other commodities tumble.
November 2008: Federal Reserve pledges to buy $600 billion in debt in first round of so-called quantitative easing.
February 2009: Gold climbs back above $1,000.
March 2009: Fed pledges to buy as much as $300 billion of Treasuries over next six months
April 2009: China announces 76 percent increase in its gold reserves to 1,054 tons
September 2009: Third Central Bank Gold Agreement limiting collective sales of European central banks to 400 tons a year till 2014.
September 2009: International Monetary Fund approved gold sales of 403.3 tons, of which 200 tons were later sold to India.
December 2009: Barrick Gold Corp. (ABX), world’s largest producer, announces end of all gold hedges. Gold climbs above $1,200 for first time.
November 2010: Fed pledges to buy $600 billion of Treasuries in second round of quantitative easing.
November 2010: Gold climbs above $1,400 for first time.
March 2011: Gold extends record on Europe’s debt crisis, so- called Arab spring in the Middle East.
September 2011: Cash gold climbs to record $1,921.15. Fed announces Operation Twist program of replacing short-term bonds with longer-term debt.
September 2012: Fed announces open-ended Treasury and mortgage securities purchases at $40 billion a month.
October 2012: Gold climbs to 2012 high of almost $1,800.
December 2012: Holdings in gold-backed exchange-traded products reach record 2,632.5 tons, before commencing their decline, according to data compiled by Bloomberg.
December 2012: Fed increases open-ended bond buying purchases to $85 billion a month. Lawmakers wrangle over fiscal cliff.
January 2013: Gold climbs to 2013 high of almost $1,700.
February 2013: Gold drops below $1,600 for first time in six months. Fed minutes suggest some members want to vary the pace of asset purchases.
April 12, 2013: Gold tumbles 5 percent, entering bear market as prices drop more than 20 percent from a record close of $1,900.23 in September 2011. Cyprus may sell gold in its reserves to cover a bailout, raising speculation that other central banks may sell.
April 15, 2013: Gold slumps 9.1 percent, the most since 1983.
Copper Below $7,000 for First Time in 18 Months as Metals Slide
Copper in London fell below $7,000 for the first time in almost 18 months as data from Europe to China, the biggest user, raised concern that demand is faltering. Aluminum, nickel, zinc, tin and lead also retreated.
Copper for delivery in three months on the London Metal Exchange plunged as much as 4 percent to $6,800 a metric ton, the lowest level since October 2011, and was at $6,840.25 at 9:38 a.m. in Shanghai. Metal for delivery in August was at 50,530 yuan ($8,175) a ton, declining by a daily limit, on the Shanghai Futures Exchange. The July futures contract on the Comex dropped 3.1 percent to $3.1035 per pound.
European car sales are sliding to a 20-year low as demand plunged last month in Germany. The Federal Reserve said yesterday in its Beige Book business survey the U.S. economic expansion remained “moderate.” China’s first-quarter gross domestic product growth and fixed-asset investments, as well as March industrial production trailed economists’ forecasts.
“After breaching key technical levels, copper is in a downward trajectory,” Xu Liping, an analyst at HNA Topwin Futures Co., said by phone from Shanghai.
Nickel Rout Seen Easing With Output Costs Breached: Commodities
Nickel, the worst-performing industrial metal in the past year, is bottoming as prices fall below the costs of producing cheaper substitutes, curbing supply as consumption rebounds.
Prices have fallen 13 percent in the past year and are now below the cost for China to produce nickel pig iron, or NPI, a substitute derived from lower-grade ores, at an average $15,700 a metric ton, Barclays Plc says. Nickel, which traded at $15,587 yesterday, will go as low as $14,500 this year, the median of 12 analyst estimates.
The metal retreated in four of the past six years as China responded to shortages by adding NPI output that now accounts for 18 percent of world supply, from 3 percent in 2006. Slumping prices may slow the expansion just as demand accelerates at the fastest pace in three years and orders to withdraw record stocks from warehouses reach more than six times the average over the past decade. Nickel will trade at $18,100 in the fourth quarter, or 16 percent more than now, the median of 25 estimates shows.
“You have less efficient producers in China, so they are more prone to cut back on production if they see prices fall much,” said Alexandra Knight at National Australia Bank Ltd. in Melbourne, the best forecaster for industrial metals over the eight quarters. “We are still forecasting growth of 8 percent for China in 2013. That should be supportive of the base metals market over the year ahead.”
Trading Partners
Nickel fell 8.8 percent this year on the London Metal Exchange as the LMEX index of six metals dropped 8.2 percent. The decline compares with a 6.2 percent retreat in the Standard & Poor’s GSCI index of 24 commodities and a 5.9 percent gain in the MSCI All-Country World Index of equities. The U.S. Dollar Index, a gauge against six major trading partners, rose 2.9 percent and Treasuries returned 0.6 percent, a Bank of America Corp. index shows.
Global output will exceed demand for a third year as China makes the most ever nickel pig iron, or NPI, a substitute for the purer metal traded in futures, Morgan Stanley estimates. Production will outpace demand by 88,000 tons this year, or more than seven months of U.S. consumption, Barclays estimates. While that’s unchanged from last year, the projected surplus is almost nine times more than the bank was forecasting as recently as October. New projects from Sherritt International Corp. (S) in Madagascar to Vale SA (VALE5) in New Caledonia are also adding supply as Chinese NPI output expands for at least the eighth consecutive year, Morgan Stanley says.
Stainless Steel
Both are the consequence of prices that reached a record $51,800 in 2007, spurring new investments. Mining companies had failed to keep pace with the 10-fold expansion in China’s stainless-steel output from 2000 to 2006, Barclays says. The alloy accounts for about 65 percent of global nickel demand, according to the International Nickel Study Group in Lisbon. China now consumes 40 percent of the base metal, more than double the proportion seven years ago.
Annual gluts since 2011 caused inventories tracked by the LME to double since November 2011 to a record 169,386 tons, exchange data show. Morgan Stanley expects demand to expand 10 percent in 2013, the most since 2010. Global stainless steel output will rise 4.9 percent to a record 36.3 million tons this year, according to MEPS (International) Ltd., an industry consultant in Sheffield, England.
Orders to withdraw metal from warehouses, known as canceled warrants, doubled to 24,528 tons this year, compared with an average of 3,721 tons over the past decade, according to LME data. Consumption, valued at $28.4 billion last year, is expanding as the International Monetary Fund predicts global economic growth will accelerate to 3.3 percent this year, from 3.2 percent in 2012.
Forward Sale
As much as 30 percent of inventories may be tied up in financing deals and unavailable to consumers, according to Societe Generale SA. The accords typically involve a simultaneous purchase of metal for nearby delivery and a forward sale to take advantage of a market in contango, when later-dated contracts cost more than those with nearer dates. To be profitable, the spread must exceed storage, financing and insurance. The LME’s monthly contracts are in contango through 2018.
Some producers are still making money, with OAO GMK Norilsk Nickel (GMKN), the largest, expected to report an increase of about 50 percent in its most widely tracked measure of profit to $3.25 billion this year, the mean of 17 analyst estimates . Shares of the Moscow-based company fell 17 percent to $15.36 in London trading this year and will rally to $20.83 in 12 months, according to the average of 15 forecasts.
Acid Leaching
Sherritt International’s shares fell 21 percent to C$4.57 since the start of January and will reach C$7.23 in 12 months, according to the average of 10 forecasts.
Mining companies are adding the most new supply through a process known as high-pressure acid leaching, designed to handle lower-grade laterite ores. Output from six of them will more than double to 205,000 tons by 2018, Morgan Stanley estimates.
The surge in Chinese nickel pig iron is a growing threat because producers have cut overhead through new technology. Electric arc furnaces and rotary kiln electric furnaces with costs as low as $14,400 are superseding blast furnaces that made NPI at $23,000 a ton, according to Barclays, which cited data from Brook Hunt, a research unit of Wood Mackenzie Ltd.
The new NPI technology is also improving the quality of output, with nickel content as high as 15 percent, from 3 percent in 2006-2007, widening its uses across stainless steel grades, according to Barclays. China’s NPI production will advance 16 percent to 395,000 tons this year, Macquarie Group Ltd. forecasts.
“We still have massive infrastructure that have to be put in play in China and when you look at prices, they should be up from here,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “But in the short term, you can’t get too excited.”
Corn Drops for First Time in Three Days as U.S. Rains Aid Sowing
Corn declined for the first time in three days after heavy rains in the Midwest boosted soil moisture needed for planting in the main growing region of the U.S., the world’s largest producer. Wheat gained.
Corn for delivery in July lost as much as 0.6 percent to $6.375 a bushel on the Chicago Board of Trade. Futures were at $6.3825 by 9:49 a.m. in Singapore on volume that was 42 percent less than the 100-day average for that time of day.
Soil moisture in the Midwest is now mostly adequate to surplus, reversing the conditions last year when the U.S. suffered a drought, DTN said in a report yesterday. The drought, the nation’s worst since the 1930s, cut corn production in the U.S. to the least in six years.
“Improving conditions in those corn-growing areas will certainly pressure prices lower,” Graydon Chong, a grains and oilseed analyst at Rabobank International, said by phone from Sydney. “We’re trading a weather market where we’re waiting how the spring crop will develop. The volatility in the market will very much be driven by updates in the weather forecast.”
Showers and thunderstorms predicted for the central and south plains in the U.S. will again miss the west Kansas region, southeast Colorado and parts of Oklahoma and Texas, DTN said. Kansas, Texas, Oklahoma and Colorado are the biggest growers of winter wheat in the U.S., the Department of Agriculture says.
Wheat for July delivery gained as much as 0.5 percent to $7.105 a bushel before trading at $7.0775. Soybeans declined 0.2 percent to $13.7725 a bushel.
“Obviously, the winter-wheat areas at the moment are still quite dry and cold,” Chong said. “We’ve yet to see what sort of damage was done to those crops.”
About 31 percent of the U.S. winter-wheat crop was rated poor-to-very poor as of April 14, up from 30 percent a week earlier, the USDA said April 15.
Euro drops after Bundesbank comments on interest rate cut
The euro dropped against the dollar on Wednesday, reversing Tuesday's gains after Bundesbank comments on a possible eurozone interest rate cut and speculation swirled over a possible German rating downgrade.
The euro dropped against the dollar on Wednesday, reversing Tuesday's gains after Bundesbank comments on a possible eurozone interest rate cut and speculation swirled over a possible German rating downgrade.
The euro dropped to $1.3033, at 2200 GMT, down from $1.3174 late Tuesday.
The euro fell to 127.97 yen, from 128.52, while the dollar rose to 99.19 yen from 97.51.
Comments from Bundesbank chief Jens Weidmann that the European Central Bank could cut interest rates below their current record lows if necessary sent the euro tumbling.
"We might adjust in response to new information," Weidmann said. But he downplayed the utility of such a move.
"I don't think that the monetary policy stance is the key issue."
Weidmann's comment that Europe's recovery could well take a decade also hit sentiment, as did rumours that Germany's AAA credit rating would be cut, according to analysts.
"The ECB is a central bank that likes to prepare the market for any potential changes in monetary policy and that is why Weidmann's comments are so important," said Kathy Lien of BK Asset management.
The dollar's gains came early in the day and got no added support from the slightly improved view of the economy in the Federal Reserve's Beige Book survey of regional activity.
"The Fed's Beige Book failed to prop up the US dollar as the survey continued to point to subdued inflation, and (the Fed policy board) may retain its highly accommodative policy stance throughout 2013 as wage pressures remain contained," said David Song, currency analyst at DailyFX.
The British pound slipped to $1.5241 from $1.5363, while the dollar rose to 0.9326 Swiss francs from 0.9223 francs.
Euro under pressure as risk aversion flares
The euro nursed heavy losses early in Asia on Thursday, having suffered its biggest one-day fall in nearly a year on talk of more easing by the European Central Bank, while commodity currencies remained under pressure as risk sentiment took a further dive.
The common currency was at $1.3033, little changed from late trade in New York, where it slid as far as $1.3001 from a high of $1.3200. Its fall of more than 1 percent on Wednesday was the biggest since June 2012.
"The market is generally in a risk off mode. For the euro, $1.3000 is going to be the first line of defense on the downside, that corresponds with the 40-day moving average as well. Below that is $1.2929, the 200-day moving average," said Sue Trinh, senior currency strategist at RBC in Hong Kong.
Against the yen, the common currency eased to 127.84, moving away from Wednesday's high around 129.75.
Already on the backfoot as European shares fell to their lowest so far this year, the euro took a further hit after ECB Governing Council member Jens Weidmann was quoted by the Wall Street Journal as saying the bank could ease further if economic data warrants it.
"A rate cut in May still looks unlikely on the back of these comments, albeit not impossible should data deteriorate markedly," analysts at Commonwealth Bank wrote in a client note.
"However, should the economy underperform into the summer, with hoped-for recovery looking more distant, further monetary easing looks increasingly likely. Odds of a June or July rate cut have increased, but ultimately further stimulus remains data-dependent in coming months."
Adding to the gloom, oil and copper prices slid to multi-month lows and Wall Street saw a broad selloff with the financial sector hit by weaker-than-expected results from Bank of America.
Commodity currencies were not spared and the Australian dollar slumped back below $1.0300 from near $1.0400 on Wednesday. It has since recovered a bit of ground to $1.0302.
Investors also sold the Canadian dollar after the Bank of Canada cut its economic growth forecasts, while data showing a rise in British unemployment knocked the pound lower.
With the euro and commodity currencies under pressure, investors turned to the U.S. dollar and even the yen, taking a bit of pressure off the Japanese currency.
The dollar index, which tracks the greenback's performance against a currency basket, jumped more than 1 percent to a one-week high of 82.701 .DXY, posting its biggest one-day gain since July 2012.
The dollar edged up to 98.12 yen, remaining within striking distance of a 4-year peak near 100 yen set last week.
The yen, however, held its ground against most of its major peers.
Traders expect the yen will resume its broad decline in time given the Bank of Japan's radical stimulus program, but expect bouts of short-covering in the near term amid worries about the health of the global economy.
Just this week, the IMF trimmed forecasts for global growth given sharp spending cuts in the United States and Europe's continuing debt crisis.
Global policymakers will discuss the impact of unprecedented monetary policy easing at meetings in Washington starting Thursday. Japan is not expected to be scolded for policies that have led to a sharp slide in the yen.
Yen Remains Higher After Japanese Cut Foreign Debt Holdings
The yen remained higher against most major peers after Japanese data showed domestic investors sold foreign bonds for a fifth week, casting doubt on whether monetary stimulus will continue to weaken the currency.
Demand for the yen was also supported after the world’s third-largest economy posted a narrower-than-estimated trade deficit last month. The currency has weakened by almost one fifth in the past six months as the Bank of Japan (8301) increased cash provisions to combat deflation. The Dollar Index (DXY) remained higher as Asian stocks fell, boosting demand for the greenback as a haven.
“This tremendous weakening in the yen has produced little more than profit taking by the Japanese themselves,” said Sean Callow, a senior foreign-exchange strategist in Sydney at Westpac Banking Corp. (WBC) “It gives the impression that money is not flowing out of Japan at all right now, so it’s at least cause for investors to have a bit of a rethink” about the effectiveness of BOJ policy.
The yen fetched 98.11 per dollar as of 11:19 a.m. in Tokyo after losing 1.4 percent in the previous two days to 98.12. It was little changed at 127.97 per euro. The dollar traded at $1.3043 per euro following a 1.1 percent gain to $1.3032 yesterday.
The Dollar Index, which tracks the greenback against the currencies of six major trade partners, was little changed at 82.591 after climbing 1.1 percent yesterday. The MSCI Asia Pacific Index of shares fell 0.5 percent.
Group of 20 finance ministers and central bankers meet for two days in Washington beginning today, before weekend talks of the International Monetary Fund and World Bank.
Foreign Investments
Japanese investors reduced their holdings of foreign debt by 331.9 billion yen ($3.4 billion) in the week ended April 12, according to data from the Ministry of Finance. That followed a net sale of 1.14 trillion yen the prior week, the most in a year.
The nation’s imports exceeded exports by 362.4 billion yen in March, a separate report from the ministry showed. That compared with the 522.2 billion-yen deficit estimated by economists in a survey.
BOJ Governor Haruhiko Kuroda unveiled a plan on April 4 to double the central bank’s holdings of government debt and stock funds in two years. Japan’s trade partners have expressed concern over the move, with the U.S. Treasury saying in its semi-annual currency report that Japan must “refrain from competitive devaluation.”
The yen plunged 19 percent over the past six months, the worst performance among 10 developed market currencies tracked by the Correlation Weighted Indexes. The dollar rose 2.7 percent and the euro gained 2.5 percent.
‘Logical Consequence’
IMF Chief Economist Olivier Blanchard said on April 16 that the yen’s depreciation is a “logical consequence of appropriate monetary policy” by the BOJ.
At their last gathering in February, the G-20 signaled that Japan may stimulate its stagnant economy as long as policy makers refrain from publicly advocating a sliding yen.
“The yen still remains in a weakening trend,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The G-20 won’t probably tell Japan to refrain from devaluing the currency, but is more likely to leave exchange rates to the market.”
Pound Slides Most in 6 Weeks Versus Dollar as Unemployment Rises
The pound fell the most in six weeks against the dollar after government data showed the U.K. unemployment rate climbed and wage increases slowed, adding to signs the economy is weakening.
Sterling dropped versus most of its 16 major counterparts as minutes of the Bank of England’s April meeting released today showed Governor Mervyn King pushed for additional stimulus for a third month before being outvoted. U.K. government bonds rose as investors sought safer assets. The International Monetary Fund cut its economic forecast for the U.K. yesterday and said the central bank should boost stimulus.
 “The outlook for the U.K. economy and the pound are actually quite bad,” said Arne Rasmussen, head of currency research at Danske Bank A/S (DANSKE) in Copenhagen. “The jobs data today is disappointing. That’s why investors should not underestimate the possibility the Bank of England will act aggressively to support growth even as it’s keeping the quantitative-easing target unchanged for now. The pound will fall much further.”
The U.K. currency dropped 0.8 percent to $1.5244 at 4:22 p.m. London time. It fell as much as 0.9 percent, the biggest decline since March 1. The pound rose 0.2 percent to 85.62 pence per euro, reversing a decline to 86.37 pence, the weakest level since March 15.
The 17-nation shared currency slid after European Central Bank Board memberJens Weidmannwas quoted by Dow Jones as saying the ECB may cut rates if data warrants.
Jobless Data
Joblessness as measured by International Labour Organisation methods rose by 70,000 to 2.56 million in the three months through February, the Office for National Statistics said. The unemployment rate climbed to 7.9 percent from 7.8 percent. Regular pay growth slowed to 1 percent, the least since records began in 2001.
Six members of the Bank of England’s Monetary Policy Committee voted to keep quantitative easing at 375 billion pounds this month, according to the minutes of the April 3-4 meeting. King, David Miles and Paul Fisher wanted to increase it by 25 billion pounds.
“The short-run trade-off between output growth and inflation meant that the committee could return inflation to the target more quickly than currently expected only by taking policy actions that would provide less support to output,” the MPC said.
The pound has tumbled 4.3 percent this year, according to Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 2.8 percent and the euro climbed 1.5 percent.
Three-month implied volatility for the pound against the dollar rose to 7.33 percent today, the highest since April 3.
Gilts Advance
U.K. 10-year bonds rose for the fourth time in five days as the jobs data fueled speculation the central bank will expand stimulus in coming months. Gilts also gained along with U.S. Treasuries and German bunds as a slide in European stocks and commodity prices boosted demand for safer assets.
The 10-year gilt yield dropped five basis points, or 0.05 percentage point, to 1.68 percent. The 1.75 percent bond maturing in September 2022 gained 0.44, or 4.40 pounds per 1,000-pound face amount, to 100.61.
Pacific Investment Management Co., which manages the world’s biggest bond fund, is holding fewer longer-maturity gilts than recommended by the benchmark it uses to gauge performance, according to Mike Amey, a money manager for the company in London.
Amey said the 30-year gilt yield, at 3.02 percent today, provides scant protection when inflation is taken into account.
Consumer prices rose 2.8 percent in March from a year earlier, a government report showed yesterday. The rate has been above the central bank’s target of 2 percent every month starting in December 2009.
“If you have a sticky inflation rate, and maybe we will hit 3 percent, then flat real yields on a 30-year bond don’t look like a great deal to me,” Amey said. “I’m still underweight.”
U.K. government bonds returned 1.3 percent this year through yesterday, according to indexes and the European Federation of Financial Analysts Societies. German bonds and U.S. Treasuries both gained 0.6 percent.
Canada Dollar Drops as Carney Reduces Economic-Growth Forecast
The Canadian dollar weakened to the lowest level in a month versus its U.S. counterpart after the Bank of Canada reduced its growth forecast for 2013 and said economic slack will persist for more than two years.
The currency fell after the central bank lowered its 2013 growth forecast to 1.5 percent from the 2 percent it had predicted in January, after recent data in Canada, China and the U.S. trailed forecasts. Governor Mark Carney kept unchanged both his policy interest rate at 1 percent and his bias to tighten even as he lowered his growth forecast.
“Although the modest withdrawal aspect is left in the statement, the slashed growth and inflation forecasts leave plenty of room for Canadian dollar rates to price rate cuts down the line,” Shahab Jalinoos, a senior currency strategist for UBS AG in Stamford, Connecticut, said in an e-mail. “Broader issues like falling commodity prices” will propel the Canadian dollar lower, he said.
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell 0.6 percent to C$1.0265 per U.S. dollar at 5 p.m. in Toronto. The currency weakened to as low as C$1.0294, the least since March 13. One loonie buys 97.42 U.S. cents.
Bonds Rally
Canada’s benchmark 10-year government bonds rose, with yields dropping three basis points or 0.03 percentage point, to 1.71 percent, touching the lowest level since Dec. 10. The 1.5 percent security maturing in June 2023 closed 24 cents higher at C$98.06.
The Bank of Canada will announce additional details tomorrow about an April 24 auction of securities maturing in 2015.
The yield on December 2013 bankers’ acceptances, a measure of interest-rate expectations, fell to the lowest since March 21, the day the Canadian government announced its 2013 budget and the last time it pared its growth forecast. The yield on the notes fell to 1.22 percent.
So-called Bax contracts have settled an average of about 17 basis points above the central bank’s target rate since 1992.
Carney’s reduced forecast follows the International Monetary Fund, which yesterday lowered its forecast to 1.5 percent from 2 percent and said Canada’s growth will be the slowest in the Group of 20 outside Europe.
Central Bank
“The members of the Bank of Canada have clearly followed the lead of many central bankers and the market as a whole in developing a more cautious stance on the pace of global growth in 2013,” Adrian Miller, director of fixed-income strategy at GMP Securities LLC, said in a note to clients. “The downward pressure on commodity prices that is likely to persist over the near term has resulted in a slight pause in growth expectations.”
Job data in Canada and the U.S., along with U.S. retail sales and first quarter gross domestic product growth in China have all come in below the median forecast in surveys of economists since the beginning of April.
Higher rates could trigger further gains in Canada’s dollar, which the central bank said is already hurting exports because of the dollar’s strength. The currency is also elevated because of haven flows and the impact of loose monetary policies elsewhere, the bank’s report said.
Rate Path
“They really want rates to be higher, but they’re constrained by the economic slack and the persistently high currency,” said Ed Devlin, head of Canadian portfolio management team at Pacific Investment Management Co., which runs the world’s largest bond fund. “When they have this tightening bias they’re speaking more to the average Canadian,” in an effort to curb consumer borrowing, than to participants in the currency and bond markets, he said. Devlin said he favors eight- to 12-year Canadian government bonds.
Foreign investors fleeing lower rates in the U.S. and Japan, where unprecedented monetary stimulus is depressing yields, have buffered the loonie’s drop this year. International investors in February bought C$5.25 billion of Canadian debt instruments, with a net C$8.01 billion purchase of bonds compared with sales of C$2.76 billion of money-market securities, Statistics Canada reported April 16.
The Canadian dollar had its biggest daily drop in more than a year on April 15, tumbling 1.2 percent as gold led a slide in commodities after China’s economic growth slowed more than forecast in the first quarter.
Gold futures, down 17 percent this year, fell to a two-year low of $1,321.50 an ounce yesterday on growing optimism that an economic recovery will curb demand for a protection of wealth. The metal slumped 13 percent in the two sessions through April 15, the most since January 1980.
Crude oil, the nation’s largest export, fell for the fourth time in five days, dropping as much as 3 percent to $86.06 a barrel in New York.
The Canadian dollar has declined 0.9 percent this year against nine other developed nation currencies tracked by the Correlation Weighted Index. The U.S. dollar rose 3 percent.
Aussie Dollar Touches 1-Month Low on Growth Concern; Bonds Rise
Australia’s dollar reached a one- month low as stocks and commodity prices retreated, reducing investor appetite for riskier assets.
Australia’s government bonds rose, sending the 10-year yield to the lowest in more than four months. The Australian and New Zealand dollars held declines against the yen from yesterday after the International Monetary Fund cut its global growth forecast, citing a lagging recovery in Europe.
“The Aussie and kiwi are hit as stocks and commodity prices declined,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd., a unit of Japan’s largest currency margin company. “While there’s no sense of urgency from the RBA to cut rates at the moment, a big drop in consumer prices or lackluster global growth could boost easing expectations.”
Australia’s dollar was little changed at $1.0306 as of 12:34 p.m. in Sydney from $1.0297 yesterday, after earlier touching $1.0269, the lowest since March 12. The so-called Aussie traded at 101.09 yen from 101.03 yen.
The New Zealand dollar bought 84.43 U.S. cents from 84.41 yesterday, when it declined 0.6 percent. The currency was at 82.80 yen.
Three-year yields in Australia touched 2.68 percent, the lowest since Jan. 24. Ten-year yields fell as much as nine basis points, or 0.09 percentage point, to 3.17 percent, a five-month low.
The MSCI Asia Pacific Index (MXAP) dropped 0.5 percent, following a 1.3 percent decline in MSCI World Index (MXWO) yesterday. Thomson Reuters/Jefferies CRB index of raw materials lost 0.8 percent yesterday.
Global Growth
The Washington-based IMF trimmed its global growth forecast this week to 3.3 percent for 2013 from the January estimate of 3.5 percent. It lowered China’s growth projection to 8 percent from 8.2 percent. China is the biggest trading partner for both Australia and New Zealand.
China’s new home prices rose in all but two major cities, the National Bureau of Statistics said in a statement today.
In Australia, the central bank reiterated in the minutes released this week of its April 2 meeting that the Australian dollar “remained high” and the inflation outlook gives it room to cut borrowing costs.
RBA Policy
Australia’s consumer prices probably rose 2.8 percent in the first quarter from a year earlier, according to the median estimate of economists before the Bureau of Statistics releases the data on April 24.
In March, the Reserve Bank of Australia sold A$71 million ($73 million) more in local currency than it bought through the so-called other outright transaction category and sold a net A$577 million in the spot market.
Interest-rate swaps data show traders see a 40 percent chance the RBA will lower its benchmark to record 2.75 percent at the next meeting on May 7, the highest since March 11, and compared with 22 percent probability indicated a week ago.
In New Zealand, job advertisements rose for a second month in March. The number of postings in newspapers and the Internet increased 0.7 percent last month from a revised 1.8 percent in February, ANZ Bank New Zealand Ltd. said in Wellington today.
New Zealand’s two-year swap rate, a fixed payment made to receive a floating rate, fell three basis points to 2.84 percent. The Reserve Bank of New Zealand will meet on April 24.
Won Falls Most in a Week on Global Economic Concerns; Bonds Rise
The won declined the most in more than a week as investors shunned riskier assets amid concerns about a weakness in the global economy. Government bonds gained.
Asian stocks dropped after commodity prices retreated on worries a worsening world outlook will cool raw materials demand. U.S. stocks sank yesterday amid a plunge in industrial metals and disappointing earnings, while European equities declined for a fourth day. South Korea’s Kospi Index fell 0.9 percent as foreign funds sold $3.8 billion more of shares than they bought this year through yesterday, exchange data show.
“There are prevailing concerns the economies around the world may not recover soon, driving the won lower as investors seek safer assets like the dollar,” said Jeon Seung Ji, analyst at Samsung Futures Inc. in Seoul. “Speculation that foreign investors are repatriating dividend income is also weakening the won, while exporters selling proceeds may limit further declines.”
The won slid 0.5 percent to 1,123.74 per dollar as of 10:22 a.m. in Seoul, according to data, the biggest drop since April 8. One-month implied volatility in the won, a measure of expected moves in the exchange rate used to price options, climbed six basis points, or 0.06 percentage point, to 8.63 percent.
The MSCI Asia Pacific Index of shares headed for its third day of declines this week after reports showed Chinese growth and industrial production expanded less than economists estimated. Europe’s benchmark Stoxx Europe 600 Index slipped yesterday amid speculation Germany’s credit rating could be downgraded. South Korea this week unveiled a 17.3 trillion won ($15.4 billion) extra budget to revive an economy that grew last year at the slowest pace since 2009.
The yield on the 2.75 percent government bonds due March 2018 dropped two basis points to 2.67 percent, the lowest level in a week, according to prices from Korea Exchange Inc.
Baht Drops From 16-Year High on Intervention Concern; Bonds Gain
The Thai baht pulled back from a 16-year high as a technical indicator signaled a possible rebound in the dollar and amid concern the central bank will intervene to slow the currency’s gains. Government bonds rose.
The baht climbed to the strongest level since 1997 yesterday as official data showed global funds poured a net $1.6 billion into sovereign debt this month through yesterday. The dollar’s 14-day relative strength index was 26 against the baht, below the 30 threshold that suggests to some traders that the greenback’s recent decline was excessive. Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said on April 12 that the monetary authority will monitor capital inflows and the baht, which has risen “faster than expected.”
“Today’s move is probably just a correction after reaching a high, and due to some concern about intervention,” said Tsutomu Soma, manager of Rakuten Securities Inc.’s fixed-income business unit in Tokyo. “Clearly, the trend remains for the baht to strengthen on fund inflows.”
The currency weakened 0.1 percent to 28.87 per dollar as of 8:58 a.m. in Bangkok, according to data. It touched 28.80 yesterday, the highest level since a devaluation in July 1997 that sparked the Asian financial crisis. The baht has appreciated 6 percent this year, the most among Asia’s 11 major currencies.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 5.28 percent.
International investors bought $9.7 billion more Thai government bonds than they sold in the first quarter, data from the Thai Bond Market Association show.
The yield on the 3.625 percent government bonds due June 2023 fell one basis point to 3.37 percent, the lowest level since August.
“Fund inflows from abroad are supporting bonds,” Rakuten’s Soma said. “Investors are also betting on the currency appreciation prospect.”
European stocks hit by German downgrade rumour
European stock markets fell on Wednesday, with Frankfurt shares briefly shedding more than 2.0 percent as speculation swirled over a potential credit rating downgrade, dealers said.
European stock markets fell on Wednesday, with Frankfurt shares briefly shedding more than 2.0 percent as speculation swirled over a potential credit rating downgrade, dealers said.
In afternoon trade, Frankfurt's DAX 30 index of top companies sank as low as 7,514.01 points. It later stood at 7,547.77, down 1.75 percent from Tuesday's closing level.
Elsewhere, London's benchmark FTSE 100 index slid 0.58 percent to 6,238.31 points, and in Paris the CAC 40 dropped 1.48 percent to 3,631.23 points.
"Equity markets took a sharp leg lower in Europe, giving back early gains as rumours of a German downgrade sparked heavy selling," said Matt Basi, head of sales trading at CMC Markets UK.
"The market reacting so drastically to idle chatter of this nature is probably less indicative of any belief in the gossip than of the general nervousness amongst traders, as the bleak macro backdrop combines with wild commodity swings, acts of terrorism and unravelling geopolitical situations in North Korea and Israel to undermine investor confidence."
In foreign exchange activity, the European single currency edged down to US$1.3128, from US$1.3174 late in New York on Tuesday.
"Once again, fear rather than optimism is the overriding factor affecting European traders, and early market rumours of a German debt downgrade have seen the DAX lead the way lower," added analyst Alastair McCaig at trading group IG.
Gold prices dipped to US$1,379 per ounce on the London Bullion Market. That compared with US$1,380 late in New York on Tuesday, when it had struck a two-year low at US$1,321.95 on the back of disappointing Chinese GDP data.
US stocks opened lower after earnings reports from Bank of America, Intel and Yahoo disappointed investors.
The Dow Jones Industrial Average sank 0.62 percent to 14,665.47 points in early trading.
The broad-based S&P 500 dipped 0.84 percent to 1,560.34 points, while the tech-rich Nasdaq Composite Index gave up 0.91 percent to 3,234.76.
Bank of America and Intel reported earnings that missed Wall Street expectations, while Yahoo reported weak online ad revenue.
Elsewhere, Asian equities traded mixed Wednesday as a Tuesday rebound on Wall Street settled nerves after a two-day sell-off sparked by the weak Chinese growth data.
Tokyo climbed 1.22 percent, Sydney rose 1.09 percent, while Seoul and Shanghai were flat and Hong Kong fell 0.47 percent.
Traders also moved in to pick up cheap stocks after the previous day's sell-off, which was inflamed by a double bomb attack on Boston that killed at least three people and injured more than 180.
Stocks may be up, but fear is back in market
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Stocks bounced back Tuesday after their worst sell-off of the year. Gold rebounded as well, following two consecutive days of staggering declines.
It's a good sign that stocks (and to a lesser extent gold) are stabilizing. It's probably premature to say that Monday was the start of a much-needed market correction.
But make no mistake. People are still nervous. The terror attacks in Boston are a reminder of just how volatile the world is.
Related: What's next for the world's financial markets
The CBOE Market Volatility Index -- or VIX ( VIX) for short -- surged more than 40% Monday. The VIX is often referred to as Wall Street's fear gauge and big spikes can be an indication that investors are extremely worried.
The VIX did pull back more than 15% Tuesday as stocks rallied. But it's still higher than where it was at the start of trading Monday. So it's not as if investors have completely swept aside concerns about Monday's market sell-off just yet.
"There is anxiety and we probably will see that for awhile," said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.
CNNMoney's own Fear & Greed Index, which looks at the VIX and six other market indicators, is also showing that investors remain on edge. The index hit Fear territory for the first time late Monday. Even with Tuesday's rebound, the index was still just in Neutral. And it remains a little closer to Fear than Greed.
Related: Why gold is not a safe haven
But the clearest signs that investors are still jittery are coming from the bond market. Long-term Treasury yields are just 1.71%. That's not far above their historical lows. Investors have continued to buy bonds (pushing their yields down in the process) even though it's been a hot year for stocks.
Given how well stocks have done, you'd expect bond yields to be surging. That's not the case.
Investors aren't really pulling money out of bonds to put into riskier stocks. They're just buying stocks in addition to bonds.
"People seem willing to take on a little more risk," said Sharon Stark, fixed income strategist with D.A. Davidson. "But investors went from putting money under the mattress to putting it in bonds and more conservative sectors in the stock market. This really shows the lack of direction and nervousness still in the market."
Just look at how well dividend paying stocks are doing. I wrote last week about the rise of McDonald's (MCD) and other McBoring stocks in the consumer staples, health care and utility sectors.
The huge rally in Coca-Cola (KO) Tuesday, following a modest earnings beat, is another example of the love affair with yield.
Related: The IPO market's latest craze: Dividends
Shares of Coke were up more than 5% Tuesday. Are investors really excited by the fact that Coke's sales volume rose a meager 4%? No. They appreciate the steady growth, but really love that Coke has a dividend that pays nearly
As long as the Federal Reserve is out there buying a huge chunk of bonds every month, long-term rates will stay low and investors will continue to be enamored with dividend stocks.
"This bull market is different than many others," Frederick said. "It's been driven by extremely low -- and you could say artificially low -- interest rates. So stable, dividend-paying stocks are doing well."
"There is not an appetite for growth stocks that don't pay dividends and there probably won't be until we have higher interest rates," he added.
But don't hold your breath.
Stark said there is no reason for the Fed to pull back on its so-called quantitative easing program anytime soon, not with questions lingering about the strength of the job recovery and the absence of any inflation. She thinks the 10-year Treasury yield could fall as low as 1.6% in the coming months and will struggle to move any higher than 2%.
With that in mind, the Fed will probably keep juicing stocks with low rates for as long as humanly possible. That's all well and good for now. But doesn't it also reflect just how tepid this supposedly roaring bull market is?
The economy is still very fragile. Europe remains a slow motion train wreck. Growth in China appears to be slowing again. North Korea is a huge wild card. And the tragedy in Boston just adds to all the uncertainty.
If the Fed and other central banks weren't being so aggressive, where would the Dow and S&P 500 be? The Fed is pushing investors into stocks whether they want to be there or not.
Investors are definitely still fearful. But it's getting harder to figure out what they are more afraid of: missing out on further stock market returns or the fact that the economy still stinks and that the world is a scary place.
Japanese Stocks Decline as U.S. Earnings Miss Estimates
Japanese stocks fell, with the Nikkei 225 Stock Average set for a fourth drop in five days, as the yen’s gain weighed on exporters and a drop in commodities led mining and energy shares lower.
Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, slid 1.3 percent. Inpex Corp. (1662), Japan’s No. 1 energy explorer, slid 1.8 percent. Murata Manufacturing Co., a maker of parts for Apple Inc.’s iPhone, lost 2.2 percent after audio-chip maker Cirrus Logic Inc. reported an inventory glut that suggests sales of the smartphone may miss estimates. GS Yuasa Corp., a supplier of batteries to Boeing Co.’s Dreamliner, jumped 7.6 percent on a report the grounded plane may resume flights.
The Nikkei 225 dropped 0.4 percent to 13,329.36 at the trading break in Tokyo. The broader Topix (TPX) Index lost 0.1 percent to 1,134.53. The gauge last week climbed to the highest since September 2008, surging 11 percent in the six days after the Bank of Japan announced its most aggressive bond-buying plan.
“Japanese stocks have risen on expectations for monetary easing and that’s over now,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which manages about 10.2 trillion yen ($104 billion) in assets. “No wonder investors want to sell.”
The Topix surged 57 percent from mid-November through yesterday amid confidence Prime Minister Shinzo Abe and newly appointed BOJ Governor Haruhiko Kuroda would take steps to tackle deflation. The gauge traded at 17.1 times average estimated earnings, compared with 14 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index.
Topix Forecast
The Topix will end the year at 1,160, about 3 percent above today’s level, according to the average estimate of analysts.
Morgan Stanley says the Topix will fall to 1,020 in the near term as investors await corporate earnings and progress on promised economic reforms. It has a year-end estimate for the Topix of 1,270.
Futures on the S&P 500 (SPX) added 0.1 percent. The gauge yesterday dropped 1.4 percent amid disappointing results by companies from Bank of America Corp. to Textron Inc. The Federal Reserve said yesterday in its Beige Book business survey that the U.S. economic expansion remained “moderate” amid gains in manufacturing, housing and autos that offset weakness in defense-related industries in some regions.
Exporters fell as the yen rose against most of its major counterparts. Toyota dropped 1.3 percent to 5,480 yen. Fanuc Corp. (6954), a maker of factory robots that gets 76 percent of its revenue outside Japan, declined 2 percent to 14,920 yen. Mitsubishi Corp. (8058), Japan’s biggest trading company, lost 1.4 percent to 1,731 yen.
Energy Shares
Japan’s exports rose 1.1 percent from a year earlier, the Finance Ministry said in Tokyo today. The trade deficit narrowed to 362.4 billion yen from 777.5 billion yen in February.
Energy and commodity suppliers fell after West Texas Intermediate crude fell for the fifth day in six, gold slumped and copper declined. Inpex dropped 1.8 percent to 480,000 yen, and smaller Japan Petroleum Exploration Co. lost 0.8 percent to 3,715 yen. Mitsubishi Materials Corp., Japan’s third largest copper producer, fell 0.7 percent to 267 yen.
Apple Suppliers
Apple suppliers fell after U.S.-based Cirrus, a maker of audio components for the iPhone and iPad reported an inventory glut. Murata Manufacturing, which makes capacitors for Apple products, lost 2.2 percent to 7,970 yen. Toshiba Corp., a supplier or memory chips, fell 1.8 percent to 551 yen.
Cirrus will record a net inventory reserve of $23.3 million for the three months through March, the company said yesterday. Most of that -- $20.7 million -- is from a high-volume product from one customer, it said, without naming the client. Apple accounts for more than 90 percent of Cirrus’s sales, according to supply chain estimates.
Among stocks that rose, GS Yuasa soared 7.6 percent to 412 yen after the Nikkei newspaper reported U.S. regulators plan to lift a ban on Boeing 787 flights as early as this month. The plane had been grounded because of problems possibly related to GS Yuasa’s lithium-ion batteries.
ANA Holdings Inc., the first airline to operate the Dreamliner, hasn’t decided on whether to resume the flights and is awaiting approval from the U.S. and Japan, spokesman Ryosei Nomura said by phone today. ANA added 4.1 percent to 205 yen.
Brokerages had the second-biggest gain behind airlines among the Topix’s 33 industry groups after data showed foreign investors last week bought the most Japanese stocks since at least 2001. Overseas buyers purchased a net 1.57 trillion yen in the shares, according to the Finance Ministry.
Nomura Holdings Inc., the country’s biggest brokerage, advanced 0.5 percent to 758 yen. Daiwa Securities Group Inc., the No. 2, added 4 percent to 849 yen.
The Nikkei Stock Average Volatility Index (VNKY) slid 0.4 percent to 25.70, indicating traders expect a swing of about 7.4 percent on the benchmark gauge over the next 30 days. Trading volume of the Nikkei 225 (NKY) was 22 percent above the 30-day average
China’s Stocks Swing Between Gains and Losses; Developers Rise
Chinese stocks swung between gains and losses after home-price data. Technology stocks rose on speculation their earnings are more resilient in an economic slowdown, while metal shares slid on lower commodity prices.
Suzhou Anjie Technology Co. (002635), a supplier to Apple Inc., led technology companies higher after reporting higher profit. China Vanke Co. and Poly Real Estate Group Co. advanced on speculation the government won’t impose further property curbs as the economy slows. New home prices rose in all but two cities, as local governments announced milder-than-expected property measures and targets. Jiangxi Copper Co. (600362) lost 1.6 percent after copper prices slumped by the daily limit in Shanghai.
“Most of the slowdown in the economy has been priced into stock prices already,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The government’s attitude towards home prices is more tolerant and lenient and there probably won’t be more tighter curbs than what we have now.”
The Shanghai Composite Index (SHCOMP) added less than 0.1 percent to 2,194.53 as of 10:44 a.m. local time, erasing a loss of as much as 0.8 percent. The CSI 300 Index rose 0.1 percent to 2,461.23. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong gained 0.3 percent.
The China-US 55 Index (CH55BN), the measure of the most- traded U.S.-listed Chinese companies, slid 2.4 percent in New York yesterday. Telecommunications providers and industrial companies fell on speculation slower economic growth will erode company earnings. Apple shares declined 5.5 percent after one of its audio-chip suppliers reported an inventory glut that suggests iPhone sales may fall short of analysts’ expectations.
The Shanghai Composite has fallen 9.9 percent from a Feb. 6 high amid concern measures to cool property prices will hurt economic growth. Valuations on the gauge dropped to 9 times projected 12-month earnings yesterday, near the lowest level since Dec. 13 and less than the seven-year average of 15.8
India’s Nifty Futures Decline on Earnings as Volatility Climbs
Indian (SENSEX) stock-index futures dropped on concern corporate earnings may miss forecasts, even after the nation’s biggest company reported a 22 percent rise in profit, and as volatility (RIL) rose to a 10-month high.
SGX CNX Nifty Index futures for April delivery fell 0.4 percent to 5,680 at 10:04 a.m. in Singapore. The underlying CNX Nifty (NIFTY) Index was unchanged at 5,688.70 yesterday. The S&P BSE Sensex index fell 0.1 percent. The Bank of New York Mellon India ADR Index of U.S.-traded shares lost 1.4 percent.
Net incomes for the 30 Sensex companies in the quarter ended March 31 may fall 0.8 percent from a year ago, the first drop in three years. Tata Consultancy Services Ltd. (TCS), India’s biggest company by market capitalization, reported net income for the quarter ended March 31 rose to 36 billion rupees ($665 million), signaling demand for outsourced software services remains buoyant. The Sensex’s 15-day volatility measure, a gauge of price swings, climbed to the highest since June.
“The volatility in large-cap stocks is worrisome,” Andrew Holland, chief executive officer of investment advisory at Ambit Capital Pvt. in Mumbai., said in an interview with TV India yesterday. “Maybe with the Reserve Bank of India’s help, we can see a clear path towards lower interest rates.”
Volatility Rising
Tata Consultancy’s 15-day volatility measure held near a 3- month high yesterday, while the gauge for Oil & Natural Gas Corp., the country’s second-biggest company, was at a six-week high. Volatility in shares of Reliance Industries Ltd. and ITC Ltd. (ITC), the third- and fourth-largest companies, is the most elevated since October.
The central bank meets on May 3 to set monetary policy, after cutting its benchmark interest rate in March for the second time this year. A recent rout in gold prices, combined with a decline in crude oil, may help damp inflation and narrow India’s record current-account deficit, boosting scope for a further reduction in interest rates.
Foreign funds bought a net $117.6 million of Indian shares on April 16, taking net investment in stocks this year to $10.2 billion, a record for the period. Inflows last year totaled $24.5 billion, the most among 10 Asian markets.
The Sensex has dropped 3.6 percent this year and is valued at 12.6 times projected 12-month profits, compared with this year’s peak of 13.8 times in January. The MSCI Emerging Markets Index trades at 10.1 times.
Emerging Stocks Fall on Commodity Plunge as Brazil Slumps
Emerging stocks fell to a four- month low, led by energy companies, as declining commodities prices dragged down equities from Brazil to Russia.
OAO Gazprom, Russia’s biggest natural-gas producer, slid to the lowest level since March 2009. Brazil’s Bovespa index slumped the most among major benchmarks in developing countries as OGX Petroleo & Gas Participacoes SA, the oil producer of Brazilian billionaire Eike Batista, dropped 11 percent. KGHM (KGH) Polska Miedz SA tumbled 7.3 percent in Warsaw as copper retreated, driving Poland’s WIG20 Index (WIG20) to a seven-month low.
The MSCI Emerging Markets Index (MXEF) dropped 0.8 percent to 1,001.10 in New York. Copper plunged the most in 16 months as the International Monetary Fund cut its forecast for China’s gross domestic product growth yesterday, while crude oil tumbled to a four-month low. The rand weakened 0.7 percent versus the dollar and South African bonds gained, as March inflation was slower than predicted by economists.
“Commodities have been in a downtrend for a while, and that accelerated with the GDP out of China,” Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a telephone interview. The IMF cutting forecasts “certainly doesn’t help.”
Gauges of energy and material stocks in the MSCI Emerging Markets Index fell the most among 10 industry groups. The emerging-markets index slipped 5.1 percent this year, trailing a 6.1 percent increase in the MSCI World Index of developed- country stocks. The emerging-markets measure trades at 10.4 times 12-month projected profit, compared with the MSCI World’s 13.7.
Emerging ETF
The iShares MSCI Emerging Markets Index exchange-traded fund lost 1.6 percent to $41.04. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, jumped 12 percent to 22.46.
The Bovespa Index slumped 2.1 percent in Sao Paulo as OGX plunged after saying its output in offshore wells dropped 26 percent in March. LLX Logistica SA and MMX Mineracao & Metalicos SA, also controlled by Batista, slumped at least 9.5 percent today. Mexico’s IPC index dropped 1.4 percent.
Russia’s Micex index fell 1.2 percent, retreating for a fifth day, the longest losing streak in two months. Gazprom sank 1.9 percent. Poland’s WIG20 Index dropped 1.9 percent. KGHM, the country’s sole copper and silver producer, fell as copper lost 3 percent.
Chinese Stocks
Most Chinese stocks rose as Hisense Electric Co. led appliance stocks higher amid a jump in profit. Banks declined on concern lending will slow. China Minsheng Banking Corp. slid 2.8 percent as the China Securities Journal said new lending may drop to 800 billion yuan ($129.4 billion) this month.
India’s (SENSEX) benchmark stock index fell for the first time this week amid concern company earnings will trail analysts’ estimates. Reliance Industries Ltd. (RIL), the second-biggest stock on the 30-stock gauge by weighting, retreated the most in six months after quarterly sales lagged behind forecasts.
The won fell from a two-week high as a worsening outlook for the currency spurred sales of South Korea’s shares by global funds. Government bonds also declined.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 295 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
China: Fujian Natural rubber import price increments
Fuzhou Customs statistics show that the first quarter of Fujian Province imported a total of 57,000 tons of natural rubber, an increase of 61.4%; worth $ 150 million, down 48.5%; import average price of $ 2,669 per ton, down 8%.
Among them, the general trade import 4.8 million tons, an increase of 1.5 times, become the dominant, accounting for 82.6% of the total imports of natural rubber in Fujian Province; processing trade imports of 08,300 tons, an increase of 4.4%, accounting for 16.9%. The vast majority of imports from ASEAN.
Association of Natural Rubber Producing Countries (ANRPC) report predicts that by 2013 the annual natural rubber production will be maintained in the range of 5% growth. Hevea yields the ability to enhance the space is very limited due to the the alternative planting varieties of natural rubber is still in the promotion of research and development stage, and the world’s natural rubber production in a relatively large increase in a short period of time is difficult, and often hype lie in natural rubber prices such as a roller coaster. Whether from the perspective of resources, or from the point of view of price stability, to seek alternate resources of ordinary rubber desperately needed. The same time, the prospects for the development of the global automotive industry is still lack of confidence in the prospects for the development of the emerging economies is unknown, leading to weak international tire market demand, market trends difficult to judge.
As for China’s natural rubber imports, customs experts recommend: First, it is necessary to further regulate the natural rubber futures market, the introduction of a more refined management terms, while increasing the variety of transactions, improve the efficiency of risk allocation. The second is to establish a monitoring and early warning mechanism for domestic and international prices of natural rubber, good reserves of natural rubber in a timely manner, to reduce the impact on rubber prices fluctuation of the industry chain.
Shanghai rubber continuous plunge or finishing a narrow range
1. Natural rubber futures
Dongjing Jiao Dikaigaozou the benchmark 1309 contract date disk settlement price of 257.5 yen / kg, compared with the previous trading settled down 1.5 yen / kg.
The Shanghai rubber opened lower after the decline slowed down, the intraday low rebound, the main RU1309 contract opened 19,500, the lowest 19260, the highest 20060, to close at 19,730, down 645 points over the previous day, all-day turnover of 624,276 hand positions to reduce the 34,116 hand 170206 hand.
2. In the rubber network pending order, the transaction prices
Trading floor Product Pending order quantity (tons) Pending order price (yuan / ton) Volume (tons) Average transaction price (yuan / ton)
Yunnan SCRWF / latex (AM) 397 20875 - -
Yunnan SCRWF / latex (PM) 192 20938 - -
Hainan SCR5 / 5 #standard rubber (PM) - - - -
Hainan SCRWF / latex (AM) 240 19922 105 20050
SCRWF / latex (PM) 210 19825 105 19950
3. Natural rubber international outer disk
Products (4 / May shipment) Today’s prices ($ / ton) Change ($ / ton)
Thailand 3 smoke RSS3 Entertained 0-0
Thailand 20 standard STR20 Entertained 0-0
Thailand 20 composite standard rubber Entertained 0-0
The Malay 20 standard SMR20 Entertained 0-0
The Malay 20 composite standard rubber Entertained 0-0
Indonesia on the 20th standard rubber SIR20 Entertained 0-0
The Vietnam 10 # standard rubber SVR10 Entertained 0-0
Vietnam 3L rubber SVR3L Entertained 0-0
Roundup: to Thailand Songkran holidays, as well as Shanghai rubber futures continued substantial decline, the futures market was entertained at domestic customers fixing cautious, waiting for prices to stabilize .
4. Natural rubber in the domestic market
The impact of futures continued to drop and the spot market today offer rare, in some areas continue to show entertained reported. Downstream plant wait and see mood, market purchases are not enthusiastic to arrange the procurement of small quantities according to their own production for two days to take the goods difficulties, according to the business feedback.Also have heard some factories USD discover their short positions yesterday traded at $ 2,480 / ton, estimated today transaction price could fall to the magnitude of 2430 U.S. dollars / ton. Today’s state-owned Yunnan latex reported 19500-19600 yuan / ton, the private plastic reported 19,300 yuan / ton; Hainan state latex reported 19,500 yuan / ton; Yunnan marked the second rubber reported 18100-18300 yuan / ton, Vietnam 3L glue tax at 19000-19500 yuan / ton, Thailand 3 # Yan Pianjiao reported 19300-19500 yuan / ton.RMB Thailand and Malaysia on the 20th the composite standard rubber at 18000-18200 yuan / ton.
Qingdao Free Trade Zone Today’s prices ($ / ton) Change ($ / ton)
Thailand 3 # smoke film 2730-2770 110-100
The Thailand 20 # standard rubber 2450 50
The Thailand 20 # composite standard rubber 2450 50
The Indonesia 20 # standard rubber 2400 50
The Malay 20 # standard rubber 2450 50
The Malay 20 # composite standard rubber 2450 50
Roundup: Free Trade Zone, the Neima Tai composite standard rubber reported 18,000 yuan / ton, although futures fell sharply rebounded, but today offer in the region continued to decline, Real Simple discuss the main transaction. Heard yesterday Mattei standard rubber spot a single transaction in the 2470-2480 U.S. dollars / ton, some factories and businesses low to cover short positions. The whole plant strong emotional watching, waiting for prices to stabilize.
(Note: The domestic market prices am quote, USD glue are offer)
 5. Comprehensive analysis and forecasts
1. Has taken measures to support the global rubber prices have little effect, Indonesia, the world’s second largest rubber producing countries called for its companion, Thailand and Malaysia abandoned Southeast Asia Rubber Agreement.
2. Basically plant in Thailand from April 13 -16, 2011 to stop the acquisition of raw materials. Weather, the recent Thailand began to above normal rainfall, south of the main rubber producing areas of heavy rainfall conducive to future restoration tapping. Last week the Tema rubber meeting of the three countries, Indonesia on April 12, Vice Minister of Agriculture, Thailand, the Thai government plan for the acquisition of natural rubber to the end of the end of March 30, Thailand will be reduced by 10% the amount of rubber exports to support rubber prices . Resume tapping in June, the government will audit the rubber purchase program.
3. Japanese Central Bank President Haruhiko Kuroda said on Tuesday premature to discuss the end of large-scale central bank easing, the Japanese economy is not out of the shadow of deflation.
4. China’s National Bureau of Statistics, China’s first quarter gross domestic product (GDP) growth of 7.7% over the same period last year, the growth rate is lower than 7.9% in the fourth quarter of 2012. In March, total retail sales of consumer goods up 12.6 percent, lower than the growth rate of 15.2% in the end of 2012. Industrial added value growth slowed in March, the performance of these began in late 2012, the recovery process may be losing momentum.
Shanghai rubber the continuous slump, today has been recovered from the bottom.Technical above, the KDJ line small upward trend Guaitou. Continuous sharp decline in the resilience of the spot market, has been a significant loss in the hands of traders hold stocks of cost. However, the current market oversupply situation will exist for a long time, SMEs lack of orders directly affect the effective digestion of the goods on the market.Estimated Shanghai rubber drop in a row, may fall into a narrow range consolidation trend, the operating range in the short term may be about 19500-20000. After a short-term consolidation, by the repression of the supply and demand side rubber prices continued downward possible.
Growth in demand is expected to promote rubber prices bottoming out
trategic analysis
Sino-US economic recovery will continue to maintain steady growth, the euro-zone debt, political issues will continue to interfere with the operation of the market. The dollar continues to remain strong pattern, will to some extent affect the recovery in commodity prices.
March domestic natural rubber is cut open, the supply will increase slightly, the main producing areas in Southeast Asia is still in stop cutting period, the overall supply pressure. China’s natural rubber imports in January-February substantial increase in tire production increased significantly, tire manufacturers overall operating rate to remain high in the end of March.
Steel tire factory operating rate of more than 90% in general; semi-steel tire factory operating rate in more than 95%; arrival of the spring period, agricultural tires and light truck tires, bias tires varieties into the peak season demand, the factory operating rate raised to full load.Although poor automobile market in February, but the main Spring Festival of factors, expected future growth significantly.
International inventory levels are low, but domestic domestic inventories remain high price pressure. Affected by the decline in natural rubber futures prices, spot prices dip again, and traders do not want a sale, the turnover in the doldrums, the market waiting to see atmosphere pervades. The Qingdao Bonded Rubber inventory 358,300 tons, reaching the highest point in nearly three years.
Main points
1. The world’s natural rubber supply is slightly larger than the demand, the supply pressure is not
2. Natural rubber producing countries organize your inventory is low in recent years, high domestic stocks, suppress prices
3. China’s natural rubber imports a substantial increase in tire factory operating rate occupy a high demand picks up
4. Spot price at home and abroad in a nearly two-year low, the downside is limited
India: Weak global cues drag spot rubber
Spot rubber slipped further on Wednesday. Declines in the domestic and international futures and the absence of buyers continued to depress the local sentiments.
There were no fresh factors either technical or fundamental to trigger a positive trend in the commodity and hence an immediate recovery in prices may not be possible.
Sheet rubber dropped to Rs 160 (162) a kg, according to traders. The grade weakened to Rs 161 (162.50) a kg at Kottayam and Kochi as quoted by the Rubber Board.
The May series declined to Rs 156 (159.08), June to Rs 155.78 (157.89), July to Rs 155.25 (157.42) and August to Rs 153.25 (156.90) a kg for RSS 4 on the National Multi Commodity Exchange.
RSS 3 (spot) surrendered to Rs 153.88 (157.23) a kg at Bangkok .
The April futures for the grade slid to ¥239.1 (Rs 132.07) from ¥244 during the day session and then to ¥238 (Rs 131.44) in the night session on the Tokyo Commodity Exchange.
Spot rubber rates (Rs/kg): RSS-4: 160 (162); RSS-5: 157 (158); Ungraded: 151 (153); ISNR 20: 149 (151) and Latex 60 per cent: 106 (107).
India’s natural rubber imports to drop on weak demand
* Imports to fall on weak demand, higher duty
* Tyre cos cut purchases due to slowdown in auto industry
* Rubber output seen rising 2 percent on new plantation
India’s natural rubber imports in 2013/14 are likely to fall by a quarter, the first drop in five years, as demand stagnates due to a slowdown in the auto industry and a possible hike in import duties, a senior industry official said.
A reduction in imports by India, the world’s fourth-biggest natural rubber producer, would put further pressure on Tokyo rubber futures <0#2JRU:>, which already hit a five-month low earlier this week.
India’s imports are likely to fall by 25 percent in the period April 2013 to March 2014 from 216,642 tonnes in the previous year, George Valy, president of the Indian Rubber Dealers’ Federation, said in an interview.
“The gap between rubber demand and supplies is coming down. Supplies are rising due to the new plantation in north-eastern states, but consumption is stagnant. The slowdown in the auto industry is cutting rubber demand from the tyre industry,” he said.
Tyre makers are the main importers of natural rubber and the biggest buyers of domestic supplies in India. Other users include manufacturers of gloves, tubes, balloons and toys.
India’s annual car sales fell for the first time in a decade in the 12 months to March 31 and are expected to post subdued growth this year due to high interest rates and fuel prices.
India started the new year with stocks of 266,000 tonnes, nearly 13 percent more than the previous year, data with the state-run Rubber Board showed.
In addition, India has been considering raising import duties on natural rubber, and the official order to implement the increase will be issued soon, Trade Minister Anand Sharma said last month.
“The government’s plan to increase import duty would also deter importers,” Valy said.
The south Asian country could increase import duties on natural rubber by as much as 70 percent to support falling local prices, two industry sources and one government official said in February.
Spot rubber prices in India have fallen 18 percent in a year to 16,100 rupees ($300) per 100 kg, but they are still higher than prices in exporters Malaysia and Thailand.
India’s production of natural rubber is likely to rise by more than 2 percent to 932,000 tonnes in 2013/14 as newly planted trees in the north-eastern states are becoming mature enough to tap, Valy said.
Farmers in India usually start tapping rubber when the plants are seven years old and continue until they are 30.
Natural rubber consumption in the year is likely to remain steady around last year’s level of 971,980 tonnes, Valy said.
“On the consumption front, things are worrisome. The slowdown in the auto industry has been trimming tyre companies’ sales to OEMs (original equipment manufacturers or automakers). They are cutting rubber purchases. Demand will remain weak at least in next few months.” ($1 = 54.2250 Indian rupees)
[China] Natural rubber prices on April 17, 2013
Unit: RMB/mt
Product Shanghai Shandong Guangdong
SCRWF (Hainan) 19400 (state); 19200 (state, Guangdong State Farms) - -
SCR10 (Hainan) 19500 (state) - -
SCR5 (Hainan) 18200 (state) - -
SCRWF (Yunnan) 19500 (state) - -
SCR10 (Yunnan) 18300 (state) 18200 (state) -
SCR5 (Yunnan) - - -
Thai RSS3 19400 (with 17% VAT included) 19400 (with 17% VAT included) -
SVR3L 19100 (with 17% VAT included, low-end price) 19100-19400 (with 17% VAT included) -
SMR20 / STR20 18000 - -
[Vietnam] Natural rubber price in Mong Cai–Dongxing: April 17, 2013
Product Price on April 16  (Yuan/mt) Price (Yuan/mt) Change (Yuan/mt) Note
SVR3L Low 15800 15800 0 excluding tax
Hight 16000 16000 0 excluding tax
The border market closed.
[Thailand] Natural Rubber prices on April 17, 2013
Baht / kg
Official  Noon Price  – RRIT,DOA
Type / Grade F.O.B. Price 
May 2013 June 2013
Bangkok Songkhla Bangkok Songkhla
RSS 1 83.40 83.15 83.60 83.35
RSS 2 82.80 82.55 83.00 82.75
RSS 3 82.25 82.00 82.45 82.20
RSS 4 81.95 81.70 82.15 81.90
RSS 5 81.50 81.25 81.70 81.45
STR 5L 78.20 77.95 78.40 78.15
STR 5 76.30 76.05 76.50 76.25
STR 10 75.60 75.35 75.80 75.55
STR 20 75.20 74.95 75.40 75.15
Concentrated Latex * 58.60 58.35 58.80 58.55
Remark : Concentrated Latex quote in Bulk
TOCOM (18/04/2013)
Day Session (9:00 - 15:30) As of Apr 18, 2013 12:55 JST
Trade Date: Apr 18, 2013   Prices in yen / kilogram  
Month Last Settlement Price Open High Low Current Change Volume Settlement
Apr 2013 239.1 236.6 236.6 231.0 234.1 -5.0 79 -
May 2013 240.9 237.9 237.9 233.4 235.2 -5.7 58 -
Jun 2013 244.1 240.1 242.0 236.7 240.1 -4.0 58 -
Jul 2013 248.0 242.0 244.1 240.4 243.9 -4.1 94 -
Aug 2013 251.0 244.8 247.2 241.3 247.2 -3.8 282 -
Sep 2013 252.4 245.8 248.9 242.6 248.7 -3.7 5,641 -
Total   6,212  
SHANGHAI (18/04/2013)
Contract Last Chg Open Interest Volume Turnover Bid-Ask Pre-clear Open Low High Lastv Comment
ru1305 18270 -700 11072 996 181493600 18210/18265 18970 18125 18020 18530   【tick】
ru1306 18585 -390 276 60 11030200 18330/18475 18975 18050 18025 18720   【tick】
ru1307 18450 -750 206 94 17179800 18435/18540 19200 18240 18240 18560   【tick】
ru1308 18675 -450 634 242 44841000 18515/18610 19125 18280 18165 18950   【tick】
ru1309 18765 -790 179478 319188 60103248300 18760/18765 19555 18605 18575 19130 54 【tick】
ru1310 19060 -740 334 154 29183700 18895/18960 19800 18850 18810 19200   【tick】
ru1311 18900 -755 3174 1138 214610200 18890/18900 19655 18915 18670 19175   【tick】
ru1401 19600 -770 19008 20870 4091013700 19605/19620 20370 19380 19350 19960   【tick】
ru1403 19800 -615 164 228 44584900 19585/19810 20415 19600 19390 20115   【tick】
ru1404 19905 -1095 6 14 2746900 19725/19950 21000 19210 18965 20000   【tick】
AFET (18/04/2013)
RSS3 (Natural Rubber Ribbed Smoked Sheets No 3)  Click for RSS's 3 bid & offer price Click for RSS3's relevant date Click for RSS3's historical chart Click for TOCOM's price Click for Auction's price contract = 5,000 kg; price quotation = Baht/kg
Open High Low Bid
Bid Offer Offer
Last Last
Chg. Settle. Price Volume Open Interest  
Prev. New Chg. Total* EFP
Prev. Curr. Chg.  
MAY 13       2 76.00           80.70     0   288      
JUN 13 74.80 78.00 74.80 4 76.50 78.50 4 78.00 1 -2.20 80.20     2   82      
JUL 13       1 74.00 77.00 4       77.20     0   102      
AUG 13 73.00 73.00 72.90 4 72.55 75.50 2 72.90 4 -3.30 76.20     5   450      
SEP 13 73.50 73.50 73.50 3 73.00 74.40 1 73.50 1 -2.30 75.80     2   479      
OCT 13 72.50 73.50 72.50 1 73.00 74.40 1 73.40 1 -2.95 76.35     9   430      
NOV 13 72.95 73.50 72.35 1 73.20 74.00 2 73.50 1 -2.75 76.25     28   410      
Total 46   2,241      
SICOM (18/04/2013)
  Contract Month Last Chg From Prev Settle Bid Ask Open High Low Close Vol Open Int Settle Prev. Day Settle
E May 13 271.0 -4.9 266.0 273.0 271.0 271.0 271.0 - 4 181 - 275.9
E Jun 13 - - 263.0 269.0 - - - - - 64 - 272.0
E Jul 13 - - 262.0 267.9 - - - - - 46 - 270.3
E Aug 13 256.0 -6.0 253.1 259.0 256.0 256.0 256.0 - 10 251 - 262.0
E Sep 13 255.5 -4.5 254.5 258.0 255.5 255.5 255.5 - 4 73 - 260.0
E Oct 13 - - 253.5 258.0 - - - - - 135 - 260.0
E Nov 13 256.0 -4.0 253.0 257.0 256.0 256.0 256.0 - 20 59 - 260.0
E Dec 13 - - 235.6 267.9 - - - - - 20 - 261.5
E Jan 14 - - 236.6 288.3 - - - - - 0 - 262.3
E Feb 14 - - - - - - - - - 0 - 262.8
E Mar 14 - - - - - - - - - 0 - 263.3
E Apr 14 - - - - - - - - - 0 - 263.5
Commodity Currency Last Change % Change Trade Date/Time
LIGHT CRUDE CON1  Apr13 USD 86.60 -0.08 -0.09% 04/16 23:50
NO 2 HT OIL CON1  Apr13 USD 2.75 +0.01 +0.39% 04/16 23:41
NATURAL GAS CON1  Apr13 USD 4.19 -0.02 -0.57% 04/16 23:50
100 OZ GOLD CON1  Apr13 USD 1,361.40 -20.80 -1.50% 04/16 23:33
SILVER 5000 CON1  Apr13 USC 2,260.00 -70.10 -3.01% 04/16 21:57
HG COPPER CON1  Apr13 USC 317.00 -1.80 -0.56% 04/17 18:28
CORN CON1  May13 USC 658.25 -2.25 -0.34% 04/16 23:50
WHEAT CON1  May13 USC 704.25 +0.50 +0.07% 04/16 23:22
SOYBEANS CON1  May13 USC 1,426.75 +4.50 +0.32% 04/16 23:49
SUGAR 11 CON1  Apr13 USC 17.77 -0.24 -1.33% 04/17 13:59
COFFEE C CON1  May13 USC 135.95 +0.10 +0.07% 04/17 13:59
COCOA CON1  May13 USD 2,279.00 -15.00 -0.65% 04/17 13:59
FROZEN OJ CON1  May13 USC 148.60 +0.45 +0.30% 04/17 13:59
COTTON NO 2 CON1  May13 USC 84.59 -0.06 -0.07% 04/17 23:47
LIVE HOGS CON1  May13 USC 87.90 +1.10 +1.27% 04/17 16:10
LIVE CATTLE CON1  Apr13 USC 126.90 +0.03 +0.02% 04/16 22:48
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