"June 6 (Bloomberg) -- Australia’s economy expanded at more than twice the pace economists forecast, sending the local currency, bond yields and stocks higher and prompting traders to pare bets on the size of interest-rate reductions.
First-quarter gross domestic product advanced 1.3 percent from the previous three months, when it rose a revised 0.6 percent, a Bureau of Statistics report released in Sydney today showed. The median estimate in a Bloomberg News survey of 24 economists was for a 0.6 percent gain.
The Australian dollar jumped almost 1 percent as concern eased that Europe’s fiscal crisis and slower growth in China will derail an economy Reserve Bank Governor Glenn Stevens says is experiencing “modest growth.” An estimated A$500 billion ($492 billion) pipeline of resource projects by companies such as BHP Billiton Ltd. has helped cushion a slump in manufacturing and services hit by a strong currency.
"We’ve got a mining boom boosting investment dramatically,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which has almost $124 billion under management. “On the other hand, the non-mining economy is really struggling.”
The local currency climbed to 98.37 U.S. cents at 1:07 p.m. Sydney time, compared with 97.76 cents immediately before the data were released. Australia’s 10-year bond yields jumped 10 basis points to 3.04 percent, and the S&P/ASX 200 Index of stocks reversed declines and gained 0.1 percent to 4,045.60 at 1:10 p.m. in Sydney.
Rate Outlook
Traders are pricing in a 25 percent chance of a half percentage point reduction in the benchmark interest rate next month, down from 50 percent prior to the GDP report, according to a Credit Suisse Group AG index based on swaps.
Compared with a year earlier, the economy expanded 4.3 percent in the first quarter, the fastest annual pace since the third quarter of 2007, today’s report showed. Economists forecast a 3.3 percent year-over-year gain.
Australia’s annual growth rate averaged over the past two quarters is the fastest among countries with Group of 10 currencies tracked by Bloomberg.
“These figures send the loudest possible message to the world that Australia is the strongest performing developed economy bar none,” Treasurer Wayne Swan said at a news conference in Canberra after the release. The government is aiming to swing the budget back into the black. It last month forecast a A$1.54 billion surplus for the year starting July 1, ending four years of deficits.
Consumer Spending
Today’s report showed household spending rose 1.6 percent in the first quarter, adding 0.9 percentage point to GDP growth. Non-dwelling construction soared 12.6 percent, adding 1 point to growth, it showed. Exports dropped 1.3 percent, shaving 0.2 point from the expansion.
The Australian dollar, the world’s fifth-most traded currency, has gained 40 percent against the U.S. dollar since the start of 2009 and reached $1.1081 on July 27, the highest level since it was floated in 1983.
It has since retreated as signs mount that Europe’s debt crisis will sap global growth. The currency dropped 6.7 percent last month after the central bank unexpectedly cut its benchmark rate by half a percentage point and as data from China, Australia’s biggest trading partner, indicated a slowing economy.
Stevens yesterday lowered rates by a quarter-point to a 2 1/2-year low of 3.5 percent, citing global uncertainty and “a degree of precautionary behavior” by consumers and businesses.
Cautious Households
Today’s report showed the nation’s household savings ratio was little changed at 9.3 percent in the three months through March from 9.4 percent in the fourth quarter of 2011.
The strength of household demand is reflected in Australian retail sales that rose at more than four times the pace that economists forecast in the three months through March, capping the best quarter since 2009 as consumers spent more at restaurants and clothing stores.
Sales adjusted to remove inflation jumped 1.8 percent in the first quarter from the prior three months, a government report showed May 7.
The job market also remained strong, with Australian payrolls increasing by 71,900 in the first three months this year, the best quarter since 2010, as the mining investment boom spurs hiring in Western Australia and Queensland.
Low Unemployment
“Overall labor market conditions firmed a little, notwithstanding job shedding in some industries, and the rate of unemployment remains low,” Stevens said after yesterday’s rate decision.
Driving Australia’s economy is demand from developing nations including China and India for iron ore, coal and natural gas.
Today’s GDP report showed new engineering construction soared 19.7 percent in the first quarter from the final three months of last year, and 53 percent from a year earlier as the mining bonanza intensifies. In contrast, housing construction dropped 2.1 percent from the fourth quarter as the industry struggles.
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Wednesday, 6 June 2012
Tuesday, 5 June 2012
South Africa's Elite Hawks police unit to probe Mobile phone giant MTN for alleged Iran graft
Business Report
"South Africa's elite Hawks police unit has opened an investigation into allegations of corruption at mobile phone giant MTN relating to its purchase of a mobile licence in Iran, a police spokesman said.
The police probe follows a $4.2 billion US civil claim filed in March by Turkish operator Turkcell accusing MTN of bribing Iranian and South African officials with cash and promises of defence equipment in order to secure the licence originally awarded to Turkcell.
“There are allegations of corruption. That's exactly what we're investigating,” Hawks spokesman MacIntosh Polela said on Tuesday.
MTN officials were also accused in the court papers of promising that Pretoria would vote favourably towards Tehran's nuclear programme at international fora trying to curb Iran's suspected pursuit of nuclear weapons.
MTN officials have denied any wrongdoing and described the Turkcell case as without legal merit. Pretoria has also denied that its diplomacy is for sale.
An MTN spokesman declined immediate comment on the Hawks investigation.
The scandal has thrown a harsh spotlight on MTN, a $31 billion company with close links to South Africa's ruling African National Congress and one of the country's great post-apartheid success stories.
MTN shares were 0.3 percent weaker at 13:27 SA time, a shade weaker that then overall Johannesburg stock market. - Reuters
Hawks probe MTN for alleged Iran graft - Companies | IOL Business | IOL.co.za
"South Africa's elite Hawks police unit has opened an investigation into allegations of corruption at mobile phone giant MTN relating to its purchase of a mobile licence in Iran, a police spokesman said.
The police probe follows a $4.2 billion US civil claim filed in March by Turkish operator Turkcell accusing MTN of bribing Iranian and South African officials with cash and promises of defence equipment in order to secure the licence originally awarded to Turkcell.
“There are allegations of corruption. That's exactly what we're investigating,” Hawks spokesman MacIntosh Polela said on Tuesday.
MTN officials were also accused in the court papers of promising that Pretoria would vote favourably towards Tehran's nuclear programme at international fora trying to curb Iran's suspected pursuit of nuclear weapons.
MTN officials have denied any wrongdoing and described the Turkcell case as without legal merit. Pretoria has also denied that its diplomacy is for sale.
An MTN spokesman declined immediate comment on the Hawks investigation.
The scandal has thrown a harsh spotlight on MTN, a $31 billion company with close links to South Africa's ruling African National Congress and one of the country's great post-apartheid success stories.
MTN shares were 0.3 percent weaker at 13:27 SA time, a shade weaker that then overall Johannesburg stock market. - Reuters
Hawks probe MTN for alleged Iran graft - Companies | IOL Business | IOL.co.za
Reserve Bank of Australia Lowers Key Rate to 3.5% as EU, China Growth Risks Mount
"June 5 (Bloomberg) -- The Reserve Bank of Australia cut its benchmark interest rate by a quarter percentage point to the lowest since 2009 as Europe’s debt crisis and slower Chinese growth overshadowed a stronger domestic labor market.
Governor Glenn Stevens and his board lowered the overnight cash rate target to 3.5 percent, the central bank said in a statement in Sydney today. Thirteen of 27 economists surveyed by Bloomberg News predicted the move, while four forecast a half- point reduction and 10 expected borrowing costs to remain unchanged.
“More recent indicators suggest further weakening in Europe and some further moderation in growth in China,” Stevens said in the statement. “Conditions in other parts of Asia have largely recovered from the effects of last year’s natural disasters, but the ongoing trend is unclear and could be dampened by slower Chinese growth.”
The local currency and stocks maintained earlier advances after Stevens’s second rate reduction in as many meetings. Australia’s economy is giving mixed signals with unemployment at a one-year low of 4.9 percent and a A$500 billion ($488 billion) investment pipeline driving growth in some regions, even as export prices have slumped, building approvals dropped and retail sales weakened.
Dollar Higher
The Australian dollar bought 97.64 U.S. cents at 2:44 p.m. in Sydney from 97.34 cents immediately before the decision was announced. The S&P/ASX 200 Index held earlier gains, rising 1.1 percent to 4,029.10 at 2:47 p.m. Sydney time.
In his statement, Stevens noted the job market’s improvement.
“Overall labour market conditions firmed a little, notwithstanding job shedding in some industries, and the rate of unemployment remains low,” Stevens said. “Nonetheless, both households and businesses continue to exhibit a degree of precautionary behaviour, which may continue in the near term.”
Reflecting the weakness in the global economy, Qantas Airways Ltd. shares plunged to a record low in Sydney today after saying annual profit may fall as much as 91 percent because of losses on overseas routes and higher fuel costs. Australia’s largest carrier, which listed in 1995, slumped as much as 18 percent.
‘Measured Statement’
The RBA hasn’t “hit the panic button,” said Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia, one of the 13 who predicted today’s reduction. “It’s a pretty measured statement, not particularly dovish. They’re mentioning all the offshore stuff and that’s a clear reason they’ve done this as they’re worried about the offshore developments, particularly in Europe.”
BHP Billiton Ltd., the world’s biggest mining company, won’t approve any major projects until the end of the year as costs rise and commodity prices ease, Chief Executive Officer Marius Kloppers said last week.
BHP is due to decide on three projects -- South Australia’s Olympic Dam copper-uranium expansion, an iron-ore port expansion in Western Australia and a potash project in Canada -- by the end of the year. They may cost a combined $68 billion to build, according to a May 23 estimate from Deutsche Bank AG.
Stevens last month lowered the benchmark by a half percentage point, and minutes of the meeting showed that the RBA’s decision on the size of the cut reflected a need for lower consumer borrowing costs.
Mortgage Rates
Australia’s four biggest banks are trying to guard margins against further erosion from elevated wholesale funding costs, by passing through less of the central bank’s rate reductions to mortgage holders.
The RBA, in its quarterly monetary policy statement released May 4, cut growth and inflation forecasts. It predicted average growth of 3 percent in 2012, down from a February estimate of 3.5 percent. Consumer prices will rise 2.5 percent in the year to December, from a previous prediction of 3 percent; underlying inflation is forecast at 2.25 percent from a previous estimate of 2.75 percent, the RBA said.
Today, Stevens said: “The board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accommodative stance of monetary policy.”
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Governor Glenn Stevens and his board lowered the overnight cash rate target to 3.5 percent, the central bank said in a statement in Sydney today. Thirteen of 27 economists surveyed by Bloomberg News predicted the move, while four forecast a half- point reduction and 10 expected borrowing costs to remain unchanged.
“More recent indicators suggest further weakening in Europe and some further moderation in growth in China,” Stevens said in the statement. “Conditions in other parts of Asia have largely recovered from the effects of last year’s natural disasters, but the ongoing trend is unclear and could be dampened by slower Chinese growth.”
The local currency and stocks maintained earlier advances after Stevens’s second rate reduction in as many meetings. Australia’s economy is giving mixed signals with unemployment at a one-year low of 4.9 percent and a A$500 billion ($488 billion) investment pipeline driving growth in some regions, even as export prices have slumped, building approvals dropped and retail sales weakened.
Dollar Higher
The Australian dollar bought 97.64 U.S. cents at 2:44 p.m. in Sydney from 97.34 cents immediately before the decision was announced. The S&P/ASX 200 Index held earlier gains, rising 1.1 percent to 4,029.10 at 2:47 p.m. Sydney time.
In his statement, Stevens noted the job market’s improvement.
“Overall labour market conditions firmed a little, notwithstanding job shedding in some industries, and the rate of unemployment remains low,” Stevens said. “Nonetheless, both households and businesses continue to exhibit a degree of precautionary behaviour, which may continue in the near term.”
Reflecting the weakness in the global economy, Qantas Airways Ltd. shares plunged to a record low in Sydney today after saying annual profit may fall as much as 91 percent because of losses on overseas routes and higher fuel costs. Australia’s largest carrier, which listed in 1995, slumped as much as 18 percent.
‘Measured Statement’
The RBA hasn’t “hit the panic button,” said Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia, one of the 13 who predicted today’s reduction. “It’s a pretty measured statement, not particularly dovish. They’re mentioning all the offshore stuff and that’s a clear reason they’ve done this as they’re worried about the offshore developments, particularly in Europe.”
BHP Billiton Ltd., the world’s biggest mining company, won’t approve any major projects until the end of the year as costs rise and commodity prices ease, Chief Executive Officer Marius Kloppers said last week.
BHP is due to decide on three projects -- South Australia’s Olympic Dam copper-uranium expansion, an iron-ore port expansion in Western Australia and a potash project in Canada -- by the end of the year. They may cost a combined $68 billion to build, according to a May 23 estimate from Deutsche Bank AG.
Stevens last month lowered the benchmark by a half percentage point, and minutes of the meeting showed that the RBA’s decision on the size of the cut reflected a need for lower consumer borrowing costs.
Mortgage Rates
Australia’s four biggest banks are trying to guard margins against further erosion from elevated wholesale funding costs, by passing through less of the central bank’s rate reductions to mortgage holders.
The RBA, in its quarterly monetary policy statement released May 4, cut growth and inflation forecasts. It predicted average growth of 3 percent in 2012, down from a February estimate of 3.5 percent. Consumer prices will rise 2.5 percent in the year to December, from a previous prediction of 3 percent; underlying inflation is forecast at 2.25 percent from a previous estimate of 2.75 percent, the RBA said.
Today, Stevens said: “The board judged that, with modest domestic growth and a weaker and more uncertain international environment, the outlook for inflation afforded scope for a more accommodative stance of monetary policy.”
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Asian Stocks, Euro, Oil Rise on Stimulus Speculation
"June 5 (Bloomberg) -- Asian stocks rose for the first time in five days, the euro strengthened and oil climbed amid speculation global policy makers will take more steps to stimulate economic growth. The Australia dollar strengthened while yields on U.S. and Japanese bonds increased.
The MSCI Asia Pacific Index added 1.3 percent as of 1:53 p.m. in Tokyo and Standard & Poor’s 500 Index futures gained 0.4 percent. The euro climbed for a third day, while the yen and the dollar weakened against most of their major counterparts. Crude oil in New York rose for a second day. Yields on 10-year Treasuries increased one basis point to 1.53 percent.
Leaders from the Group of Seven countries will hold a conference call to discuss the European debt crisis today ahead of the G-20 meeting next week. The Reserve Bank of Australia lowered its key interest rate today by 25 basis points to 3.5 percent, the lowest level since 2009. China’s insurance regulator said it will allow insurers’ to broaden their investment scope, and four Taiwan government-controlled funds bought stocks yesterday to help pare losses, according to the Taipei-based Commercial Times.
“We are likely to see a reasonably strong policy response in a number of countries,” said Angus Gluskie, managing director at White Funds Management in Sydney, who manages more than $350 million. “It’s stacking up to be a reasonably good buying opportunity.”
MSCI Asia Pacific Index rebounded from the lowest close since November, as declines yesterday dragged down valuations on the region’s benchmark to 11.2 times estimated earnings on average, the lowest this year.
Qantas Tumbles
Australia’s S&P/ASX 200 Index advanced 1.3 percent after central bank Governor Glen Steven’s second rate cut in as many meetings. Thirteen of 27 economists surveyed by Bloomberg News predicted the move, while four forecast a half-point reduction and 10 expected borrowing costs to remain unchanged.
“The RBA has put more weight on global factors,” said Matthew Sherwood, Perpetual Investments’ head of investment markets research in Sydney. Perpetual manages funds of about $23 billion. “The bank is clearly worried about the outlook for Europe and households domestically are showing cautionary behavior.”
Qantas Airways Ltd., Australia’s largest carrier, plunged to a record low in Sydney after saying annual profit may decline as much as 91 percent amid mounting losses on international routes and increased fuel costs. Qantas slumped as much as 19.4 percent before trading at A$1.16.
Taiwan’s Taiex Index climbed 1.5 percent amid speculation the government will take steps to bolster equities.
Shanghai Composite
Taiwanese lawmakers are trying to find a compromise solution among 20 draft bills and 10 versions of a capital gains tax on stock trading, the official Central News Agency reported yesterday.
Searches for “Shanghai Composite” were blocked from China’s most-used microblogging service after the stock index’s drop on the 23rd anniversary of the Tiananmen Square crackdown corresponded to the date of the event. The Shanghai Composite Index dropped by 64.89 points yesterday, matching the date on which Chinese authorities crushed student-led protests on June 4, 1989. The gauge was little changed today.
Korea’s Kospi Index advanced 1.1 percent, while the Nikkei 225 Stock Average gained 0.8 percent in Tokyo. Japan’s broader Topix Index, which entered a bear market yesterday as it plunged to a level not seen since 1983, added 1.5 percent.
The S&P 500 closed up less than 0.1 percent in New York yesterday after it fell 9.9 percent from a four-year high on April 2 through last week.
Factory Orders Decline
The Institute for Supply Management’s non-manufacturing index, which covers almost 90 percent of the economy, probably held at 53.5, matching April’s four-month low, according to median forecast of economists surveyed by Bloomberg before a report from the Tempe, Arizona-based group today. Orders to U.S. factories unexpectedly declined 0.6 percent in April from the previous month, according to the Commerce Department report yesterday.
The euro advanced 0.2 percent against both the dollar and yen to $1.2523 and 98.13 yen. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.2 percent to 82.397.
Credit-Default Swaps
Oil futures advanced 0.9 percent after rising for a second day before a government report that may show crude stockpiles dropped for the first time in 11 weeks in the U.S., the world’s biggest consumer of the commodity. U.S. inventories probably slipped 1 million barrels last week as refineries increased gasoline output to meet peak summer consumption, according to the median estimate of nine analysts in a Bloomberg News survey before an Energy Department report tomorrow.
Yields on Australia’s 10-year securities rose 13 basis points to 2.903 percent while Japan’s 10-year rate was up 3.5 basis points at 0.85 percent from yesterday, when it touched 0.79 percent, the lowest since 2003.
The cost of insuring Asia-Pacific corporate and sovereign bonds from non-payment fell, according to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan dropped 4 basis points to 206 basis points, Royal Bank of Scotland Group Plc prices show. The gauge is set for its lowest close since May 31, according to data provider CMA.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net ; Adam Haigh in Sydney at ahaigh1@bloomberg.net . "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Sent from my BlackBerry® wireless device
The MSCI Asia Pacific Index added 1.3 percent as of 1:53 p.m. in Tokyo and Standard & Poor’s 500 Index futures gained 0.4 percent. The euro climbed for a third day, while the yen and the dollar weakened against most of their major counterparts. Crude oil in New York rose for a second day. Yields on 10-year Treasuries increased one basis point to 1.53 percent.
Leaders from the Group of Seven countries will hold a conference call to discuss the European debt crisis today ahead of the G-20 meeting next week. The Reserve Bank of Australia lowered its key interest rate today by 25 basis points to 3.5 percent, the lowest level since 2009. China’s insurance regulator said it will allow insurers’ to broaden their investment scope, and four Taiwan government-controlled funds bought stocks yesterday to help pare losses, according to the Taipei-based Commercial Times.
“We are likely to see a reasonably strong policy response in a number of countries,” said Angus Gluskie, managing director at White Funds Management in Sydney, who manages more than $350 million. “It’s stacking up to be a reasonably good buying opportunity.”
MSCI Asia Pacific Index rebounded from the lowest close since November, as declines yesterday dragged down valuations on the region’s benchmark to 11.2 times estimated earnings on average, the lowest this year.
Qantas Tumbles
Australia’s S&P/ASX 200 Index advanced 1.3 percent after central bank Governor Glen Steven’s second rate cut in as many meetings. Thirteen of 27 economists surveyed by Bloomberg News predicted the move, while four forecast a half-point reduction and 10 expected borrowing costs to remain unchanged.
“The RBA has put more weight on global factors,” said Matthew Sherwood, Perpetual Investments’ head of investment markets research in Sydney. Perpetual manages funds of about $23 billion. “The bank is clearly worried about the outlook for Europe and households domestically are showing cautionary behavior.”
Qantas Airways Ltd., Australia’s largest carrier, plunged to a record low in Sydney after saying annual profit may decline as much as 91 percent amid mounting losses on international routes and increased fuel costs. Qantas slumped as much as 19.4 percent before trading at A$1.16.
Taiwan’s Taiex Index climbed 1.5 percent amid speculation the government will take steps to bolster equities.
Shanghai Composite
Taiwanese lawmakers are trying to find a compromise solution among 20 draft bills and 10 versions of a capital gains tax on stock trading, the official Central News Agency reported yesterday.
Searches for “Shanghai Composite” were blocked from China’s most-used microblogging service after the stock index’s drop on the 23rd anniversary of the Tiananmen Square crackdown corresponded to the date of the event. The Shanghai Composite Index dropped by 64.89 points yesterday, matching the date on which Chinese authorities crushed student-led protests on June 4, 1989. The gauge was little changed today.
Korea’s Kospi Index advanced 1.1 percent, while the Nikkei 225 Stock Average gained 0.8 percent in Tokyo. Japan’s broader Topix Index, which entered a bear market yesterday as it plunged to a level not seen since 1983, added 1.5 percent.
The S&P 500 closed up less than 0.1 percent in New York yesterday after it fell 9.9 percent from a four-year high on April 2 through last week.
Factory Orders Decline
The Institute for Supply Management’s non-manufacturing index, which covers almost 90 percent of the economy, probably held at 53.5, matching April’s four-month low, according to median forecast of economists surveyed by Bloomberg before a report from the Tempe, Arizona-based group today. Orders to U.S. factories unexpectedly declined 0.6 percent in April from the previous month, according to the Commerce Department report yesterday.
The euro advanced 0.2 percent against both the dollar and yen to $1.2523 and 98.13 yen. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, fell 0.2 percent to 82.397.
Credit-Default Swaps
Oil futures advanced 0.9 percent after rising for a second day before a government report that may show crude stockpiles dropped for the first time in 11 weeks in the U.S., the world’s biggest consumer of the commodity. U.S. inventories probably slipped 1 million barrels last week as refineries increased gasoline output to meet peak summer consumption, according to the median estimate of nine analysts in a Bloomberg News survey before an Energy Department report tomorrow.
Yields on Australia’s 10-year securities rose 13 basis points to 2.903 percent while Japan’s 10-year rate was up 3.5 basis points at 0.85 percent from yesterday, when it touched 0.79 percent, the lowest since 2003.
The cost of insuring Asia-Pacific corporate and sovereign bonds from non-payment fell, according to traders of credit- default swaps. The Markit iTraxx Asia index of 40 investment- grade borrowers outside Japan dropped 4 basis points to 206 basis points, Royal Bank of Scotland Group Plc prices show. The gauge is set for its lowest close since May 31, according to data provider CMA.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net ; Adam Haigh in Sydney at ahaigh1@bloomberg.net . "
===
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Sent from my BlackBerry® wireless device
Growth Slowdown Seen in U.S. as Recession Dodged: Economy
"June 4 (Bloomberg) -- The U.S. economy looks set to deliver a repeat performance in 2012: for the third straight year, it may suffer a swoon yet not slip into a recession.
“I don’t think the slowdown will be any more consequential than the past two years,” said John , a former Federal Reserve researcher who is chief economist at RDQ Economics LLC in New York. “There are positives out there in the economy. We’ll avoid a recession.”
Household balance sheets are in better shape, with indebtedness down about $100 billion in the first quarter, according to the New York Fed. Banks are more profitable: Earnings have risen for 11 straight quarters, based on data compiled by the Federal Deposit Insurance Corp. Even the housing market is reviving, with starts through the first four months of this year 24 percent higher than the comparable 2011 period.
Stocks plunged on Friday on news that American employers last month added the fewest workers to their payrolls in a year while the jobless rate rose. Treasuries gained, sending yields to record lows, as investors sought refuge from rising financial strains in Europe and slowing growth in the U.S. and China. German and U.K. yields fell to all-time lows after Spanish Economy Minister Luis de Guindos said the future of the euro is at stake.
Orders to U.S. factories unexpectedly declined for a second month in April, pointing to a deceleration in manufacturing as the global economy cools, a Commerce Department report showed today. Bookings dropped 0.6 percent after a revised 2.1 percent slump in March, the first back-to-back decreases in more than three years.
Stocks Fall
Stocks retreated, sending the Standard & Poor’s 500 Index down 10 percent from this year’s peak in April. The S&P 500 dropped 0.2 percent to 1,275.29 at 10:24 a.m. in New York.
Following the jobs report, Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, lowered his forecast for third-quarter economic growth to 2 percent from 3 percent. He sees the economy expanding 2.5 percent this quarter.
Allen Sinai, chief executive officer of Decision Economics in New York, bumped up his odds of a recession next year to 15 percent from 10 percent.
Mitt Romney, the presumptive Republican nominee in November’s presidential election, seized on the jobs figures to attack Barack Obama. “It is now clear to everyone that President Obama’s policies have failed to achieve their goals,” he said in a statement.
Obama Administration
The administration, seeking to blunt the political impact, highlighted private payroll gains over the past 27 months while promoting measures Obama has proposed to boost hiring.
The decline in jobs growth to 69,000 last month from a high this year of 275,000 in January was reminiscent of the labor- market cooling that occurred in both 2010 and 2011. Then as now, employers turned skittish as Europe’s sovereign-debt woes worsened.
Repeating the pattern of the last two years, Fed Chairman Ben S. Bernanke and his fellow central bankers are likely to respond to the job-market weakness by announcing further steps to stimulate growth. The moves could come when the Fed meets on June 19-20 to decide monetary strategy, Feroli said in a note to clients. Bernanke may give a hint of the Fed’s plans when he testifies to Congress on June 7.
Policy makers elsewhere face even more pressure to come up with ways to boost their economies. The European Central Bank may cut its benchmark interest rate from 1 percent as soon as this week, Holger Schmieding, chief economist at Berenberg Bank in London, said in a June 1 report. China will respond with a 2 trillion yuan ($314 billion) fiscal stimulus this year and next, according to Donald Straszheim, senior managing director of New York-based ISI Group.
‘Better Shape’
Sinai said the U.S. is in “better shape” to weather the global economic tremors than it was in the past, and in comparison with other countries today, provided the euro region’s currency compact doesn’t collapse completely. He sees U.S. growth picking up to 2.5 to 3 percent in the second half of this year as consumer spending expands, encouraging employers to take on more workers.
Household purchases rose 0.3 percent in April, the Commerce Department reported on June 1. That followed a 2.7 percent annualized increase in the first quarter, the most since the final three months of 2010.
Demand is holding up at store chains. Retailers’ same-store sales topped analysts’ estimates in May. Sales at Minneapolis- based Target Corp., the second-largest U.S. discount retailer, climbed 4.4 percent. Framingham, Massachusetts-based TJX Cos., the owner of T.J. Maxx and Marshalls, posted an 8 percent increase, reports showed last week.
Auto Sales
While automobile sales slipped in May from April, they were still up 17 percent from a year earlier, according to Ward’s Automotive Group.
Consumers are benefitting from easier credit terms as financial institutions seek to put the money they’ve earned to work. U.S. banks “eased standards on credit card, auto and other consumer loans,” according to the Fed’s quarterly survey of senior loan officers, released on April 30.
Investor nervousness over the world economy has pluses and minuses for U.S. households. On the negative side, it has pushed down stock prices, reducing household net worth. On the positive side, it has helped bring down gasoline prices and mortgage rates.
The average price of regular unleaded gasoline fell to $3.61 a gallon on May 31 from a 2012 high of $3.94 on April 5, according to AAA, the nation’s largest motoring group, as oil demand ebbed with the slowing world economy.
Commodity Prices
“We’re benefitting from a global drop-off in commodity prices,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
Rates for 30-year U.S. mortgages fell to a record as concern about Europe’s financial crisis drove investors to the safety of the government bonds that guide borrowing costs. The average rate for a 30-year mortgage dropped to 3.75 percent in the week ended May 31 from 3.78 percent, according to Freddie Mac, the McLean, Virginia-based mortgage financier.
The drop in loan rates is aiding housing, the trigger for the worst recession since the Great Depression. Confidence among U.S. homebuilders jumped to a five-year high in May, the National Association of Home Builders/Wells Fargo index showed.
Toll Brothers Inc. is among builders benefiting from the revival in demand. Second-quarter profit at the Horsham, Pennsylvania-based company exceeded analysts’ estimates as orders surged 47 percent from a year earlier.
“While domestic and global headline risk remains a concern,” Chairman Robert Toll said on a May 23 earnings call, “we are feeling better than we have at any time in the past five years.”
To contact the reporters on this story: Rich Miller in Washington at rmiller28@bloomberg.net ; Shobhana Chandra in Washington at schandra1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
“I don’t think the slowdown will be any more consequential than the past two years,” said John , a former Federal Reserve researcher who is chief economist at RDQ Economics LLC in New York. “There are positives out there in the economy. We’ll avoid a recession.”
Household balance sheets are in better shape, with indebtedness down about $100 billion in the first quarter, according to the New York Fed. Banks are more profitable: Earnings have risen for 11 straight quarters, based on data compiled by the Federal Deposit Insurance Corp. Even the housing market is reviving, with starts through the first four months of this year 24 percent higher than the comparable 2011 period.
Stocks plunged on Friday on news that American employers last month added the fewest workers to their payrolls in a year while the jobless rate rose. Treasuries gained, sending yields to record lows, as investors sought refuge from rising financial strains in Europe and slowing growth in the U.S. and China. German and U.K. yields fell to all-time lows after Spanish Economy Minister Luis de Guindos said the future of the euro is at stake.
Orders to U.S. factories unexpectedly declined for a second month in April, pointing to a deceleration in manufacturing as the global economy cools, a Commerce Department report showed today. Bookings dropped 0.6 percent after a revised 2.1 percent slump in March, the first back-to-back decreases in more than three years.
Stocks Fall
Stocks retreated, sending the Standard & Poor’s 500 Index down 10 percent from this year’s peak in April. The S&P 500 dropped 0.2 percent to 1,275.29 at 10:24 a.m. in New York.
Following the jobs report, Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, lowered his forecast for third-quarter economic growth to 2 percent from 3 percent. He sees the economy expanding 2.5 percent this quarter.
Allen Sinai, chief executive officer of Decision Economics in New York, bumped up his odds of a recession next year to 15 percent from 10 percent.
Mitt Romney, the presumptive Republican nominee in November’s presidential election, seized on the jobs figures to attack Barack Obama. “It is now clear to everyone that President Obama’s policies have failed to achieve their goals,” he said in a statement.
Obama Administration
The administration, seeking to blunt the political impact, highlighted private payroll gains over the past 27 months while promoting measures Obama has proposed to boost hiring.
The decline in jobs growth to 69,000 last month from a high this year of 275,000 in January was reminiscent of the labor- market cooling that occurred in both 2010 and 2011. Then as now, employers turned skittish as Europe’s sovereign-debt woes worsened.
Repeating the pattern of the last two years, Fed Chairman Ben S. Bernanke and his fellow central bankers are likely to respond to the job-market weakness by announcing further steps to stimulate growth. The moves could come when the Fed meets on June 19-20 to decide monetary strategy, Feroli said in a note to clients. Bernanke may give a hint of the Fed’s plans when he testifies to Congress on June 7.
Policy makers elsewhere face even more pressure to come up with ways to boost their economies. The European Central Bank may cut its benchmark interest rate from 1 percent as soon as this week, Holger Schmieding, chief economist at Berenberg Bank in London, said in a June 1 report. China will respond with a 2 trillion yuan ($314 billion) fiscal stimulus this year and next, according to Donald Straszheim, senior managing director of New York-based ISI Group.
‘Better Shape’
Sinai said the U.S. is in “better shape” to weather the global economic tremors than it was in the past, and in comparison with other countries today, provided the euro region’s currency compact doesn’t collapse completely. He sees U.S. growth picking up to 2.5 to 3 percent in the second half of this year as consumer spending expands, encouraging employers to take on more workers.
Household purchases rose 0.3 percent in April, the Commerce Department reported on June 1. That followed a 2.7 percent annualized increase in the first quarter, the most since the final three months of 2010.
Demand is holding up at store chains. Retailers’ same-store sales topped analysts’ estimates in May. Sales at Minneapolis- based Target Corp., the second-largest U.S. discount retailer, climbed 4.4 percent. Framingham, Massachusetts-based TJX Cos., the owner of T.J. Maxx and Marshalls, posted an 8 percent increase, reports showed last week.
Auto Sales
While automobile sales slipped in May from April, they were still up 17 percent from a year earlier, according to Ward’s Automotive Group.
Consumers are benefitting from easier credit terms as financial institutions seek to put the money they’ve earned to work. U.S. banks “eased standards on credit card, auto and other consumer loans,” according to the Fed’s quarterly survey of senior loan officers, released on April 30.
Investor nervousness over the world economy has pluses and minuses for U.S. households. On the negative side, it has pushed down stock prices, reducing household net worth. On the positive side, it has helped bring down gasoline prices and mortgage rates.
The average price of regular unleaded gasoline fell to $3.61 a gallon on May 31 from a 2012 high of $3.94 on April 5, according to AAA, the nation’s largest motoring group, as oil demand ebbed with the slowing world economy.
Commodity Prices
“We’re benefitting from a global drop-off in commodity prices,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
Rates for 30-year U.S. mortgages fell to a record as concern about Europe’s financial crisis drove investors to the safety of the government bonds that guide borrowing costs. The average rate for a 30-year mortgage dropped to 3.75 percent in the week ended May 31 from 3.78 percent, according to Freddie Mac, the McLean, Virginia-based mortgage financier.
The drop in loan rates is aiding housing, the trigger for the worst recession since the Great Depression. Confidence among U.S. homebuilders jumped to a five-year high in May, the National Association of Home Builders/Wells Fargo index showed.
Toll Brothers Inc. is among builders benefiting from the revival in demand. Second-quarter profit at the Horsham, Pennsylvania-based company exceeded analysts’ estimates as orders surged 47 percent from a year earlier.
“While domestic and global headline risk remains a concern,” Chairman Robert Toll said on a May 23 earnings call, “we are feeling better than we have at any time in the past five years.”
To contact the reporters on this story: Rich Miller in Washington at rmiller28@bloomberg.net ; Shobhana Chandra in Washington at schandra1@bloomberg.net "
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
Monday, 4 June 2012
The Financial Crisis: Staying Alive as a Bond Investor - South African view
A Great Article form Alastair Sellick from PSG Asset Management
"The PSG Angle is an electronic newsletter of PSG Asset Management."
"These days, the facts change fast and when the facts change, the view tends to change. At PSG Asset Management however, we pride ourselves on being able to make long-term investment decisions based on inputs that change less frequently than the views expressed by the market.
We reserve the right to alter critical assumptions that influence the valuations of various fixed interest instruments in the blink of an eye. However, the parameters that are changing are filtered through a fixed interest process that has been fine-tuned over many years. As a team, we debate our inputs rigorously on a frequent basis. We discuss the relative importance of many statistical, economic, market and financial variables in our models, and once we have reached consensus, we take decisions. Make no mistake, though, as we watch the financial shrapnel flying through the prism of our dealing room, we strategise and we act.
We run various fixed interest funds with varying risk tolerance and return objectives. Certain low risk funds are targeting Cash-type returns. Others are targeting Cash + (1% -3%), and yet others are targeting Cash + 5%. Some of our fixed interest funds are blended into low risk products, and other funds rely on cash and near cash investments as a parking place in between bouts of risk aversion and over-valuation of equity investments.
When Governor Gill Marcus delivered the statement of SARB Monetary Policy Committee (MPC) on 24 May 2012, we were struck by two things.
Firstly, at no point was there a discussion of whether or not interest rates would be changed at that meeting. Secondly, there was an emphasis that the SARB would not hesitate to act by either hiking or cutting interest rates, as required by the rapidly evolving global circumstances. There is now a very real possibility that the SARB might go through the entire up-cycle in inflation without having to hike interest rates. This would mean that the impact of rising inflation will be felt through a steepening yield curve. Once the peak of inflation has been confirmed, the yield curve will start to flatten again, and then long dated government bonds will start to offer value. At that point, we will look to start increasing the weight and duration of nominal government bonds in our bond portfolios.
In the background, however, we must not reduce the chaotic global backdrop to mere White Noise. Greece has defaulted and will likely default again. We are now treated to regular, inconclusive elections on a monthly basis, and we have seen regime change in Ireland, Spain, Italy and, of course, France. “Merkozy” is no more, but regime change in Germany will send shock-waves throughout the world and global financial markets.
How does a South African bond investor invest when Europe’s debt capital markets are busy imploding?
South Africa has an equivalent / better credit rating than several European Sovereigns, and lower bond yields than many. The ZAR is free floating, unlike the relatively homogeneous Euro which has not weakened as much as the European PIGS require, and is not as strong as the Germans demand. Thus we should buy short end SA bonds (or receive short rates) and look to accumulate longer dated SA bonds (or receive longer rates) into weakness. If the prices of oil & gold fall off a cliff due to a global recession and deflation, then we take our cue from the ZAR. If the weakness in the currency is less than that of oil, bonds become a buy.
More simply put, watch the ZAR price of oil and gold. If the SARB is forced to cut again, the same applies.
Look for value in the real rate space – inflation-linked bonds offer value anywhere from 2.25% to 3.00%.
Volatility will rise, and with it, opportunities for those with a strategic long-term plan."
"The PSG Angle is an electronic newsletter of PSG Asset Management."
"These days, the facts change fast and when the facts change, the view tends to change. At PSG Asset Management however, we pride ourselves on being able to make long-term investment decisions based on inputs that change less frequently than the views expressed by the market.
We reserve the right to alter critical assumptions that influence the valuations of various fixed interest instruments in the blink of an eye. However, the parameters that are changing are filtered through a fixed interest process that has been fine-tuned over many years. As a team, we debate our inputs rigorously on a frequent basis. We discuss the relative importance of many statistical, economic, market and financial variables in our models, and once we have reached consensus, we take decisions. Make no mistake, though, as we watch the financial shrapnel flying through the prism of our dealing room, we strategise and we act.
We run various fixed interest funds with varying risk tolerance and return objectives. Certain low risk funds are targeting Cash-type returns. Others are targeting Cash + (1% -3%), and yet others are targeting Cash + 5%. Some of our fixed interest funds are blended into low risk products, and other funds rely on cash and near cash investments as a parking place in between bouts of risk aversion and over-valuation of equity investments.
When Governor Gill Marcus delivered the statement of SARB Monetary Policy Committee (MPC) on 24 May 2012, we were struck by two things.
Firstly, at no point was there a discussion of whether or not interest rates would be changed at that meeting. Secondly, there was an emphasis that the SARB would not hesitate to act by either hiking or cutting interest rates, as required by the rapidly evolving global circumstances. There is now a very real possibility that the SARB might go through the entire up-cycle in inflation without having to hike interest rates. This would mean that the impact of rising inflation will be felt through a steepening yield curve. Once the peak of inflation has been confirmed, the yield curve will start to flatten again, and then long dated government bonds will start to offer value. At that point, we will look to start increasing the weight and duration of nominal government bonds in our bond portfolios.
In the background, however, we must not reduce the chaotic global backdrop to mere White Noise. Greece has defaulted and will likely default again. We are now treated to regular, inconclusive elections on a monthly basis, and we have seen regime change in Ireland, Spain, Italy and, of course, France. “Merkozy” is no more, but regime change in Germany will send shock-waves throughout the world and global financial markets.
How does a South African bond investor invest when Europe’s debt capital markets are busy imploding?
South Africa has an equivalent / better credit rating than several European Sovereigns, and lower bond yields than many. The ZAR is free floating, unlike the relatively homogeneous Euro which has not weakened as much as the European PIGS require, and is not as strong as the Germans demand. Thus we should buy short end SA bonds (or receive short rates) and look to accumulate longer dated SA bonds (or receive longer rates) into weakness. If the prices of oil & gold fall off a cliff due to a global recession and deflation, then we take our cue from the ZAR. If the weakness in the currency is less than that of oil, bonds become a buy.
More simply put, watch the ZAR price of oil and gold. If the SARB is forced to cut again, the same applies.
Look for value in the real rate space – inflation-linked bonds offer value anywhere from 2.25% to 3.00%.
Volatility will rise, and with it, opportunities for those with a strategic long-term plan."
Asian Stocks Fall a Fourth Day as Oil Drops on U.S., China Data
"June 4 (Bloomberg) -- Asian stocks fell for a fourth day, Chinese shares in Hong Kong headed for a bear market and U.S. futures and oil tumbled after data from the U.S. and China added to evidence of a global economic slowdown. The dollar strengthened and Australian bond yields dropped to a record low.
The MSCI Asia Pacific Index lost 2.3 percent as of 12:47 p.m. in Tokyo. Japan’s Topix slid 2.3 percent, heading for the lowest close since Dec. 1, 1983, while the Hang Seng China Enterprises Index of mainland stocks was more than 20 percent below this year’s peak, a common definition of a bear market. Standard & Poor’s 500 Index futures slipped 0.7 percent. Oil futures retreated near an eight-month low, while copper declined for a fourth day. Australia’s bonds climbed, with all maturities of one year or longer falling to records.
“People are more concerned about a return of their capital as opposed to a return on their capital,” said Nick Maroutsos who oversees about A$3 billion ($2.9 billion) as managing director and co-founder of Sydney-based Kapstream Capital. “The recovery is still going to continue to have fits and starts. We need something more substantial that’s going to get investors back into the market. Until we get that, we’re not going to see risk assets perform well.”
China’s non-manufacturing purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. U.S. unemployment rose to 8.2 percent in May and payrolls increased less than the most-pessimistic forecast in a Bloomberg News survey of economists, Labor Department figures showed June 1. European leaders remain divided on solutions for the region’s debt crisis.
Dollar Advance
The greenback advanced against 14 of its 16 major peers, with the Australian dollar leading declines, down 0.6 percent to 96.47 U.S. cents. Australian three-year yields declined as much as 14 basis points to a record 1.89 percent. The one-year-rate touched 2.338 percent. Yields on Japan’s benchmark 10-year securities fell to 0.79 percent, the least since June 2003.
Sony Corp. dropped below 1,000 yen in Tokyo trading for the first time since 1980, when the Walkman was introduced in the U.S. The shares fell as much as 2.3 percent to 990 yen on the Tokyo Stock Exchange.
Australian corporate bond risk surged to the highest since November, according to traders of credit-default swaps, with the Markit iTraxx Australia index jumping 10 basis points to 212 basis points, according to Westpac Banking Corp. The gauge of default swap contracts on 25 companies was set for the highest close since Nov. 28, and the biggest daily increase since May 16, according to data provider CMA.
Oil, Copper
“There’s a lot of psychological pressure among investors with the weak non-manufacturing data in China and global issues such as U.S. data and the euro crisis dragging on stocks,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing.
Oil for July delivery lost as much as 1.6 percent to $81.89 a barrel in electronic trading on the New York Mercantile Exchange. Prices slid $3.30, or 3.8 percent, to $83.23 a barrel June 1, the lowest close since October. Copper futures for July delivery fell 1.9 percent to $3.2505 a pound on the Comex in New York. The London Metal Exchange is closed today for a public holiday.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net ; Weiyi Lim in Singapore at wlim26@bloomberg.net
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
The MSCI Asia Pacific Index lost 2.3 percent as of 12:47 p.m. in Tokyo. Japan’s Topix slid 2.3 percent, heading for the lowest close since Dec. 1, 1983, while the Hang Seng China Enterprises Index of mainland stocks was more than 20 percent below this year’s peak, a common definition of a bear market. Standard & Poor’s 500 Index futures slipped 0.7 percent. Oil futures retreated near an eight-month low, while copper declined for a fourth day. Australia’s bonds climbed, with all maturities of one year or longer falling to records.
“People are more concerned about a return of their capital as opposed to a return on their capital,” said Nick Maroutsos who oversees about A$3 billion ($2.9 billion) as managing director and co-founder of Sydney-based Kapstream Capital. “The recovery is still going to continue to have fits and starts. We need something more substantial that’s going to get investors back into the market. Until we get that, we’re not going to see risk assets perform well.”
China’s non-manufacturing purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. U.S. unemployment rose to 8.2 percent in May and payrolls increased less than the most-pessimistic forecast in a Bloomberg News survey of economists, Labor Department figures showed June 1. European leaders remain divided on solutions for the region’s debt crisis.
Dollar Advance
The greenback advanced against 14 of its 16 major peers, with the Australian dollar leading declines, down 0.6 percent to 96.47 U.S. cents. Australian three-year yields declined as much as 14 basis points to a record 1.89 percent. The one-year-rate touched 2.338 percent. Yields on Japan’s benchmark 10-year securities fell to 0.79 percent, the least since June 2003.
Sony Corp. dropped below 1,000 yen in Tokyo trading for the first time since 1980, when the Walkman was introduced in the U.S. The shares fell as much as 2.3 percent to 990 yen on the Tokyo Stock Exchange.
Australian corporate bond risk surged to the highest since November, according to traders of credit-default swaps, with the Markit iTraxx Australia index jumping 10 basis points to 212 basis points, according to Westpac Banking Corp. The gauge of default swap contracts on 25 companies was set for the highest close since Nov. 28, and the biggest daily increase since May 16, according to data provider CMA.
Oil, Copper
“There’s a lot of psychological pressure among investors with the weak non-manufacturing data in China and global issues such as U.S. data and the euro crisis dragging on stocks,” said Tang Yonggang, an analyst at Hongyuan Securities Co. in Beijing.
Oil for July delivery lost as much as 1.6 percent to $81.89 a barrel in electronic trading on the New York Mercantile Exchange. Prices slid $3.30, or 3.8 percent, to $83.23 a barrel June 1, the lowest close since October. Copper futures for July delivery fell 1.9 percent to $3.2505 a pound on the Comex in New York. The London Metal Exchange is closed today for a public holiday.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net ; Weiyi Lim in Singapore at wlim26@bloomberg.net
Steven
Steven Morris CA (SA)
Mobie : 083 943 1858
Fax: 086 671 2498
E-Mail: steven@global.co.za
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