Dear
Ladies and Gentlemen,
Call
me 'old-fashioned', but surely Governments
should not be allowed to tell banks
what they can and cannot say to
the public - "for fear of affecting
stock prices'?
That
is exactly what we have seen happen
Thursday whereby the Federal Reserve
has 'ordered' all banks not to
divulge the results of the 'stress
tests' until after the earnings
reporting season which runs from
next Monday for two weeks.
|
| Questions
Why? |
Why
would banks be asked not to divulge
the stress-test results? I'll
tell you why, because the Federal
Reserve does not want any bad news
at all, to spoil what is going to
be yet a further hike in this pathetic
Bear Market Rally. If certain
banks came out and said that they
had 'failed' the stress test and would
need more funding from the Fed' within
6 months, then lo and behold the markets
and in particular the financial sector
would decline - wiping out much of
the gains we have seen over the past
5 weeks.
So
banks it seems are now allowed
to derail Mr Geithner, Mr Bernanke
and Ms Bair's collective attempts
to con the whole world into believing
the recession in the US is over.
Indeed, the one Bank that worries
me the most, Wells Fargo, announced
Thursday record 1st quarter results
- that is absolutely stunning
9 days after the quarter ends
and on the back of the hugely
negative announcements they made
in March - just what has initiated
this complete about-turn?
The Fed' and this game that
the US Government is playing -
it is called 'Con the People'
and you too can play; all you
need is a narrow-mind (or better
still, no mind of your own), you
need experience of having worked
in Wall Street from 2003 - 2007
and quite possibly in Hedge Funds.
You need to have that great asset
of 'believing absolutely everything
your Government says' (even though
you are out of work, your house
was re-possessed and you are now
living next door to the Mexican
Border).
An added advantage would be
if you liked George Bush and his
policies; believe the War in Iraq
has been or is being won and that
Afghanistan is the next obvious
country to try and 'stabilise'.
Of course if you drive a 4 x 4,
own copious shares of McDonalds
and have a flagpole at the end
of your drive with a Stars and
Stripes on it - you'll be great
at playing this game!!!
Ladies and Gentlemen, come
on, what is going on here.
We are seeing more revised figures
that we have ever been before
- there is that talk of 'Chinese
Accounting', but what of 'US Accounting'
- no-one can tell me that we're
not seeing massive manipulation
from the US Government, Federal
Reserve and mass-media - to name
but a few. Couple that with
CEO's of Banks and Carmakers,
being 'urged' to go live on the
Looney Tunes show or whatever
60 minute television show is most
favoured in the US currently (other
than the home shopping show) and
we have a complete and utter nonsense
that will only move the financial
problems forward a number of years.
There is absolutely and categorically
no way in this world the US is
out of a recession or even coming
anywhere close to the end of it.
No matter what spin you put on
it; how many revisions or revisions
of revisions you put on the numbers
and no matter how many times some
CEO is dredged up to National
television to say their company
has performed the greatest Houdini
act this side of AIG, quite simply
this is one large con and one
that will in no way solve the
financial crisis, just stave it
off for another President or at
the very least another term.
The stock market is now crossing
important territory this month
as first quarter corporate earnings
begin in earnest. With the FASB
engineering a hocus-pocus act
on bank earnings last week the
market is expected to get a boost
from the new trend in phony financial
services accounting. This will
give the market an additional
boost this month.
Combined with better earnings
guidance from companies, which
I view as almost impossible in
this environment, might be enough
to propel stocks even higher.
A key index level to watch
for a new break-out is Dow 9,015.10
and the Dow Transports at 3,717.26;
if these indices break through
these important resistance levels
then my intermediate and long-term
bearish view on stocks will be
violated. Until we crack these
thresholds, this is still a bear
market rally.
I don't believe this will be
a normal cyclical economic recovery,
regardless of what the stock market
does. The stock market is largely
manipulated by sleuths whereas
the bond market is largely dominated
by the "smart" money. And the
credit indicators tell me that
we're a long way from bottoming
in this credit cycle - especially
in several markets that are not
currently assisted by the Fed
and Treasury. Basically, high
quality credit spreads have not
narrowed since the commencement
of this stock rally. This is bearish
price action.
I've never experienced a debt
deflation. Nor have most people
currently alive. It is unwise
and foolish to treat this bear
market like any other in the post-WW
II period because it is totally
unique; the scope and depth of
the ongoing destruction of consumer
and business credit, bank balance
sheet compression and insolvency,
consumer retrenchment and soaring
unemployment should not be underestimated.
The rare nature of this recession
precludes a cyclically normal
US recovery.
This is a time for investors
to largely preserve capital and
wait for the market environment
to improve as it pertains to government
regulation and the future of the
global banking system. Many questions
are still unanswered or unresolved.
Simply, it is not clear how the
new financial landscape will emerge
in the post-2007 credit bear market
and as a result investors should
tread cautiously.
In the 1930s the Dow posted
several major bear market rallies
before finally bottoming in June
1932. The current rally - now
the third such period of gains
since early 2008 - has room to
advance because of the massive
amount of concerted global fiscal
spending now hitting the financial
system and eventually, the real
economy. But like a drug addict
that needs his fix this recovery
will require another dose of spending
in 2010 as government stimulus
fails to supplant consumer spending
indefinitely. The consumer will
not save the day as he remains
focused on balance sheet repair
and cash savings.
In the absence of a global
consumer now that the United States
is raising its savings rate, there
isn't one nation that can supplement
US imports. This implies major
hurdles for the global economy
and therefore corporate earnings
as we look beyond a blip in economic
activity the second half of 2009.
This bear should not be underestimated.
The destruction of credit and
wealth has not passed its peak
but rather is taking a time-out
before feasting again on the financial
system in the not-too-distant
future.
It is also not as if Europe
and the rest of the world aren't
in on the 'act'; Europe are starting
to speak of 'bottoming out' and
in all of these 'Quantative Easing
Measures', we are seeing are basic
hyperbole for 'bailing out' anyone
and anything that we can, just
to give the impression that we
will muddle through this in quick
time.
Japan are taking measures but
they are different, they absolutely
have to inject more money into
the country in order to miss a
third straight decade of problems
- and they are not trying to cover-up
anything, they are so deeply in
trouble that they all know what
needs to be done there.
Who knows, maybe there is an
inane fear that if you let your
country 'settle' naturally into
a recession/depressionary period
and let the rot work its way out
of its own volition, then you
look at Japan and are afraid that
this is what could happen to your
country if you do just that.
So instead, you quite simply
shut people up, tell a pack of
lies, pay-off the media, revise
every figure you can to your own
requirements and say this is all
in the name of progress!
Go figure and if anyone thinks
that for the past two weeks I
have been wrong in saying that
this is a Bear Market Rally -
then I'm in good company:
On to the numbers on the boards:
|
| US
Markets
How
the US did this week ..... |
 The
US budget deficit surged in March
as tax payments by companies and individuals
dropped and the government spent more
to rescue banks and revive the economy.
The
excess of spending
over revenue climbed
to $192.3 billion,
compared with a
gap of $48.2 billion
in the same month
a year earlier.
Spending increased
to $321.2 billion,
and revenue fell
28% to $129 billion.
The deficit six
months into the
2009 fiscal year
already exceeds
the record set in
the entire previous
year. Rising job
losses and plunging
corporate profits
are cutting into
tax receipts, while
the government commits
billions of Dollars
to bolster an economy
in its second year
of a recession.
During the first
half of fiscal year
that began Oct.
1, the country's
deficit swelled
to a record $956.8
billion, compared
with a $313 billion
shortfall during
the same period
a year earlier.
Corporate tax
receipts totaled
$56.2 billion through
March, down from
$129.5 billion in
the first half of
fiscal 2008, the
Treasury said. Individual
income tax collections
are down 15% so
far this fiscal
year to $429.7 billion
compared with $503.5
billion in the year-earlier
period.
The deficit in
2008 totaled a record
$454.8 billion.
The Congressional
Budget Office estimated
on March 20 that
the gap will swell
to $1.85 trillion
this fiscal year.
Almost half of
the $94.2 billion,
or 41%, surge in
government spending
last month compared
with March 2008
reflected cash infusions
to Fannie Mae and
Freddie Mac, the
two biggest mortgage
underwriters. Fannie
Mae received $15.2
billion last month
and Freddie Mac
got $30.8 billion,
the government said.
The government
spent $2.9 billion
last month on its
Troubled Asset Relief
Program, the plan
aimed at aiding
banks, bringing
the fiscal year-to-date
total to $293.4
billion.
President Barack
Obama in February
signed into law
a $787 billion stimulus
program that he
pledged will preserve
or create 3.5 million
jobs. Since then,
the administration
has also committed
funds to help US
automakers and to
spur investors to
buy real estate
assets that are
clogging banks'
balance sheets.
Obama has signed
a $410 billion spending
bill to provide
funding for most
government operations
through Sept.30.
The US House
of Representatives
and the Senate last
week approved drafts
of Obama's 2010
budget that largely
adhere to the administration's
priorities. The
House approved a
$3.55 trillion plan
on April 2 that
echoes Obama's calls
for revamping the
health-care system,
rewriting education
policies and reining
in global warming.
Obama said last
week the US needs
to reduce its deficit
after the economic
crisis passes.
"Once we have
stabilized the economy,
we are going to
have to bring these
huge deficits down,"
Obama told reporters
April 2 in Baden-Baden,
Germany.
In other categories,
spending by the
Social Security
Administration rose
7.3% to $324.2 billion
for the fiscal year
to date; spending
by the Department
of Health and Human
Services, which
administers the
Medicare and Medicaid
health programs,
climbed to $156.2
billion from $137.6
billion and spending
by the Defense Department
increased to $331.7
billion from $308
billion.
**************************************
General Motors
Corp. and Chrysler
LLC had ratings
cut on some of their
debt by Standard
& Poor's as the
automakers face
government deadlines
to restructure or
file for bankruptcy.
GM's $4.5 billion
senior secured revolving
credit facility
was reduced to CCC-
from CCC, or nine
grades below investment
quality, S&P said
Friday in a statement.
S&P dropped its
recovery rating
to 2 from 1, saying
lenders may recoup
70% to 90% in a
default by Detroit-based
GM.
S&P's actions
underscored doubts
about whether the
companies, propped
up with $17.4 billion
in federal loans,
can meet President
Barack Obama's directives
to shrink debt,
chop labor costs
and revamp operations.
They risk losing
their US aid and
be pushed into government-ordered
bankruptcies.
The downgrades
for GM, the biggest
US automaker, and
No. 3 Chrysler didn't
include the possibility
of further government
funding, S&P said.
Obama's auto task
force said it would
help finance GM
until the end of
May and Chrysler
until April 30.
GM's corporate-credit
rating was left
unchanged at CC,
which S&P said reflected
"our view of the
likelihood that
GM will default
-- through either
a bankruptcy or
a distressed debt
exchange."
Chrysler's senior
secured first-lien
term loan due 2013
was lowered to CC
from CCC, and a
senior secured second-lien
term loan due 2014
was reduced to C
from CC, or 11 grades
below investment
quality. S&P reduced
its recovery rating
to 4 from 1, projecting
lenders could get
back 30% to 50%
in a default by
closely held Chrysler.
GM and Chrysler
are both working
to reduce debt and
labor expenses.
GM is meeting
this week and next
with a team from
the US Treasury
to craft a revised
plan to save the
company. Lenders
for Auburn Hills,
Michigan-based Chrysler
are holding meetings
and exchanging proposals
with the Treasury
to cut the carmaker's
debt, people familiar
with the situation
have said.
**************************************
Wednesday's minutes
from the Federal
Reserve add surprisingly
little to our understanding
of how it reached
its surprise decision
to buy government
bonds.
The minutes do
not explain how
the Fed arrived
at its $300bn figure
for Treasury purchases,
what it hoped this
amount of buying
would achieve or
what circumstances
if any might lead
it to buy more.
Instead the minutes
provide a softer
focus picture of
the Fed's thinking.
Having downgraded
its economic outlook,
the Fed wanted to
provide additional
stimulus.
Officials settled
on "substantial
additional asset
purchases" because
schemes to provide
finance for credit
markets were taking
a long time to scale
up.
A simple reading
of the minutes would
suggest the Fed
might respond to
any further big
downgrade in its
forecasts in a similar
fashion - raising
purchases as a rough
proxy for rate cuts
it cannot implement
with rates already
close to zero.
At the March
18 meeting, one
Fed policymaker
wanted to stick
to buying mortgage-related
securities. Another
wanted to add only
more Treasury purchases.
Buying both was
a way to keep everyone
happy and hedge
the Fed's bets in
the light of uncertainty
as to which type
of asset purchase
might prove effective.
"Several members
noted that working
across a range of
assets and instruments
was appropriate
when the effects
of any one tactic
were uncertain,"
the minutes say.
Fed officials
have long differed
as to the merits
of buying Treasuries
- and this was reflected
in the minutes.
Some thought buying
Treasuries "should
ease financial conditions
generally while
minimising the Federal
Reserve's influence
on the allocation
of credit".
However, others
thought purchases
of securities issued
by Fannie Mae and
Freddie Mac would
have more impact,
while some worried
the Fed would be
seen as setting
out to monetise
the government deficit.
Fed officials
agreed the monetary
base was likely
to "grow significantly"
as a result of large-scale
additional asset
purchases - but
still described
this as a "consequence"
of policy rather
than a channel through
which it might work.
One official
"in particular"
did put specific
weight on the need
for "sustained increases
in the monetary
base". But the Fed
still stopped short
of embracing a target
for money growth
or the logic of
so-called "quantitative
easing" - leaving
a difference between
its avowed strategy
and that of the
Bank of England
even though both
are now buying government
bonds.
**************************************
And after all
that I have mentioned
above, President
Barack Obama said
he's "starting to
see progress" toward
a recovering economy
even as it is "still
under severe stress."
"What we're starting
to see is glimmers
of hope across the
economy," the president
told reporters at
the White House
after getting an
update on the economy
from Federal Reserve
Chairman Ben S.
Bernanke, Treasury
Secretary Timothy
Geithner, and Sheila
Bair, chairman of
the Federal Deposit
Insurance Corp.
Obama cited increased
refinancing of home
mortgages, money
flowing from the
$787 billion stimulus
package and a 20%
increase in government-backed
loans to small businesses
"over the last month
alone." Still, "we're
still seeing a lot
of job losses, a
lot of hardship,"
he said.
The talks, which
lasted about one
hour, centered on
stimulating the
economy, stabilizing
banks, reducing
strain in the credit
markets, the rising
jobless rate, mortgage
refinancing and
the health assessment
of banks, including
"stress tests" being
conducted by the
Fed.
"We have always
been very cautious
about prognosticating,
and that's not going
to change," Obama
said. "The economy's
still under severe
stress, and obviously
during these holidays
we have to keep
in mind that whatever
we do ultimately
has to translate
into economic growth,
and jobs, and rising
incomes for the
American people."
Obama said he
and his top advisers
are setting the
stage in coming
weeks for other
steps to bolster
the economy.
"Over the next
several weeks, you'll
be seeing additional
actions by the administration,"
Obama said, offering
no clues what they
might be.
Obama told reporters
he and his experts
discussed stabilization
in the financial
system and efforts
to keep people in
their homes as a
result of government
programs to modify
loans, leading to
a pickup in refinancing.
He said he feels
"very good" about
progress in "unlocking
lending in some
particular markets,"
noting that credit
has eased for small
business. There's
been a 20% increase
in the largest loan
program operated
by the Small Business
Administration in
the last month,
he said.
"Small businesses
are starting to
get money" for payroll
and operating expenses,
Obama said. Money
is beginning to
flow to construction
projects around
the nation from
the $787 billion
stimulus package,
he added.
The average rate
on a US 30-year
fixed mortgage dropped
to 4.73% in the
week ended April
3, the lowest since
1971. Fed policymakers
last month kept
the benchmark lending
rate in a range
of zero to 0.25%.
Obama didn't
mention the status
of the Fed's tests
being conducted
to see how the 19
largest US banks
would hold up if
the recession worsens.
Results may be released
later this month.
"We're starting
to see progress,
and if we stick
with it, if we don't
flinch in the face
of difficulties,
then I feel absolutely
convinced that we're
going to get this
economy back on
track," Obama said.
Still, "we've still
got a lot of work
to do." He didn't
take reporters'
questions - no surprises
there!
There are signs
of economic improvement.
Orders placed with
factories rose 1.8%
in February, the
first gain since
July. Purchases
of existing homes
rose 5.1% to an
annual rate of 4.72
million in February
amid lower prices.
To be sure, the
recession that began
in December 2007
lingers. The unemployment
rate rose to 8.5%
in March, the highest
level since 1983,
and employers have
cut payrolls by
5.1 million workers
since the start
of the downturn,
the worst performance
in the post-World
War II era.
The economy probably
shrank at a 5% annual
rate in the first
quarter, according
to the median estimate
survey earlier this
month.
Also attending
Friday's meeting
were Mary Schapiro,
chairman of the
Securities and Exchange
Commission; John
Dugan, head of the
Office of the Comptroller
of the Currency,
an arm of the Treasury
Department that
regulates national
banks; and Obama's
top economic advisers,
Lawrence Summers,
director of the
National Economic
Council, and Christina
Romer, head of the
White House Council
of Economic Advisers.
Summers Thursday
expressed confidence
that the US recession
is nearing an end.
"We can be reasonably
confident that is
going to end within
the next few months
and you'll no longer
have that sense
of free fall," Summers
told the Economic
Club of Washington.
|
| European
Markets What
has been happening in Europe this
week ..... |
 European
stocks climbed for a fifth straight
week, the longest stretch of gains
since October 2007, as speculation
grew the worst of the credit crisis
is over and government measures will
succeed in reviving the global economy.
HSBC
Holdings Plc, UniCredit
SpA and Natixis SA
rallied more than
9% after Wells Fargo
& Co. reported a record
first-quarter profit
that beat the most
optimistic Wall Street
estimates. Daimler
AG, the world's second-largest
maker of luxury cars,
rose 3.6% after saying
it anticipates a profit
improvement and the
German government
agreed to more than
triple payments to
buyers of new low-emission
vehicles.
The Dow Jones Stoxx
600 Index added 1%
to 188.06. The index
has rebounded 19%
since reaching a 12-year
low on March 9 as
banks from Barclays
Plc to Citigroup Inc.
signaled they had
a positive start to
the year and Treasury
Secretary Timothy
Geithner unveiled
plans to finance the
purchase of as much
as $1 trillion in
lenders' toxic assets.
National indexes
rose in 14 of the
18 western European
markets in the holiday-shortened
trading week. Germany's
DAX Index climbed
2.4%. France's CAC
40 added 0.5%, while
the UK's FTSE 100
slipped 1.1%.
The Bank of England
left its benchmark
interest rate unchanged
at a record low of
0.5% and said it will
keep buying government
bonds to fight the
deepest recession
in a generation.
Strategists are
at odds over whether
the low in March marked
the bottom of Europe's
21-month stocks rout.
Morgan Stanley on
April 6 advised investors
to sell European equities,
saying "the bear market
is not over." A day
later, JPMorgan Chase
& Co. said the rally
will go on as investors
buy before an expected
rebound in earnings
growth this year.
Analysts expect
profits for companies
in the Stoxx 600 to
climb 22% on average
this year with financial
firms leading the
growth, estimates
by the 'so-called'
experts show. Total
hogwash in my opinion!
Goldman Sachs Group
Inc. said in a report
dated April 8 investors
should favor manufacturing,
technology and other
industries that rely
on economic growth
as the recession eases.
HSBC, Europe's
biggest bank, added
9.1%. Italy's UniCredit
climbed 10%. Natixis,
the unprofitable French
lender whose investors
were pushed to merge
by the government,
jumped 16%.
Hypo Real Estate
Holding AG jumped
12% as the German
government offered
to buy the commercial-property
lender, moving closer
to the country's first
bank nationalization
since the 1930s.
ING Groep NV gained
14% after the largest
Dutch financial-services
firm said it plans
to raise as much as
8 billion Euros ($10.6
billion) selling assets
to boost capital.
A measure of banks
in the Stoxx 600 has
clawed back 64% from
the March lows, the
steepest gain among
19 industries in the
period. Lenders were
among the worst performers
last year as global
credit-related losses
and writedowns topped
$1 trillion.
Daimler, which
on April 8 predicted
a "gradual improvement"
in profit this year,
added 3.6%. Goldman
Sachs upgraded the
carmaker to "buy"
from "neutral," citing
restructuring measures
and more clarity on
the company's operational
and financial outlook.
German Chancellor
Angela Merkel's coalition
government agreed
to more than triple
payments to buyers
of new low- emission
vehicles who scrap
their old cars in
an election-year bid
to boost auto sales.
Infineon Technologies
AG rallied 48%. UBS
AG raised its recommendation
on Europe's second-largest
chipmaker to "buy"
from "neutral," saying
non-dilutive refinancing
is looking more likely
for the company.
DSG International
Plc, the UK's biggest
electronics retailer,
soared 20%. The Financial
Times said the company
may raise "several
hundred million Pounds"
by selling shares.
The retailer said
in a statement it
regularly reviews
its capital structure
and no final decision
on any course of action
has been taken.
Skanska AB sank
9.6% as Sweden's largest
builder reported a
33% drop in first-quarter
orders and said it
will consider further
cost cuts if next
year's bookings decline.
Wavin plunged 23%.
Europe's biggest maker
of plastic pipes for
sewers on April 7
said the European
construction market
was "unlikely" to
pick up this year
and the company will
take "firm actions"
should more cost cuts
be needed.
|
| The
UK Market Did it
follow the Global trend ..... |
 The
Bank of England left the benchmark
interest rate unchanged and said it
will keep buying government bonds
to fight the deepest recession in
a generation.
The
nine-member Monetary
Policy Committee,
led by Governor
Mervyn King, kept
the main rate
at 0.5%, the lowest
since the bank
was founded in
1694, as predicted
by 60 of 62 economists
in a survey. The
panel also agreed
to continue the
three-month program
to purchase 75
billion Pounds
($110 billion)
of assets to bolster
the economy, the
bank said.
"The committee
noted that since
its previous meeting
a total of just
over 26 billion
Pounds of asset
purchases had
been made and
that it would
take a further
two months to
complete that
program," the
Bank of England
said in a statement.
The UK economy
is shrinking at
the fastest pace
since 1980, threatening
to push inflation
below the Bank
of England's 2%
target and eventually
stoke deflation.
Whilst growth
may return at
the end of the
year, investors
have called on
King to keep up
the pace of bond
purchases to push
down yields and
ease credit markets.
This month's
meeting is basically
a stocktaking
exercise to see
how the purchases
are going and
see the impact
on yields. Rates
are as low as
they're going
to go. When they
get closer to
spending the 75
billion, then
people will think
about what happens
next if it doesn't
have the desired
effect.
King stoked
doubts about his
intentions when
he indicated March
24 that officials
may not spend
all the money
available to them.
The yield on the
10-year gilt,
which dropped
to the lowest
in at least 20
years after the
plan was originally
unveiled last
month, has since
risen about 0.4
percentage point
to 3.32%. The
yield was little
changed after
Friday's decision.
In my view,
it was a missed
opportunity. We've
run out of interest
rate ammunition,
and it would have
been a cheap and
easy way to intervene
verbally and get
gilt yields down.
It's a bit disappointing
to say the least.
The Bank of
England's plan
was hailed as
a model for other
central banks
to follow when
it was announced
on March 5. Friday's
decision was the
first since so-called
quantitative easing
began.
The Federal
Reserve kept its
benchmark at a
range of zero
to 0.25% on March
18. The European
Central Bank last
week cut its rate
a quarter-point
to 1.25%.
ECB council
member Ewald Nowotny
said in an interview
that cutting the
benchmark rate
below 1% is still
"open for discussion,"
though he said
didn't favor doing
so. He also said
it would be "sensible"
for the bank to
buy corporate
debt.
Recent reports
have indicated
that the economy's
downward spiral
is slowing. A
gauge of services
industries rose
to a six- month
high in March
and Nationwide
Building Society's
measure of house
prices climbed
for the first
time in more than
a year. The Bank
of England has
also said that
financial institutions
expect credit
conditions to
ease.
There are some
encouraging signs
that the bond-purchase
program is smoothing
access to loans,
and the economy
should show signs
of recovery around
the turn of the
year but it must
be remembered
that near-term
prospects are
bleak.
UK unemployment
jumped the most
since 1971 in
February and the
National Institute
of Economic and
Social Research
estimates gross
domestic product
dropped 1.5% in
the first quarter.
That follows a
1.6% fourth-quarter
contraction, the
biggest since
1980.
Michael Page
International
Plc, the UK's
second-largest
recruitment company,
said on April
7 that first-quarter
profit slumped
32% as the pace
of layoffs increased.
Laura Ashley Holdings
Plc, the UK furnishings
and clothes chain
known for floral
patterns, said
March 31 annual
profit fell 49%
as Britons spent
less to furnish
their homes.
King said March
24 he expects
inflation, which
accelerated to
3.2% in February,
to resume its
"sharp" slowdown.
The bank two months
ago forecast that
the inflation
rate will fall
to 0.3% in 2011.
UK producer
prices increased
2% in March, the
slowest annual
pace in 20 months,
the statistics
office said Friday.
|
| Asia
Pacific Regional Markets
Did
they set the tone or follow the
lead ..... |
 JAPAN
Tokyo
stocks ended higher
Friday in somewhat
volatile trading,
led by hefty gains
among shipping shares
such as Mitsui OSK,
as well as insurers,
which rallied for
the second consecutive
day.
After a bullish
start, the market
became increasingly
directionless in the
afternoon, however,
dipping into negative
territory as players
await US economic
data due next week.
The Nikkei 225
Stock Average rose
48.05 points, or 0.5%,
to 8964.11. The Topix
index of all the Tokyo
Stock Exchange First
Section issues rose
4.16 points, or 0.5%,
to 845.97. Volume
was heavy at about
3 billion shares,
due partly to buying
related to the settlement
of April Nikkei 225
options.
The Nikkei briefly
topped the psychologically-important
9,000 level early
in the session for
the first time since
Jan. 8, but investors
were quick to take
profits and square
positions ahead of
the weekend.
For the week, the
Nikkei added 2.4%,
and has finally risen
above break-even for
2009; the index is
now up 1.2% year-to-date.
Sumitomo Mitsui
Financial Group's
announcement Thursday
to issue up to $8
billion in new common
shares to shore up
its capital base weighed
heavily on both the
banking sector and
the overall market.
Its shares remained
ask-only for the entire
session, while rival
Mizuho Financial Group
sank 9.6% to Y198
on massive volume
on fears it may also
have to raise capital.
Mitsubishi UFJ
Financial Group has
recently come to the
public market for
the same purpose;
its shares closed
off 1% at Y517. The
Topix's bank subindex
dropped 3.2%, and
was the biggest loser
among the 33 subindexes.
Former high-flier
Fast Retailing also
sank 7.6% to Y10,750,
despite reporting
solid fiscal first
half results Thursday
and lifting its sales
and operating profit
forecasts for the
full fiscal year,
as some felt its forecasts
were disappointing.
Goldman Sachs also
cut its rating to
Neutral from Buy.
Shipping shares
were the top percentage
winners, pushing the
marine transport sector
up 5.8%. Mitsui OSK
gained 6.6% to Y580,
while Nippon Yusen
gained 4.9% to Y447.
Given the Japanese
stock market's recent
rally, some market
players may view shipping
stocks as laggards,
said SMBC Friend Research
Center analyst Mitsuru
Miyazaki.
Insurance stocks
were also strong,
with Tokio Marine
rising 3.5% and Sompo
Japan Insurance up
4.9%.
June Nikkei 225
futures ended up 40
points, or 0.4%, at
8970 on the Osaka
Securities Exchange.
In other cash markets,
the Osaka Securities
Exchange gained 116.84
points, or 0.7%, to
16,600.36, while the
Jasdaq Securities
Exchange ended up
2.57 points, or 0.3%,
at 1027.14.
SOUTH KOREA
South Korean shares
closed higher Friday
led by banks on hopes
for improved earnings
in the global financial
sector, but local
funds' heavy profit-taking
capped further gains.
The Korea Composite
Stock Price Index,
or Kospi, finished
19.69 points, or 1.5%,
higher at 1336.04,
a retreat from early
gains that saw the
index rise as much
as 3%.
The Kospi was up
4.1% this week, posting
its fifth straight
week of gains, the
longest weekly winning
streak since June,
2007. The index has
also gained 31.1%
from its March trough.
Domestic funds
sold heavily to take
profit and because
they probably face
more requests for
fund redemption after
the Kospi broke above
the mid-1200 level,
said Bae Sung-young,
an analyst at Hyundai
Securities.
Domestic institutions
offloaded a net KRW474.2
billion worth of stocks
Friday. But foreigners
and local retail investors
picked up net KRW405.2
billion and KRW78.9
billion worth of stocks,
respectively.
Banks led the broad
market gain on rising
expectations for their
earnings, said analysts.
Shinhan Financial
Group rose 1.2% to
KRW30,300, and Woori
Finance Group climbed
8% to KRW9,960.
Samsung Electronics
also outperformed
its peers by ending
4% higher at KRW603,000,
while Hynix Semiconductor
fell 4.3% to KRW13,500
on concerns about
a potential rights
offering.
Posco ended up
1.2% at KRW379,500
ahead of its first-quarter
earnings report. The
company after the
market close said
its net profit fell
69% to KRW325 billion
due mainly to a fall
in demand and higher
costs arising from
a weaker won.
Its bottom line
came in slightly lower
than local research
firm FnGuide's forecast
for a 67% decline.
Asiana Airlines
pleaded guilty and
will pay $50 million
in criminal fines
for fixing cargo rates
on international air
shipments, the US
Justice Department
said Thursday.
Its stocks ended
up 0.2% at KRW4,140
while its rival Korean
Air rose 0.8% to KRW40,400.
HONG KONG
Closed for as Public
Holiday Friday.
CHINA
Signs of a pickup
in the economy and
hopes of a recovery
in domestic demand
drove gains in mining
and energy stocks,
sending China's benchmark
index to its highest
close in more than
seven months.
The benchmark Shanghai
Composite Index, which
tracks both A and
B shares, ended up
2.7% at 2444.23, the
highest since Aug.
20, when it settled
at 2523.28.
The Shenzhen Composite
Index rose 3.5% to
820.84.
Turnover for the
Shanghai Composite
Index rose to CNY157.86
billion ($23.1 billion)
from CNY108.8 billion
Thursday.
Analysts said the
Shanghai Composite
Index will likely
test the 2500 psychological
resistance next week.
They said any better-than-expected
figures in March and
first-quarter economic
data due in the coming
days would help build
the market's upward
momentum.
The official Xinhua
News Agency reported
Friday afternoon that
China's March exports
fell 17.1% from a
year earlier, a milder
decline than the 20%
drop that economists
had expected and an
improvement from February's
25.7% fall.
Nonferrous metals
companies soared after
benchmark copper futures
on the Shanghai Futures
Exchange hit the 5%
upside limit, fueled
partly by overnight
gains in copper prices
on the London Metals
Exchange.
Western Mining
rose by the 10% daily
trading limit to CNY13.85.
Yunnan Copper also
jumped 10% to CNY22.28.
Other cyclical
stocks rose on hopes
of increasing demand.
Coal producer Henan
Shenhuo Coal Industry
& Electricity Power
jumped 6.1% to CNY29.12.
Pingdingshan Tianan
Coal Mining climbed
7.1% to CNY23.45.
Airlines soared
on hopes their earnings
will improve later
this year. China Southern
Airlines added 6.7%
to CNY5.61, and Air
China was up 7.7%
at CNY6.69.
Shanghai Pudong
Development Bank ended
up 0.9% at CNY22.22,
underperforming the
broader market and
other financial companies,
after the bank said
it plans to sell up
to CNY15 billion worth
of shares in a private
placement and up to
CNY15 billion subordinated
bonds on the interbank
market.
Analysts said concerns
about the dilution
effect from the planned
fundraising offset
any positive impact
from the bank's 2008
earnings. Pudong Development's
net profit surged
to CNY12.52 billion
from CNY5.50 billion
in 2007.
TAIWAN
Taiwan stocks closed
2.01% higher at a
seven-month high on
Friday, posting their
seventh straight week
of gains as LCD shares
such as Chi Mei jumped
on hopes the sector
had bottomed out.
The main TAIEX
share index closed
114.16 points higher
at 5,781.96, its strongest
close since Sept 26.
Turnover was high
at T$160.14 billion
($4.7 billion), similar
to most trading days
in the past two weeks,
but more than double
the average figure
seen during the down
months of January
and February this
year.
LCD makers led
the day's climb, with
Chi Mei advancing
by its daily 7% limit
after a senior executive
told local media he
believed the worst
was over for the industry.
Its larger rival
AU Optronics closed
6.58% higher, while
the broader optoelectronics
sub-index ended the
session up 4.32%.
LCD makers struggled
for much of the first
quarter of this year,
but have recently
managed to stage a
turnaround on the
back of China's move
to boost buying of
electronic products
in rural areas.
The optoelectronics
sub-index has climbed
nearly 50% since the
beginning of the year,
far outpacing the
26% advance on the
big board.
Shares of Taiwan
Semiconductor Manufacturing
Co ended 1.15% higher,
just before the world's
contract chip maker
said its first quarter
sales fell by an annual
55% on weaker chip
demand, but the result
beat its own forecast
due to rush orders
related to China.
Financial shares
also climbed, led
by Cathay Financial
, after it reversed
a year-ago loss to
report market-beating
first quarter profits.
Cathay Financial
closed the session
4.57% higher after
reporting a first-quarter
net profit of T$4.98
billion ($147 million),
exceeding market expectations
and turning back on
its T$5.98 billion
loss during the same
period last year.
Sentiment in the
banking sector was
further boosted by
San Francisco-based
Wells Fargo's announcement
that it expects to
post a record $3 billion
first-quarter profit.
THE PHILIPPINES
Closed for as Public
Holiday Friday.
SINGAPORE
Closed for as Public
Holiday Friday.
INDONESIA
Closed for as Public
Holiday Friday.
MALAYSIA
Share prices on
Bursa Malaysia closed
higher Friday with
the KLCI at 941.38,
the highest in six
months fuelled by
positive sentiment
following the new
Cabinet line-up, dealers
said.
The CI increased
23.49 points or 2.56%
Friday, as the market
continued to react
positively to the
new list of ministers
and deputy ministers,
which was announced
Thursday by Prime
Minister Datuk Seri
Najib Tun Razak.
The index recorded
an intra-day high
of 942.4 and a low
of 925.86.
The overnight gain
on Wall Street which
saw the Dow Jones
Industrial Index up
by 3.14% to 8,083.38
and the S&P 500 rising
3.81% to 856.56 also
influenced market
momentum.
Analysts are also
expecting the CI to
touch 950 level next
week as the buying
momentum has been
getting stronger especially
in heavyweights.
The Finance Index
gained 182.92 points
to 7,015.36, the Industrial
Index rose 59.7 points
to 2,227.82 and the
Plantation Index advanced
121.37 points to 4,918.59.
Of the FTSE-BM
Index series, the
FBMEmas went up 164.1
points to 6,192.58,
the FBM30 added 162.79
points to 6,047.76,
the FBM2BRD was 49.16
points higher at 4,040.24
and the FBM-MDQ rose
83.42 points to 3,108.2.
Advancers led decliners
by 554 to 100 while
143 counters were
unchanged, 446 still
untraded and 34 others
suspended.
Volume increased
to 1.155 billion shares
worth RM1.298 billion
compared to Thursday's
715.124 million shares
valued at RM990.704
million.
Among the actives,
KNM rose 1.5 sen to
44.5 sen, Gula Perak
increased half sen
to five sen, Maybank-OR
gained six sen to
RM1.06 and Resorts
World advanced nine
sen to RM2.36.
Of the heavyweights,
Sime Darby increased
40 sen to RM6.50,
Maybank rose 10 sen
to RM3.98, Tenaga
advanced 40 sen to
RM6.50 and TM gained
six sen to RM3.64.
Volume on the Main
Board increased to
1.036 billion shares
valued at RM1.275
billion compared to
Thursday's 651.606
million shares worth
RM975.666 million.
Turnover on the
Second Board advanced
to 41.702 million
shares worth RM10.375
million from Thursday's
19.265 million shares
valued at RM6.022
million.
Volume on the Mesdaq
Market appreciated
to 32.748 million
shares valued at RM4.249
million from 13.076
million shares worth
RM2.187 million previously.
Warrants increased
to 32.105 million
worth RM3.605 million
from 15.35 million
valued at RM1.591
million Thursday.
THAILAND
Thai stocks ended
near three-month highs
on Friday after gains
in oil prices helped
push up big-cap energy
shares such as PTT
and PTT Exploration,
but concern over anti-government
protests were a drag
for much of the day.
The Thai government
late Thursday declared
a public holiday on
Friday, in an effort
to ease disruption
from continuing antigovernment
protests, which were
blocking main roads
in the capital. But
Bangkok's foreign
exchange, bond and
stock markets were
open as the central
bank said financial
institutions will
operate as normal.
The Thai SET index
ended up 2.2% at its
highest close since
12 January, with PTT,
the country's biggest
energy firm, and its
energy subsidiary
PTT Exploration and
Production each climbing
more than 2%. PTT's
refinery and petrochemical
affiliates posted
stronger gains, with
Thai Oil and IRPC
each surging about
9%. PTT Aromatics
jumped 11% and
PTT Chemical gained
3.4%.
The late energy
stock buying came
after oil prices rose
nearly 6%.
Dealers in Bangkok
attributed early dull
trade to anti-government
protests, which made
investors particularly
wary about buying
ahead of the market
closure for the April
13-15 Songkran Festival.
Thai stocks still
ended the week up
1.8%, Southeast Asia's
third-worst performer,
followed by Singapore's
0.4% gain and Indonesia's
2.3% fall.
INDIA
Closed for as Public
Holiday Friday.
AUSTRALIA
Closed for as Public
Holiday Friday.
NEW ZEALAND
Closed for as Public
Holiday Friday.
|
| Global
Commodities 'Food
for thought' or 'a Grain
of truth' ..... |
 Commodity
markets charged to a strong finish
in the shortened trading week ahead
of the Easter break with oil prices
up by more than $2 a barrel on Thursday
while a jump for copper encouraged
a broad rally across the base metals
sector.
Among
precious metals, gold
remained below the
$900 an ounce level,
continuing its recent
consolidation phase,
while gains for platinum
led palladium prices
higher.
In energy markets,
oil prices found support
from better-than-expected
US unemployment data
and gains for in US
equities with the
Dow Jones Industrials
Average closing above
the above the 8,000
points level mark.
At the end of trading
in New York on Thursday,
ICE May Brent gained
$2.47, or 4.8%, at
$54.06 a barrel, moving
between a low of $51.85
and a high of $54.27.
Nymex May West
Texas Intermediate
settled up $2.86,
or 5.8%, at $52.24
a barrel, ranging
between a low of $49.72
to a high of $54.45.
Over the week,
Brent rose 1.1% ,
while WTI lost 0.5%.
Elevated levels of
crude stockpiles in
the US has kept WTI
under pressure relative
to Brent crude this
week.
US petrol and heating
oil prices rose on
Thursday but were
marginally lower over
the week. Nymex May
RBOB unleaded gasoline
rose 4.1 cents, or
2.9%, to $1.4810 a
gallon, down 0.8%
over the week.
Nymex May heating
oil ended just over
3 cents higher, up
2.2%, at $1.4288 a
gallon, but down 1.2%
over the week.
US commodity markets
were closed on Friday
but Monday is not
a US holiday so some
trading will take
place on April 13
on Nymex, ICE and
CBOT exchanges.
On Friday, the
International Energy
Agency predicted that
global oil demand
would drop by a hefty
2.4m barrels a day
in 2009 to 83.4 mb/d,
a cut of 1m b/d compared
with last month's
forecast.
The IEA said the
pace of contraction
was close to early
1980's levels, with
a growing consensus
that an economic and
oil demand recovery
would be deferred
to 2010
"This is a pretty
exceptional period
of demand collapsing,"
said David Fyfe, head
of the oil industry
and markets division
at the IEA, the energy
watchdog of the developed
world.
Mr Fyfe did not
rule out further downward
revisions to the IEA's
demand forecasts.
"I think everyone
is trying to gauge
when the recession
is going to bottom
out," said Mr Fyfe:
"We can't say definitively
that global GDP is
not going to worsen."
The IEA also said
that stocks had risen
to 61.6 days of forward
demand cover in February,
the highest since
1993 and well above
Opec's comfort range,
around 52 days.
In Chicago on Thursday,
soyabeans ended above
the $10 a bushel level
in heavy trading volumes
amid concerns about
supply tightness after
the US government
cut its estimate for
stocks at the end
of the current crop
year.
The US Department
of Agriculture cut
20m bushels from the
stock projection for
the end of 2008/09
to 165m bushels, reflecting
an increase in exports
due to strong demand
from China.
On the supply side,
the USDA reduced its
forecast for Argentine's
soyabean crop by 4m
tonnes to 39m tonnes,
a larger reduction
than some traders
expected.
CBOT May soyabeans
hit a high of $10.30¾
a bushel but ended
Thursday's session
up just 1½ cents at
$10.07½ a bushel,
rising 1.2% over the
week.
Analysts at MF
Global said: "There
is a real story unfolding
in soyabeans with
exports still streaming
out faster than our
tight carryover (stock
position) can afford,
an ideal situation
for bulls that will
prompt both hedge
funds and end users
to extend long positions
(bets on prices rising)".
Corn and wheat
prices failed to match
the pace set by soyabeans.
CBOT May corn slipped
5½ cents at $3.91½
a bushel, down 3.2%
this week. CBOT May
wheat lost 10 cents
at $5.22 a bushel,
down 7.4% over the
week.
Orange juice prices
jumped almost 10%
this week on concerns
that drought conditions
in Florida could affect
yields.
ICE May orange
juice rose futures
pushed through the
80 cents-a-Pound level,
rising 9.6% to 83.20
cents over the week.
Base metals made
a strong gains on
Thursday, helped by
to short-covering
ahead of the Easter
weekend as trading
in Shanghai will continue
on Friday and Monday.
Copper pushed above
the $4,500 mark, rising
3.9% to $4,570 a tonne,
up 6.2% over the week.
Copper is moving
from the LME's warehouses
into China amid growing
optimism that the
government's stimulus
package will boost
the demand from the
power industry, the
world's largest user
of the metal. Copper
prices in Shanghai
have been trading
at a substantial premium
to LME prices, creating
a favourable arbitrage
opportunity. Chinese
copper imports have
risen strongly in
the first two months
of this year and China's
State Reserves Bureau
is reported to be
active in the market,
rebuilding the country's
strategic stockpiles.
Chinese trade data
released next week
was widely expected
to show primary copper
imports for March
hitting new record
highs, around 300,000
tonnes, up from 270,948
tonnes in February.
It would be simple
to interpret copper
flows into China as
an indication of a
sustained improvement
in demand, a view
recently expressed
by a number of Chilean
producers.
In the past, when
SRB (the Government)
purchasing has been
the key driver of
copper imports, metal
flowed largely into
China via Shanghai.
However, more recently
metal has been landed
a number of differing
locations, and this
trend has been interpreted
indicative of strong
underlying demand.
Aluminium rose
3.2% to $1,540 a tonne,
gaining 4% over the
week.
The London Metal
Exchange will be closed
on Friday and Monday
and the European Climate
Exchange's futures
trading is also closed
on Friday and Monday
Gold eased 0.1%
to $878.40 a troy
ounce on Thursday
, trading in a narrow
range between a low
of $874.10 and a high
of $886.05. Over the
week, gold lost 1.5%
under pressure from
strength in the Dollar
and recent gains for
global stock markets.
Platinum hit the
psychological $1,200
a troy ounce mark
for the first time
since September, rising
4.3% over the week
to $1,204.5
Platinum's strength
encouraged gains for
palladium which increased
7.1% at $233.5 a troy
ounce.
opper extended its push
above $4,000 a tonne,
rising 6.6% over the
week to $4,316 a tonne.
Shanghai copper prices
are trading at a premium
to London Metal Exchange
copper prices, which
has helped draw metal
into China, where traders
anticipate further government
buying to replenish
strategic stockpiles.
Some delegates at
the CRU/Cesco copper
conference, the industry's
largest annual meeting,
in Chile this week,
were concerned that
the market could stage
a correction if the
support provided by
Chinese government buying
ended because there
was little evidence
of an improvement in
underlying demand.
In energy markets,
ICE May Brent oil rose
72 cents to $53.47 a
barrel on Friday, for
a rise over the week
of 2.9%. Nymex May West
Texas Intermediate lost
13 cents to $52.51 a
barrel, virtually flat
over the week.
Agricultural commodities
rallied after the US
said American farmers
would cut the amount
of land devoted to growing
crops this year to 246m
acres, down 2.8% from
the previous year, which
sparked concerns about
supply tightness.
Over the week, CBOT
May soyabeans rose 7.1%
to $9.82 a bushel while
CBOT May corn gained
3.4% at $4.00 a bushel
and CBOT May wheat increased
9% at $5.53 a bushel.
Gold traded around $900
a troy ounce on Friday,
off 0.3% on the day
and 2.3% lower on the
week as gains for equity
markets hit sentiment
towards bullion.
On Thursday, gold
sank to its lowest level
of the week at $893.70
after the G20 agreed
to ask the IMF to bring
forward bullion sales
to finance help for
the poor.
The IMF plans to
sell 403 tonnes of gold
but speculation that
additional sales were
to be considered was
played down by analysts.
The sale of the IMF
gold is likely to be
conducted under the
Central Bank Gold Agreement,
which is due to expire
on 26 September.
Because of the limited
time before the expiry
of the CBGA and the
legislative hurdles
that need to be cleared
(including a US act
of Congress), it is
almost guaranteed that
a third five-year central
bank gold agreement
(CBGA3) would be announced,
probably at the IMF
spring meetings where
more detail on the planned
gold sale would materialise.
|
| Global
Currencies In
for a Penny, in for a Pound ..... |
The
Dollar advanced this
week as rising risk
aversion boosted haven
demand for the US currency.
The
Dollar suffered the
previous week following
the G20 meeting of
global leaders in
London as an agreed
boost in funds available
to the International
Monetary Fund to fight
the financial crisis
lifted equities and
investor risk appetite.
But the rally in
equity markets faded
in recent days as
the onset of the first-quarter
corporate earnings
season unsettled investors.
This fed through to
currency markets,
which continued to
be driven by the ebb
and flow of risk appetite.
Furthermore, the
G20 plans to increase
funds for the IMF
drew criticism in
some quarters.
Jurgen Stark, an
European Central Bank
executive board member,
described the creation
of the IMF's special
drawing rights, announced
after the G20 meeting,
as "helicopter money"
for the globe.
Analysts said the
comments suggested
fears of inflation
still lurked at the
heart of the ECB.
Over the week,
the Dollar rose 2.2%
to $1.3199 against
the Euro, advanced
2% to SFr1.1521 against
the Swiss franc and
climbed 1.3% to $1.4646
against the Pound.
The Dollar also
received a boost as
data showed the US
trade deficit narrowed
to $26bn in February,
its smallest level
in nine years.
The perfect mix
of stronger-than-expected
US exports and weaker-than-expected
imports was very good
news for the currency.
Meanwhile, the
Pound advanced against
the Euro, rising 1%
to £0.9010 over the
week.
The Pound showed
little reaction to
Thursday's decision
by the Bank of England
to leave interest
rates unchanged at
0.5% and its announcement
that it was on track
to complete its programme
to boost liquidity
in the financial system
by purchasing £75bn
of gilts in the next
two months.
Elsewhere, the
Yen was flat at Y100.33
against the Dollar
over the week as the
Japanese currency
also found haven support
from the rise in risk
aversion.
Analysts said figures
showing a slight improvement
in Japan's trade balance
also supported the
Yen, suggesting the
worst of the plunge
in the country's current
account balance might
be behind it.
The Yen rose 2.2%
to Y132.48 against
the Euro on the week
and gained 1.3% to
Y146.96 against the
Pound.
South Korea's Won,
Indonesia's Rupiah
and India's Rupee
strengthened for a
fifth straight week
as signs a global
recession is abating
bolstered investors'
risk appetite, helping
Asia's emerging markets
attract funds.
The won Thursday
touched 1,300 per
Dollar for the first
time in three months
on speculation record-low
borrowing costs and
government stimulus
will revive an economy
on the brink of recession.
Asian equity funds
outside Japan drew
the largest amount
of new money in a
year for the week
ending April 8, according
to EPFR Global, a
research company based
in Cambridge, Massachusetts.
The Won strengthened
0.6% this week to
1,333 per Dollar as
of 3 p.m. in Seoul,
India's Rupee climbed
0.8% to 50.01 and
this week traded stronger
than 50 for the first
time since February.
Indonesia's Rupiah
advanced 1.4% to 11,310.
Financial markets
in India, Indonesia
and the Philippines
were closed Thursday
for the Easter holiday.
The Won rose 14%
against the Dollar
in the past month,
Asia's best performance.
Bank of Korea Governor
Lee Seong Tae said
April 9 the pace of
the nation's economic
slowdown has "moderated
significantly." The
economy will shrink
2.4% this year, the
first contraction
since 1998, before
expanding 3.5% in
2010, the central
bank said Thursday.
Thailand's Baht
rose Thursday on speculation
global funds bought
stocks as Prime Minister
Abhisit Vejjajiva
said he would remain
in office and refrain
from using force against
anti- government demonstrators.
Abhisit has vowed
not to resign and
rejected calls for
new elections after
protesters used taxis
to block Bangkok's
streets. Global funds
bought $123 million
more Thai stocks than
they sold this month
through Thursday,
according to stock
exchange data.
Malaysia's Ringgit
completed its first
weekly loss in five
after the nation's
factory output fell
for a sixth month,
raising concern an
economic slowdown
is deepening. The
currency dropped 1%
to 3.6157 per Dollar.
Taiwan's Dollar
had its first weekly
decline since February
after the central
bank reportedly stepped
in to weaken the currency
and help exporters
weather a global recession.
The currency dropped
1.3% to NT$33.8 versus
the US Dollar this
week, the worst performance
among Asia's 10 most-
used currencies. Overseas
sales, which are equivalent
to about 70% of the
island's gross domestic
product, dropped for
a seventh straight
month in March, the
government reported
April 7.
The Philippine
peso fell 0.3% to
48.03 per Dollar,
ending three weeks
of gains, on speculation
more interest-rate
cuts are needed to
stoke the economy.
The Australian
Dollar surged up to
its highest level
in almost 6-months
against the Euro.
But the aussie eased
from multi-day highs
against its US, Japanese
and Canadian counterparts.
The Australian
Dollar soared to a
6-month high of 1.8221
against the Euro in
early Asian deals
on Friday. The next
upside target level
for the aussie is
seen at 1.80. At Thursday's
close, the Euro-aussie
pair was worth 1.8304.
And as always,
rounding out currencies
here in China. The
RMB was little changed
against the Dollar
this week at 6.8338
per Dollar from 6.8348
on April 3 on speculation
the government will
keep the currency
from appreciating
to aid exporters as
overseas sales slide.
|
| China
Key
news eminating from China this week
..... |
 China's
economic growth has a "good" outlook
that's strengthened confidence,
central bank adviser Fan Gang said.
"We
have stronger confidence,
but confidence doesn't
solve problems,"
Fan said Friday
at a forum in Shanghai,
adding that the
world's third-biggest
economy needs more
reforms.
China's manufacturing
expanded for the
first time in 6
months in March
as car sales rose
10% from a year
earlier to a monthly
record, adding to
evidence that the
nation's 4 trillion
RMB ($585 billion)
stimulus package
is helping stoke
domestic demand.
At the same time,
Chinese exports
fell in March for
a fifth month as
recessions in the
US, Japan and Europe
continued to erode
demand for the Asian
nation's goods.
"The biggest
lesson we have learned
from this financial
crisis is that we
can't spend too
much and savings
can't be too low,"
Fan said.
**************************************
China's exports
fell for a fifth
month in March,
adding urgency to
government efforts
to stimulate domestic
demand to revive
growth in the world's
third- biggest economy.
Overseas sales
declined 17.1% to
$90.29 billion from
a year earlier,
the customs bureau
said on its Web
site. Imports dropped
25.1%, leaving a
trade surplus of
$18.56 billion.
Collapsing world
trade and the nation's
slowest economic
expansion in seven
years have cost
the jobs of millions
of factory workers
and prompted Premier
Wen Jiabao to roll
out a 4 trillion
RMB ($585 billion)
stimulus package.
To spur consumption,
China is subsidizing
rural purchases
of televisions and
refrigerators and
plans a 29% increase
in welfare spending
this year.
The RMB traded
at 6.8333 against
the Dollar as of
4:21 p.m. in Shanghai,
from 6.8336 before
the numbers.
The export decline
was less than February's
record 25.7% drop.
The median forecast
in a survey of 15
economists was for
a 20% decline. February's
trade surplus was
$4.84 billion.
The trade figures
showed "positive
signs," the customs
bureau said, adding
that exports of
labor-intensive
products such as
garments, furniture,
shoes increased
from a year earlier.
The value of imports
stabilized, it said.
Seasonally adjusted
figures showed a
32.8% jump in exports
from the previous
month and a 14%
increase in imports,
the bureau said.
Chinese ports'
cargo traffic rose
for the first time
this year in March
while a decline
in container traffic
slowed, the Ministry
of Transport said
April 8.
The export numbers
may reflect a "modest
improvement in global
demand" and restocking
by retailers in
the US, said Jing
Ulrich, head of
China equities at
JPMorgan Chase &
Co. in Hong Kong.
Shipments to
the European Union
fell 20.2% from
a year earlier,
while those to the
US declined 12.6%.
Haier Group Corp.,
China's biggest
appliance maker,
may benefit from
efforts to counter
the collapse in
trade by stimulating
consumption at home.
The government has
earmarked 20 billion
RMB ($2.9 billion)
of subsidies for
home-appliance purchases
in the countryside,
hoping to generate
150 billion RMB
of sales this year.
In the long term,
an expanded social
safety net may also
boost demand. The
State Council issued
this month an 850
billion RMB health-care
plan, including
building at least
one hospital in
every county and
expanding medical
insurance coverage
to 90% of the 1.3
billion population
by 2011.
Some economists
expect China's exports
to revive later
this year as the
global economy stabilizes
and trade finance
improves. The Group
of 20 nations pledged
this month to make
at least $250 billion
available in the
next two years to
support the finance
of trade through
export credit agencies
and development
banks such as the
World Bank.
Still, research
by the National
Development and
Reform Commission,
China's top economic
planning agency,
suggests shipments
may decline 10%
this year, compared
with a 17% gain
in 2008.
China's full-year
exports haven't
fallen since at
least 1990, government
data shows.
The Paris-based
Organization for
Economic Cooperation
and Development
predicts that global
trade will shrink
13% in 2009 as loss-ridden
banks cut back on
credit to exporters
and importers
To aid businesses
hit by the slump
in demand, China
has cut export taxes,
halted gains by
the RMB against
the Dollar, and
announced revival
plans for 10 industries,
including autos,
steel, shipping
and textiles.
**************************************
Shanghai Pudong
Development Bank
Co., part-owned
by Citigroup Inc.,
plans to raise as
much as 30 billion
RMB ($4.4 billion)
selling shares and
bonds to ensure
it has enough capital
to meet regulatory
requirements.
The lender will
raise as much as
15 billion RMB from
a private placement,
equivalent to as
much as 20% of its
existing shares,
to 10 investors
including the bank's
major shareholders,
according to a filing
Friday to Shanghai's
stock exchange.
The statement didn't
say whether Citigroup
will buy shares.
The bank will also
raise as much as
15 billion RMB issuing
subordinated debt.
Pudong, which
said Thursday its
2008 profit more
than doubled, aims
to maintain credit
growth at 28% this
year as the government
spurs lending to
support its 4 trillion
RMB economic stimulus
package. Financial
regulators are urging
banks to strengthen
capital and guard
against possible
loan defaults as
China's economic
expansion slows
amid the global
recession.
The Shanghai-based
bank may sell about
800 million shares
at about 18.7 RMB
apiece, raising
its capital-adequacy
ratio by about 1.5
percentage points.
Pudong Bank rose
0.9% to 22.22 RMB
at 2:42 p.m. in
Shanghai trading.
The stock has gained
68% this year.
The company,
whose market value
now exceeds Citigroup's
$16.6 billion, had
a capital-adequacy
ratio of 9.06% as
of Dec. 31, according
to its 2008 annual
report. The minimum
required by China's
banking regulator
is 10%. A capital
shortage would cut
into earnings by
limiting loan growth
and curbing interest
income.
Chairman Ji Xiaohui
said in November
the company's fund-
raising is part
of a strategy to
double assets to
2.5 trillion RMB
in four years.
Pudong will have
to compete to attract
investors as other
lenders seek to
raise funds. Bank
of China Ltd. said
in March it may
sell as much as
120 billion RMB
of subordinated
bonds over the next
four years.
The lender said
Thursday its 2008
net income rose
to 12.5 billion
RMB from 5.5 billion
RMB a year earlier,
after its effective
tax rate dropped
to 18.2% from 48.9%,
confirming preliminary
figures released
in January.
Concerns about
slowing profit growth
and the collapse
of China's equity
market triggered
a 67% drop in Pudong
Bank's shares last
year, forcing it
to delay selling
stock.
The company was
established in 1992
by the government
of eastern Shanghai's
Pudong county to
fund construction
of the city's Lujiazui
financial area,
conceived as China's
version of Wall
Street. New York-based
Citigroup owns 3.78%
of the Chinese bank,
which has 439 outlets
nationwide.
**************************************
China's demand
for stainless steel
may rise as much
as 8% this year
as government stimulus
spending spurs consumption
in the world's largest
metals consumer,
said an economist
with TaiRMB Iron
& Steel Group.
Demand may rise
to 6.76 million
metric tons this
year, with government
spending accounting
for 500,000 tons
of additional consumption,
said Hao Peigang
from TaiRMB Steel,
China's biggest
stainless-steel
producer.
China's government
has pledged 4 trillion
RMB ($585 billion)
in spending on housing,
railways and other
infrastructure to
support sagging
growth, raising
metal demand. Utilization
rates at major stainless-steel
producers jumped
to 90% in the first
quarter from about
50 to 60% in the
December quarter,
Macquarie Bank Ltd.
said Feb. 16.
Shanxi Taigang
Stainless Steel
Co., TaiRMB Steel's
listed unit which
accounts for all
of the parent's
stainless capacity,
said March 11 demand
is recovering and
prices may be "bottoming."
Baoshan Iron
& Steel Co., China's
second-biggest stainless
steel producer,
is also increasing
output, Vice President
Chen Ying said Feb.
16. Baoshan still
has one blast furnace
suspended in the
stainless-steel
unit, general manager
Fu Zhongzhe said
March 30.
|
| Summary
The
coming week looks like ..... |
In
the good old US of A,
first-quarter corporate
earnings season kicks
into full swing next
week and market sentiment
will be the dominate
driver for trading.
Bank
earnings next week,
which include Goldman
Sachs, on Tuesday,
JP Morgan on Thursday
and Citigroup on Friday,
will be the most closely
watched. Markets are
relatively optimistic
ahead of the bank
earnings following
positive guidance
from Wells Fargo on
April 9.
In all honesty,
I expect all of the
banks to report 'better
than expected' figures,
'record first quarter
profit' and everything
in their respective
gardens to be rosy;
and given the billions
and billions in hand-outs
that they have received,
why shouldn't they
feel optimistic? (tongue
in cheek).
Markets will receive
US CPI and retail
sales next week, which
could be potential
market movers also.
Looking at bond markets,
there is definitely
more room for bond
yields to fall further.
Looking at technical
factors, with the
Fed continuing to
purchase long-term
bonds it appears that
10-year yields will
be capped a 3% - that
it is a strong buy
point for traders.
Back to the 'real-world'
now and the week ahead
is on the light side
for the UK and the
Euro zone, with many
market participants
admitting to looking
towards the economic
releases across the
Atlantic to dictate
market strategy.
According to the
economics department
at UBS (that well-known
bank that loses money
but can still grade
other banks and economies!),
the release of final
euro zone consumer
price index (CPI)
data should draw some
attention, with economists
expecting no revisions
to headline CPI. It
is projected to have
risen 0.4% month-over-month
and an annualized
0.6%.
Although the data
for headline inflation
are final readings,
this will be the markets
first look at core
CPI for March, says
the UBS report. Annual
core CPI is expected
to fall to a 1.4%
level in March from
1.7% the month prior.
UBS economists
also suggest looking
at the release of
euro zone industrial
production for possible
signs of stabilization.
The consensus is for
a 2.4% month-over-month
decline following
the 3.5% fall from
January.
Both releases are
slated for Thursday.
And here at home;
Asia-Pacific markets
are expected to react
to outside factors
such as stimulus plans
and US corporate earnings
next week amid a light
economic data schedule.
The major release
out of the region
will be Chinese first
quarter GDP on Thursday.
First quarter GDP
is expected to climb
5.9%, following a
6.8% increase in the
previous quarter.
Economists are
optimistic that economic
growth will surprise
to the upside. Persistent
improvements in manufacturing
PMIs are pointing
to an even better
6.5% increase, they
said.
However any rise
in economic growth
will be low compared
to previous years.
Chinese GDP has been
on a downward trend
since the third quarter
of 2007 when economic
growth hit a peak
of 11.5%. DBS economists
said China needs to
create a sustainable
program for domestically-driven
growth to remain competitive.
China's GDP results,
along with US retail
sales, housing starts
and the Feds Beige
Book will be some
of the major movers
of currency markets
this week.
Its also earnings
season in the US as
I mentioned at the
start, any worse-than-expected
numbers could weigh
on equity markets,
and, in turn, the
Australian Dollar/US
Dollar. The Aussie
Dollar has traded
above 70 US cents
all week, but I expect
the currency to fall
below this level next
week.
The prospect of
dismal news dominating
forecasts could provide
some support to Australian
interest rate markets.
In Australia I expect
bonds to rally through
most of next week.
The weaker than
expected Australian
employment report,
released April 9,
provides more risks
to the domestic economy
and could cap the
rise in market rates.
Australia's unemployment
rate climbed half
a percent to 5.7%
this week, against
forecasts for a 5.4%
result. The sole major
release next week
is the National Australia
Bank measure of business
confidence for March.
In Japan, the only
major releases will
be final industrial
production figures
for February, and
the corporate goods
prices index for March,
which is expected
to continue its deflationary
trend.
All told Ladies
and Gentlemen, I expect
the next 2 weeks -
the two weeks of Earning
Season - to continue
to see volatility
that verges on the
ridiculous - especially
given that it will
predominantly to the
upside.
However, as mentioned
in the last couple
of Newsletters, I
see the correction
coming shortly after
(if not in the middle
of) this short reporting
period and from thereon
in, I see the gains
of the past 5 weeks
being eroded.
It may take a lot
to convince those
'Bulls' out there
that this Bear Market
Rally does not have
legs; but in all honesty,
the fundamentals still
point to problems
and all of the rhetoric
and spin in the world
is not going to sustain
any Bear Market Rally
much longer.
|
As
always, I will keep you posted with
major developments as/when they
occur in the week ahead.
In
the meantime, I wish you all a very
pleasant weekend.
Market
Newsletter Written By
Adrian
Page
Managing
Director
Financial
Page International |
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