Regions

[Muthukali]

SET: Global market volatility still likely

The global economy is still highly volatile despite the positive sentiment following Greece's elections, said Veerathai Santiprabhob, chief strategy officer of the Stock Exchange of Thailand.

He noted many other countries posted weak economic data.

Global markets reacted positively to Greece's election results on Sunday, as the New Democracy Party, which supports the EU stimulus package, is likely to succeed in forming a government, meaning Greece can keep it membership in the euro zone.

But US tax incentives will expire this year, and a new round of quantitative easing is unlikely before the presidential election slated for November.

"It is quite difficult to see an extreme stimulus package happening before the election," he said.

China is also selecting a new leader and its economic team remains unclear, while growth in Brazil and India is slowing.

"When emerging economies slow down, commodity consumption will be lower with prices dropping sharply," said Dr Veerathai.

"Foreign funds haven't flowed out of the Thai capital market yet, with investment in the stock market down by US$470 million in May, but the Thai bond market saw an uptick of $1.38 billion that month."

Foreigners are still net buyers in the Thai share market the first five months, gaining $2.62 billion, despite Taiwan and South Korean markets seeing outflows of $3.86 billion and $3.48 billion, respectively.

Investment in the Thai bond market the first five months reached $458.97 billion, compared to $696.17 billion all of last year.

Healthy earnings for listed Thai firms are expected to support the market index for at least two years, as Thailand has 21 large-cap stocks on the trading lists of foreign investors, compared to 22 for the Singapore Stock Exchange. Stocks on global trading lists must have market capitalisation of more than US$1 billion and trading volume of more than US$10 million per day.

 

[Muthukali]

Asia Stocks, Oil Fall as Spanish Yields Soar; Aussie Halts Gains

Asian stocks and oil fell as borrowing costs in Spain climbed to a euro-era record, fueling concern the debt crisis is deepening. The Australian dollar halted a three-day advance.

The MSCI Asia Pacific Index fell 0.2 percent at 9:20 a.m. in Tokyo as the Nikkei 225 Stock Average slid 0.3 percent. Oil in New York fell 0.1 percent to $83.17 a barrel. The so-called Aussie dropped 0.1 percent to $1.0111, before the Reserve Bank releases minutes of its June meeting at which it cut interest rates for a second straight month. Standard & Poor’s 500 Index futures were little changed.

Spain, which has asked euro-region governments for as much as 100 billion euros to help shore up its banks, reported yesterday that bad loans jumped in April to 8.72 percent of total lending, the highest since 1994. The 10-year Spanish yield surged above 7 percent. Group of 20 nations are discussing a mix of measures, including deficit reduction for some countries and pledges for additional stimulus by others with sounder finances, a Canadian official said as leaders prepare for a two-day summit in Mexico.

“We are positioned quite negatively,” said Tim Riordan, of Parker Asset Management Ltd., a hedge fund in Sydney that has about $200 million under management. “We see Europe escalating rather than solving its problems. The focus is rolling on to Spain, and with bond yields going over 7 percent, this has been a red flag in the past. You’re in a bit of a downward spiral and this leads us to be fairly cautious.”

The MSCI Asia-Pacific (MXAP) Index, which lost 10 percent through yesterday from this year’s highest level in February, is trading at 1.2 times book value, compared with 2.1 times for the S&P 500 and 1.3 times for the Stoxx 600, according to data compiled by Bloomberg. A number below one means companies can be bought for less than value of their assets.

The euro was little changed at $1.2590. Demand for the 17- nation euro was limited as Spain prepared to sell bills today. The Japanese yen climbed 0.2 percent.

Federal Reserve policy makers will bring new forecasts to their June 19-20 meeting today and probably will mark down their April central-tendency estimate for growth of 2.4 percent to 2.9 percent this year.

 

[Muthukali]

Fed Expands Operation Twist by $267 Billion Through 2012

The Federal Reserve will expand its Operation Twist program to extend the maturities of assets on its balance sheet and said it stands ready to take further action to put unemployed Americans back to work.

The central bank will prolong the program through the end of the year, selling $267 billion of shorter-term securities and buying the same amount of longer-term debt in a bid to reduce borrowing costs and spur the economy.

“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference in Washington following a two-day meeting of the Federal Open Market Committee. “Additional asset purchases would be among the things that we would certainly consider.”

Policy makers moved to shore up the world’s largest economy as faltering growth leaves it vulnerable to fallout from the European debt crisis and looming fiscal tightening in the U.S. Fed officials today lowered their outlook for growth and employment, foreseeing a jobless rate of at least 7.5 percent at the end of 2013.

The yield on the 10-year Treasury note rose to 1.65 percent at 4:35 p.m. in New York from 1.62 percent late yesterday. The Standard & Poor’s 500 Index fell 0.2 percent to 1,355.69 after declining as much as 0.9 percent.

Easing Bias
“Clearly, the bias is still towards even more easing,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “Our base case would still be that we’ll probably see some more easing before year end,” said Coronado, a former Fed economist.

The continuation of Operation Twist “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the FOMC said.

Policy makers repeated their view that economic conditions will probably warrant keeping interest rates “exceptionally low” at least through late 2014. The FOMC has kept the main interest rate in a range of zero to 0.25 percent since December 2008.

“Growth in employment has slowed in recent months, and the unemployment rate remains elevated,” the FOMC said. “The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.”

Fed officials lowered their forecasts for growth and raised their predictions for unemployment in each of the next three years.

Growth Outlook
Policy makers now see 1.9 percent to 2.4 percent growth in 2012, down from their April forecast of 2.4 percent to 2.9 percent. The unemployment rate will end the year at 8 percent to 8.2 percent, up from 7.8 percent to 8 percent in April.

Unemployment will end 2014 at 7 percent to 7.7 percent, up from a 6.7 percent to 7.4 percent in April, according to their so-called central tendency estimates, which exclude the three highest and three lowest forecasts.

The Fed said today it will sell Treasury securities with remaining maturities of about three years or less. It will purchase securities with six years to 30 years remaining.

The existing maturity-extension program was announced Sept. 21 and expires this month. Under that program, the Fed is selling $400 billion of short-term government debt and replacing it with the same amount of longer-term Treasuries.

Borrowing costs have fallen since the Fed announced Operation Twist. The yield on the 10-year Treasury note fell to a record low 1.4387 on June 1.

Little Concern
Today’s Fed statement and policy makers’ projections show that there is little concern over inflation.

Inflation “has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable,” the Fed said. Oil prices have slumped 23 percent to $84.03 a barrel yesterday since reaching a high of $109.77 a barrel in February.

Central banks across the world are considering steps to stimulate their economies.

Bank of England Governor Mervyn King and three other policy makers were overruled this month as they pushed to expand their bank’s bond-purchase program, meeting minutes showed today. European Central Bank President Mario Draghi left the door open for a rate cut at a June 6 press conference.

Bank of Japan
The Bank of Japan should be ready to “take appropriate actions without ruling out any options in advance” if the European crisis worsens, some of its board members said in May, according to minutes released today. The People’s Bank of China cut borrowing costs for the first time since 2008 earlier this month and loosened controls on banks’ lending and deposit rates.

Europe’s debt crisis has intensified since the FOMC’s meeting in April, roiling financial markets. The Standard & Poor’s 500 Index was down by 4.3 percent as of yesterday from its 2012 peak on April 2.

“The Federal Reserve is very much involved with talking with European leaders,” Bernanke said today. “We are prepared to work together if that can be done constructively, but at this point we’re mostly in consultation mode.”

The Fed’s two rounds of asset purchases totaling $2.3 trillion and record-low interest rates since December 2008 have left the central bank short of its full-employment goal.

The economy added 69,000 jobs in May, the fewest in a year, and the unemployment rate unexpectedly climbed to 8.2 percent from 8.1 percent, its first increase in almost a year.

Companies are cutting back as the economy shows signs of slowing. FedEx Corp., operator of the world’s largest cargo airline, is restructuring its express business and retiring 24 jet freighters.

Slowing Growth
“We believe U.S. domestic and global economic conditions will be impacted by the European debt crisis, slowing growth in Asia and the uncertainty these issues create on the global economy and the demand for our services,” FedEx Chief Financial Officer Alan Graf said yesterday on an earnings call.

Also taking a toll on the economy: concern that Congress will fail to reach a compromise in time to avoid $600 billion in tax increases and budget cuts next year.

Among government contractors coping with delayed procurements and agency cost-cutting is Preferred Systems Solutions, a Vienna, Virginia-based engineering and information technology provider.

“I’m feeling more of a pinch and squeeze than I ever have before,” said Scott Goss, president and chief executive officer. “As soon as they start these massive cuts, they’re going to impact the economy.”

Economic data in recent weeks have pointed to slowing growth.

Sales Fell
Retail sales fell 0.2 percent for a second month in May, according to a June 13 report from the Commerce Department, as elevated unemployment and the smallest wage gains in a year prompted consumers to curtail their spending.

Industrial production unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods, data from the Fed showed last week.

Fifty-eight percent of economists in a June 18 Bloomberg News survey said the FOMC would prolong Operation Twist, with an additional 8 percent predicting the Fed would announce the move at its meeting on July 31-Aug. 1.

Richmond Fed President Jeffrey Lacker dissented for the fourth meeting in a row, saying he doesn’t support extending Operation Twist. He said last month he believes the central bank will probably need to raise the main interest rate next year.

It was the first meeting for Governors Jeremy Stein and Jerome Powell, who joined the Fed last month, raising the Washington-based board to its full, seven-member strength for the first time since 2006.

 

[Muthukali]

Buying Europe Banks Is Easy for Herro as Cheap Stocks Fall

European banks, Japanese carmakers, Hong Kong developers and Russian oil producers have gotten so cheap that stock investors from Harris Associates LP’s David Herro to Aberdeen Asset Management’s Kathy Xu are buying.

“I’ve been significantly adding,” said Herro, whose $7.9 billion Oakmark International Fund beat 81 percent of peers in the past three years. “Even though it feels gloomy, this type of environment makes my job quite easy.”

The retreat that erased $3.6 trillion from global stocks this quarter has left more than 580 companies in MSCI Inc. indexes, including BNP Paribas SA (BNP) and OAO Gazprom (GAZP), valued at less than their net assets, data compiled by Bloomberg show. The cheapest shares trade for an average 0.7 times book value. That compares with 9.6 for the most expensive equities, led by health-care and consumer products companies such as Kimberly- Clark Corp. whose earnings aren’t tied to the economy.

Stocks with the lowest price-to-book ratios have returned an average 6.2 percent per quarter during the past decade, beating the 4.3 percent gain for shares with the highest valuations, according to data compiled by Bloomberg.

Xu, whose Aberdeen China Opportunities Fund (GOPAX) topped 94 percent of peers the past three years, has been adding Hong Kong developers after China’s economic slowdown and corruption probes sent valuations to a five-year low versus global peers. HSBC Global Asset Management, with about $400 billion of client assets, says Russian energy companies are attractive after they fell to a 45 percent discount to their net assets, the cheapest level since 2009.

Value Stocks
The declines show that most investors are still more concerned with preserving their capital than earning higher returns, five years after the collapse of securities tied to subprime mortgages helped trigger the global financial crisis.

Shares with the lowest price-to-book ratios retreated an average 10 percent since March, led by companies linked to Europe’s debt crisis and the economic slowdown. They trailed the most expensive shares by 7.2 percentage points, the widest gap since Bloomberg began tracking quarterly data in 2002.

“We can find many value stocks at current levels,” saidXu, a Hong Kong-based money manager at Aberdeen, which oversees $295 billion and held about 18.9 million shares of Sun Hung Kai Properties Ltd. (16), Hong Kong’s biggest developer by market value, at the end of May. “We’ve topped up some of our weightings.”

‘Brave Enough’
Global investors surveyed by Charlotte, North Carolina- based Bank of America Corp. from May 31 to June 7 cut their equity holdings in Russia and Japan and had their biggest underweight positions in banks, meaning they own less of the shares than are represented in benchmark indexes.

The respondents, who manage a combined $689 billion, favored health-care companies and household-products makers. Kimberly-Clark (KMB), the Dallas-based maker of Kleenex tissues and Huggies diapers, has jumped 10 percent this quarter and hit an all-time high in New York trading on June 19. The shares are valued at 6 times net assets, the highest on a quarterly basis since December 2001, according to data compiled by Bloomberg.

“We’ve kicked around this question quite a bit of whether we’re brave enough to buy into some of the deeply undervalued but risky stocks,” said David Semple, who oversees about $35 billion as director of international equity at Van Eck Global in New York. “I don’t think we’re there yet.”

Bullish Analysts
Europe’s economy stalled in the first quarter while Japan’s May exports to the region fell 0.9 percent, hurt by the yen’s 4.5 percent rally against the dollar since March 15. Economic growth in China slowed to the weakest pace since 2009 in the first quarter. Oil, Russia’s biggest source of export revenue, has tumbled 21 percent this quarter.

“Until we have more visibility from a geopolitical perspective, it’s difficult to be particularly bullish on the Russian market,” said Gareth Morgan, a London-based money manager at F&C Investments, which oversees about $157 billion.

The cheapest stocks now are favored most by analysts, who predict average gains of 24 percent for the group and 27 percent earnings growth during the next 12 months, according to about 12,000 estimates compiled by Bloomberg. That compares with an average return prediction of 14 percent and projected profit growth of 20 percent for the most expensive companies, the data show.

Moody’s Downgrades
BNP Paribas may rally 36 percent after the Paris-based bank plunged to 0.45 times its reported net assets at the end of May, the lowest level on a monthly basis since Bloomberg began tracking the data in 1995, according to the average share-price projection of 26 analysts. France’s largest bank posted first quarter net income of 2.87 billion euros ($3.64 billion), topping estimates, and said it will boost capital by retaining earnings.

Moody’s Investors Service cut BNP’s long-term credit rating to A2 from Aa3 yesterday, one of 15 bank downgrades made by the ratings company. Credit Suisse Group AG (CSGN), UBS AG, Royal Bank of Scotland Group Plc, Societe Generale SA, Deutsche Bank AG (DBK) and Credit Agricole SA were among European lenders downgraded, according to a Moody’s statement.

Toyota Motor Corp. (7203), Japan’s biggest automaker, predicted in February that sales will climb 21 percent to a record 9.58 million vehicles in 2012. Akio Toyoda, president of the Toyota City, Japan-based company, said on June 4 he’s still optimistic as consumers replace older vehicles. The shares trade for 0.9 times reported book value, a 34 percent discount versus the 10- year average, data compiled by Bloomberg show.

BNP Paribas shares lost 15 percent since March, while Toyota retreated 14 percent.

Property Slump
“What we’ve seen now since the end of the first quarter is extreme stress on equity markets,” said Herro, whose Chicago- based firm reported a $519 million stake in BNP Paribas at the end of the first quarter and a position of about $1.1 billion in Toyota. “People like us, who really focus on good quality companies at low prices, are getting very enthused.”

Sun Hung Kai has tumbled 19 percent since March 29 after the firm’s billionaire co-chairmen were arrested by Hong Kong’s anti-corruption commission. Standard & Poor’s said in a June 15 statement that daily operations at the developer remain “intact” after the probe.

The company will boost its per-share book value by 5 percent this year, according to the average of 18 analyst estimates compiled by Bloomberg. The shares tumbled to 0.7 times book value in May, the lowest on a monthly basis since September 1998, according to data compiled by Bloomberg.

The Hang Seng Property Index (HSP), comprised of seven developers in the world’s most expensive place to own a home, sank to the lowest valuation in five years versus the MSCI World Real Estate Index (MXWO0RE), the data show.

Buying Opportunity
Gazprom, Russia (INDEXCF)’s natural-gas export monopoly, has retreated 13 percent this quarter and its price-to-book ratio fell to a record low last month. The Moscow-based company was valued at 0.5 times net assets yesterday, compared with an average multiple of 1.2 since 2006, according to data compiled by Bloomberg.

Moscow-based OAO Lukoil, Russia’s second-biggest oil producer, trades for 3.9 times earnings, a 42 percent discount to its historical average. The MSCI All-Country World Energy index has a multiple of 9.1, the data show.

“The long term prospects of the Russian oil industry look promising,” said Ed Conroy, a London-based money manager at HSBC Global Asset Management, which oversees about $10 billion in stocks of the four largest emerging markets and is placing its biggest bet on Russia. “Current valuations definitely constitute a buying opportunity.”

 

[Muthukali]

Euro Crisis Hits Profits Globally as P&G Cuts Forecast

Europe’s debt crisis is putting pressure on corporate earnings globally with companies from Procter & Gamble Co. (PG) to Danone (BN) cutting forecasts and signaling profits will fall at more companies this year.

Analysts predict members of the Standard & Poor’s 500 Index in the U.S. will report a 1.1 percent average drop in second- quarter earnings, after estimating a gain as recently as last month, according to data compiled by Bloomberg. That would be the first decline in 11 quarters after a 6.2 percent average increase in the first quarter. A stronger dollar is another threat to earnings as U.S. exports become more expensive.

In Asia, the chairman at computer manufacturer Compal Electronics Inc. (2324) said last week that concern about a global slowdown is making him less optimistic about the second half of the year. Paris-based Danone lowered its 2012 profitability forecast as Spanish shoppers switch to cheaper brands of yogurt.

“There is a lot of trepidation about second-quarter earnings,” Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York, said in a June 22 interview. He oversees about $2 billion including shares of Apple Inc. and DuPont Co. “You are very unlikely to see companies coming out with favorable outlooks given the problems in Europe and the slowing growth in the U.S. and China.”

Fewer Cigarettes
The recession that has hit at least 8 of 17 countries in the euro region is hurting demand for all types of products. FedEx Corp., (FDX) an economic bellwether because it transports phones to pharmaceuticals, last week predicted full-year earnings that trailed some analysts’ estimates. Philip Morris International Inc. (PM), the world’s largest publicly traded tobacco company, anticipates second-quarter shipments in the European Union will tumble as much as 9 percent, hurt in part by Spain’s almost 25 percent jobless rate.

“It’s the economy, the unemployment,” Andre Calantzopoulos, Philip Morris’s chief operating officer, told analysts on a June 21 conference call. “It’s the austerity measures.”

Those measures, which include eliminating 150,000 civil service jobs in Greece and cutting 11.5 billion euros ($14.5 billion) from the country’s budget, have curbed spending by consumers and businesses. In Germany, Europe’s largest economy, business confidence fell to the lowest in more than two years in June, a sign the crisis may be spreading as leaders grapple with bailing out Greece, Spain and Italy.

P&G’s Forecast
P&G, the world’s largest consumer-goods company, cut its earnings and revenue forecasts last week for the second time in fewer than two months. For the fiscal fourth quarter ending this month, earnings per share excluding some items will be as much as 79 cents, down from a previous forecast for a maximum of 85 cents, Cincinnati-based P&G said. A year earlier, P&G reported adjusted earnings of 84 cents a share.

“There’s been slow to no GDP growth in developed markets and significant levels of unemployment in the United States and in Europe,” Chief Executive Officer Robert McDonald said at a June 20 investor conference in Paris. The company, whose brands include Tide detergent and Gillette razors, also attributed the reduced forecast to currency losses as overseas earnings carry less value when converted into dollars.

The dollar has gained 6.5 percent against seven major currencies since April 30, according to the Federal Reserve’s U.S. Trade-Weighted Major Currency Dollar Index. Also, for the first time in 13 years, the real, ruble and rupee are weakening the most among developing-nation currencies, while the the yuan has depreciated more than in any other period since its 1994 devaluation.

Stronger Dollar
New York-based Philip Morris cut its full-year earnings forecast to $5.10 to $5.20 a share, from an April prediction of $5.20 to $5.30, citing the dollar’s strength. The maker of Marlboro cigarettes generates all of its sales outside of the U.S.

Philip Morris “is just a canary in the coal mine for many others who are going to use currencies as an excuse or legitimate reason” for declining profit, said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion.

Adding to executives’ concerns, U.S. hiring shows no signs of a rebound this year, Federal Reserve officials said last week in reducing their projections for 2012 growth. The Fed pared its estimate for U.S. 2012 gross domestic product growth to 1.9 percent to 2.4 percent, down from a 2.4 percent to 2.9 percent prediction in April.

FedEx’s projections for GDP growth of 2.2 percent in the U.S. and 2.4 percent globally this calendar year assume “the successful management of the debt crisis in Europe and the avoidance of significant tax increases next year in the U.S.,” Michael Glenn, CEO of the FedEx Corporate Services unit, said on a June 19 conference call.

Airlines Hit
Memphis, Tennessee-based FedEx, operator of the world’s largest cargo airline, predicted profit will rise to $6.90 to $7.40 a share for the fiscal year through May 2013, compared with an average analyst estimate of $7.38.

Passenger airlines are also suffering. While Europe’s three biggest carriers have avoided giving specific forecasts for 2012, the International Air Transport Association almost doubled its loss prediction for European airlines to $1.1 billion. Cathay Pacific Airways Ltd. (293), Asia’s largest international carrier, cut flights to North America and Europe this year, imposed a hiring freeze on ground staff and offered cabin crew unpaid leave after predicting “disappointing” first-half earnings.

“Everybody is worrying about the slowing world economy,” John Slosar, CEO of Cathay Pacific, said June 11 at the IATA annual meeting in Beijing.

Less Optimism
Europe’s debt crisis has led Taipei-based Compal Electronics to become more conservative, according to Chairman Rock Hsu. Compal is the world’s second-largest contract maker of laptop computers, with clients including Dell Inc., Hewlett- Packard Co. and Asustek Computer Inc.

“Compared to three months ago we’re not as optimistic toward the second half because market conditions are not as strong,” Hsu said in a June 22 interview. “We didn’t originally expect any growth from Europe, yet we’re now worried that conditions there will flow through to impact Asia.”

U.S. companies lowering forecasts last week included truck- rental company Ryder System Inc. (R) and home-goods retailer Bed Bath & Beyond Inc. (BBBY), leading to stock declines.

The S&P 500 Index (SPX) has tumbled 5.9 percent since hitting a four-year high April 2, and the MSCI World Index (MXWO) has slumped 9 percent during that same period.

Europe’s crisis may worsen unless leaders agree on a unified plan for the region, according to Dan Akerson, CEO of General Motors Co. (GM), the world’s largest automaker. The situation in Europe is “at best stable,” Akerson said in a telephone interview while in St. Petersburg, Russia, on June 21.

“My expectation is that if Europe experiences a recession, I think the U.S. can kind of manage its way through it,” Akerson said. “If there were divides in the union, if the euro were to go away, then I think it’s anybody’s guess what the implications would be for the U.S., for the rest of the world, quite frankly.”

 

[Muthukali]

Stocks Drop as Dollar, Treasuries Rise Before EU Summit

Stocks slid, while the dollar and Treasuries rose, amid concern a meeting of European leaders this week will fail to halt a debt crisis that threatens to drag U.S. corporate earnings to the first decline since 2009. Oil slumped while agricultural commodities rallied.

The MSCI All-Country World Index (MXWD) fell for a third day, losing 1.4 percent at 4 p.m. in New York, and the Standard & Poor’s 500 Index retreated 1.6 percent. The dollar strengthened against 15 of 16 major peers, with the euro dipping below $1.25. Ten-year Treasury note yields fell seven basis points to 1.61 percent. The Spanish 10-year yield increased 26 basis points. Oil tumbled below $80 a barrel for a third day while corn and soybeans surged on concern dry weather will hurt crops.

Failure by leaders at the summit to come up with measures to shore up the weakest countries may be “fatal” for the euro, billionaire investor George Soros said yesterday, while German Chancellor Angela Merkel rejected joint euro-area bonds or bills in a speech today. Greek Prime Minister Antonis Samaras, who is recovering from surgery and won’t attend the summit, accepted the resignation of Finance Minister Vassilios Rapanos today.

“Expectations in Europe are really low and usually by this stage, when we’re going into one of these summits, there’s normally a bit more hope around,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “They like to take things to the brink in order to engineer the outcomes they want,” he said. “It’s a pretty risky game to pursue, but it’s not the first time it’s happened.”

Market Leaders
The S&P 500 has retreated 7.4 percent from a four-year high in April as Europe’s debt crisis spread and economic data pointed to a slowing recovery. Stocks resumed losses today after briefly trimming declines when Commerce Department data showed demand for new U.S. homes rose more than forecast in May, with purchases climbing 7.6 percent to a 369,000 annual rate.

Indexes of technology, financial and energy shares lost at least 1.9 percent to lead declines in all 10 main industry groups in the S&P 500 today. Bank of America Corp., Intel Corp. and Hewlett-Packard Co. lost more than 3.3 percent for the biggest declines in the Dow Jones Industrial Average, which sank 138.12 points to 12,502.66.

Alcoa, the largest U.S. aluminum producer, is scheduled to report second-quarter results on July 9 to start the earnings season for Dow companies. Profits at S&P 500 companies fell 1.1 percent in the April-June period, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.

Earnings Pessimism
Earnings pessimism is reaching levels last seen during the global financial crisis of 2008 and 2009, based on company guidance. Fifty-nine corporations issued profit projections that trailed analyst estimates during the 20 days through June 22, or 3.1 times the number of those that exceeded them. The ratio has been greater than 3 for eight straight days, the longest stretch in three years. It was at least that high the majority of the time between October 2008 and April 2009, climbing to 11.5 in December 2008, the data show.

The Stoxx Europe 600 Index (SXXP) dropped 1.5 percent. Unicredit SpA and BNP Paribas SA led a selloff in banks, both falling at least 5.5 percent. Nokia Oyj lost 11 percent amid speculation Samsung Electronics Co.’s earnings may miss some analyst estimates. Shire Plc slumped 11 percent after regulators approved a generic version of its second-biggest selling drug.

Spain’s IBEX-35 Index sank 3.7 percent and Italy’s FTSE-MIB Index tumbled 4 percent, the most in two months, while Greece’s ASE Index sank 6.8 percent to lead losses among 24 developed markets tracked by Bloomberg.

Dollar Climbs
The euro slipped 0.5 percent to $1.2504 after dipping as low as $1.2471. The shared currency lost 1.5 percent against the yen and weakened against 10 of 16 major peers. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, jumped 0.2 percent.

Policy makers should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts, Soros said in London. Funding would come from European Treasuries backed by each euro member, he said. Germany’s Merkel, speaking to a conference in Berlin as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive.”

Spanish Bank
European banks slumped 3 percent as a group to lead declines in all 19 industries tracked by the Stoxx 600. Spanish banks may have their credit ratings cut by Moody’s Investors Service for a second time in less than six weeks after the nation’s sovereign rating was lowered, said three people with knowledge of the situation.

Cyprus said today it will seek a financial lifeline from the euro area’s firewall funds, becoming the fifth of the euro’s 17 member states to seek a bailout.

A visit by the international creditors to determine how far Greece has slipped behind on budget targets that underpin access to the international funds was suspended. Greek President Karolos Papoulias will represent the country at this week’s summit as Samaras convalesces after surgery for a detached retina. Finance-Minister designate Rapanos resigned after being hospitalized on June 22 for nausea and dizziness.

‘Similar Symptoms’
“I think I speak for all of us when I say, ‘We feel your pain,’” Ed Yardeni, president and chief investment strategist at Yardeni Research Inc. in New York, wrote in a note to clients. “We are all starting to show similar symptoms as we suffer through the never-ending insanity of the European financial crisis and the latest round of emergency summits.”

The Italian two-year yield climbed 54 basis points to 4.33 percent, with the similar-maturity Spanish yield advancing 42 basis points. The Belgian five-year note yield dropped four basis points to 2.00 percent as the government sold 2.8 billion euros ($3.5 billion) of 2017, 2022 and 2032 bonds. Germany sold 2.045 billion euros of 12-month bills, while France auctions as much as 8.4 billion euros of short-dated securities.

The 30-year U.S. Treasury bond yield declined eight basis points to 2.68 percent.

The S&P GSCI Index of commodities added 0.7 percent as 18 of 24 raw materials tracked by the gauge advanced. Corn and soybeans rallied more than 3.5 percent. Much of Iowa and Illinois, the biggest U.S. corn and soybean-growing states, will be mostly dry until at least June 29, according to the National Weather Service.

Oil Retreats
Oil dropped 0.7 percent to $79.21 a barrel in New York, erasing earlier gains of as much as 1.2 percent, as tropical Storm Debby shifted away from offshore energy installations.

The MSCI Emerging Markets Index (MXEF) slipped 1.3 percent, falling for a third day. The Shanghai Composite Index slid 1.6 percent to the lowest close since Jan. 16. The ISE National 100 Index fell 1.6 percent in Istanbul. Turkey is weighing a response after Syria shot down one of its warplanes in international airspace, Foreign Minister Ahmed Davutoglu said.

Egypt’s EGX30 Index jumped 7.6 percent, the most since February 2008, after Mohamed Mursi, the Muslim Brotherhood candidate, was declared the country’s first freely elected president.

 

[Muthukali]

Yen Gains, South Korean Stocks Drop Before Europe Summit

Asian stocks rose for the first time in five days and the yen strengthened for a third day before a European summit on the region’s debt crisis. Corn snapped a three-day advance that drove prices up 13 percent.

The MSCI Asia Pacific Index advanced 0.4 percent as of 11:39 a.m. in Tokyo. The yen rose 0.1 percent versus the dollar and gained against 14 of its 16 major peers. South Korea’s Kospi Index (KOSPI) dropped 0.3 percent. Standard and Poor’s 500 Index futures slipped less than 0.1 percent. Corn slid 0.8 percent after surging the previous three days amid dry weather that devastated U.S. crops. Natural gas advanced for a fifth day.

Trading volume on benchmark indexes in Japan and Hong Kong were more than 20 percent below the 30-day intraday average, on the eve of Europe’s 19th summit to tackle the debt crisis. Data showed confidence among South Korean manufacturers fell to the lowest level in four months, while the China Securities Journal said the country may introduce “more proactive” policies to ensure stable growth in the world’s second-largest economy.

“We’ve seen numerous summits come and go -- they usually deliver something but it’s often no more than the bare minimum,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages almost $100 billion. “In China, there’s no doubt their economy has slowed and the authorities have been slower to respond than they were in 2008 because they don’t want to set off another inflationary boom.”

Kospi Slides
Nine stocks gained for every seven that dropped in the MSCI Asia Pacific Index (MXAP), which lost 3 percent in the past four days. The gauge has tumbled 12 percent from its peak this year on Feb. 29 amid concern U.S. and Chinese economic growth is slowing as Europe’s debt crisis worsens.

South Korea’s Kospi dropped for a fifth day, headed for its longest losing streak in more than a month. Australia’s S&P/ASX 200 gained 0.6 percent, led by consumer staples. The Hang Seng Index rose 0.7 percent.

Japan Tobacco Inc. (2914), Asia’s largest cigarette maker by market value, climbed 3.4 percent in Tokyo as investors sought shares of companies with earnings less tied to economic growth. Hyundai Motor Co. dropped 2.5 percent in Seoul.

The yield on Japan’s 10-year bond fell 1 basis point and the cost of insuring Japanese bonds against default dropped after Prime Minister Yoshihiko Noda yesterday pushed a bill to double a sales tax through parliament’s lower house. The Markit iTraxx Japan index eased 1.5 basis points to 186.5 basis points, Deutsche Bank AG prices show. The benchmark rose 34.4 basis points this quarter through yesterday, according to CMA.

 

[Muthukali]

Asian Stocks, Oil Gain on U.S. Economic Data Before Euro Summit

Asian stocks rose a second day and oil gained after U.S. economic data showed resilience in the world’s biggest economy before a European summit on the debt crisis. Currencies of Australia and New Zealand advanced.

The MSCI Asia Pacific Index added 0.8 percent as of 9:56 a.m. in Tokyo, where the Nikkei 225 Stock Average advanced 1 percent. Futures on the Standard & Poor’s 500 Index rose 0.1 percent after gauge yesterday climbed 0.9 percent. Oil gained 0.5 percent to $80.62. The Australian dollar and the kiwi rose for a third day, advancing 0.3 percent against the greenback.

A report early next month may show China’s inflation cooled significantly in June, according to the official Xinhua News Agency, giving policy makers more room to add stimulus. Orders for U.S. durable goods and contracts to buy existing homes rebounded in May. Chancellor Angela Merkel, speaking on the eve of Europe’s 19th summit on crisis, said Germany’s constitution wouldn’t allow joint euro bonds.

“Markets are really just focused on getting some more commentary out of the summit in Europe,” said Belinda Allen, senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. In China, “there will be more support for growth and it’s now just when that will occur and how that will occur. So markets are looking for any sign that’s getting closer to fruition.”

Euro Strengthens
About seven stocks rose for each that fell on the MSCI Asia Pacific Index. The gauge has tumbled about 11 percent from its peak this year on Feb. 29 amid concern global growth is slowing as Europe’s crisis worsens. Shares on the gauge trade at an average of 11.8 times estimated earnings, compared with 12.8 on the S&P 500 Index and 10.3 for the Stoxx Europe 600 Index.

The euro strengthened 0.2 percent to $1.249. The currency gained for the first time in three days before an Italian debt auction today.

The 17-nation currency was set for the biggest quarterly drop versus the yen since September on prospects the European Central Bank will cut interest rates next week to foster growth amid debt crisis. The European currency has fallen 10 percent since the end of March versus the yen and has lost 6.4 percent against the dollar during the period. The dollar has declined 4.1 percent against the yen this quarter.

 

[Muthukali]

RIM Reports Loss as It Cuts Jobs, Delays BlackBerry 10

Research In Motion Ltd. (RIMM), losing ground to Apple Inc. (AAPL) and Google Inc. (GOOG), said it will delay the BlackBerry 10 phone release, cut 5,000 jobs and posted a quarterly loss that was five times bigger than projected.

The stock plunged 22 percent after the company reported a first-quarter loss of 37 cents a share, excluding some items. Analysts had estimated a 7 cent loss, according to data compiled by Bloomberg. Sales tumbled 43 percent to $2.8 billion, missing an estimate of $3.05 billion.

RIM, which stopped giving sales and profit forecasts last quarter, has failed to keep up with the capabilities of Apple’s iPhone and Android devices, prompting customers to flee the BlackBerry platform. The company is working on an operating system with better Web and touch-screen features -- a lineup that now won’t arrive until the first quarter of next year, more than a year later than originally planned.

“The delay may just be the final nail in the coffin,” said Sameet Kanade, an analyst at Northern Securities in Toronto who has a sell rating on the stock. “This is not just a disappointing quarter, but is a big question mark about the company going forward.”

Stock Slide
RIM fell as low as $7.14 in late trading after closing at $9.13. The stock had already lost more than two-thirds of its value in the past 12 months and had fallen almost 95 percent from its stock market peak in mid-2008, cutting the business’s market value to $4.79 billion.

The job cuts will shrink the workforce by about 30 percent, cutting it from 16,500 to 11,500 by March, RIM said.

The company also reported a pretax writedown of $335 million and said it expects to report an additional operating loss in the second quarter. The first-quarter net loss was $518 million, or 99 cents a share, compared with a profit of $695 million, or $1.33, a year earlier.

RIM’s plummeting stock price has spurred investors to demand a shakeup in strategy, with some shareholders seeking a breakup or merger. Chief Executive Officer Thorsten Heins said in May that RIM had hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help evaluate its strategic options.

At the time, RIM forecast an operating loss for the first quarter and said it was streamlining operations by reducing spending and headcount. The company is trying to save $1 billion in annual operating costs by eliminating workers and manufacturing sites.

‘Not Satisfied’
“I am not satisfied with these results and continue to work aggressively with all areas of the organization and the board to implement meaningful changes to address the challenges, including a thoughtful realignment of resources,” Heins, 54, said today in a statement. “Our top priority going forward is the successful launch of our first BlackBerry 10 device.”

Even before the latest results, some investors were pushing RIM to put itself on the block.

“We would like to see a sale of the company or a breakup, and if a breakup, the sale of each of the parts,” Vic Alboini, chairman of the Toronto-based investment firm Jaguar Financial Corp. (JFC), said last month. He sees Microsoft Corp. (MSFT) or International Business Machines Corp. as potential buyers.

“We’re pushing and cajoling RIM to get to the promised land of a sale or breakup,” he said.

One bright spot is RIM’s cash balance, Kanade said today. The company’s cash, equivalents and short- and long-term investments rose to $2.2 billion last quarter, from $2.1 billion in the previous three months.

“The only saving grace is they have cash of $2 billion, but they’ll start burning that,” he said.

Market Share
The company’s share of the global smartphone industry fell by more than half to 6.4 percent in the first quarter, according to research firm IDC. Android, an operating system developed by Google and shared with manufacturers, jumped to 59 percent, while Apple’s iOS operating system accounted for 23 percent.

U.S. BlackBerry defections remain high, RIM said today on a conference call.

“Their business is being squeezed by Apple and Android,” said Scott Sutherland, an analyst at Wedbush Securities in San Francisco who has a neutral rating on RIM.

RIM had previously said that the first of the new BlackBerry 10 phones would come out in the latter part of this year, without giving a more specific time frame. And the product was originally expected in the first quarter of 2012. Pushing the BlackBerry 10 to 2013 means it could come out months later than Apple’s iPhone 5 and products built on Microsoft Corp.’s Windows 8 platform.

RIM said it shipped 7.8 million BlackBerrys and 260,000 PlayBook tablets in its last fiscal quarter, which ended June 2. Analysts had projected 8.8 million smartphones and 280,000 tablets, according to a survey of 10 analysts. A year earlier, RIM shipped 13.2 million BlackBerrys and 500,000 PlayBooks.

“Outside of breaking apart the business and trying to maximize the value for the pieces,” Sutherland said, “it’s going to be very, very difficult for them.”

 

[Muthukali]

June consumer sentiment drops to six-month low

Consumer sentiment dropped to a six-month low in June as Americans' view of the economy soured, a survey released on Friday showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment fell to 73.2 in June from 79.3 in May.

It was the lowest level since December and fell short of economists' expectations for the index to hold at the same level as June's preliminary reading of 74.1.

The deterioration in consumers' attitudes came mostly from households with incomes over $75,000; sentiment among lower-income households was little changed, the survey said.

"While the overall level of consumer sentiment is substantially above last summer's low - which would normally indicate a growth slowdown, not a downturn - the buying plans of upper-income households have also sharply declined," survey director Richard Curtin said in a statement.

"Since these households account for a large share of total spending, if the declines continue in the months ahead, it could have a substantial impact on total spending."

The overall measure of buying plans for durables and vehicles fell to 125 from 132.

News of economic developments heard by consumers was increasingly negative. When asked about their expectations for the unemployment rate, survey respondents were more likely to expect increases rather than declines.

Consumers were also more likely to report economic conditions had weakened recently, and less likely to expect them to improve in the coming year.

The survey's barometer of current economic conditions fell to 81.5 from 87.2, while the gauge of consumer expectations slid to 67.8 from 74.3. Both indexes were at their lowest levels since December.

The survey's one-year inflation expectation rose for the first time since March to 3.1 percent from 3.0 percent, while the survey's five-to-10-year inflation outlook climbed to 2.8 percent from 2.7 percent.

 

[Muthukali]

Wall Street opens 1 percent higher on EU plan

Stocks soared at the open on Friday after euro zone leaders agreed to allow rescue funds to be used to stabilize the region's banks.

The Dow Jones industrial average .DJI was up 188.68 points, or 1.50 percent, at 12,790.94. The Standard & Poor's 500 Index .SPX was up 20.30 points, or 1.53 percent, at 1,349.34. The Nasdaq Composite Index .IXIC was up 53.61 points, or 1.88 percent, at 2,903.10.

 

[Muthukali]

Vietnam banks may increase dollar purchases: experts

Banks with ample funds may start hoarding US dollars again as lending money on the interbank market at cheap interest rates has become less profitable, financial experts said.

There is concern that dong interest rates on the interbank market are too low, which will drive banks toward dollar assets, a general director of a Ho Chi Minh City-based bank said. Such a trend could lead to a dollar shortage, he warned.

Industry insiders also said around VND64 trillion worth of central bank bonds will mature over the next few months. That means a large amount of money will flow back to commercial banks.

“If interbank rates stay low at 3 or 4 percent as seen recently, people may reconsider converting their dong assets into dollars,” said a financial expert who asked not to be named.

The State Bank of Vietnam said early this month that it had injected about VND180 trillion into the economy, buying US$9 million worth of dollars since the beginning of the year.

Analysts said the move helped improved the liquidity of the banking system, but at the same time could result in greenback scarcity later.

Pham Hong Hai, deputy general director of HSBC, said the exchange rate will hover around VND20,850 per dollar through September, before rising in the final months of the year when dollar demand for imports increases.

Hai noted that the exchange rate could also rise if global economic conditions worsen, causing foreign investors in Vietnam to withdraw their money.

 

[Muthukali]

More firms shut down in Vietnam as economic downturn deepens

More than 26,300 companies shut down or halted operations in the first six months, up 5.4 percent from the same period last year, the General Statistics Office said Friday.

Of the closures, 4,100 companies have shut down permanently, an increase of 35.4 percent year-on-year, the office said in a report.

Those figures compare to 36,195 new companies that were established in the period, down 12.5 percent from the first half of last year.

Fewer new businesses and more closures are results of difficulties that local companies are facing and not able to overcome, according to the report.

Vietnam’s economic growth slowed to 4.38 percent in the first half of 2012 from 5.63 percent growth achieved over the same period last year, the General Statistics Office said.

Even though growth picked up in the second quarter, to 4.66 percent from a disappointing 4.0 percent, it still falls short of the government target of 6-6.5 petcent for this year.

 

[Muthukali]

Vietnam to cut refinance, discount rates

The State Bank of Vietnam said on Friday it will cut the refinance rate to 10 percent from 11 percent from July 1.

It will also bring the discount rate to 8 percent from 9 percent, the central bank said in a statement.

 

[Muthukali]

Vietnam real estate market now recovering: construction minister

The real estate market has hit its bottom and is now picking up, though at a slow pace, says Construction Minister Trinh Dinh Dung.

“The market has been sluggish for a very long time, since the second quarter of 2011 in Hanoi and since 2009 in Ho Chi Minh City. But now there are positive signs with transactions rising,” Dung said in an interview published in Thursday’s Vietnam Economic Times.

He said the market had “frozen” due to many reasons, including a squeeze on bank loans and an oversupply of housing products.

“So it is vital to ease credit access for homebuyers. At the same time, developers should focus on market segments with real demand,” Dung said.

“The market will continue to face many difficulties this year, but in the medium and long term, it will get better, meeting the housing demand of the public and contributing to economic growth,” he said, noting that the property sector is a driving force behind the steel and construction industries.

The Ho Chi Minh City Real Estate Association this week called for urgent support from the government to revive the market, requesting tax relief and easing of home ownership regulations for foreigners.

 

[Muthukali]

Asia Stocks Rally on Japan Confidence; Oil Declines

Asian stocks headed for their longest winning streak since March and credit risk fell as manufacturing indicators in Japan and China beat forecasts and European leaders agreed on measures to ease the debt crisis. The euro weakened and oil declined after rallying last week.

The MSCI Asia Pacific (MXAP) Index added 0.4 percent in its fourth day of gains as of 12:09 p.m. in Tokyo. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent. The euro dropped against most of its major peers after gaining 1.8 percent against the dollar June 29. Oil in New York sank 1.1 percent to $84.07 a barrel after surging the most in three years. Corn in Chicago rose to the highest since September. The Markit iTraxx indexes tracking credit-default swaps for Asia ex-Japan, Japan and Australia all fell.

Japan’s Tankan index of large manufacturers’ sentiment and China’s Purchasing Managers’ Index exceeded economist estimates, while a reading today may show factory activity in the euro zone contracted for an 11th month. Global equities rallied the most this year on June 29 as European leaders eased aid requirements for Spain and Italy. Stocks staged the biggest June rally since 1999, giving equity investors bigger gains for the first half than the dollar, bonds and commodities.

“We have been adding risk,” said Hugh Young, who helps manage $70 billion in Asian equities at Aberdeen Asset Management Asia Ltd. in Singapore. “Nobody’s overly optimistic about economic growth but they are realistic. We are bumping along the bottom and this is quite healthy given where we’ve been.”

Samsung Tumbles
Japan’s Nikkei 225 (NKY) Stock Average rose 0.2 percent and the Topix Index was up 0.1 percent. The nation’s quarterly Tankan index was minus 1 in June from minus 4 in March, the central bank said today. Economists surveyed by Bloomberg News expected a reading of minus 4, and a negative number means pessimists outnumber optimists.

South Korea’s Kospi index increased 0.1 percent after data yesterday showed exports in June snapped three months of declines. Australia’s S&P/ASX 200 Index rose 1.2 percent. China’s Shanghai Composite Index slid 0.2 percent, even as two stocks gained for every one that fell. The Hong Kong market is closed today for a holiday.

China’s PMI fell to 50.2 in June from 50.4 in May, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing reported yesterday. That compares with the 49.9 median estimate in survey of 24 economists. A final PMI reading for June by HSBC Holdings Plc and Markit Economics today was better than a preliminary level published last month.

Galaxy Blocked
BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 1.2 percent in Australia after commodity prices rallied last week. Samsung Electronics Co. (005930), the world’s top handset maker, fell as much as 2.4 percent in Seoul, the biggest decline in a week, after Apple Inc. won a court ruling blocking sales of the Galaxy Nexus smartphone in the U.S.

The euro fell 0.4 percent to $1.2623 and 100.68 yen before data today forecast to show manufacturing contracted and the currency bloc’s jobless rate climbed to a record, boosting prospects the European Central Bank will cut interest rates.

The ECB, which has kept borrowing costs at a record low of 1 percent since December, will probably lower the benchmark rate by 0.25 percentage point on July 5, a Bloomberg survey of economists shows. The 17-nation currency posted the biggest jump in more than a year versus the yen on June 29 after euro leaders eased terms on loans to Spanish banks and relaxed conditions on potential help for Italy.

Euro Puts
Derivatives traders see at least a year of pain for the euro even after the currency’s rally late last week. One-year options show that the premium for puts, which grant the right to sell the euro versus the dollar, over calls, which confer the right to buy, is the most relative to three-month contracts since Bloomberg began tracking the data in 2003.

“On a long-term basis what you need to make the euro a survivable currency is fiscal-policy union in Europe, and you are a long way from that,” Jeff Applegate, the chief investment officer at Morgan Stanley Smith Barney, which manages over $1.7 trillion, said in a June 29 interview. “The value of the euro will go lower.”

Corn and soybeans climbed amid concern hot, dry weather will erode prospects for crops in the U.S. Corn for December delivery gained as much as 4.6 percent to $6.64 a bushel on the Chicago Board of Trade, the highest for that contract since Sept. 12. Soybeans for November delivery rose 0.5 percent.

The S&P GSCI gauge of 24 commodities fell 0.5 percent after gaining the most since April 2009 on June 29. Copper in London declined 0.8 percent, and zinc fell 1.6 percent. Rubber futures in Tokyo jumped the most in seven months.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 5 basis points to 168 as of 8:38 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The index is set for its lowest close since May 4, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market

 

[Muthukali]

Vietnam unemployment up slightly to 2.29 pct

Vietnam’s unemployment rate rose to 2.29 percent in the first six months compared to 2.22 percent a year ago, the General Statistics Office said, warning of more job cuts as economic downturn worsens.

“The jobless rate in Vietnam now is still low,” news website VnExpress cited Statistics Office Director Do Thuc as saying. He said under similar tough conditions in 2009, the rate was higher at 2.9 percent.

Thuc said a person is only considered jobless if they do not have any source of income during the survey period of seven days. Those who have lost their jobs but are still working in another sector, even temporarily, are not counted, he added.

He said with more than 26,000 companies having shut down or halted opearations in the first six months, there will be challenges for the economy and the employment situation.

According to the office, 31.7 percent of companies in Vietnam plan to downsize.

Statistics from the Ministry of Labor, Invalids and Social Affairs show that there were 175,000 new claims for unemployment insurance in the first five months alone.

 

[Muthukali]

Australia brings in contentious carbon tax

Australia on Sunday introduced a controversial carbon tax in a bid to tackle climate change, with Prime Minister Julia Gillard hailing the move amid opposition warnings it will stifle industry.

The tax on corporate pollution, which drew thousands of protesters on to the streets of Sydney on Sunday, will mean some 350 entities will be liable to pay Aus$23 (US$23.5) for every ton of carbon emissions they produce.

It comes into effect on the same day as an equally contentious levy on mining profits, the hard-fought Minerals Resource Rent Tax on iron ore and coal, which helped topple former prime minister Kevin Rudd.

Gillard hailed the introduction of the carbon tax in Australia, one of the world's worst per capita polluters.

"As a Labor government, we haven't done all of this for no reason, we've done it because we believe it's pivotal to Australia's future," she told the Australian Broadcasting Corporation.

"Today is a Sunday where Australians will go about their ordinary lives, but today is a day too when we seize the future, we seize a clean energy future."

The government hopes the scheme will mean that by 2020, Australia's carbon pollution will be at least 159 million tons less per year than it would be otherwise -- the equivalent, it says, of taking 45 million cars off the road.

The plan is to start with a fixed price and transition to a market-based emissions trading scheme after three years, similar to that adopted by the European Union.

But the tax has been bitterly opposed by the conservative opposition, which argues it will see the cost of living soar as businesses pass their increased costs onto consumers as well as hurt industry.

"(The carbon tax) is the slow boa constrictor sapping life out of one business after another," opposition lawmaker Warren Truss, leader of the Nationals, told the ABC.

The government says the increase in the cost of living as a result of the tax will be modest, about 0.7 percent, and for most people will be offset by a compensation scheme.

But opposition leader Tony Abbott pledged on Twitter that "if elected we will immediately legislate to scrap the carbon tax to help families" and he has previously vowed to abolish the mining tax if he wins the 2013 elections.

The pollution levy is a deeply divisive issue in Australia, fuelling anger after Gillard pledged there would be no carbon tax under a government she led ahead of the 2010 election but, then once elected, set out to introduce one.

Several thousand people took part in a public rally against it in Sydney on Sunday, many waving banners such as 'We voted no carbon tax', while in Melbourne about 150 demonstrated on the steps of state parliament.

The mining tax has also been a difficult reform with Rudd's initial ambitious plan to levy the "super profits" of Australia's booming mining sector at 40 percent provoking a huge backlash from the powerful industry.

Gillard, who ousted Rudd in a Labor party room coup shortly after the tax was announced, later negotiated a 30 percent impost on coal and iron ore only.

But critics have warned that the resources industries, whose exports to fast-growing Asia helped Australia dodge recession during the financial crisis, will suffer under the tax expected to bring in Aus$3.0 billion in 2012-13.

Gillard said despite the political fallout, the carbon levy which is expected to bring in Aus$4.0 billion in its first financial year, was "the right thing" to reform the economy.

"In the months ahead I think as the dust settles from this debate, Australians will be able to see that we've done the right thing to tackle climate change," she told reporters in Melbourne.

 

[Muthukali]

Vietnam to refund VAT to foreigners from July 1

Foreign visitors to Vietnam can get their value-added tax refunded on departure from the Noi Bai or Tan Son Nhat airports starting July 1, the Vietnam Customs said.

The visitors should submit the tax refund application and have their listed products checked, before receiving the money. The items will be transferred to the cargo section, or taken by the passengers as hand luggage.

The goods are required to be brand new and not on the list of prohibited items. A valid invoice with a value of at least VND2 million (US$95) is required.

The refund will be made in Vietnam dong and can be converted to other currencies later.

The pilot program will last until June 30, 2014, giving refunds for purchases at airports, tourism zones and several places in big cities. Retailers must register with the authorities to join the scheme, the government said in the statement.

The VAT refund has been planned by the Finance Ministry since September last year.

The duration of stay by foreigners eligible to collect refunds has not been clarified. France gives tax refunds to foreign visitors who stay in the country for no more than three months, and the limit in Singapore is six months.

 

[Muthukali]

Vietnam to raise power prices from July 1 after inflation slows

Vietnam will raise electricity prices by 5 percent from July 1 after inflation slowed and as the country seeks to meet growing power demand.

Power tariffs will rise to an average VND1,369 (7 cents) a kilowatt-hour from VND1,304 currently, Hoang Quoc Vuong, deputy minister of industry and trade, said Friday in a telephone interview. The increase follows a 5 percent gain in December.

Vietnam Electricity, the state-owned utility known as EVN, is allowed to raise power prices every three months based on factors including changes in fuel costs or exchange rates, according to regulations which became effective in June last year. Higher prices could help improve finances at the company, which lost VND23.5 trillion in 2010 from electricity generation and exchange-rate movements, according to finance minister Vuong Dinh Hue, and which often sells power at below the cost of supply.

“If the tariff doesn’t go up it’s difficult for EVN to catch up with losses,” Anthony J. Jude, the director of the energy division at the Asian Development Bank’s Southeast Asia department said before the announcement. “It’s important for them to have the cashflow to invest in new generation.”

Vietnam estimates it will spend VND929.7 trillion to boost its electricity generation capacity by 2020 to meet domestic demand, Pham Manh Thang, head of the energy division at the Ministry of Industry and Trade, told reporters at a briefing in Hanoi in August.

First nuclear
The country will seek to raise capacity to 75,000 megawatts by 2020, according to the seventh electricity master plan, approved by the prime minister last year. The country intends to import and produce between 194 billion and 210 billion kilowatt- hours of electricity in 2015, according to the plan. Production and imports will rise to between 330 billion and 362 billion kilowatt-hours in 2020, the same year the country is targeting the inauguration of its first nuclear power plant.

Increasing generation capacity may be necessary to help Vietnam retain its position as an attractive destination for foreign investment. Electricity shortages are among weaknesses Vietnam faces in attracting foreign investment, Minister of Planning and Investment Bui Quang Vinh said March 15.

“Vietnam’s competitiveness is under threat because power generation has not kept pace with demand,” the World Bank said in its 2012 Vietnam Development Report. Pledged foreign direct investment in Vietnam was $6.38 billion in the first half of 2012, down 28 percent from the same period a year earlier, the Foreign Investment Agency of the Ministry of Planning and Investment said June 26.

Inflation impact
The electricity tariff adjustment may help check a deceleration in inflation and create higher costs for businesses amid a slowdown in economic growth. Consumer prices rose 6.9 percent from a year earlier in June, the slowest since December 2009. Vietnam’s economy expanded 4.66 percent in the second quarter from a year earlier, after climbing 4 percent in the first three months of 2012, according to General Statistics Office data.

“Of course it will add to inflationary pressures, and companies and households will complain, but they have to do it,” said Nguyen Xuan Thanh, an economist with the Vietnam Program at the Harvard Kennedy School, said by telephone from Ho Chi Minh City before the announcement. “The longer the wait, the more difficult it will be for the government to raise prices in the future.”