Regions

[Muthukali]

Stocks, Commodities Gain on U.S. Manufacturing Growth

U.S. stocks gained, with the Standard & Poor’s 500 Index returning to an almost four-year high, and commodities reversed early losses following a report showing stronger-than-forecast growth in American manufacturing. Oil rallied the most in six weeks.

The S&P 500 advanced 0.8 percent to close at 1,419.04 at 4 p.m. in New York, adding to its 12 percent first-quarter rally. The Dow Jones Industrial Average increased 52.45 points to 13,264.49, the highest since December 2007. The S&P GSCI (SPGSCI) Index rose 1.7 percent as heating oil, gasoline and copper led gains in 19 of 24 commodities. Ten-year Treasury yields lost two basis points to 2.19 percent after decreasing as much as five points.

Stocks and commodities recovered from earlier losses after the Institute for Supply Management’s manufacturing index increased to 53.4 last month and a gauge of factory employment climbed to the highest level since June. The data helped assuage concern about the global economy after earlier reports showed European unemployment rose to a 14-year high in February and manufacturing contracted for an eighth month in March.

“Here in the United States, things have stabilized,” Barry James, who helps oversee $3.3 billion as president of James Investment Research in Xenia, Ohio, said in a telephone interview. “The manufacturing side has been the strength of our economy and the exporting has been huge -- that’s what has sustained us the past several years.”

Market Movers
The S&P 500 needs to rise only about 10 percent to reach its previous record high of 1,565.15 set in October 2007. Gains in U.S. stocks today were led by producers of raw materials and energy, with Freeport-McMoRan Copper & Gold Inc. rallying 2.8 percent and Chevron Corp. rising 1 percent to pace the advance. Avon Products Inc. surged 17 percent after Coty Inc. offered to buy the cosmetics company for $10 billion.

Apple Inc. advanced 3.2 percent after Consumer Reports said on its website that the new iPad’s high-resolution screen provides the best detail and color accuracy of all tablets it has seen.

Groupon Inc. slid 17 percent after the largest provider of daily online deals reported a “material weakness” in its financial controls and said fourth-quarter results were worse than previously stated because of higher refunds to merchants.

The S&P 500 reversed a drop of 0.3 percent in the first hour of trading after the ISM’s factory index topped the median economist forecast of 53. The group’s production gauge climbed to a three-month high and its measure of employment reached the highest level since June.

The best first-quarter gain for the S&P 500 since 1998 sent U.S. stocks above gold by the most in more than a decade, a sign of growing investor confidence in corporate profits as analysts raise earnings estimates for the first time this year.

Quarterly Returns
The S&P 500 climbed 12 percent, 5.3 percentage points more than gold for the widest gap to start a year since 1999, according to data compiled by Bloomberg. The S&P GSCI Total Return Index of 24 commodities gained 5.9 percent over the three months, while Treasuries slipped 1.3 percent, trailing equities by the most since 2009. Corporate bonds increased 2.4 percent and the dollar fell 1.6 percent.

Thirty-year Treasury bonds fell today, erasing earlier gains and sending their yield one basis point higher to 3.35 percent. Two-year yields were little changed at 0.33 percent.

The worst is over for the $10 trillion U.S. Treasury market following the biggest quarterly rout since 2010, say Wall Street’s largest bond trading firms.

After rising to as high as 2.4 percent last month from 1.88 percent at the end of 2011, the yield on the benchmark 10-year note will finish 2012 at 2.49 percent, according to the average estimate in a Bloomberg News survey of the 21 primary dealers that trade with the Federal Reserve. That’s the same as a January poll, suggesting the market isn’t ready to declare a bear market in bonds after a 30-year bull run.

Treasury Bets
Signs of strength in the economy, which caused a 5.56 percent loss in bonds maturing in 10 years or more last quarter, may fade in the second half of 2012, the dealers say. Tax cuts are expiring, $1 trillion of mandatory federal budget cuts are due to kick in and $100-a-barrel oil is eating into consumer spending. With inflation in check, Fed Chairman Ben S. Bernanke said last week that the central bank will consider further stimulus, even after upgrading its economic outlook March 13.

Among commodities tracked by the S&P GSCI index, heating oil, gasoline and nickel surged more than 2.2 percent. Oil for May delivery rose $2.21, or 2.1 percent, to settle at $105.23 a barrel on the New York Mercantile Exchange. It was the biggest gain since Feb. 21.

China Manufacturing
Commodities also advanced after data showed manufacturing growth in China. A Purchasing Managers’ Index rose to a one-year high of 53.1 in March, China’s logistics federation and the National Bureau of Statistics said yesterday. The gauge has a pattern of rising each March. The data failed to end predictions for policy loosening as analysts described the gain as seasonal and a separate survey showed exporters struggling.

The Stoxx Europe 600 Index (SXXP) increased 1.5 percent as national benchmark gauges in the U.K. and Germany led gains in the region. Among European stocks, Oriflame Cosmetics SA jumped 2.6 percent after Coty’s offer for Avon. Cookson Group Plc jumped 6 percent after the Sunday Times said the company may spin off a unit.

European Debt
The yield on Italian 10-year bonds dropped one basis point to 5.11 percent, leaving the difference in yield with bunds two basis points lower. The Spanish 10-year yield was little changed at 5.35 percent.

The Markit iTraxx SovX Western Europe Index of credit- default swaps tied to the debt of 15 governments dropped 3.2 basis points to 266.75.

The yen appreciated 1 percent versus the euro, while the Dollar Index, which tracks the U.S. currency against those of six trading partners, lost 0.2 percent.

The MSCI Emerging Markets Index added 0.7 percent. In South Korea, the Kospi Index advanced 0.8 percent after the country’s credit rating outlook was raised by Moody’s Investors Service to positive from stable, boosting demand for the nation’s assets.

The FTSE/JSE Africa All Shares Index advanced 1.3 percent in Johannesburg. The ISE National 100 Index added 0.9 percent in Istanbul after Turkish economic growth in the fourth quarter was 5.2 percent, exceeding economists’ estimates.

 

[Muthukali]

S&P 500 Beating Gold Most Since 1999 on Positive Earnings

The best first-quarter gain for the Standard & Poor’s 500 Index since 1998 sent U.S. stocks above gold by the most in more than a decade, a sign of growing investor confidence in corporate profits as analysts raise earnings estimates for the first time this year.

The S&P 500 climbed 12 percent, 5.3 percentage points more than gold for the widest gap to start a year since 1999, according to data compiled by Bloomberg. The S&P GSCI Total Return Index (SPGSCITR) of 24 commodities gained 5.9 percent over the three months, while Treasuries slipped 1.3 percent, trailing equities by the most since 2009. Corporate bonds increased 2.4 percent and the dollar fell 1.6 percent.

S&P 500 Beating Gold Most Since 1999 as Profit Outlook Rises

Traders work in the S&P 500 pit of the CME Group's Chicago Board of Trade.​

Stocks are diverging from defensive investments such as gold as appetite for risk increases. While bulls see it as a sign profits and the economy are gaining traction, bears point to Federal Reserve Chairman Ben S. Bernanke’s warnings that more stimulus may be needed as evidence that the rally has gone too far. To money manager Laszlo Birinyi, slower gains in precious metals signal pessimism is starting to fade.

“The problem with gold now is that people are starting to accept the economy recovery,” Birinyi, president of Westport, Connecticut-based Birinyi Associates Inc., said in a March 29 phone interview. Even as confidence builds, “people are still too focused on the concerns and the fact that this looks similar to last year, where everyone said sell in May and go away,” he said. “That’s exactly the kind of thing we look for.”

Monthly Gain
The benchmark gauge for American equities advanced 0.8 percent last week to 1,408.47, bringing the increase for March to 3.1 percent. The S&P 500 rose 0.8 percent to 1,419.04 today.

U.S. Treasuries lost 1 percent in the month after S&P 500 earnings expanded for a ninth straight quarter and manufacturing and home sales improved, while corporate bonds dropped 0.6 percent. The S&P GSCI commodity gauge slipped 2.4 percent and the Dollar Index, which measures the currency against the biggest U.S. trading partners, added 0.3 percent.

Record earnings, improved U.S. manufacturing and retail sales, and attempts by European leaders to contain their debt crisis helped stocks rally in the quarter, beating gold as demand for assets that protect against losses faded. Equities pulled ahead in March when Bernanke damped speculation he would carry out more bond purchases, adding to evidence that the recovery is gathering momentum. He said on March 26 that while he’s encouraged by the decline in unemployment, more stimulus is needed to create jobs.

One-Year Low
The rally in gold may pick up speed should central banks signal further action, according to Ioan Smith, a director at Knight Capital Europe Ltd. in London. Futures on the metal surged 1.6 percent on March 26 after Bernanke said the economy needs “continued accommodative monetary policy” to boost jobs.

“If the Fed reinstitutes quantitative easing measures later in the year, coupled with rising fiscal deficits and currency debasement among countries in the developed world, then gold may continue to hold an underlying bid,” Smith said in an e-mail.

Fourteen out of 21 primary dealers in U.S. Treasuries say the Fed will probably need a third round of bond purchases, or quantitative easing, to bolster the economy, according to a Bloomberg News survey.

LSI, Lennar Earnings
The S&P 500 has rallied 28 percent since it reached a one- year low on Oct. 3, gaining as companies from LSI Corp. (LIS) to Lennar Corp. (LEN) reported earnings that beat estimates. Profits for the 500 companies will rise 13 percent in 2012 after climbing 9.9 percent in 2011, estimates and data compiled by Bloomberg show. Analysts boosted forecasts by 0.2 percent in the four weeks through March 22 to $104.37 a share in the biggest increase of 2012. They fell during January and February, the data show.

The Commerce Department said last week the economy grew 3 percent during the last three months of 2011, more than any quarter since June 2010. Equity gains came as the Chicago Board Options Exchange Volatility Index, or VIX, sank 64 percent since the end of September, a record two-quarter retreat, Bloomberg data show.

“It’s not just that people bought equities because they had nothing else to do with their money, it’s that the actual underlying businesses had done pretty well,” Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $1.5 billion, said in a March 28 interview. “As people start to realize this, you’ll see a migration of that safe haven trade out of gold and into the portions of the global equity market which are really able to benefit.”

Volatility Notes
Rallying stocks and the plunging VIX (VIX) also caused demand for the VelocityShares Daily 2x VIX Short-Term ETN (TVIX), known by the symbol TVIX, to explode as traders sought a cheap way to protect gains in equities. Interest in the note, which owns VIX futures, was so great Credit Suisse Group AG stopped issuing shares in February after its market value soared to almost $700 million from $162.8 million at the end of 2011.

The combined value of the five biggest VIX-related securities traded on U.S. markets swelled to $2.8 billion as of March 29, more than doubling from the level at the end of 2011. Their market capitalization rises as their sponsors issue new stock to keep the share prices aligned with an underlying index.

The 9.9 percent increase in earnings last year wasn’t enough to spare the S&P 500 from its smallest annual move since 1947, leaving the valuation measure at 13.6 times reported profits on the last day of 2011, 20 percent below the average since 1954, data compiled by Bloomberg show. Since then, the price-earnings ratio climbed to 14.6, about 11 percent below the historic mean.

Annual Start
“The huge monetary thrust has market speculators timing when the liquidity wave will break,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees more than $116 billion in client assets, said in a March 30 phone interview. “Market participants are positioning for a pullback in risk-taking. Investors should consider a second-half growth scare in the U.S. economy, which is not out of the question.”

Companies in the U.S. may struggle to increase earnings as profit margins, or the percentage of sales converted into net income, shrink. Margins for all U.S. companies reached 13 percent last quarter, higher than any time since 1950, according to data compiled by the Commerce Department. For the S&P 500, they’ve narrowed this year by 0.2 percentage point, according to data compiled by Bloomberg.

Internet Bubble
LSI, a maker of chips used in computer disk drives, jumped to the highest level in almost five years on March 14 after raising its first-quarter sales prediction, citing a stronger- than-expected recovery in the industry. Analysts boosted 2012 earnings projections for the Milpitas, California-based company 16 percent, the biggest increase among the 500 companies in the benchmark gauge for American equities.

Projections for 2012 profit at Lennar are up 10 percent from four weeks ago, with analysts forecasting a 67 percent increase, data compiled by Bloomberg show. The third-largest U.S. homebuilder by revenue reported better-than-estimated net income for the period ending Feb. 29 after new home orders rose. The stock increased 38 percent last quarter, the best January- to-March period since 1998.

Financial companies, technology shares and the consumer- discretionary group led gains in the S&P 500 last quarter, with each rising at least 16 percent. The two worst-performing industries were phone stocks and utilities, industries investors typically flock to in times of economic uncertainty for their higher dividend yields.

‘Biggest Friend’
“Confidence is returning on the recovery and as it does, gold’s relative standing is diminishing,” James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in a March 26 phone interview. “The biggest friend of gold in recent years is the same biggest friend of the bond market: fear. When confidence has returned and fear dissipates, gold pales.”

Even with the rally, individuals have been reluctant to put money in equities. Net outflows of funds that invest in U.S. equities totaled $2.13 billion in January and $3.21 billion in February. The withdrawals continued into March, with $1.8 billion out in the week ended March 21 and $2.9 billion the week before, according to the Investment Company Institute in Washington.

Unemployment Declines
Gains in stocks came as the unemployment rate reached 8.3 percent in January after falling five straight months, home sales beat estimates and the Conference Board’s gauge of consumer confidence rose to the highest level in a year. The world’s largest economy will grow 2.2 percent this year, up from the 1.7 percent in 2011, according to the median of 72 economists surveyed by Bloomberg.

“The perceived risk in the outlook for the global economy is now somewhat lower than what it was even three months ago,” said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which oversees $72 billion. Gold’s underperformance is a “sign that investors are regaining some of the lost confidence in the capitalistic system as a whole.”

 

[Muthukali]

Australia Holds Benchmark Rate at 4.25% on Europe, U.S. Optimism

Australia’s central bank kept its benchmark interest rate unchanged as Europe’s debt crisis stabilizes and signs of stronger U.S. growth brighten the outlook for the global economy.

Governor Glenn Stevens and his board left the overnight cash-rate target at 4.25 percent, the Reserve Bank of Australia said in a statement in Melbourne today. The decision was forecast by all 24 economists surveyed by Bloomberg News.

Stevens’s third straight pause after two reductions late last year reflects confidence U.S. companies will keep hiring, Europe’s recession will remain mild, China’s growth will ease to a more sustainable pace and domestic employment will be supported by A$456 billion ($475 billion) of resource projects. Such an outcome risks higher wages and faster price increases.

“The slowdown in China is still likely to be viewed as orderly by the RBA,” Paul Brennan, a senior economist at Citigroup Inc. in Sydney, said before the decision. “The unemployment rate, which is the yardstick by which the RBA judges the opposing forces driving the structural change in the Australian economy, remains fairly evenly balanced.”

The Australian currency has risen in six of the past seven quarters, reaching $1.0856 in late February. Investors were pricing in a 36 percent chance of a rate cut, a Credit Suisse Group AG index based on swaps showed before today’s decision was announced.

The economy lost 15,400 jobs in February and recorded the first increase in the jobless rate since August, to 5.2 percent, which is still less than half the euro zone’s 10.8 percent level.

Weak Reports
Since the RBA’s March 6 meeting, government reports have shown fourth-quarter gross domestic product expanded at half the pace economists forecast, and the weakest exports in almost three years led to Australia’s first trade deficit in 11 months in January.

China is Australia’s biggest trading partner, and the RBA has said it expects Chinese demand for commodities to remain strong even as recent data painted a mixed picture of the world’s second-largest economy.

A Purchasing Managers’ Index of manufacturing in China rose to a one-year high of 53.1 in March, China’s logistics federation and the National Bureau of Statistics said April 1. The gauge has a pattern of rising each March. In contrast, a PMI from HSBC Holdings Plc an Markit Economics showed manufacturing contracting and export orders falling.

The U.S. may be emerging as a main engine for global growth. An improving job market, rising stock prices and easier credit are combining to lift U.S. consumer confidence and spending, with optimism measured by the Bloomberg Comfort Index near a four-year high. Personal-consumption expenditures increased by the most in seven months in February, rising 0.8 percent, the Commerce Department said last week.

Australia has grown more dependent on resources as employment in manufacturing dropped by about 30 percent since 2007, while mining and government rose by more than 50 percent, HSBC estimates.

 

[Muthukali]

SET rises 11.98 points - Thailand

The Stock Exchange of Thailand main index went up 11.98 points or 1.00% to close at 1,211.07 points at the end of trading session on Tuesday afternoon. The trade value was 30.37 billion baht, with 3.71 billion shares traded.

The SET50 index ended at 853.51 points, up 9.64 points or 1.14%, with a total trade value of 20.28 billion baht.

The SET100 index rose 19.63 points or 1.07% to stand at 1,851.18 points, with a total turnover of 24.13 billion baht.

The SETHD index went up 7.95 points or 0.70% to 1,148.73 points with a total trade value of 7.11 billion baht.

The MAI index rose 1.21 points or 0.41% to close at 294.30 points, with total transaction value of 578.95 million baht.

Top five most active values were as follows;

BBL - stood at 190.50 baht, up 5.00 baht (2.70%)
PTT - stood at 359.00 baht, up 2.00 baht (0.56%)
KBANK - stood at 161.00 baht, up 5.00 baht (3.21%)
PTTEP - stood at 179.50 baht, up 3.00 baht (1.70%)
SCB - stood at 149.00 baht, up 6.00 baht (4.20%)

 

[Muthukali]

Fed Signals No Need for More Easing Unless Growth Falters

The Federal Reserve is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target.

“A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below” 2 percent, according to minutes of their March 13 meeting released today in Washington. That contrasts with the assessment at the FOMC’s January meeting in which some Fed officials saw current conditions warranting additional action “before long.”

Stocks slumped while the dollar and Treasury yields rose. The Standard & Poor’s 500 Index lost 0.4 percent to 1,413.31 as of 4:12 p.m. in New York, retreating from yesterday’s highest close since May 2008. Yields on 10-year Treasury notes increased 11 basis points to 2.3 percent. The Dollar Index, a gauge of the currency against six major peers, rallied 0.7 percent.

The March minutes show decreased urgency to add stimulus with no sentiment expressed for additional easing without a deterioration in economic conditions. The central bank also affirmed its plan, first announced in January, to hold interest rates near zero through late 2014 as the economy’s improvement may not be sufficient to lower the outlook for coming years.

Asian stocks fell for the first time in four days, with the MSCI Asia Pacific Index sliding 0.9 percent as of 10:51 a.m. in Tokyo.

‘Positive Enough’
“I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing,” Atlanta Fed President Dennis Lockhart said today on Bloomberg Radio’s “Hays Advantage” with Kathleen Hays. “The outlook is positive enough that I am not sure I see the need for it.”

Lockhart, a voting member on monetary policy this year, has never dissented from a decision of the FOMC since becoming president of the Atlanta Fed in March 2007.

Markets reacted sharply because investors expected a signal for new rounds of quantitative easing, said Michael Gapen, a former Fed economist who is a senior U.S. economist at Barclays Capital Inc. in New York.

“There were others who were convinced the Fed was going to have to do it and some QE was still priced in,” Gapen said. Today’s minutes don’t “rule out QE3 - the Fed still thinks there are downside risks to remain concerned about -- but the trends right now don’t suggest they need to do more,” he said.

Affirmed Plan
The central bank first said in January that it may hold interest rates near zero through at least late 2014 as the economy may fail to grow fast enough to continue bringing down the unemployment rate. Fed Chairman Ben S. Bernanke has defended the pledge as appropriate since the meeting, saying that despite some improvement in the economy it’s “far too early to declare victory.”

The FOMC said in March that unemployment is still “elevated” even after recent improvements in the job market. Richmond Fed President Jeffrey Lacker dissented because he doesn’t anticipate that economic conditions will warrant exceptionally low rates for so long.

Fed policy makers also discussed the conditions under which they’d alter their 2014 interest rate plan. That commitment is conditional on the performance of the economy “and members concurred that the date given in the statement would be subject to revision in response to significant changes in the economic outlook,” the minutes said.

Employment
“A number” of policy makers did not see that threshold being met and said that “while recent employment data had been encouraging” there was a “nonnegligible risk that improvements in employment could diminish as the year progressed,” the minutes said.

Bernanke highlighted those risks in a March 27 television interview with ABC News.

“We need to be cautious and make sure this is sustainable,” he said in the interview. “We haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.”

Asked if another round of quantitative easing, or large- scale bond purchases, remains “on the table,” the 58-year-old Fed chief said, “we don’t take any options off the table.”

“We have to be prepared to respond to however the economy evolves,” he said.

Those remarks expanded on a speech by Bernanke on March 26 in Arlington, Virginia, in which he said the fall in the jobless rate may reflect “a reversal of the unusually large layoffs that occurred during late 2008 and over 2009.” Significant improvement in reducing unemployment will probably require faster growth, he said.

Raise Forecasts
In their March discussion policy makers did not see the economy growing so strongly that they would have to raise their forecasts in coming years.

“Most participants did not interpret the recent economic and financial information as pointing to a material revision to the outlook for 2013 and 2014,” the minutes said.

FOMC participants also discussed additional steps they could take to better explain to the public how changes in the economic outlook affect monetary policy decisions, such as what qualitative or quantitative data would prompt which actions, according to the minutes.

“Several participants suggested that it could be helpful to discuss at a future meeting some alternative economic scenarios and the monetary policy responses that might be seen as appropriate under each one,” according to the minutes, which noted no decision was made on future steps on the Fed’s communication strategy.

Higher Gas Price
The best six months of job growth since 2006, unemployment at a three-year low, and stock-market gains are giving Americans the means to withstand a higher gasoline price. A March 30 report from the Commerce Department said Americans increased their spending by the most in seven months, with purchases climbing 0.8 percent in February.

“Consumers are becoming a little bit more resilient to fuel prices,” Don Johnson, U.S. sales chief for General Motors Co., said yesterday on Bloomberg Television’s “In The Loop With Betty Liu.” More consumers will be spurred to replace old cars, he said, “as the economy continues to strengthen, which it has been recently, more and more of that pent-up demand will be released into the market.”

 

[Muthukali]

SET drops 12.98 points - Thailand

The Stock Exchange of Thailand main index went down 12.98 points or 1.07% to close at 1,198.09 points at the end of trading session on Wednesday afternoon. The trade value was 24.28 billion baht, with 3.00 billion shares traded.

The SET50 index ended at 843.26 points, down 10.25 points or 1.20%, with a total trade value of 16.76 billion baht.

The SET100 index fell 21.19 points or 1.14% to stand at 1,829.99 points, with a total turnover of 19.87 billion baht.

The SETHD index went down 12.05 points or 1.05% to 1,136.68 points with a total trade value of 6.92 billion baht.

The MAI index dropped 1.20 points or 0.41% to close at 293.10 points, with total transaction value of 459.74 million baht.

Top five most active values were as follows;

CPF - stood at 37.50 baht, up 0.50 baht (1.35%)
PTTGC - stood at 68.75 baht, down 1.50 baht (2.14%)
KBANK - stood at 157.00 baht, down 4.00 baht (2.48%)
BANPU - stood at 604.00 baht, down 6.00 baht (0.98%)
IVL - stood at 36.50 baht, down 1.25 baht (3.31%)

 

[Muthukali]

ECB Keeps Rate at 1% as Economy Shrinks, Price Risks Grow

The European Central Bank left interest rates unchanged as policy makers balance the threat of inflation in Germany against the need to fight the sovereign debt crisis.

ECB officials meeting in Frankfurt today kept the benchmark rate at a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey. President Mario Draghi holds a press conference at a 2:30 p.m.

While nations from Greece to Spain are battling recessions and record unemployment, workers in Germany are winning some of the biggest pay increases in 20 years, widening the gaps between Europe’s largest economy and its euro-area peers. Draghi warned in March of “upside risks” to inflation and started talking about how to withdraw the ECB’s emergency measures, just months after cutting rates and pumping more than 1 trillion euros ($1.3 trillion) of cheap cash into Europe’s banking system to stem the sovereign debt crisis.

“Early signs of wage inflation and rising house prices in Germany will make some hawkish Governing Council members nervous,” said Christian Schulz, senior economist at Berenberg Bank in London. Still, it’s too early to start removing support for banks and “the overall weak economy easily warrants continued low interest rates,” he said.

Recessions
The 17-nation euro economy will shrink 0.3 percent this year, according to the European Commission, which projects contractions in Italy, Spain, Belgium, Greece, Cyprus, the Netherlands, Portugal and Slovenia. By contrast, Germany’s economy is forecast to expand 0.6 percent.

“The ECB is in a dilemma,” said Holger Sandte, chief economist at WestLB Mellon Asset Management in Dusseldorf. “It’s not an optimal currency area. The economy is terrible in some parts and okay in others, and prices are diverging.”

House prices in Spain plunged 11.2 percent last year; in Germany they rose 5.5 percent, the most since the country’s post-reunification property boom in the early 1990s.

Bundesbank President Jens Weidmann was one of the first ECB policy makers to start talking about an eventual exit from stimulus measures, saying the emergency lending to banks entails significant risks.

‘Stability Culture’
Draghi, in an interview with Germany’s mass tabloid Bild newspaper last month, said he shares Weidmann’s concerns and “all members of the Governing Council have taken to heart Germany’s stability culture.”

Tools the ECB could use to absorb liquidity include longer- term deposits or the issuance of debt certificates, Christian Thimann, Draghi’s adviser, said in an article published last week.

“Exit talks are in large part targeted at Germans and other inflation hawks concerned about rising inflation and the emergence of asset-price bubbles,” said Marco Valli, chief euro-area economist at UniCredit Global Research in Milan. “They want to show they have the tools available to tackle inflation, but they’re nowhere close to a starting the exit.”

While Draghi will probably affirm his view that the euro- area economy has stabilized, contracting manufacturing output suggests the recovery remains fragile.

At the same time, euro-area inflation, driven by higher oil prices and tax increases, will breach the ECB’s 2 percent limit for a second straight year in 2012 before slowing to 1.6 percent in 2013, according to ECB forecasts.

Price Pressure
Wage settlements in Germany may fuel price pressures.

With unemployment at a two-decade low and exports to countries outside the euro area partially shielding the economy from the debt crisis, German workers are asking for a bigger slice of the pie.

IG Metall, Europe’s biggest labor union with about 3.6 million workers, is demanding 6.5 percent more pay.

Germany’s 2 million public service workers are set for a 6.3 percent raise over two years under an agreement reached with the government, the Ver.di union said on March 31. That would be the biggest increase negotiated by the union since 1992.

“The agreement will likely mark a turning point in wage developments in Germany after years of wage restraint,” said Klaus Baader, an economist at Societe Generale SA in Hong Kong.

Some economists say rising German wages are part of a rebalancing that has to take place within the euro zone. Germany, which has long relied on exports for growth, needs to spur household spending, while peripheral nations have to cut wages to improve competitiveness and export performance.

“Draghi’s main message today will probably be that the ECB has done its bit,” said Julian Callow, chief European economist at Barclays in London. “One reason is that the ECB doesn’t really have another big rabbit to pull out of its hat, the other is that they really want to sit back and let governments get on with fixing the crisis.”

 

[Muthukali]

Stocks, Commodities Drop on Fed Minutes, Spanish Auction

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Stocks and commodities slid for a second day as weaker demand at a Spanish debt auction and the U.S. Federal Reserve’s reluctance to add more monetary stimulus fueled concern the global economic recovery will slow. The euro fell and Spanish, Italian and Portuguese bond yields surged.

The Standard & Poor’s 500 Index lost 1 percent as of 4 p.m. in New York, its second-worst drop of the year, and the Dow (INDU) Jones Industrial Average slid 124.8 points to 13,074.75. The Stoxx Europe 600 Index tumbled 2.1 percent. The euro depreciated against 12 of 16 major peers, while 10-year Treasury yields fell seven basis points to 2.23 percent. Spanish 10-year yields surged 24 basis points to 5.69 percent. Silver and gold plunged more than 3 percent and oil extended losses after U.S. supplies grew by the most since 2008.

The S&P 500 has tumbled 1.4 percent from an almost four- year high of 1,419.04 on April 2 following a 12 percent rally in the first three months of the year, the best first-quarter gain in 14 years. The Fed will refrain from increasing monetary accommodation unless the economic expansion falters or prices rise at a rate slower than its 2 percent target, minutes of a March 13 policy meeting released yesterday showed.

“I can’t remember a time where knowing where you are in the trading cycle is as almost important as the news that’s coming,” Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas Asset Management LLC in Norfolk, Virginia, which oversees about $2 billion, said in a telephone interview. “When you are at the top of a trading range between 1,100 and 1,400, it will take very little bad news -- and maybe some news about quantitative easing, which is not bad news -- for the market to go down.”

Economic Data
U.S. stocks retreated even after an ADP Employer Services report showed companies expanded payrolls by 209,000 following a revised 230,000 gain in February. The median estimate in the Bloomberg News survey called for a 206,000 increase. Economists project a government report in two days will show private employers added 215,000 jobs and total payrolls, including government positions, increased by 205,000.

Service industries in the U.S. expanded less than forecast in March as orders grew at the slowest pace in three months. The Institute for Supply Management’s non-manufacturing index dropped to 56 from a one-year high of 57.3 in February. Readings above 50 signal expansion, and economists surveyed by Bloomberg News projected 56.8 for the gauge, according to the median estimate.

SanDisk Tumbles
Losses in U.S. stocks today were led by financial, technology and commodity companies, with gauges of each group dropping at least 1.2 percent as nine of the 10 main industry groups in the S&P 500 retreated. Bank of America Corp., Alcoa Inc. and Microsoft Corp. lost more than 2 percent for the biggest declines in the Dow.

SanDisk Corp. slid 11 percent, the most since January, after the biggest maker of flash-memory cards cut its forecast for first-quarter sales and profitability, citing weaker-than- expected pricing and demand for components that store data in mobile phones.

General Electric Co. fell 1.1 percent after its debt rating was cut by Moody’s Investors Service because of “heightened risk” from its finance unit, whose own grade was cut below the parent company’s for the first time in two decades.

U.S. equities retreated yesterday as the Fed minutes showed less urgency to add stimulus. Policy makers last month affirmed the plan, first announced in January, to hold interest rates near zero through late 2014 on concern the economy may fail to grow fast enough to continue bringing down unemployment.

‘Welcome Change’
“There’s no justification for the Fed to ease monetary policy further,” Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp., said in a Bloomberg Television interview from Singapore. “The market has run up at a very heavy pace, so I think a breather or a correction would be a welcome change for now.”

Almost 50 shares fell for each that advanced in the Stoxx 600. Automakers slumped after U.S. sales of cars and light trucks in March missed the average estimate in a Bloomberg survey of analysts. PSA Peugeot Citroen (UG) slid 5.8 percent and Volkswagen AG fell 2.7 percent. Petropavlovsk Plc, a producer of gold in Russia, sank 6.5 percent as the precious metal retreated for a second day.

Germany’s DAX Index slumped 2.8 percent and Sweden’s OMX Stockholm 30 Index tumbled 3.6 percent to lead losses among major European national indexes. German factory orders increased in February less than economists had forecast. Orders, adjusted for seasonal swings and inflation, increased 0.3 percent from January, the Economy Ministry in Berlin said. Economists had predicted a gain of 1.5 percent, according to the median of 35 estimates in a Bloomberg News survey.

Euro Weakens
The euro weakened 0.7 percent to $1.3142, falling for a third straight day and reaching the weakest level since March 16. Yields on Italian and Portuguese 10-year bonds surged 21 basis points each.

The cost of insuring sovereign debt rose, with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments climbing 6.1 basis points to 271. Swaps on Spain jumped 22 basis points to 461, the highest since November, according to CMA.

Spain sold 2.59 billion euros ($3.41 billion) of bonds due between January 2015 and October 2020, compared with a planned maximum of 3.5 billion euros.

ECB Holds Rates Steady
European Central Bank officials meeting in Frankfurt today kept the benchmark interest rate at a record low of 1 percent, as predicted by all 57 economists in a Bloomberg News survey. ECB President Mario Draghi said while a moderate economic recovery is expected this year, the outlook is subject to “downside risks” as the debt crisis damps momentum. Draghi also said any talk of an exit strategy from stimulus measures is premature for now.

Oil tumbled 2.4 percent to $101.47 a barrel, extending losses after the U.S. Energy Department said stockpiles rose 9.01 barrels to 362.4 million. Gold plunged 3.5 percent to $1,614.10 an ounce, the lowest since January, silver sank 6.7 percent and copper dropped 3.3 percent to $3.7905 a pound as 21 of 24 commodities tracked by the S&P GSCI Index retreated, sending the gauge down 2 percent for its biggest drop of the year.

Emerging Markets
Markets in China and Taiwan were shut for holidays. The MSCI Emerging Markets Index (MXEF) fell 1.7 percent, halting a three- day, 2.2 percent climb. The Micex Index (MICEX) fell 2.4 percent in Moscow and the FTSE/JSE Africa All Shares Index (JALSH) slid 2.3 percent in Johannesburg as oil and metals fell. Turkey’s ISE National 100 Index (XU100) retreated 1.3 percent. South Korea’s Kospi Index (HSCEI) slid 1.5 percent, the biggest loss since Dec. 19.

China accelerated the opening of its capital markets by more than doubling the amount foreigners can invest in stocks, bonds and bank deposits. The China Securities Regulatory Commission increased quotas for qualified investors to $80 billion from $30 billion, according to a statement yesterday. Offshore investors will also be allowed to pump an extra 50 billion yuan ($7.95 billion) of local currency into the country, up from 20 billion yuan.

Australia’s dollar sank to an 11-week low as data showed the nation had an unexpected trade deficit. The Aussie slid 0.7 percent to $1.0257 after Australia posted a trade deficit for a second month in February, completing the first consecutive shortfalls in two years.

 

[Muthukali]

SET drops 15.68 points - Thailand

The Stock Exchange of Thailand main index went down 15.68 points or 1.31% to close at 1,182.41 points at the end of trading session on Thursday afternoon. The trade value was 29.66 billion baht, with 3.72 billion shares traded.

The SET50 index ended at 831.74 points, down 11.52 points or 1.37%, with a total trade value of 21.05 billion baht.

The SET100 index fell 25.03 points or 1.37% to stand at 1,804.96 points, with a total turnover of 24.70 billion baht.

The SETHD index went down 9.55 points or 0.84% to stand at 1,127.13 points, with total trade value of 7.73 billion baht.

The MAI index dropped 2.58 points or 0.88% to close at 290.52 points, with total transaction value of 356.02 million baht.

Top five most active values were as follows;

IVL - stood at 36.00 baht, down 0.50 baht (1.37%)
KBANK - stood at 153.00 baht, down 4.00 baht (2.55%)
CPF - stood at 33.75 baht, up 0.25 baht (0.67%)
PTTGC - stood at 68.25 baht, down 0.50 baht (0.73%)
ADVANC - stood at 174.50 baht, down 7.00 baht (3.86%)

 

[Muthukali]

Employers Added 120,000 Jobs in March, Fewest in Five Months

Employers in the U.S. added fewer jobs than forecast in March, underscoring Federal Reserve Chairman Ben S. Bernanke’s concern that recent gains may not be sustained without a pickup in growth.

The 120,000 increase in payrolls, the fewest in five months, followed a revised 240,000 gain in February that was bigger than first estimated, Labor Department figures showed today in Washington. The March increase was less than the most pessimistic forecast in a Bloomberg News survey in which the median estimate called for a 205,000 rise. Unemployment fell to 8.2 percent, the lowest since January 2009, from 8.3 percent.

Faster employment growth that leads to bigger wage gains is necessary to propel consumer spending that accounts for about 70 percent of the economy. Today’s data also showed Americans worked fewer hours and earned less on average per week, helping explain why Fed policy makers say interest rates may need to stay low at least through late 2014.

“We see a lack of sustainability in terms of strong job growth,” Tony Crescenzi, a strategist at Pacific Investment Management Co. in Newport Beach, California, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “This is still not strong enough to create escape velocity, which is to say an economy strong enough to make it on its own without additional monetary stimulus from the Federal Reserve.”

Stock-index futures declined after the figures, with the contract on the Standard & Poor’s 500 Index expiring in June falling 1 percent to 1,376.3 at 8:51 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 2.08 percent from 2.18 percent.

Payroll Estimates
Payroll estimates from 80 economists in the Bloomberg survey ranged from increases of 175,000 to 250,000 after an initially estimated 227,000 gain the prior month. Revisions added a total of 4,000 jobs to payrolls in January and February.

The March data showed a 34,000 decrease in retail employment, the biggest decline since October 2009.

The unemployment rate, derived from a separate survey of households, was forecast to hold at 8.3 percent, according to the survey median.

The jobless rate dropped as unemployed workers stopped looking for work and left the labor force. The participation rate, which indicates the share of working-age people in the labor force, fell to 63.8 percent from 63.9 percent.

Jobs and Obama
While a 0.9 percentage-point drop in unemployment since August may underpin President Barack Obama’s standing leading up to the vote in November, only one president since World War II - - Ronald Reagan -- has been re-elected with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment in the month of the election, after the rate had fallen almost three percentage points in the previous 18 months.

Private payrolls, which exclude government agencies, rose 121,000 in March after a gain of 233,000 the prior month. They were projected to climb by 215,000. Manufacturing payrolls increased by 37,000 after a 31,000 gain.

Sustained auto sales are prompting Ford Motor Co. (F), the second-biggest U.S. automaker, to bring in more workers. The Dearborn, Michigan-based manufacturer boosted its 2012 sales forecast to 14.5 million to 15 million vehicles from a previous projection of 13.5 million to 14.5 million.

“We’ve already announced some shift increases, some adds in terms of shifts this year,” Erich Merkle, sales analyst at Ford, said April 3 on a conference call with analysts. “So, certainly we’ll be adding some people to fill those shifts.”

Service Providers
Employment at service-providers increased 89,000 after a 211,000 gain in February. Professional and business service payrolls rose 31,000 last month, even as temporary hiring declined 7,500.

“We see modest growth inside the U.S. and demand for labor,” Carl Camden, president and chief executive officer of Kelly Services Inc. (KELYA), a Troy, Michigan-based staffing agency, said March 12 during a conference. The expansion is “a nice steady, not robust, not rock-and-roll, but a steady recovery, capable of producing a steady stream of jobs.”

At the Western Area Career and Technology Center in Canonsburg, Pennsylvania, about 25 miles southwest of Pittsburgh, the job placement rate is 94 percent.

Some companies in the region, home to an energy boom related to shale gas drilling, are starting to compete for workers, Joseph Iannetti, the school’s director said April 4. Enrollment at the campus in Canonsburg, typically less than 400 students, is 430 this year, he said.

Demand for Skills
“We’re about to go into a really nice labor shortage here,” he said. “We’re seeing increasing demand for people with skill.”

Matt Stuckey, 42, sought work for several months in 2011. In February, the former U.S. Marine officer became a marketing director for the United Services Automobile Association, a San Antonio, Texas-based provider of financial services to military personnel.

“During the fourth quarter of last year it was very quiet,” he said in a March 27 telephone interview. “Then at the beginning of the year the job market just turned on.”

The Commerce Department last week said the economy expanded at a 3 percent annual pace in the fourth quarter after a 1.8 percent rate in the prior three months. Gross domestic product grew at a 2 percent pace in the first quarter, according to the median estimate in a Bloomberg survey of economists last month.

Construction Jobs
Today’s report also showed construction companies reduced payrolls by 7,000 workers last month after a 6,000 decrease. Government payrolls fell 1,000 in March.

Average weekly earnings fell to $806.96 in March from $807.56, today’s report showed. The average work week for all workers decreased to 34.5 hours from 34.6.

Wage increases are needed to help Americans weather gasoline prices that have increased by 66 cents this year through April 4, to $3.94 a gallon, according to data from AAA, the nation’s largest auto club.

The so-called underemployment rate, which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking, decreased to 14.5 percent from 14.9 percent.

Bernanke, in a speech to economists on March 26, said the employment gains have been a “welcome development. Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks.”

“We cannot yet be sure that the recent pace of improvement in the labor market will be sustained,” Bernanke said, adding he was particularly concerned about the number people out of work for six months or longer.

The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more eased as a percentage of all jobless, to 42.5 percent from 42.6 percent.

 

[Muthukali]

U.S. Stock Futures, Dollar Fall While Treasuries Rise on Jobs

U.S. stock futures fell, signaling more Standard & Poor’s 500 Index losses following the biggest weekly retreat of the year, as the dollar declined while Treasuries and gold rose after American employers added fewer jobs than forecast in March.

S&P 500 futures slumped 1.1 percent to 1,374.90 following the benchmark index’s 0.7 percent weekly loss. All stock exchanges in the U.S., western Europe, Canada and Brazil were closed for Good Friday. Russia’s Micex Index retreated 1.9 percent at 10:10 a.m. New York time. The dollar lost as much as 1.3 percent to 81.31 yen, the lowest in a month. Yields on 10- year Treasuries (USGG10YR) fell 12 basis points to 2.06 percent. Gold for immediate delivery rose 0.4 percent to $1,638.20 an ounce.

Yields on 10-year Treasuries dropped the most intraday since January after the U.S. Labor Department said employers added 120,000 jobs, the fewest in five months and less than the median economist forecast of 205,000 in a Bloomberg survey. The amount had exceeded 200,000 for three straight months.

“This is a real shock,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion, said in a telephone interview. “Everybody is so hung up on the 200,000 increase.”

Equity traders had 45 minutes to react to the jobs report in the U.S. Futures linked to the S&P 500 and Dow Jones Industrial Average stopped at 9:15 a.m. New York time on CME Group Inc.’s Chicago Mercantile Exchange.

Commodities, Bonds
While gold traded in London, U.S. commodity markets were shut for the holiday. The Securities Industry and Financial Markets Association recommended trading in fixed-income securities end at noon in New York, opting for an early close rather than a complete shutdown because of the jobs report.

The U.S. unemployment rate fell to 8.2 percent, the lowest since January 2009, from 8.3 percent. Faster employment growth that leads to bigger wage gains is necessary to propel consumer spending that accounts for about 70 percent of the economy. The data also showed Americans worked fewer hours and earned less on average, helping explain why the Federal Reserve says interest rates may need to stay low at least through late 2014.

“This is not a horrible report, but it is weaker than the market has recently become accustomed to,” Thomas Simons, a government-debt economist at Jefferies Group Inc., wrote in a note to clients. “This is going to turn up the heat on the debate for QE3 since a deceleration in the economic data has been highlighted as a prerequisite for such a program,” he said, referring to a third round of stimulus measures known as quantitative easing.

Before the U.S. jobs report, Asian stocks and South Korea’s won fell on concern Europe’s debt crisis will weigh on global growth. The MSCI Asia Pacific Index (MXAP) slid 0.4 percent, and the won weakened against all 16 major peers. Taiwan’s Taiex Index rallied 0.9 percent after the finance minister said some foreign investors may be exempt from a capital-gains tax.

 

[Muthukali]

Stock Futures Plunge Following Weak Jobs Report

U.S. stock futures fell, signaling more Standard & Poor’s 500 Index losses following the biggest weekly retreat of the year, after American employers added fewer jobs than forecast in March.

S&P 500 (SPX) futures expiring in June slumped 1.3 percent to 1,372.70 at 7:07 a.m. Tokyo time following the benchmark index’s 0.7 percent weekly loss. Dow Jones Industrial Average futures dropped 143 points, or 1.1 percent, to 12,835. Nasdaq-100 Index futures retreated 1.2 percent to 2,721.50. U.S. stock exchanges were shut for Good Friday on April 6, when the employment report was released.

Equities slumped last week after the Federal Reserve signaled it will refrain from further monetary stimulus and concern about Europe intensified. The U.S. Labor Department said April 6 that employers added 120,000 jobs, the fewest in five months and less than the median economist forecast of 205,000 in a Bloomberg survey. The amount had exceeded 200,000 for three straight months.

“This is a real shock,” Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion, said in a telephone interview. “Everybody is so hung up on the 200,000 increase.”

The S&P 500 fell 0.7 percent last week to close at 1,398.08 on April 5, after reaching the highest level since May 2008 on April 2. The Dow Jones Industrial Average lost 151.90 points, or 1.2 percent, to 13,060.14 last week.

Alpha Natural, Apple
Nine out of 10 S&P 500 industries retreated during the holiday-shortened week. Energy companies fell the most as Alpha Natural Resources Inc. (ANR) slumped 6.6 percent, leading the group to a 1.8 percent drop. SanDisk Corp. and Constellation Brands Inc. tumbled at least 8.4 percent after providing disappointing forecasts. Apple Inc. jumped 5.7 percent, helping drive technology companies in the benchmark index to the longest string of weekly gains since at least 1989.

Equities failed to build on the S&P 500’s best first- quarter rally since 1998. Minutes from the March 13 meeting of the Federal Open Market Committee showed that the central bank will refrain from increasing monetary accommodation unless economic expansion falters or prices rise at a rate slower than its 2 percent target. Concern about Europe’s debt crisis intensified as Spain sold 2.59 billion euros ($3.4 billion) of bonds at an auction, less than the maximum target of 3.5 billion euros.

The U.S. jobless rate fell to 8.2 percent, the lowest since January 2009, from 8.3 percent, the Labor Department said. Faster employment growth that leads to bigger wage gains is needed to propel consumer spending that accounts for about 70 percent of the economy. Americans worked fewer hours and earned less on average, helping explain why the Fed says interest rates may need to stay low at least through late 2014.

Pace of Recovery
“What it calls into question and what the debate will be about is, once again, what is the pace of the recovery?” Mark Freeman, who oversees about $13 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a telephone interview.

Fed Chairman Ben S. Bernanke has kept rates near zero since 2008 and expanded the central bank’s balance sheet with two rounds of asset purchases totaling $2.3 trillion. S&P 500 rallies during the first quarter of 2010 and 2011 stalled in April both years, with the index sinking as much as 16 percent and 19 percent, respectively, amid concern the Fed would stop stimulating the economy.

The S&P 500 surged 12 percent from January through March of this year as data on manufacturing, real estate and the labor market boosted optimism about the world’s largest economy. Reports last week showed manufacturing in the U.S. expanded at a faster pace than forecast while jobless claims dropped to the lowest level in four years.

 

[Muthukali]

VIX Posts Longest Streak of Gains Since 2003

The benchmark gauge for U.S. options prices rose for a seventh day, the longest streak since August 2003, as concern about employment growth and earnings spurred investors to guard against losses in stocks.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 13 percent to 18.81 today, its highest level in a month. The VIX measures the cost of options on the Standard & Poor’s 500 Index, which has fallen four straight days and retreated 1.1 percent to 1,382.20 today.

“We’re in a corrective phase and people are protecting themselves,” Bob Baur, chief global economist at Principal Global Investors, which oversees about $242 billion, said today in a phone interview. “The economic data is softening and there’s a lot of risk in the market.”

Prices to insure equities increased after the Labor Department said on April 6 that employers added 120,000 jobs, the fewest in five months and less than the median economist forecast of 205,000 in a Bloomberg survey. The VIX rose and equities slumped last week after the Federal Reserve signaled it will refrain from further monetary stimulus and concern grew about Europe’s debt crisis.

Spain is in “extreme difficulty,” Prime Minister Mariano Rajoy said April 4, raising the possibility of a bailout. The fourth-biggest economy in the region sold 2.59 billion euros ($3.4 billion) of bonds at an auction last week, near the minimum, and the spread between yields on its 10-year debt and German bonds widened to a level last seen Dec. 12.

Europe, Earnings
“There’s stress in Europe, concerns about the U.S. economy and heavy news flow coming out in the next weeks in terms of earnings,” Ralph Edwards, director of derivatives strategy at Investment Technology Group Inc. in New York, said in a phone interview. “All of that is pushing the VIX back up.”

The VIX fell a record 64 percent in the last two quarters as improvements in U.S. payrolls and consumer confidence pushed the S&P 500 to its biggest first-quarter rally since 1998, advancing 12 percent in 2012 through March 30.

Alcoa Inc. is scheduled to disclose first-quarter results tomorrow, the first Dow Jones Industrial Average company to report. The New York-based aluminum producer will report a loss of 4 cents a share, according to the average of 19 analyst estimates in a Bloomberg survey.

VIX futures expiring this month rose 6.2 percent to 19.60, while May contracts rose 4.9 percent to 21.45. The VIX, a gauge of expected S&P 500 price swings over the next 30 days, has averaged 20.54 over its 22-year history. The VIX averaged 18.04 from January through April 2011, falling to 14.62 on April 28, a day before the S&P 500 peaked and began a 19 percent decline that lasted until Oct. 3.

VIX Posts Longest Streak of Gains Since 2003​

A trader signals an order in the Volatility Index Options (VIX) pit on the floor of the Chicago Board Options Exchange (CBOE) on Aug. 9, 2011. VIX futures expiring this month rose 4.1 percent to 19.20.​

 

[Muthukali]

JPMorgan’s Iksil May Spur Regulators to Dissect Trading

Market-moving trades by JPMorgan Chase & Co. (JPM)’s chief investment office probably will force regulators to seek more detail on banks’ derivatives positions to help them distinguish risk management from speculation.

Bruno Iksil, a London-based trader in the unit, has built derivatives positions linked to corporate credit that are so big he’s moved markets, according to hedge fund managers and dealers. While Joe Evangelisti, a bank spokesman, said yesterday that the trades are part of the firm’s hedging strategy, four market participants said they resemble proprietary bets, or wagers with the lender’s own money.

Executives at New York-based JPMorgan, the biggest U.S. bank with $2.27 trillion of assets at year-end, have opposed the so-called Volcker rule that seeks to prevent banks with federal backing from making speculative trades. Details on Iksil’s positions are too sparse for regulators to determine whether they should be permitted, said Frank Partnoy, a former derivatives trader who’s now a law and finance professor at the University of San Diego.

“This could be an almost completely matched, hedged position, or it could be massively risky, and there’s just no way to tell without getting more complete disclosure,” Partnoy, author of “Infectious Greed: How Deceit and Risk Corrupted the Financial Markets” said in a phone interview. “I’m surprised that regulators don’t see this example and cry out for more disclosure and more information about these contracts.”

Bank Regulators
Judith Burns, a Securities and Exchange Commission spokeswoman, declined to comment on whether the agency is looking into the trading. Bryan Hubbard, a spokesman with the Office of the Comptroller of the Currency, which regulates banking at JPMorgan, and the Federal Reserve’s Barbara Hagenbaugh also declined to comment.

The three regulators are among those working on the final version of the Volcker rule.

Regulators are stationed in JPMorgan’s offices and are aware of what the bank is doing, said a person familiar with the company’s thinking, who asked not to be identified because he wasn’t authorized to discuss it.

The results of JPMorgan’s chief investment office “are disclosed in our quarterly earnings reports and are fully transparent,” Evangelisti said in a phone interview.

Harvey Pitt, a former U.S. Securities and Exchange Commission chairman, said yesterday in an interview on Bloomberg Television’s “InBusiness With Margaret Brennan” that trading such as Iksil’s should raise regulatory concerns because it’s influencing market prices.

‘Dispel Concerns’
“I’d want to talk with the folks at JPMorgan and understand exactly what took place here,” Pitt said. “And then I would try to get a report out to the public as quickly as possible to dispel concerns about things that may not have occurred and to raise issues about things that actually did occur.”

Arthur Levitt, another former SEC chairman who is a senior adviser to Goldman Sachs Group Inc. (GS), said in a radio interview on “Bloomberg Surveillance” that he expects regulators will require more information on banks’ derivatives positions.

“And I think that is unfortunate,” said Levitt, who also is on the board of Bloomberg LP, the parent of Bloomberg News. “That raises all kinds of competitive issues.”

JPMorgan holds a portfolio of investment-grade debt and uses “credit-related instruments” such as derivatives to protect against a decline in the value of the holdings, Evangelisti said.

‘Simply a Balancing’
“Our most recent activity noted in the media is simply a balancing of those credit-related investments to reduce the impact of our hedge,” he said. “We do this in the ordinary course of our asset- and liability-management activities.”

Jack Gutt, a spokesman at the Federal Reserve Bank of New York, declined to comment on whether the New York Fed is examining the trades. Jamie Dimon, JPMorgan’s chairman and chief executive officer, is on the New York Fed’s board of directors.

“This will be the first test of how aggressively the Fed will enforce the Dodd-Frank Act,” which includes the Volcker rule, said Mark Williams, a lecturer at Boston University’s School of Management. “From a Fed regulatory standpoint, I see JPMorgan as having some serious explaining to do.”

The positions, by the bank’s calculations, amount to tens of billions of dollars and were built with the knowledge of Iksil’s superiors, a person familiar with the firm’s view said.

Price Movements
Iksil may have built a position totaling as much as $100 billion in contracts in one index, according to the market participants, who said they based their estimates on the trades and price movements they witnessed as well as their understanding of the size and structure of the markets.

Even if regulators are satisfied that Iksil’s trades are intended to hedge other risks the bank is taking, regulators should be aware that derivatives often fail as offsets because of differences in the way contracts are written and traded, Partnoy said.

“It’s not a pure hedge, it has a speculative element to it, and that’s particularly true when the contracts are this big, when you’re talking about tens of billions of dollars,” said Partnoy, whose new book “Wait: The Art and Science of Delay” is being published in June by PublicAffairs.

“The only perfect hedge is in a Japanese garden,” he said.

 

[Muthukali]

Stocks Drop as Gold Rises After Disappointing Jobs Report

U.S. stocks fell, extending losses from the Standard & Poor’s 500 Index’s worst week of 2012, while yields on 10-year Treasuries slipped and gold rose as job creation in the world’s biggest economy trailed estimates.

The S&P 500 lost 1.1 percent to 1,382.20 at 4 p.m. New York time. Treasury 10-year yields slipped as much as four basis points to a one-month low of 2.02 percent. Gold futures added 0.8 percent to $1,643.90 an ounce. The euro reversed losses, climbing 0.1 percent to $1.3113. Copper futures slumped to the lowest level since Feb. 17.

U.S. employers added 85,000 fewer jobs in March than economists projected, the biggest shortfall since the report released on July 8, according to data compiled by Bloomberg. The Labor Department’s April 6 statement spurred concern about the pace of American growth after improving economic data helped fuel a 12 percent first-quarter rally in the S&P 500 (SPX), the best annual start since 1998. The index lost 0.7 percent last week.

“The economy does continue to grow, but slowly,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “That’s been the source of frustration for a lot of investors, that we haven’t had the big forward movement in the economy like we have in the past.”

All western European stock markets were shut for holidays, along with Australia, New Zealand, Hong Kong, Thailand and South Africa. U.S. markets were closed on April 6, when the monthly report from the Labor Department was released. The MSCI Asia Pacific Index (MXAP) of shares in the region fell 0.6 percent today.

Overcoming Jobs
The U.S. jobs report presents a challenge that stocks have overcome nine times during the bull market that drove the S&P 500 up more than 100 percent in three years. While the S&P 500 averaged losses of 0.8 percent in the day after the data missed projections by at least 85,000 since March 2009, the benchmark gauge cut its decline in half a week later and was up 0.9 percent after two weeks, the data show.

Alcoa Inc. (AA) slipped 0.3 percent. The aluminum producer is scheduled to disclose first-quarter results tomorrow, the first Dow Jones Industrial Average company to report. AOL Inc. (AOL) surged 43 percent, the most since it was spun off from Time Warner Inc. in 2009, after agreeing to sell and license patents to Microsoft Corp. in a deal valued at $1.06 billion.

The Shanghai Composite Index (SHCOMP) slid 0.9 percent. China’s consumer prices rose 3.6 percent in March from a year earlier, the government said. That compared with the 3.4 percent median estimate in a Bloomberg survey of economists and a 3.2 percent gain the previous month. The one-year swap rate rose five basis points to 3.195 percent.

‘High and Disappointing’
“The CPI number is very high and disappointing,” said Ju Wang, a rates strategist at Barclays Plc in Singapore. “It’s bad for sentiment as it may delay a reserve requirement cut.” Barclays has predicted a reduction this month.

Treasuries rose, driving yields lower, as investors sought the safety of U.S. debt amid concern about the economy. Investors prepared to bid at three sales of coupon-bearing debt totaling $66 billion starting tomorrow.

The Swiss franc breached the 1.20 limit versus the euro early in Asian trading today, the second time the barrier has been crossed since Switzerland’s central bank introduced the currency cap on Sept. 6.

While gold futures advanced, the S&P GSCI Index of 24 raw materials retreated 0.6 percent. Copper in New York fell to $3.705 a pound, the lowest level since Feb. 17.

 

[Muthukali]

Businesses think it's okay to bribe officials: study - Vietnam

Many businesses consider bribing officials an acceptable practice in Vietnam, according to a study done by the Vietnam Chamber of Commerce and Industry (VCCI).

A Vietnamnet report Wednesday said the study found most of more than 270 businesses surveyed were willing to pay or have paid bribes to "lubricate" procedures related to their business.

The survey was conducted in Hanoi, the northern city of Hai Phong, the central city of Da Nang, Ho Chi Minh City, the southern province of Dong Nai, and the Mekong Delta city of Can Tho as part of a project initiated by VCCI’s Steady Development for Businesses Office.

Money envelopes, travel tours, dinners and employment of officials' relatives were among several forms of bribes mentioned.

In some cases, officials earn profits from their shares in businesses, even though they never buy the shares, the study found.

It also found that many companies willing to pay bribes to get things done saw themselves as victims of the practice.

Sixty-three percent of surveyed businesses said the complicated and unclear system of licenses was one of the main causes of corruption in Vietnam.

More than half of the respondents said that it was a complicated process to lease land from the state, while over 60 percent said they need to have contacts in banks or “relationships” with credit officials to access the government’s loan initiatives.

Nearly 50 percent of the businesses that supply products and services to state-owned agencies and companies admitted they send gifts to officials who are in charge of contracts.

Nguyen Ngoc Anh, chief of the study team, said only 32 percent of the businesses felt that the current laws were strict enough to fight corruption.

Up to 87 percent said laws still have loopholes that allow corruption.

According to Anh, another great challenge was that even good laws were not enforced properly. Businesses also blamed the low salaries that state employees get as a factor encouraging corruption.

VCCI Vice chairman Doan Duy Khuong said businesses accept the "lubricating fees" for immediate benefit, but in the long run, the practice will “destroy" their business thinking and competitiveness.

Businesses should not invest much into “gifts” for officials, Khuong said.

 

[Muthukali]

SET down 16.80 points - Thailand

The Stock Exchange of Thailand main index went down 16.80 points or 1.42% to close at 1,165.61 points at the end of trading session on Tuesday afternoon. The trade value was 25.01 billion baht, with 3.77 billion shares traded.

The SET50 index ended at 819.57 points, down 12.17 points or 1.46%, with a total trade value of 17.30 billion baht.

The SET100 index fell 26.62 points or 1.47% to stand at 1,778.34 points, with a total turnover of 20.60 billion baht.

The SETHD index went down 12.34 points or 1.09% to stand at 1,114.79 points, with total trade value of 6.19 billion baht.

The MAI index dropped 3.63 points or 1.25% to close at 286.89 points, with total transaction value of 305.49 million baht.

Top five most active values were as follows;

BANPU - stood at 582.00 baht, down 12.00 baht (2.02%)
SCB - stood at 141.50 baht, down 3.50 baht (2.41%)
SCC (XD) - stood at 341.00 baht, down 5.00 baht (1.45%)
PTT - stood at 349.00 baht, unchanged
ADVANC - stood at 169.50 baht, down 5.00 baht (2.87%)

 

[Muthukali]

Vietnam Airlines confirms IPO plan for 2013, targets foreign investors

Vietnam Airlines aims to become Southeast Asia’s third-biggest carrier in 2015

National carrier Vietnam Airlines plans to conduct an initial public offering (IPO) no later than the end of next year, with 70-80 of its stake remaining with the state, a newspaper reported Friday.

The plan is part of a larger restructuring roadmap for the carrier, which aims to become Southeast Asia’s third-biggest airline in 2015, according to Dau Tu, a newspaper published by the Ministry of Planning and Investment.

The IPO is expected to raise US$200 million. “This target can only be reached if the company can attract foreign investors,” a senior official was quoted as saying in the report.

Vietnam Airlines plans to retain two of its subsidiaries – technical service provider VAECO and jet fuel supplier VINAPCO – and withdraw from other non-airline sectors, including banking and insurance.

The divestment is expected to bring back another VND530 billion ($25.48 million) for the company, according to the plan.

Chief Executive Officer Pham Ngoc Minh said at a briefing in Hanoi last month that Vietnam Airlines will postpone plans for an IPO until the second half of next year from the original schedule of this year as the “market is not yet attractive to investors.”

The carrier has announced plans to receive 26 A321 planes by 2014 and it intends to order A320 neo-family planes for deliveries after that. It will also get 19 Boeing 787-9 Dreamliners and 14 Airbus A350s beginning in 2015.

 

[Muthukali]

Vietnam cuts rates for second time in a month as economy slows

Vietnam cut its interest rates for the second time in less than a month as easing inflation gives the central bank room to bolster economic growth.

The State Bank of Vietnam will reduce the refinancing rate by 1 percentage point to 13 percent, and cut the discount rate by the same amount to 11 percent, effective on Wednesday April 11, it said in a statement on its website Tuesday.

The central bank also lowered the dong deposit cap for terms of one month and above to 12 percent from 13 percent.

Vietnam’s economy expanded at the slowest pace since 2009 in the first quarter as bank lending declined and domestic demand weakened, adding pressure on the central bank to lower rates to spur growth. Policy makers have ordered the nation’s top four banks to lower borrowing costs from as high as 25 percent, seeking to counter a fall in loans.

“Inflation is still on a downtrend,” Tai Hui, Singapore-based head of Southeast Asian economics at Standard Chartered Plc, said in a note after the announcement. “The rate cut in March was well received by the market. This perhaps gave the State Bank of Vietnam some confidence to go ahead this time, especially when growth in the first quarter was quite weak.”

Vietnam’s consumer prices rose 14.15 percent in March from a year earlier, compared with a 16.44 percent pace in February. While it was the slowest pace of increase since March 2011, Vietnam’s inflation is still the fastest in a basket of 17 Asia- Pacific economies tracked by Bloomberg.

 

[Muthukali]

Elliott drops UK lawsuit against Vietnam’s Vinashin Shipping

Hedge fund Elliott Advisers LP dropped a UK lawsuit against Vietnam’s biggest shipbuilder, lawyers for the state-owned Vietnam Shipbuilding Industry Group said.

The company, known as Vinashin, and its advisers “were informed by Elliott’s lawyers, that Elliott wanted to discontinue the court action,” Mayer Brown LLP, Vinashin’s lawyers, said Tuesday in an e-mail. “No reason was offered by Elliott to Vinashin for the discontinuance.”

Elliott was suing for the face value on the investment, which totaled $13.2 million with unpaid interest and default interest.

Vinashin defaulted on the first payment of a $600 million loan in December 2010. It racked up debts of over $4.4 billion.

Eight former Vinashin executives, including the ex-chief executive officer, were sentenced to prison terms of as much as 20 years at the end of March.

A spokeswoman for Elliott’s lawyers at Bingham McCutchen LLP in London declined to comment.