Regions

[Muthukali]

RBA Cuts Growth, Inflation Forecasts on Weaker Jobs

The Reserve Bank of Australia cut growth and inflation forecasts as weak labor and housing markets keep price gains in check, underscoring its decision this week to cut interest rates by the most in three years.

“Labor market conditions have continued to be on the soft side to date, with large increases in employment in mining and some service industries roughly offset by declines in the manufacturing, hospitality and retail sectors,” the central bank said today in its quarterly monetary policy statement. “A recovery in housing construction is unlikely in the near term.”

The RBA sees average growth of 3 percent in 2012, down from its February estimate of 3.5 percent. Consumer prices will rise 2.5 percent in the year to December, from a previous prediction of 3 percent; underlying inflation is predicted at 2.25 percent from a previous 2.75 percent, the central bank said. The estimates are based on the overnight cash rate target remaining at 3.75 percent, it said.

The revisions reflect RBA Governor Glenn Stevens’s decision three days ago to slash the benchmark rate by half a percentage point to a two-year low, even as most economists polled forecast a quarter-point reduction. The RBA is trying to buttress a housing market in which prices have fallen for five straight quarters, bolster employment as a high currency hurts non- resource industries and boost confidence that has weakened among consumers who are saving more.

The Australian dollar was at $1.0259 as of 11:32 a.m., little changed from before the RBA statement. It was heading for a 2 percent drop since April 27, which would be the biggest weekly slide this year.

‘Subdued Growth’
“The assumed high level of the exchange rate and a weak short-term outlook for building construction are expected to result in subdued growth outside of the mining sector in the near term,” the RBA said. “Growth in household spending moderated at the end of 2011 and partial indicators suggest that it remained soft in early 2012.”

Australia’s four biggest banks are trying to guard margins against further erosion from elevated wholesale funding costs, by passing through less of the central bank’s rate cuts to mortgage holders. The RBA lowered rates twice late last year by 25 basis points.

The RBA said today that its half percentage-point cut this week was made “in order to deliver the appropriate level” of borrowing rates. “The board judged that it was desirable for financial conditions to be easier than those which had prevailed in December, and that this required a 50 basis point reduction in the cash rate.”

Tradables Inflation
The nation’s unemployment rate has held at about 5.2 percent for the past six months, less than half the level in Europe, even as the currency’s strength hurts manufacturing and tourism.

The central bank, explaining the revision of the inflation outlook, said it expects the decline in the price of international goods to diminish given the exchange rate has been little changed for a year. A weakening in domestically produced inflation will rely on moderate wage growth due to a weaker labor market and improved productivity as companies respond to the heightened competitive pressure caused by the exchange rate, it said.

The central bank described inflation last quarter as “unusually low.”

Budget Cuts
The economy will also have to absorb the biggest fiscal contraction as a proportion of gross domestic product since at least the fiscal year that started in July 1953. The government is seeking to return the budget to surplus in the fiscal year beginning July 1. It will deliver the budget May 8.

The RBA noted the plan, saying “public final demand is also expected to grow at well below-trend rates over the forecast period as both federal and state governments undertake fiscal consolidation.”

Australia’s economy is struggling to accelerate, unexpectedly posting back-to-back trade deficits as coal and metal exports slumped. The RBA said today that “exports have been revised lower, largely reflecting a reassessment of the ability of mining companies to utilize new transport and port capacity fully in the near term, along with weaker manufacturing exports.”

The Australian dollar has risen in six of the past seven quarters. Tourism, manufacturing and retail industries have weakened under the currency’s 41 percent rise in the past three years.

Traders are betting there’s a 74 percent chance Stevens will lower rates by a quarter point to 3.5 percent at the next meeting in June, according to swaps data compiled by Bloomberg.

Resource Bonanza
Even after this week’s rate cut, Australia has the highest borrowing costs among major developed nations as Stevens seeks to manage an economy powered by demand from emerging nations including China and India for iron ore, coal and natural gas. Chevron Corp., Royal Dutch Shell Plc, Woodside Petroleum Ltd. and ConocoPhillips are among energy companies spending $180 billion to explore and develop gas fields in Australia.

The RBA said the outlook for mining investment has been revised higher since its last statement as its liaison suggested some projects previously seen as “only possible now look more likely to go ahead than had been previously assumed, and that work on some other projects is progressing at least as fast as was expected.”

The central bank said the biggest offshore risk to its forecast is that Europe’s sovereign debt crisis could intensify and derail the upswing in the global economy. Global growth is expected to be 3.5 percent this year and 4 percent next year, it said.

“While the likelihood of that occurring has eased somewhat in recent months, partly because of the actions of authorities in Europe, the situation remains fragile,” the central bank said in the statement.

 

[Muthukali]

Sun Hung Kai Properties Suspends Trading of Hong Kong Shares

Sun Hung Kai Properties Ltd. (16), Hong Kong’s biggest developer, halted trading of its shares today pending a price-sensitive announcement.

Hong Kong’s anti-corruption commission arrested Thomas and Raymond Kwok, the billionaire co-chairmen of Sun Hung Kai, and Rafael Hui, formerly the city’s No. 2 official, in March in one of the highest-level investigations in the body’s 38-year history. Thomas Chan, an executive director of the company, had been arrested earlier. As of yesterday, no charges had been laid by the Independent Commission Against Corruption, known as the ICAC.

The probe has increased public concern about real estate policies implemented by the government as property price gains made Hong Kong the world’s most expensive place to own a home. Thomas and Raymond Kwok were arrested in connection with a probe into offenses suspected to have been committed under the Prevention of Bribery Ordinance, the company said March 29.

Sun Hung Kai’s spokeswoman Brenda Wong declined to comment on today’s suspension, as did Valentina Chan, a spokeswoman for the ICAC.

Sun Hung Kai shares have fallen 15 percent in Hong Kong trading since the March 29 arrests, compared with a 1 percent decline in the Hang Seng Property Index.

Raymond Kwok denied any wrongdoing at an April 4 press conference at the company’s headquarters, his first and only comments since the arrest.

SUNeVision Holdings Ltd. (8008), a unit of Sun Hung Kai, also suspended trading in its shares today.

 

[Muthukali]

Job Gains Trailing Forecasts Add to U.S. Slowdown Concern

American employers in April added the fewest number of jobs in six months and wages stagnated, adding to concern the almost three-year-old economic expansion is cooling.

The 115,000 increase in payrolls was less than forecast and followed a revised 154,000 gain in March that was larger than initially estimated, Labor Department figures showed yesterday in Washington. The median estimate in a Bloomberg News survey called for a 160,000 advance. Unemployment fell to a three-year low of 8.1 percent as people left the labor force.

“Employers are hiring, they’re just hiring at a very modest rate,” said Jonas Prising, president of the Americas at Milwaukee-based ManpowerGroup, a provider of temporary workers. “The current growth rate of employment is probably consistent” with economic growth of 2 percent, he said.

A slowdown in hiring, along with wage gains that are failing to keep pace with inflation, may make it difficult for consumers to boost their spending, which accounts for 70 percent of the world’s largest economy. The figures also represent a challenge for President Barack Obama, who was attacked by Republican opponent Mitt Romney’s campaign for his “failed economic record.”

The April increase in payrolls leaves the labor market 5 million jobs short of the 8.8 million lost as a result of the 18-month recession.

Stocks slumped yesterday, sending the Standard & Poor’s 500 Index to its worst week of the year. The S&P 500 dropped 1.6 percent to 1,369.10 at the close in New York. The yield on the benchmark 10-year Treasury note fell to 1.88 percent from 1.93 percent late the prior day.

Small Businesses
Weakening consumer confidence is depressing sales at businesses like Tops American Grill, Bakery & Bar in Schenectady, New York. Evan Christou, the owner, said he would need to see a significant increase in sales for a sustained period before adding to his staff of 42 employees.

“We’re kind of consolidating and multitasking,” said Christou, 49. “In this market, it’s pretty much a wait-and-see attitude.”

Transportation and warehousing, government agencies and construction were among the areas cutting jobs in April, while factories added the fewest workers in five months, yesterday’s report showed. Bloomberg survey estimates for total payrolls ranged from increases of 89,000 to 210,000 after a previously reported 120,000 rise in March.

Private Payrolls
Private payrolls during Obama’s term in office turned to positive from negative in April, with a net gain of 35,000. Overall payrolls remain lower than when Obama was inaugurated because there are 607,000 fewer government workers, including federal, state and local employees.

Edward LaHaie, 52, of Powder Springs, Georgia, got a job in April as a regional sales manager for Rawal Devices Inc., a maker of control systems for industrial and commercial air conditioners. He had been out of work since November when he lost a similar sales job.

“There are always opportunities for someone who has skills,” he said. “It took a little longer than I would have liked. I was unemployed for 170 days and I counted every one of them.”

The data came a day before Obama formally opened his re- election campaign with rallies in the swing states of Ohio and Virginia. Romney has made the president’s stewardship of the economy a point of attack and polls show voters are focused on jobs and growth.

Romney Criticism
“From green jobs that never materialized to an unemployment rate that has remained above 8 percent for 39 straight months, President Obama’s rhetoric simply doesn’t match with his failed economic record,” Andrea Saul, a Romney campaign spokeswoman, said in a statement yesterday.

Alan Krueger, chairman of Obama’s Council of Economic Advisers, focused on 26 consecutive months of private job growth. April “provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression,” he said in a statement.

The Obama campaign is pointing to a revival in the auto industry to support his record.

Chrysler Group LLC, the automaker controlled by Fiat SpA, said it will accelerate the addition of 1,100 jobs and a third crew of workers by hiring them in November, pulling ahead plans for increasing production in early 2013.

Economists pointed to some bright spots in the report. Payroll gains for the prior two months were revised higher by a total of 53,000 jobs. Some of the slowdown may reflect unusually warm weather that boosted hiring early in the year.

Pulled Forward
“It’s very possible that hiring was pulled forward” due to a mild January and February, said Christophe Barraud, an economist and strategist at Market Securities Paris LLP, who correctly forecast April payrolls. “This report is not good, but we have to wait for the next one to see if the real trend is actually decelerating.”

The unemployment rate was forecast to hold at 8.2 percent, according to the survey median. It has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.

The participation rate, which indicates the share of working-age people in the labor force, fell to 63.6 percent, the lowest since December 1981, from 63.8 percent.

The report also showed a drop in long-term unemployed Americans. The number of people out of work for 27 weeks or longer fell as a percentage of all jobless, to 41.3 percent.
Financial Analyst

Among those still looking for work is David Bouchey, of Aurora, Colorado, who lost his job as a financial analyst in 2007. He said he thought his years of experience and three post- graduate degrees would land him a job.

“I’m overqualified for almost every job I apply for,” said Bouchey, 54. He, his wife and two sons live on about $1,000 a month in public assistance. “I never thought the economy would be this bad.”

Average hourly earnings were $23.38 in April, little changed from the month before, the jobs report showed. It was the first time without an increase since August. Earnings rose 1.8 percent from April 2011, matching January’s 12-month increase as the smallest in a year. The average work week for all workers held at 34.5 hours.

Faster economic growth would help lay the groundwork for more hiring. The economy expanded at a 2.2 percent annual rate in the first quarter after a 3 percent pace the prior three months, according to Commerce Department data. Consumer spending grew 2.9 percent, the most in more than a year.

Europe’s Jobless
The U.S. labor market is still faring better than some of the other major economies. Joblessness in the 17-nation euro area increased to 10.9 percent in March, the highest since April 1997, from 10.8 percent a month earlier.

United Parcel Service Inc. (UPS), the world’s largest package- delivery company, is among firms taking note.

“During the quarter, the most positive news has come from the U.S. where indications of economic rebound are evident,” Scott Davis, chief executive officer of UPS, said on an April 26 conference call. “Retail sales have grown faster than expected and the employment environment has improved. On the other hand, economies in other parts of the world continue to face challenges.”

To provide some fuel for the economy, Federal Reserve policy makers last month repeated their plan to hold borrowing costs low through late 2014 to spur growth.

Fed Outlook
“The unemployment rate has declined but remains elevated,” Fed policy makers said in an April 25 statement. The group “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” and “anticipates that the unemployment rate will decline gradually.”

Factory payrolls increased by 16,000, the smallest in five months. Construction companies cut jobs for a third straight month. Retailers added 29,300 employees, almost recouping losses in the prior two months. Employment gains at service-providers were the weakest since August. Government payrolls declined for the seventh month in the last eight.

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 -- held at 14.5 percent.

 

[Muthukali]

Sarkozy Becomes First French President in 30 Years to Be Ousted

Nicolas Sarkozy’s defeat in the French presidential election makes him the first incumbent in more than 30 years to fail to win re-election, and the ninth European leader to be booted out since the region’s debt crisis began.

Sanctioned for his flamboyant personal style and slowing economic growth, Sarkozy lost to Socialist Francois Hollande, who got about 52 percent of the vote against 48 percent, polling estimates showed. Sarkozy is the second French president to lose a re-election bid since World War II after former President Valery Giscard d’Estaing was vanquished in 1981.

“After 35 years of politics, after 10 years at the highest levels of government, after five years as head of state, I will become a Frenchman among the French,” Sarkozy said last night, conceding defeat.

With joblessness at a 12-year high and public debt at a record, the electorate proved unwilling to forgive the 57-year- old lawyer for foibles such as celebrating his 2007 victory at a chic Paris restaurant and a holiday on a billionaire’s yacht, making the election an anti-Sarkozy vote.

“If the French had jobs and more money in their pockets, they’d be confident and ready to forgive,” said Laurent Dubois, a professor at the Institute of Political Studies in Paris.

Sarkozy joins a long list of victims of the crisis, which began with subprime mortgages in the U.S. before causing government yields to diverge across Europe. Leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia, Slovakia and the Netherlands were elbowed out from their posts.

Act Like a King
At the start of his term, Sarkozy, an outsider with immigrant roots, was France’s most popular leader since General Charles de Gaulle, World War II hero and founder of the Fifth Republic. By the time he announced his re-election bid in February, he was the most unpopular incumbent French president since the war and was counting on his stewardship of the debt crisis to deliver a second term.

The dislike of Sarkozy began well before the financial crisis hit France. His approval rating fell to 32 percent by May 2008, a year after his election, from 65 percent a month after his election, pollster TNS Sofres said.

“The French cut the heads off kings, but they also want a king and they want their king to act like a king,” said Fabrice Seiman, co-chief executive officer of Lutetia Capital in Paris, who was once an adviser to the budget minister.

Unpopularity
Sarkozy’s unpopularity began the night of his 2007 victory, which he celebrated at Fouquet’s, a fancy restaurant on Paris’s Avenue des Champs Elysees, with about a dozen chief executive officers.

He then went off the coast of Malta on the yacht belonging to one of them, Vincent Bollore.

Next came a public divorce with his wife Cecilia - the first ever by a sitting president - and an even more public courtship with singer-model Carla Bruni, his third wife, including a well-publicized visit to Euro Disney.

He used a presidential press conference Jan. 8, 2008 to announce that his affair with Bruni was “serious.” They were married Feb. 2, 2008 at the Elysee presidential palace.

On Feb. 23, 2008 he was caught on video at an agricultural fair using a vulgar expression against a man who refused to shake his hand.

Sarkozy tried to make amends. In a March 6 television interview, he said he regretted the evening at Fouquet’s and the yachting holiday, saying at the time he was disoriented because of his troubled second marriage.
‘Error Committed’

On RTL radio on April 20, Sarkozy said “the error I committed at the start of my tenure was to not understand the symbolic dimension of the presidency and not acting with enough gravity. I will not make the same mistake because now I understand the role.”

In October, he and Carla went out of their way to ensure that the birth of their baby girl, Giulia, was kept out of the media spotlight.

Sarkozy might have gotten away with his Ray-Ban wearing style and “President Bling-Bling” reputation had the economy not gone into a tailspin, said Dominique Reynie, a senior researcher at Paris’s Institute of Political Studies.

“People were fascinated with him when he arrived at the Elysee in his shorts and running shoes,” he said. “It was refreshing. But when the crisis began it became intolerable, and once the negative image kicked in it was impossible to dislodge.”

‘Refreshing’
Sarkozy campaigned in 2007 promising to create jobs and boost purchasing power. The fallout from the financial crisis hit France through 2008, driving the unemployment rate from a 30-year low of 7.5 percent in early 2008 to almost 10 percent at the end of 2011.

France weathered the economic malaise better than countries such as Spain, where one-in-four people is jobless, and avoided bank bailouts on the scale seen in either the U.K. or Germany.

On Sarkozy’s watch, the French growth slowed to 1.6 percent in 2011 from 2.3 percent in 2007, while the trade gap widened to a record 69.6 billion euros from 42.5 billion euros in the same period. Still, France avoided sliding back into recession, as happened in Britain, Italy and Spain.

Sarkozy pushed through some difficult domestic reforms, increasing the minimum retirement age to 62 from 60, guaranteeing a minimum transport service during strikes and making the running of universities more flexible.

He is also credited with key contributions to organizing support packages for countries such as Greece, Portugal and Ireland, as well as working within the Group of 20 nations to stiffen global financial regulation.

‘Merkozy’
The exit of Sarkozy, who with German Chancellor Angela Merkel, was at the heart of the efforts to resolve the region’s debt crisis, may slow the region’s recovery plan. Sarkozy and Merkel, leaders of Europe’s two largest economies, worked so closely the duo was called “Merkozy.”

“Along with Angela Merkel, Sarkozy saved Europe, but he grates on the nerves of many French,” said Lutecia’s Seiman.

Disagreement between European leaders on how to end the debt crisis and the growing burden of support for euro area members cost France its AAA credit rating for the first time.

Standard & Poor’s stripped France of its top rating by one level on Jan. 13. Sarkozy called it a non-event, saying it “changes nothing” and he has found vindication in the markets.

On the campaign trail, he regularly vaunted a drop in French borrowing costs as a sign of confidence from the financial markets.

AAA Rating
France’s benchmark 10-year bond currently yields about 2.8 percent, down from as much as 3.7 percent at the end of November. The equivalent Spanish securities yield 5.7 percent, while German Bunds pay 1.6 percent.

Sarkozy held interior, budget and finance ministry positions before running for president in 2007, while Hollande, also 57, has never held a ministerial post. Members of Sarkozy’s government criticized Hollande’s lack of experience during the campaign, warning it would hurt France’s credibility.

“Experience does matter,” Prime Minister Francois Fillon said during a January visit to Brazil. “That’s why Sarkozy should be re-elected.”

An Ifop poll taken during the April 22 first round showed that 73 percent of Hollande voters voted for the Socialist to punish Sarkozy’s government, much more than the 44 percent who said it was because they agreed with his ideas. The poll involved 3,509 people and no margin of error was given.

Hollande’s Project
Hollande has repeatedly accused Sarkozy’s government of increasing borrowing to fund tax breaks for the rich, swelling the public debt to 1.69 trillion euros, or 85.8 percent of gross domestic product from 64.2 percent in 2007.

Sarkozy announced measures to bolster growth and job creation, including an unpopular increase in the country’s value-added-tax to compensate for cuts in labor charges and the imposition of a financial transaction tax.

Hollande wants to force banks to separate consumer and investment operations and stop awarding stock options to executives. He has promised to tax personal earnings of more that 1 million euros at a rate of 75 percent, to boost France’s minimum wage and add 60,000 public school teachers.

Hollande often made references to Sarkozy’s “behavior” in his campaign speeches and advertised himself as a “normal” person, drawing an implicit contrast with his rival.

Envisaged Defeat
Unlike Hollande, Sarkozy isn’t a graduate of France’s elite Ecole Nationale d’Administration. The son of a Hungarian immigrant and grandson of a Jewish immigrant from Salonika, he earned a law degree from Paris X Nanterre university and worked in that profession during the 1980s while also remaining committed to politics.

He’ll be able to resume his career and spend time with his family after saying yesterday that he’ll be quitting politics.

“I’ve always envisaged defeat,” he said in January. “One must always envisage all possibilities.”

 

[Muthukali]

Asian Stocks Advance After Biggest Loss in Six Months

Asian stocks rose, with the regional benchmark index rebounding from its biggest loss in six months, after Capcom (9697) Co. forecast higher profit and Hong Kong Exchanges & Clearing Ltd. posted income that beat analysts’ estimates.

Capcom jumped 6.8 percent in Tokyo after the video-game developer said full-year net income will increase 46 percent. Honda Motor Co., Japan’s second-largest carmaker, climbed 1.9 percent after Credit Suisse Group AG raised its rating to outperform, the equivalent of buy. Leighton Holdings Ltd. added 1.2 percent in Sydney as the Australia’s largest construction company reaffirmed its profit forecast.

“It’s not as bad as it seems,” said Stan Shamu, a market strategist at IG Markets in Melbourne, a provider of trading services in stocks, bonds and commodities. “There are still growth concerns, but yesterday was just an easier decision for people to exercise caution. After such a big reaction we’d expect markets to come back.”

The MSCI Asia Pacific Index (MXAP) gained 0.3 percent to 121.61 as of 10:15 a.m. in Tokyo, with more than two shares rising for each that fell. The measure lost 2.9 percent in the past three days on concern Europe’s debt crisis may worsen amid political changes and the global economic recovery may falter as Australia’s central bank cut its economic growth forecast and U.S. services industries expanded less than forecast.

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The stock gauge finished the day little changed yesterday in New York, recovering from a 0.4 percent decline after Warren Buffett said American lenders are in “fine shape,” propelling a rally in bank shares.

The MSCI Asia Pacific Index has risen 6.5 percent this year through yesterday, compared with an 8.9 percent gain by the S&P 500 and a 4.2 percent advance by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 12.4 times estimated earnings on average, compared with a multiple of 13 for the S&P 500 and 10.6 times for the Stoxx 600.

 

[Muthukali]

Treasuries Snap Gain Before Three Debt Sales This Week

Treasuries snapped a two-day gain on speculation yields that approached record lows will erode demand when the government auctions $72 billion of coupon-bearing securities this week, starting with a three-year auction today.

Benchmark 10-year notes, scheduled for sale tomorrow, yielded 1.62 percentage points more than the upper end of the Federal Reserve’s target range for overnight bank loans, a three-month low. The average over the past five years is 2.08 percentage points. Yields slid yesterday as investors sought the safest assets after elections in France and Greece raised concern European governments will drop deficit-cutting plans that they implemented to combat the region’s debt crisis.

“The market is very expensive,” said Kei Katayama, who buys Treasuries in Tokyo at Daiwa SB Investments Ltd., which oversees the equivalent of $62 billion and is part of Japan’s second-largest securities company. “If the European situation clears up, then Treasury prices should correct.”

Ten-year notes yielded 1.87 percent of 9:46 a.m. in Tokyo, according to Bloomberg Bond Trader data. The 2 percent security due in February 2022 changed hands at 101 1/8. The rate was as low as 1.82 percent yesterday, versus the record of 1.67 percent.

The three-year auction will be for $32 billion, and the 10- year sale will total $24 billion. The Treasury Department will conclude this week’s offerings with a $16 billion 30-year bond on May 10.

U.S. debt rose yesterday after Francois Hollande, who defeated incumbent Nicolas Sarkozy for the French presidency, pledged to push for less austerity.

The Fed plans to buy as much as $5 billion of Treasuries today, targeting securities due from May 2018 to February 2020, according to the Fed Bank of New York’s website.

The purchases are part of the U.S. central bank’s effort to replace $400 billion of shorter-term debt in its holdings with longer maturities by the end of June to hold down borrowing costs.

 

[Muthukali]

S. Korea Producer-Price Inflation Eases Before Rate Decision

South Korean producer-price inflation cooled to the slowest pace in 26 months on a decline in meat and fish costs, according to a report released two days before a monetary-policy meeting.

Prices climbed 2.4 percent in April from a year earlier, the smallest gain since February 2010, after a 2.8 percent increase in March, the Bank of Korea said in a statement in Seoul today. Prices fell 0.1 percent from March.

“Waning price pressures will give policy makers more room to stay pat for a long time or even cut interest rates,” said Park Sang Hyun, chief economist at HI Investment & Securities Co. in Seoul. “Without a clear sign of growth momentum at home and overseas and a limited government budget, they may consider monetary easing as early as July.”

The Bank of Korea will keep its benchmark rate unchanged for an 11th straight month, according to all 15 economists surveyed by Bloomberg News. Samsung Securities Co. says that the first cut since 2009 may come next quarter as waning inflation allows policy makers to focus on spurring growth.

Consumer prices rose 2.5 percent in April from a year earlier, the slowest pace in 21 months, a government report showed on May 1.

South Korea’s economy expanded at the fastest pace in a year during the first quarter, boosted by government spending and investments by semiconductor chipmakers. Still, the Bank of Korea reduced its economic growth forecast for this year to 3.5 percent from 3.7 percent on April 16, citing downside risks from the European debt crisis and high oil prices.

 

[Muthukali]

Australia’s Trade Gap More Than Doubles to $1.62 Billion

Australia’s trade deficit widened in March to the biggest in five years as a 5 percent rise in imports outpaced export growth in an economy driven by the mining industry.

Imports outpaced exports by A$1.587 billion ($1.6 billion), from a revised A$754 million deficit in February, the Bureau of Statistics said in a report in Sydney today. The gap was the widest since a A$1.82 billion shortfall in May 2008 and exceeded the A$1.3 billion median estimate in a Bloomberg News survey of 20 economists.

The data add to pressure on central bank Governor Glenn Stevens to extend interest-rate cuts as the economy slows and inflation eases, and traders are betting on another cut next month. Stevens last week reduced rates by half a percentage point to a two-year low of 3.75 percent and the central bank revised its export outlook lower in a quarterly statement.

“The global environment is under a fair bit of stress,” said Tom Kennedy, economist at JPMorgan Chase & Co. in Sydney who forecasts another RBA rate cut in August. “At the moment the international story is outweighing the domestic strength in the Australian economy.”

The Australian dollar fell after the report. It bought $1.0171 as of 11:50 a.m. in Sydney from $1.0186 immediately before the figures were released.

Weaker International Demand
Exports rose 2 percent to A$24.5 billion, led by an 8 percent gain in rural goods, today’s report showed. Imports advanced 5 percent to A$26.1 billion on a 20 percent gain in consumption goods, the report showed.

Overseas shipments were affected by weaker international demand and disruptions on the supply side such as industrial disputes in the coal industry, Kennedy said. Imports were in part boosted by purchases of capital equipment by an expanding mining industry, he said.

“You have to look at this from a long-term perspective and how the economy is going to unfold,” he said. “The mining boom is continuing and the capex story is still alive.”

 

[Muthukali]

India Driving Away Telecom Operators Amid Probe: Tech

India’s mobile-phone industry, once a symbol of rapid growth, is turning into something else: a demonstration of the difficulty of doing business there. Some telecom companies have left and others said they may follow.

India has rewritten tax rules, scrapped 122 licenses tainted by graft allegations and recommended charging 11 times more for airwaves in a bid to wrest more money from operators to help plug the widest budget deficit among the biggest emerging markets.

Bahrain Telecommunications Co. (BATELCO), known as Batelco, left India after its permit was canceled. Emirates Telecommunications Corp., or Etisalat, has shut its operations in the country. Shares of billionaire Sunil Mittal’s Bharti Airtel Ltd. (BHARTI), India’s biggest operator, have dropped 8.2 percent this year. Idea Cellular Ltd. (IDEA), controlled by billionaire Kumar Mangalam Birla, has fallen 4.1 percent. India’s Benchmark Sensitive Index, or Sensex (SENSEX), has gained 7 percent.

“It has become a bit of a nightmare,” said Andrea Williams, who helps manage about $1 billion as head of European equities at Royal London Asset Management. “Expectations were higher for telecom than other Indian industries, but as of late we haven’t seen many decisions that have inspired a lot of confidence.”

Other Challenges
The telecommunications industry isn’t the only one facing regulatory and legal hurdles in India. Delays in approvals to acquire land for coal mining have hampered power generation. In July, the Supreme Court banned iron ore mining, following allegations of illegal extraction, in the state of Karnataka, cutting off supplies to steelmakers. ArcelorMittal (MT), the world’s largest steelmaker, and South Korea’s Posco have been waiting seven years to acquire enough land for steel mills worth a combined $36 billion.

ArcelorMittal’s billionaire Chairman Lakshmi N. Mittal, who started an oil refinery in India this month, said the country is growing more slowly than it can, partly because project permissions take too long. In December, Prime Minister Manmohan Singh, under fire from opposition parties and allies, scrapped a plan to allow foreign retailers, including Wal-Mart Stores Inc. and Carrefour SA, to open outlets.

Vodafone Group Plc (VOD), Telenor ASA (TEL), Idea and Bharti are among companies that helped to build the world’s second-biggest mobile-phone market after India opened up the industry in the 1990s. Subscribers have grown 158 times to 919 million since 2001, and competition means users enjoy some of the world’s cheapest calls.

Lost Revenue
The industry’s troubles started in 2010, when the nation’s auditor said the 2008 sale of permits to operate mobile-phone services was “arbitrary and lacked transparency,” and the government may have lost as much as $31 billion in revenue. The report sparked the country’s biggest corruption investigation and led to the arrest of the then-telecommunications minister, bureaucrats and company executives. All of the accused deny wrongdoing.

In February, India’s top court scrapped the 122 phone licenses, including those of Batelco, Etisalat (ETISALAT), Telenor and Russia’s AFK Sistema (AFKS), and ordered a fresh auction of airwaves.

Last month, the Telecom Regulatory Authority of India set a reserve price of 181 billion rupees ($3.4 billion) for a fresh permit spanning the country, compared with 16.6 billion rupees for similar licenses sold in 2008. Vodafone said the nonbinding recommendations will do “irreparable harm,” while the Cellular Operators Association of India called it a “disaster.”

Raising Call Charges
“Indian operators have grown accustomed to certain prices, so this may seem harsh, but I’m confident that the industry will prevail,” TRAI Chairman J.S. Sarma told reporters on April 23 in New Delhi. “Over a 20-year projection, these prices are more than manageable and we will give companies enough time to pay these prices.”

The proposals, if accepted by the government, will raise call charges by as much as 30 percent, companies including Vodafone said in a letter to Telecommunications Minister Kapil Sibal on April 27.

“These shortsighted recommendations could singlehandedly cut the industry’s growth in half,” said D.H. Pai Panandiker, president of the RPG Foundation, a New Delhi-based research group. “A sudden tariff hike will drive subscribers away.”

Telenor, the Nordic region’s biggest operator, jumped as much as 3 percent on April 30 after announcing a “precautionary measure” of writing down $682 million of remaining value in its Indian operations. The company has said it will quit India if the airwave recommendations are accepted.

‘Investors Are Hesitant’
“India is the main reason that investors are hesitant” about investing in Telenor, Saeed Baradar, an analyst at Societe Generale in London, said in an e-mailed note to clients the same day. “Removal of that fear will result in at least a 15 percent to 20 percent re-rating in the stock.”

Meanwhile, India’s Finance Minister Pranab Mukherjee, under pressure to avoid a junk credit rating from Standard & Poor’s, is chasing at least 520 billion rupees from operators to help plug the budget deficit. He accounted for 400 billion rupees from the sale of spectrum in his budget proposals on March 16 and introduced an amendment to the law after the Supreme Court in January ruled Vodafone’s acquisition of Hutchison Whampoa Ltd.’s Indian operation in 2007 wasn’t liable for $2.3 billion in capital gains tax.

Net Sellers
He told lawmakers on April 27 that the proposed change is to remove “ambiguities” in the law, and it won’t hurt investment flows into the country.

Foreign funds turned net sellers of Indian stocks in April, the first month of withdrawals in 2012, according to data compiled by Bloomberg. The rupee has slipped 5.2 percent against the dollar since the budget, the worst performance among Asian currencies.

The government, which said the change to tax law will apply to deals going back 50 years, has yet to confirm if it will make a fresh attempt to tax Newbury, U.K.-based Vodafone. The world’s biggest mobile-phone company said on April 17 that it will seek international arbitration should India persist with the demand. Sistema and Telenor, with a combined $5.8 billion investment in India, have also threatened similar action over their scrapped permits.

“Once the poster child for foreign investment, India’s telecom sector has become challenging and difficult due to poor regulator intent,” said Suresh Mahadevan, a Mumbai-based analyst at UBS AG. “Prospective investors may now see India as unfair, with a huge amount of regulatory risk.”

 

[Muthukali]

Stocks, Commodities Fall as Euro Extends Slump on Greece

Stocks and commodities slid, while the euro extended its longest slump since 2008, as concern that new Greek political leaders will back out of bailout agreements sent the nation’s benchmark equity index to an almost 20-year low.

The Standard & Poor’s 500 Index slipped 0.4 percent to close at 1,363.72 at 4 p.m. in New York. The index pared a loss of as much as 1.6 percent after holding for most of the day above 1,350, a technical level watched by traders. Greece’s ASE index plunged 3.6 percent to close at the lowest level since November 1992. Copper and oil lost at least 1 percent as the S&P GSCI Index of commodities wiped out most of its 2012 gain. The euro fell a seventh day, losing 0.3 percent to $1.3013. Ten-year Treasury yields fell to a three-month low.

Speculation that Greece’s new government will reject terms of its financial rescue grew as New Democracy leader Antonis Samaras said he failed to form a coalition following the weekend elections, passing the opportunity to Alexis Tsipras’s Syriza party. Tsipras said he plans to form a government of left-wing parties that would nationalize banks, repeal recent labor reforms and cancel the bailout accords.

“The situation in Europe could get worse before it gets better,” said James McDonald, chief investment strategist at Northern Trust Corp. in Chicago. His firm manages $715 billion. “The concern is about the potential that Greece does not carry through on their agreements and they default and leave the euro. While investors have known Greece is going to be challenged to handle their debt load, it’s another thing to watch unfold.”

Rebound From 1,350
The S&P 500 dropped for the fourth time in five days, extending its retreat from a four-year high last month to 3.9 percent. Consumer-discretionary, financial and commodity companies led losses among eight of the 10 main industry groups today.

Hewlett-Packard Co. and Bank of America Corp. dropped more than 2 percent to lead the Dow Jones Industrial Average (INDU) down 76.44 points to 12,932.09, paring losses after sliding as much as 198 points. The S&P 500 dipped below 1,350, a so-called support level being watched by traders, for only about 15 minutes this morning.

“We found support for the S&P 500 at 1,350 where you would have expected it to be,” said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.6 billion. “Once that held you’ve seen a willingness to buy the dip in the U.S. market in names that people have become comfortable with.”

Market Leaders
McDonald’s Corp. retreated 2.1 percent after April sales trailed analysts’ projections. Electronic Arts Inc. (EA), the second- largest U.S. video-game publisher, declined 4.3 percent as its forecasts fell short of estimates. Fossil Inc., owner of the namesake watch brand, plunged 38 percent after the company reduced its full-year earnings forecast amid weakness in Europe.

The 10-year U.S. Treasury note yield fell for the third straight day, losing three basis points to 1.84 percent after dipping as low as 1.81 percent, the lowest level since February 3. The government sold $32 billion of three-year notes today, the first of three sales this week totaling $72 billion.

Investors in Treasuries reduced bets the securities will advance and raised neutral positions to the highest in a month, according to a weekly survey by JPMorgan Chase & Co.

The proportion of “net longs” was cut to zero from six percentage points last week as the level of outright longs dropped to equal the level of outright shorts, which was unchanged at 17 percent. A long position is a bet that an asset will increase in value, while a short is a wager it will decrease.

European Markets
The Stoxx Europe 600 Index (SXXP) slid 1.7 percent, erasing yesterday’s gain, as six shares fell for each that gained. Automakers, mining and financial-services companies led the retreat. National Bank of Greece tumbled 8.4 percent. Bankia SA slid 4.8 percent in Madrid as El Confidencial said the Spanish government will nationalize the lender. Royal KPN NV rallied 17 percent as America Movil SAB (AMX) offered 2.6 billion euros ($3.4 billion) to increase its stake.

The euro fell 0.4 percent versus the yen. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, climbed 0.3 percent, advancing for the seventh consecutive day in its longest rally since 2010. The so-called Aussie weakened against 12 of its 16 major peers after the nation reported a larger-than-estimated trade deficit.

Greece Speculation
Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC.

“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”

Tsipras told his pro-bailout counterparts they must renounce support for the European Union-led rescue if there is to be any chance of forging a coalition. Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking pledges to implement austerity measures by the time he meets with them tomorrow. Samaras said he would not do so, and would support a minority government if necessary.

Greece’s Parliament is split down the middle on the bailout deals negotiated with the EU and IMF.

‘All Surprised’
“We’ve de-stabilized Greece politically and now we’re all surprised they can’t take the decisions to do what we want them to do,” Carl Weinberg, chief economist at High Frequency Economics, told Bloomberg Television. “If Greece falls out of compliance with the IMF program and goes into a hard default, that will raise questions about the capital base of the ECB, put a burden on the other governments of Europe, and that will trigger a series of events that I think won’t have a very happy ending.”

Oil in New York declined 1 percent to $97.01 a barrel in New York, falling for a fifth day in its longest slump in three months, after Saudi Arabian Oil Minister Ali al-Naimi said prices are too high. Copper sank 2.5 percent to $3.6775 a pound as 17 of 24 commodities tracked by the S&P GSCI declined, sending the gauge down 0.6 percent and trimming its 2012 advance to 0.6 percent.

The MSCI Emerging Markets Index (MXEF) sank 1 percent as benchmark indexes in Mexico, India and Brazil lost at least 1.4 percent. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong slid 0.5 percent as residential land sales dropped 92 percent in major Chinese cities.

 

[Muthukali]

Asian Stocks Fall to Three-Month Low, Kiwi Declines

Asian stocks fell to the lowest level in more than three months and New Zealand’s dollar dropped for an eighth day on concern Greek leaders will back out of bailout agreements. Australian bond yields slid to a record low and the currency sank after the government said it will cut spending.

The MSCI Asia Pacific Index (MXAP) declined 1.4 percent at 1:04 p.m. in Tokyo, poised for its lowest close since Jan. 19. The Nikkei 225 Stock Average lost 1.7 percent. Standard & Poor’s 500 Index futures weakened 0.4 percent. The kiwi fell 0.4 percent against the dollar in its longest losing streak since March 2001. Australian 10-year bond yields slid to 3.347 percent, while the Aussie sank 0.6 percent. Rubber plunged 4.2 percent.

Alexis Tsipras, leader of Greece’s Syriza party, said he plans to form a government that would nationalize banks, repeal recent labor reforms and cancel the bailout accords. Australia’s government said yesterday it will lower spending for the first time in at least 42 years, while Prime Minister Julia Gillard said a budget surplus would provide scope for interest-rate cuts. Toyota Motor Corp. and 13 other companies in the Nikkei 225 are reporting earnings today.

“Europe remains the biggest issue facing markets that we need to have clarity on,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages about $150 billion. “It’s not clear how deep the downturn is going to be and the effect this is going to have elsewhere.”

About eight stocks fell for each that rose on the MSCI Asia Pacific Index. Equity benchmarks in Hong Kong and South Korea dropped at least 1.1 percent.

Exporters, Earnings
Mitsubishi Motors Corp., which got 24 percent of its sales in the December quarter from Europe, dropped 2.3 percent. Cosco Corp. Singapore Ltd. (COS) fell 3.5 percent after the shipbuilding unit of China’s biggest shipping company posted first-quarter earnings that missed analysts’ estimates. Panasonic Corp., Japan’s largest appliance maker, jumped 2.1 percent after the Nikkei newspaper said it may post a 50 billion yen ($626 million) profit this fiscal year.

Quarterly profit at the 455 companies in the MSCI Asia Pacific Index that have reported earnings for the most recent period missed analyst estimates by 0.4 percent, according to data compiled by Bloomberg.

The euro dropped 0.3 percent to 1.2968 per dollar, an eighth day of losses. Tsipras told his pro-bailout counterparts they must renounce support for the European Union-led rescue if there is to be any chance of forging a coalition government.

‘Risk Aversion’
“Political turmoil in Greece raised concerns that the nation may not implement austerity measures and worsen Europe’s debt crisis,” Ken Kajisa, an analyst at broker ACE Koeki Co. in Tokyo, said by phone. “Risk aversion by investors increased, leading to sales of industrial commodities including rubber.”

Rubber fell the most since Nov. 10, while oil futures lost 0.4 percent. Crude dropped for a sixth day, the longest losing streak since July 2010. The S&P GSCI Index of 24 commodities slid 0.1 percent, taking its drop in the past six days to 5.8 percent. The gauge has almost erased its 2012 gain.

Shares of Rio Tinto Group (RIO), the world’s third-biggest mining company, lost 1.9 percent. BHP Billiton Ltd., Rio’s largest rival, retreated 1.2 percent. The Australian government dumped its promised corporate tax cut that was meant to compensate miners for the introduction of higher mineral royalties.

The cost of insuring Japan and Australia bonds from default increased, according to traders of credit-default swaps.

The Markit iTraxx Japan index climbed 4 basis points to 204 basis points, Credit Agricole SA prices show. The measure is set for its highest close since Nov. 30, according to data provider CMA. The Markit iTraxx Australia index rose 1 basis point to 168, Credit Agricole prices show. The gauge is poised for its highest close since Jan. 18, according to CMA.

 

[Muthukali]

U.S. Stock Futures Drop Amid Political Turmoil in Europe

U.S. stock-index futures fell, indicating the Dow Jones Industrial Average (INDU) will drop for a sixth day, as investors speculated political wrangling in Europe may intensify, harming the global economic recovery.

Green Mountain Coffee Roasters Inc. declined 1.5 percent in German trading after removing founder Robert P. Stiller as chairman. MercadoLibre Inc. (MELI) sank 4.2 percent in late trading yesterday as first-quarter earnings missed analysts’ projections. Walt Disney Co. rose after profit beat estimates.

Futures on the Standard & Poor’s 500 Index expiring in June slid 0.7 percent to 1,349.6 at 10:11 a.m. in London. Dow futures lost 61 points, or 0.5 percent, to 12,806. The Dow average has slumped 2.6 percent in the past five days.

“We have for the moment the risk-off trade,” said Hans Goetti, Singapore-based chief investment officer for Asia at Finaport Investment Intelligence, which has $1.5 billion in assets under management. He spoke in a Bloomberg Television interview with John Dawson. “We have to ride out the uncertainty surrounding Greece and the euro zone. At the moment it does not look very good.”

Concern about the European debt crisis has helped drive the S&P 500 down 2.5 percent in May. The stand-off in Greece since an inconclusive May 6 election has reignited European concern over the nation’s ability to hold to the terms of its two bailouts negotiated since May 2010. With parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.

Greek Meetings
Alexis Tsipras, lead of the Syriza party, is due to meet Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, from about 5 p.m. in Athens today to discuss a government alliance.

Still, confidence among U.S. chief executive officers in the first quarter climbed to the highest level in almost three years, a private survey showed. The Young Presidents’ Organization said today that higher expectations for the economy, sales and labor market helped push up its Global Pulse Index of U.S. sentiment to 65.1, the strongest since the survey began in July 2009, from 62.2 in the prior three months. Readings greater than 50 show the outlook was more positive than negative.

Green Mountain (GMCR) slid 1.5 percent to $25.98. The maker of Keurig coffee machines stripped Stiller of his position as chairman after he sold shares to meet a margin call at a time when the company’s trading policies prohibited such sales.

Green Mountain Chairman
Michael J. Mardy, chairman of the audit and finance committee, will serve as interim chairman starting immediately, Waterbury, Vermont-based Green Mountain said late yesterday. About $125.5 million of Stiller’s Green Mountain stock was sold May 7 to meet margin requirements after the shares tumbled last week, according to a filing with the U.S. Securities and Exchange Commission yesterday.

MercadoLibre fell 4.2 percent to $84.29 in late trading in New York. The Latin American online-auction site posted first- quarter earnings excluding some items of 45 cents a share, falling short of the average analyst estimate in a Bloomberg survey by 1 cent.

Seattle Genetics Inc. (SGEN) plunged 8.6 percent to 17.40 in late trading in New York. The maker of a drug for Hodgkin lymphoma reported a first-quarter sales were $48.2 million, missing the average analyst estimate of $51.8 million.

Human Genome Sciences Inc. (HGSI) slipped 2.9 percent to $14.20 in Germany. GlaxoSmithKline Plc said it will begin a hostile $2.6 billion tender offer at $13 a share this week for the U.S. company after it rebuffed a takeover approach.

Disney rose 1.3 percent to $44.88 in Germany. The world’s largest entertainment company said second-quarter net income increased to $1.14 billion, or 63 cents a share, from $942 million, or 49 cents, a year earlier. Excluding one-time items, profit of 58 cents beat the 55-cent average of 28 estimates compiled by Bloomberg.

 

[Muthukali]

BOE Halts Stimulus as Inflation Threat Outweighs Slump

Bank of England officials halted stimulus expansion after seven months of bond purchases as the threat of inflation trumped concerns about an economy that’s succumbed to a double-dip recession.

The nine-member Monetary Policy Committee led by Governor Mervyn King today held its quantitative-easing target at 325 billion pounds ($525 billion), ending a second round of stimulus, a move forecast by 43 out of 51 economists in a Bloomberg News survey. Officials also left the benchmark interest rate at a record low of 0.5 percent. The pound erased its decline against the dollar.

With inflation on course to exceed Bank of England forecasts and the economy struggling to recover, policy makers have been divided on how to resolve the dilemma. Today’s decision signals price-growth worries are mounting even as the U.K. struggles with government budget cuts, high unemployment and threats from Europe’s debt crisis.

“They’re trying to signal a transition away from a mild dovish bias toward a more normal stance,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “Our forecast is that they’re done with QE, but you can’t rule out more later this year. They could get blown off course if market conditions deteriorate.”

Pound Advances
The pound rose as much as 0.4 percent against the dollar after the announcement, erasing its loss on the day. It traded at $1.6169 as of 12:41 p.m. in London.

Government bonds declined, pushing the yield on the 10-year gilt up 7 basis points to 1.970 percent. The yield fell to a record-low 1.881 percent yesterday as Europe’s debt crisis pushed investors to seek refuge in the relative safety of U.K. sovereign debt.

Unlike the last time the bank halted quantitative easing in February 2010, the central bank didn’t issue a statement today. King is due to speak at a press conference on May 16, when the bank will publish the new economic forecasts that underpinned today’s decision. Minutes of the meeting, showing how policy makers voted, will be released on May 23.

“Keen to defend today’s decision, the message is probably going to be that the risks around the inflation target are now balanced,” said Philip Rush, an economist at Nomura International Plc in London. “That would mean the MPC has no current bias to changing policy, but of course does not pre- commit it to do nothing.”

Euro-Area Inflation
Elsewhere, Russia’s central bank refrained from cutting interest rates for a fifth month today, signaling determination to hold down price growth. The European Central Bank said today that professional forecasters raised their estimates for inflation this year and next. Forecasters estimate euro-area inflation will average 2.3 percent and 1.8 percent, up from 1.9 percent and 1.7 percent three months ago respectively.

In the U.K., consumer-price growth accelerated to 3.5 percent in March and inflation concerns are mounting.

Deputy Governor Paul Tucker said April 18 that the “uncomfortably above target” rate could hold above 3 percent into the second half of the year. Policy maker Adam Posen ended a push for further stimulus last month and minutes of that meeting said there was a risk that inflation may “fall less rapidly” than projected.

QE Outlook
Still, the Confederation of British Industry, the U.K.’s biggest business lobby, said a third round of QE can’t be ruled out, citing “subdued” economic conditions and signs that euro- area tensions are building again.

Reports last week indicated manufacturing and services weakened in April after the economy shrank 0.2 percent in the first quarter. J Sainsbury Plc (SBRY), the U.K.’s third-largest supermarket owner, said yesterday that the “wider economic situation remains uncertain.”

Factory output rose a faster-than-expected 0.9 percent in March from February, when it fell a downwardly revised 1.1 percent, the statistics office said today. Overall industrial production fell 0.3 percent, in line with economists’ forecasts.

In the euro area, Britain’s biggest export market, Spain is struggling to contain speculation it will need a bailout, while a political stalemate in Greece after elections has raised concerns the country may leave the currency bloc. More than 50 percent of investors predict a country will exit this year, according to the Bloomberg Global Poll published today.

The minutes of today’s decision may reveal a split among policy makers. David Miles, the only MPC member to vote for more stimulus last month, has since said in an interview that his decision looks vindicated, while Martin Weale said data showing the U.K. slipped back into recession strengthened the argument for more QE.

“It is possible for the MPC to reopen the tap on asset purchases at any stage, even in principle at least, next month,” said Philip Shaw, an economist at Investec Securities in London. “But more realistically the committee has probably entered a period of ‘wait and see.’”

 

[Muthukali]

U.S. jobless claims fall, trade gap widens

WASHINGTON (Reuters) - The number of Americans submitting new applications for jobless benefits edged down last week, easing concerns the labor market was deteriorating after April's weak employment growth.

While the claims data indicated the economy remained on a moderate growth path, a report from the Commerce Department showing a widening in the trade deficit in March suggested economic growth was much slower in the first quarter than initially believed.

New claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 367,000, the Labor Department said on Thursday. The prior week's figure was revised up to 368,000 from the previously reported 365,000.

Economists polled by Reuters had forecast claims inching up to 369,000 last week. The four-week moving average for new claims, considered a better measure of labor market trends, fell 5,250 to 379,000.

"It looks like the (jobless claims) numbers are reverting to the declining trend that got interrupted briefly," Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

Separately, the trade gap grew 14.1 percent to $51.8 billion, the biggest jump in nearly a year, even though exports also hit a record high.

Economists polled by Reuters had expected the trade gap to widen to about $50 billion.

The weak trade balance number could cause the government to lower its first-quarter growth estimate to below an annual pace of 2 percent from 2.2 percent, according to economists.

U.S. stock index futures briefly edged higher on Thursday after the data, while the U.S. Treasury 30-year bond briefly extended price losses. The dollar pared losses against the euro.

Coming on the heels of April's sluggish employment gains, the claims data could calm fears the labor market was stagnating.

Companies added a meager 115,000 new jobs to their payrolls in April, the fewest in six months, the government reported last Friday.

Most economists have viewed the pull-back in job creation as payback after the weather-induced gains in the previous months and believe the underlying pace of payrolls growth is around 175,000 - the monthly average for the past three months.

Even Federal Reserve Chairman Ben Bernanke last month said an unseasonably warm winter had probably brought forward some of the hiring by companies, artificially boosting payrolls in January and February.

"They (jobless claims) have simmered down after the noises we had earlier. This shows we have moderate job growth. They're consistent with monthly job payroll growing at 150,000 to 180,000," said Scott Brown, Chief Economist, Raymond James in St. Petersburg, Florida.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 61,000 to 3.23 million in the week ended April 28. That was the lowest level since July 2008.

The number of Americans on emergency unemployment benefits fell 36,275 to 2.69 million in the week ended April 21, the latest week for which data is available. The number of people on extended benefits slipped 4,304 to 350,579.

Some states are losing their eligibility for extended benefits and reducing the duration of emergency compensation. That could artificially push down the unemployment rate as people dropping off the benefits rolls give up the hunt for work.

A drop in the share of working-age Americans either with a job or looking for one to near a 30-1/2-year low pushed the jobless rate down to 8.1 percent last month from 8.2 percent in March.

A total of 6.42 million people were claiming unemployment benefits during the week ending April 21 under all programs, down 174,529 from the prior week.

 

[Muthukali]

SET drops 16.60 points - Thailand

The Stock Exchange of Thailand main index went down 16.60 points or 1.38% to close at 1,190.65 points at the end of trading session on Thursday afternoon. The trade value was 45.79 billion baht, with 7.59 billion shares traded.

The SET50 index ended at 832.43 points, down 12.84 points or 1.52%, with a total trade value of 30.82 billion baht.

The SET100 index fell 27.18 points or 1.48% to stand at 1,809.73 points, with a total turnover of 36.01 billion baht.

The SETHD index went down 18.52 points or 1.65% to stand at 1,106.98 points, with total trade value of 10.77 billion baht.

The MAI index dropped 1.25 points or 0.41% to close at 303.94 points, with total transaction value of 569.69 million baht.

Top five most active values were as follows;

PTT - stood at 335.00 baht, down 10.00 baht (2.90%)
TRUE - stood at 4.10 baht, up 0.32 baht (8.47%)
KBANK - stood at 153.00 baht, down 2.50 baht (1.61%)
CPF (XD) - stood at 40.00 baht, down 0.75 baht (1.84%)
BBL - stood at 181.00 baht, down 4.00 baht (2.16%)

 

[Muthukali]

Stock market swoons on Europe, China concerns

Thai stocks fell by 1.38% yesterday as worries about the euro-zone crisis and weak Chinese trade data led investors to cut risky positions.

The Stock Exchange of Thailand index fell below 1,200 points just minutes after the opening, dropping as low as 1,185 before rebounding on bargain-hunting to end at 1,190.65, down 16.6.

Trade was heavy, totalling 45.8 billion baht.

Energy stocks fell by 1.99%, banks shares by 1.8% and information and communications technology stocks by 1.82%. Foreign investors were net sellers of 4.88 billion baht.

The index has now fallen by nearly 4% or almost 50 points since reaching its high for the year of 1,240 points earlier this month.

Analysts said worries about the European debt crisis and how recent political changes in Greece and France could affect policies will continue to weigh on market sentiment in the near future. A slowdown in Chinese exports _ April exports rose just 4.9% year-on-year against forecasts of 8.5% _ also fuelled worries about global economic growth.

SET president Charamporn Jotikasthira said the fear now is that efforts to address the euro-zone crisis will become more complicated following recent elections.

Global factors will drive local sentiment in the near future, he said.

"Europeans will reduce consumption due to the economic slowdown, which in turn will affect global demand," said Mr Charamporn.

Apichart Phubunjerdkul, an analyst at Tisco Securities, said concerns about Greece and the euro sparked a rally in the US dollar. The baht yesterday was quoted at 31.13/15 to the dollar against 31.08/10 on Wednesday.

Mr Apichart said the local currency may weaken, and the SET index could fall to the next support level of 1,180 points in the next several sessions.

Chai Chirasevenuprand, the head of research at Capital Nomura Securities, agreed the market is expected to remain weak today as investors look to lock in profits from recent rallies.

Capital Nomura projects support at 1,179/75 points, with resistance at 1,200/04.

 

[Muthukali]

JPMorgan reveals shock losses

US banking giant JPMorgan Chase on Thursday revealed that it would incur losses that could run into the billions as a result of bad bets on derivatives.

In a unscheduled conference call, chief executive Jamie Dimon reported the trades cost the company around $2 billion in recent weeks, half of which was clawed back.

It "could cost us as much as one billion dollars," Dimon said, admitting that how markets react in the coming days and weeks could put the final price tag much higher. "It could get worse."

The losses were linked to JPMorgan's Chief Investment Office, which hedged the firm's assets and liabilities against synthetic credit derivatives.

"These were egregious mistakes," Dimon said. "They were self-inflicted and this is not how we want to run a business." JPMorgan shares fell 5.5 percent in after-hours trade.

The losses are a humiliation for Dimon -- one of Wall Street's best known titans -- and for the bank, coming hot on the heels of the 2008 financial crisis.

Then, the collapse of the market in mortgage derivatives punched a giant hole in banks' balance sheets and plunged the world's largest economy into the worst recession in a generation, costing millions of jobs.

As recently as last month, JPMorgan executives told investors they were "very comfortable" with positions held by the bank, raising questions about how much was known by senior management and when.

The revelations are also likely to fuel debate about President Barack Obama's sweeping reforms of Wall Street.

Under rules still being finalized, banks would see limits on how much they can trade for their own benefit using deposits, the so-called Volcker rule. Wall Street has fiercely opposed curbs on this sometimes lucrative trade.


US banking giant JPMorgan Chase on Thursday revealed that it would incur massive losses as a result of poor trades on derivatives. In a unscheduled conference call chief executive Jamie Dimon, pictured on May 3, reported the mistakes "could cost us as much as one billion dollars."

 

[Muthukali]

SET rises 0.36 point - Thailand

The Stock Exchange of Thailand main index went up 0.36 point or 0.03% to close at 1,191.01 points at the end of trading session on Friday afternoon. The trade value was 38.05 billion baht, with 6.23 billion shares traded.

The SET50 index ended at 833.65 points, up 1.22 points or 0.15%, with a total trade value of 23.39 billion baht.

The SET100 index rose 1.68 points or 0.09% to stand at 1,811.41 points, with a total turnover of 28.02 billion baht.

The SETHD index went up 0.06 point or 0.01% to stand at 1,107.04 points, with total trade value of 6.44 billion baht.

The MAI index gained 0.47 point or 0.15% to close at 304.41 points, with total transaction value of 626.80 million baht.

Top five most active values were as follows;

TRUE - stood at 3.86 baht, down 0.24 baht (5.85%)
PTT - stood at 336.00 baht, up 1.00 baht (0.30%)
JAS - stood at 3.18 baht, down 0.14 baht (4.22%)
KBANK - stood at 152.00 baht, down 1.00 baht (0.65%)
BANPU - stood at 524.00 baht, down 14.00 baht (2.60%)

 

[Muthukali]

Ex-UBS Trader Sues After Firing for Mispricing Securities

A former UBS AG (UBSN) trader, who was fired after the bank found he worked with a colleague to manipulate trading figures, sued for unfair dismissal in London.

Ramon Braga, a trader on the corporate-credit desk, colluded in the alteration of “marked-to-market” valuations of assets by Denis Minayev, UBS staff said at an employment tribunal yesterday.

Minayev, a proprietary trader, “re-marked” Braga’s trading book on 66 occasions, even though he shouldn’t have had the authority to do so, UBS investigator Richard Kennedy said.

“If you shift one of those markers, it can give a completely false picture,” employment Judge Graeme Hodgson said at a hearing yesterday.

Braga, who is suing for unfair dismissal, was an inexperienced trader who was “thrown in at the deep end,” his lawyer Amy Sander said at the tribunal hearing. He wasn’t aware of many of the changes Minayev made, she said, and thought his actions were permitted by managers. Braga was also accused by UBS of “procuring a false broker quote,” she said.

UBS is already dealing with the fallout from alleged unauthorized trades by London-based UBS employee Kweku Adoboli, which the bank said led to a $2.3 billion loss. It resulted in regulatory probes and the resignation of Chief Executive Officer Oswald Gruebel. JPMorgan Chase & Co. (JPM) CEO Jamie Dimon said yesterday his New York-based firm suffered a $2 billion loss after a trading unit’s “egregious” failure to manage risks.

Internal Probe
Kennedy, the UBS investigator, said the bank had uncovered the re-marking of Braga’s trades during an internal probe into him and Minayev, who also no longer works at the firm. Asked why a proprietary trader had been able to access Braga’s trading book, Kennedy said Minayev’s role had changed and he was asked not to adjust positions any more.

“Despite his change in role, he hadn’t had his marking privileges removed,” Kennedy said.

Dominik Von Arx, a spokesman for Zurich-based UBS, said Braga “was a junior employee” in the bank’s fixed-income, currency and commodities unit.

“He was dismissed for gross misconduct in October 2011 following an investigation into alleged mismarking,” Von Arx said in an e-mailed statement. “UBS has zero tolerance for such behavior.”

Minayev declined to comment when reached by phone. Braga’s lawyers declined to comment outside court or when contacted by e-mail.

 

[Muthukali]

JPMorgan faces tough time restoring credibility: brokers

REUTERS - JPMorgan Chase & Co (JPM.N), the biggest U.S. bank by assets, will be able to manage the $2 billion loss from a hedging program that backfired but analysts said it may take far longer to repair the damage to its credibility as a risk manager.

JPMorgan shares were down 8 percent at $37.39 in premarket trading on Thursday, a day after it said its chief investment office had racked up big mark-to-market losses in its synthetic credit portfolio.

"This is a well-owned stock due to the confidence investors have in the JPM risk (management) and some of that confidence was lost yesterday," Citi analysts said in a note to clients.

Bernstein analysts termed the loss a "big credibility hit" for the lender, which takes pride in its strong risk management.

Citi cut its share price target to $45 from $52, Nomura to $50 from $55 and Goldman Sachs to $48 from $50. FBR Capital Markets lowered its rating on the stock by a notch to "market perform."

JPMorgan sailed through the financial crisis without reporting a loss, and its strong balance sheet allowed it to take over investment bank Bear Stearns and consumer bank Washington Mutual when they collapsed in 2008.

The bank had $2.32 trillion of assets supported by $190 billion of shareholder equity at the end of March.

Goldman Sachs said that while the direct impact of the loss was manageable, the broader implications were negative, as they highlighted an unfavorable operating environment and raised questions about regulatory scrutiny.

"To regain (credibility), we think JPM needs to go further to explain to investors conceptually how this could happen on such a large scale and the resulting changes that are going to be made," the Citi analysts said.

FBR said that although core business lines remained strong and intact, the potential risk the credit derivatives portfolio posed to future earnings was a worry.

"Until the company is able to unwind this portfolio, there is little clarity into and a lot of uncertainty surrounding JPMorgan's future earnings," FBR said in a note to clients.