September 23, 2017

Markets Rise as Traders Weigh Employment Data

Stocks on Wall Street edged higher on Thursday, putting equities on track for a third consecutive session of gains, as a flurry of economic data pointed to improving economic conditions.

Gains were limited, however, with many investors reluctant to make big bets going into Friday’s payroll report, and with the prospect of a Western-led strike against Syria still uncertain.

In afternoon trading, the Standard Poor’s 500-stock index was 0.2 percent higher, the Dow Jones industrial average also gained 0.2 percent and the Nasdaq composite was 0.3 percent higher.

While the data was positive, it did little to alter investor speculation about when the United States Federal Reserve might begin to ease its accommodative monetary policies, credited with spurring the equity market’s gains in 2013.

“Equities are stuck right now, and there won’t be conviction for buyers or sellers until we get more clarity,” said Todd M. Schoenberger, managing partner at LandColt Capital in New York.

The ADP National Employment Report showed that private employers added 176,000 jobs in August, nearly matching expectations for a gain of 180,000 jobs, while weekly initial jobless claims fell more than expected to a seasonally adjusted 323,000.

Separately, the Institute for Supply Management’s read on the services sector rose more than expected in August, while factory orders fell less than had been anticipated.

European shares ended the day higher, with the FTSEurofirst 300 index up 0.5 percent, and Asian markets closed mostly higher, helped by the Bank of Japan’s decision to continue its stimulus program.

In a positive sign of near-term upward momentum, the S. P. 500 closed above its 100-day moving average for the first time since Aug. 26 on Wednesday. It also closed above its 14-day moving average for the first time since Aug. 8.

After falling 3.1 percent in August, its worst monthly performance since May 2012, the S. P. 500 has kicked off September with a 1.5 percent advance thus far.

Market movement has recently been driven by the likelihood of a Western-led strike against Syria in retaliation for a possible chemical weapons attack against civilians; on Wednesday, the Senate Foreign Relations Committee backed a resolution supporting a strike.

Investors have been especially focused on any possible effect on oil supplies. Benchmark crude oil rose 0.8 percent, to $107.99 a barrel, extending its gains over the last two weeks.

“Until we have clear certainty on what will happen, it will be hard for the market to focus on anything but Syria for long,” Mr. Schoenberger said. “Will a war impact what the Fed does? Should we expect oil to go to $140? This is the big issue investors have.”

On Friday, the Labor Department will release its closely watched report on nonfarm payrolls for August.

“We’ve got a wait-and-see attitude ahead of the data, which isn’t surprising given the terrific day we had yesterday,” said Art Hogan, managing director at Lazard Capital Markets in New York. “While I’m not expecting any big moves ahead of tomorrow’s data, it is a positive that we’re not giving up any of our recent gains right now.”

The European Central Bank left its benchmark interest rate unchanged at a record low on Thursday, a decision that had been expected after recent economic indicators showed the euro zone economy was beginning to recover, albeit weakly.

Mario Draghi, the bank’s president, repeated that the central bank expected to keep its key rates “at present or lower levels” for an extended period, citing only “tentative signs” of economic improvement and a return of confidence in the euro zone.

Similarly, the Bank of England said it would keep its benchmark interest rate unchanged at a record low of 0.5 percent.

Ahead of the start of the Group of 20 summit meeting, Russia and China warned that an end to the Fed’s stimulus program could have a negative effect on the global economy.

The yield on a benchmark 10-year Treasury note was down slightly, to 2.94 percent. Analysts said the rout in Treasuries in recent months could persist.

Retail stocks will be in focus as many stores will report their August sales data. Costco Wholesale reported same-store sales that beat expectations despite lower fuel prices; its shares rose 2 percent.

Astex Pharmaceuticals rose 2.5 percent after Otsuka Pharmaceutical agreed to buy the company for $886 million.

Microsoft said late on Wednesday that a jury had decided in its favor in the second of two trials in federal court concerning Motorola Mobility’s licensing of so-called standard, essential patents used in Microsoft products. Shares of Microsoft, a component of the Dow average, were up 0.5 percent.

Boeing raised its 20-year outlook for the Chinese airplane market by 6 percent, citing growing demand for single-aisle and small, wide-body planes as travel in the Asia-Pacific region has surged. Its shares rose 0.2 percent.

Article source: http://www.nytimes.com/2013/09/06/business/daily-stock-market-activity.html?partner=rss&emc=rss

Rising Price Index Hints at Rebound in Japan

TOKYO — Japanese consumer prices rose in June at their highest annual pace in nearly five years in an early sign of an end to persistent deflation, boding well for the central bank’s bold stimulus plan to achieve its 2 percent inflation target in two years.

The 0.4 percent rise in core consumer prices, which is slightly higher than a median market forecast for a 0.3 percent increase, was largely because of a rise in electricity bills and a weak yen that inflated the cost of gasoline imports.

But it is an encouraging sign for the Bank of Japan, eager to end 15 years of grinding deflation, because it suggests that more companies are optimistic enough about the economy to believe they can raise prices or at least not cut them.

The data is also a boost to Prime Minister Shinzo Abe’s sweeping pro-growth policies that aim to pull the world’s third largest economy out of stagnation.

Mr. Abe’s government, which is driving an aggressive policy mix of monetary and fiscal stimulus to foster sustainable long-term growth, has already seen positive signs as first-quarter data showed Japan was the fastest-growing major economy in the world.

The increase in the core consumer price index, which excludes fresh food but includes energy costs, was the highest annual pace since a 1 percent rise in November 2008. It is the first time in 14 months that consumer prices have risen. (In May, prices neither rose nor fell.)

Tokyo core C.P.I., a leading indicator of nationwide prices, rose 0.3 percent in July after a 0.2 percent increase in June, matching the median forecast, suggesting prices will continue to rise in the coming months.

The Bank of Japan unleashed an intense burst of monetary stimulus on April 4, promising to double the supply of money through aggressive asset purchases to meet its 2 percent inflation target in roughly two years.

Many analysts expect prices to gradually rise, reflecting improvements in the economy, but they view the two-year time frame for achieving the inflation goal as too ambitious.

Article source: http://www.nytimes.com/2013/07/26/business/global/rising-price-index-hints-at-rebound-in-japan.html?partner=rss&emc=rss

Fundamentally: Japanese Stocks, Trying to Return to High Gear

As the administration of Prime Minister Shinzo Abe pushed to devalue the yen, investors gravitated toward long-forgotten Japanese exporters, which directly benefit from this policy. That’s because a weakening yen makes the price of Japanese-made products more competitive in the global marketplace.

Indeed, some of the best-performing Japanese stocks in this stretch were traditional, multinational industrial giants. Shares of Toyota Motor, for instance, returned nearly 115 percent from mid-November of last year to May 22.

Then in a flash, this strategy seemed to fall apart — or did it?

Concerns over the Bank of Japan’s commitment to so-called quantitative easing — coupled with fears that the Federal Reserve in the United States would soon end its own bond-buying program — helped push the country’s stocks into yet another correction. From its May 22 peak, the Nikkei 225 index of Japanese shares fell more than 20 percent by June 13. But then it came roaring back by more than 16 percent on more recent signs that the country’s economy was indeed nearing a turnaround.

The currency was also whipsawed. After exchange rates had sunk to a low of 103 yen to the dollar, the yen strengthened back to around 94 to the dollar before sliding again. At the end of the week, it stood at more than 99.

As the dust settles, Japanese equity funds are up more than 27 percent for the year. And, year to date, the yen has weakened more than 14 percent against the dollar.

This roller-coaster ride, though, has complicated matters for investors.

Should they go back to favoring shares of exporters, since the yen has been losing value again? Or should they ignore those companies and instead tilt toward businesses that can thrive under a strong yen, should the trend reverse once more? Or should they avoid Japanese stocks altogether?

Many market watchers say investors can sidestep these questions, at least for the moment. Instead, they can do what Japanese stock fund managers have done for years: find ways to invest in Japanese companies without necessarily betting on Japan’s economic growth.

For example, one of the top Japanese holdings in the Causeway International Value fund is the JGC Corporation, an engineering company.

“It’s one of our largest Japanese holdings but it has little do with Japan,” said Sarah H. Ketterer, co-manager of the fund, which beat more than 85 percent of its peers in the past year. Among other things, she said, the company builds liquefied natural-gas plants to help meet the growing demand for the fuel in Southeast Asia.

Over all, less than one-fifth of the company’s revenue comes from Japan.

Another alternative is to invest in companies that don’t necessarily require a strong economy, but that stand to benefit from demographic trends playing out in Japan.

Among the biggest holdings in the Matthews Japan fund, for instance, is JP-Holdings, which operates child-care centers.

In addition to advocating a weak yen to reinvigorate economic growth, Mr. Abe been calling for more women to enter the work force, including leadership posts in Japanese corporations. The country has long been plagued by an aging labor pool, in part because of a declining birthrate. Getting more women into the work force could help address the aging issue and bolster gross domestic product. To do that, though, the government acknowledges a need for more day care options nationwide.

“Companies have to boost investments in child care to facilitate moving young mothers into the work force,” said Taizo Ishida, lead manager of Matthews Japan. And JP-Holdings, one of the largest operators of child care centers in Japan, would surely stand to benefit, he said. Since the start of the year, the shares have more than tripled in value.

Strategists say investors should also look for those few Japanese companies that have shown a willingness to go against the grain.

For instance, during the years when the yen was strengthening, few exporters could gain global market share in the face of a strong currency.

One exception, though, was Unicharm, a maker of diapers. Yoko Sakai, an analyst at Harding Loevner who specializes in Japanese equities, said Unicharm could achieve this partly because it recognized early on that to sell in a cost-effective way to the developing world, it couldn’t rely on the same high-quality, high-priced diapers that Japanese customers demanded. It produced cheaper diapers, which proved quite popular in countries like Indonesia and Thailand, Ms. Sakai said.

Harding Loevner looked for the other kinds of nontraditional thinking from Japanese companies that are domestically oriented. “Whether the yen works for them or against them in a year or two,” she said, “we want companies that can find ways to improve.”

One such company, she said, is ABC-Mart, a shoe retailer in which Harding Loevner invests. ABC-Mart began as a wholesaler but decided to integrate vertically by owning its own retail stores. Then it began buying some shoe brands. “This company isn’t just taking share, it is disrupting the market and getting rid of the middleman,” she said.

WHEN will it be safe to start betting more directly on a Japanese rebound?

It’s hard to say, according to money managers. Skepticism about the future of the stock market is deeply rooted. “In Japan, people are conditioned to sell after a 20 percent rise in asset prices,” said M. Campbell Gunn, manager of the T. Rowe Price Japan fund.

And Ms. Sakai said, “If anybody tells you that they know what’s going to happen in Japan, they’re lying.”

At the very least, money managers say the recent correction is a reminder of just how far the Japanese stock market has to go before it really recovers.

Charles de Lardemelle, co-manager for the IVA International fund, points out that Japan, which has had a shrinking population and work force, hasn’t even begun to tackle the issue of immigration reform, which may also be required to turn around the population trend toward fewer workers. And at the corporate level, he said, there needs to be greater consolidation of companies with a greater focus on delivering more to shareholders.

“To have a real, sustainable long-term rally in Japan,” he said, “you have to see a lot of political changes that so far have not happened.”

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

Article source: http://www.nytimes.com/2013/07/14/your-money/japanese-stocks-trying-to-return-to-high-gear.html?partner=rss&emc=rss

Dow Falls Below 15,000; Retailers Add to Slump

Video game shops, restaurants and retailers led the stock market lower Wednesday.

Without any good news to drive the market up, investors grappled with the question hanging over financial markets: When will the Federal Reserve and other central banks pull back their economic stimulus programs?

Markets have turned turbulent as traders start preparing for a time when the Fed and central banks in Europe and Japan are not pumping as much money into the financial system.

“There’s nothing concrete out there to turn us around today,” said Russell Croft, portfolio manager at the Croft-Leominster Value Fund in Baltimore. “So naturally enough, people are back to thinking about the Fed.”

The Dow Jones industrial average fell 126.79 points, or 0.8 percent, to close at 14,995.23. The Dow had its first three-day stretch of losses this year and is down 1.7 percent for the week.

A rout in global markets helped pull the Dow down 116 points on Tuesday. The selling started after the Bank of Japan decided not to make any new attempt to spur growth in its nation’s economy, which is the world’s third largest.

In other trading on Wednesday, the Standard Poor’s 500-stock index fell 13.61 points, or 0.8 percent, to 1,612.52. All 10 industry groups in the index dropped, led by consumer discretionary and utility companies. The Nasdaq composite fell 36.52 points, or 1 percent, to 3,400.43. Two of the top-performing stocks in the S. P. 500 this year, Netflix and Best Buy, led consumer discretionary companies down. Netflix lost $6.82, or 3 percent, to $207.64. Best Buy dropped $1.01, or 4 percent, to $26.88. GameStop fell $1.13, or 3 percent, to $36.59.

The S. P. 500, the stock-market benchmark for most investment funds, has lost 3.4 percent since reaching a record high on May 21. The next day, the Fed chairman, Ben S. Bernanke, said the central bank could decide to scale down its bond-buying program in the coming months if the economy looked strong enough.

Many on Wall Street think the Fed could signal that it is ready to start cutting back on its $85 billion in bond purchases at the end of its two-day meeting on Wednesday. That’s a reason bond traders have been selling Treasury notes, sending the 10-year yield from a low of 1.63 percent last month to as high as 2.29 percent this week. On Wednesday, the yield on the 10-year Treasury note edged up to 2.23 percent from 2.19 percent Tuesday, as the note fell 10/32, to 95 25/32.

Despite the losses, there were a few bright spots. Cooper Tire and Rubber jumped 41 percent after Apollo Tyres of India announced plans to buy the tire maker for $2.5 billion.

In commodities trading, crude oil rose 50 cents, to $96.10 a barrel, in New York. Gold rose $15, to $1,392 an ounce.

Article source: http://www.nytimes.com/2013/06/13/business/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: In a Shift, Interest Rates Are Rising

A specialist at the New York Stock Exchange. Investors have braced themselves for a new era of higher interest rates.Richard Drew/Associated PressA specialist at the New York Stock Exchange. Investors have braced themselves for a new era of higher interest rates.

It has been a reliable fact of life for investors, corporations and ordinary borrowers: interest rates, for the most part, keep heading lower.

But all of that may be about to change. For prospective homeowners, the cost of mortgages has been going up in recent weeks. Governments are also facing the prospect of higher borrowing costs down the road, and they are projecting increases to their debt burdens. Savers with money in bank accounts, on the other hand, have the prospect of finally earning more than a pittance on their deposits.

The interest rate charged by lenders, often cited as the single most important factor behind economic decisions, has been steadily going down for most of the time since the early 1980s, and has fallen to historical lows since the financial crisis. Over the last few months, though, investors and banks have been demanding higher payments for their loans, pushing up interest rates and bond yields.

The first tremors have been felt most sharply on investment products that were reliant on low rates, like bonds issued by American companies. But the movement is quickly spreading out into the real economy.

“I think you all should be ready, because rates are going to go up,” Jamie Dimon, the chief executive of JPMorgan Chase, told a financial industry conference at the Waldorf-Astoria Hotel in Manhattan on Tuesday.

As investors brace themselves for a new era of higher interest rates, global markets in bonds, currencies and stocks have experienced spasms of turmoil. On Tuesday, the catalyst for the market’s volatility was disappointment over the Bank of Japan’s decision not to take new steps to address rising bond yields. That heightened worries that other central banks — the Federal Reserve in particular — will soon pull back on pumping money into the financial system.

Since the financial crisis of 2008, the Fed has taken unprecedented steps to reduce rates, in an effort to stimulate borrowing and economic growth and bring down the unemployment rate. Recently, though, Ben S. Bernanke, the Fed chairman, signaled that the central bank could scale back its efforts in coming months if the economy improved. But there is much debate on Wall Street over what Mr. Bernanke is planning and when it might take shape.

Several prominent money managers say they believe that the economic recovery is weakening, which will make it impossible for Mr. Bernanke to pare the central bank’s intervention and could lead to falling rates again. Interest rates have experienced temporary spikes a number of times in recent decades before heading back down.

But recent economic reports, including last Friday’s job report, suggest that the economy is slowly recovering.

In anticipation of what the Fed may do, many on Wall Street have been preparing their portfolios for a future in which interest rates do not remain at the low levels of the last few years. In a survey of 500 large investors, 43 percent said they were planning to cut back on their exposure to bonds this year, while only 16 percent are planning to increase it, according to the asset manager Natixis.

The recent efforts to adjust to higher bond yields have already been messy. Investors have been piling out of supposedly safe bond funds that have been a source of reliable returns in recent years, creating unexpected volatility in the markets.

Big American asset managers who borrowed money to buy foreign stocks and bonds have recently been selling those holdings, hurting markets around the world. That has been worsened by data suggesting that economic growth may be slowing outside the United States.

The realignment in the markets was evident on Tuesday as Asian and European stock markets fell. In the United States, stocks swung widely, with the benchmark Standard Poor’s 500-stock index closing down 1.02 percent. Treasury prices fell, pushing the yield on the benchmark 10-year Treasury note as high as 2.29 percent — its highest level since April 2012 — before settling at 2.19 percent. The Japanese yen strengthened 2.8 percent against the dollar.

Many market specialists say they think that a transition could go more smoothly in the long run if interest rates continue to rise as the United States economy grows. Still, even in that optimistic situation, a wide array of market participants will have to shift their operating procedures and assumptions from a world where declining interest rates were a given.

“When past performance has been so consistent, the risk that investors underestimate the risk, I think has consistently been an issue,” said Richard Ketchum, the president of the Financial Industry Regulatory Authority, which oversees brokers.

The recent market volatility highlights the connection between Wall Street investors and consumers. Banks set mortgage rates in line with the yields on mortgage-backed bonds, for example. So as a sell-off has hit the market for such bonds, causing their yields to rise, ordinary borrowers end up paying more.

The rising cost of a new mortgage has already pushed down the number of people refinancing old mortgages, putting a crimp on a recent source of extra income for many households.

The looming question now is whether higher mortgage rates could stall the rally in home prices that has been taking place across the country.

Many real estate analysts say that homes are so affordable that even a considerable rise in interest rates would not do much to undermine the housing recovery, especially if the economy is growing at a healthy rate.

“There’s no strong correlation between interest rates and home prices,” said Douglas Duncan, chief economist at Fannie Mae.

But Joshua Rosner, a managing director at the research company Graham Fisher Company, said many Americans were still so heavily indebted that even a small rise in mortgage rates would hit the housing market. “Affordability is already a problem, and rising rates won’t help that,” he said.

For governments around the world, a rise in rates will eventually push up their borrowing costs at a time when they may still be grappling with fiscal deficits. Some countries will probably be able to take a steady increase in their stride. But a jarring wave of selling has recently hit certain bond markets in Latin America and Europe, pushing up borrowing costs for governments there.

Recent market moves have also been an unpleasant jolt for ordinary savers who have come to view bonds as a stable anchor for any retirement account. The Vanguard total bond market mutual fund fell 2.7 percent last month after returning a steady 5.4 percent a year since 2008. Funds holding junk bonds, which were one of the hottest investments in recent years, have suffered even more.

Some managers argue that the important thing is to shift between different types of bonds, de-emphasizing longer-term, government-issued bonds. But whatever the mix, it is likely that bonds will present a risk to investors that they have not in recent history.

“There’s no doubt we’re living through the end of a generational bull market in bonds,” said Scott Minerd, the chief investment officer at Guggenheim Partners.

Article source: http://dealbook.nytimes.com/2013/06/11/in-a-shift-interest-rates-are-rising/?partner=rss&emc=rss

Nikkei Sinks Again Amid Mixed Signals From Central Bank

HONG KONG — The Japanese central bank on Monday released minutes of a recent meeting that showed some board members skeptical of the bank’s own strategy of lifting Japan from deflation, while another big fall in the country’s stock market stoked fears of further volatility in the weeks and months ahead.

But European stocks shrugged off the slide on the Japanese stock market Monday and traded higher as a member of the European Central Bank repeated the bank’s commitment to low interest rates. Stock markets in Britain and the United States were closed for public holidays.

In Tokyo, the minutes of the Bank of Japan’s policy meeting on April 26 revealed a degree of doubt about the bank’s ability to inject a healthy dose of inflation into an economy that has suffered from crippling deflation for years.

‘‘A few members’’ pointed out that the target of 2 percent inflation appeared ‘‘difficult to achieve’’ in the planned time frame of about two years from now, ‘‘since it was highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation,” according to the minutes.

Some board members also noted that the bank’s aggressive easing policies appeared to have been perceived by the markets as ‘’contradictory’’ — comments that highlighted the challenges that the bank and policy makers are wrestling with.

The bank, on one hand, has committed to ending deflationary expectations and sparking an economic recovery by flooding the economy with money, a logical result of which would be rising long-term interest rates. But the bank has also committed to keeping those interest rates in check, partly by buying large amounts of government bonds. That has sowed confusion among market players over whether they should welcome or panic at the recent rise in long-term rates.

On Monday, the Nikkei 225 share average in Tokyo fell 3.2 percent. The decline followed a 7.3 percent slump last Thursday, when a rally of about 80 percent since mid-November came to an abrupt end.

“While it’s still difficult to clearly pinpoint a reason, the big market falls themselves have started to stoke fear among investors,” Koichi Fujishiro, an economist at the Dai-ichi Life Research Institute, said in a report. He said that high-frequency trading by investors looking for short-term gains helped magnify those market swings.

“Japan’s fundamentals have not changed,” Mr. Fujishiro said. But, he added, “turmoil in financial markets won’t settle down overnight, and we are likely to see nervousness remain for some time.”

An article carried by the Nikkei business daily on Monday urged calm.

‘’Investors need a bird’s-eye perspective of market movements, not a bug’s-eye perspective,’’ wrote Ryo Suzuki, a columnist who is a member of Nikkei’s editorial board. “Things look different from a larger perspective,” he said. “For people who sat out on the market surge, this might be a good time to get in on the action.”

Japanese stocks have been on a tear since last November, swept by a wave of optimism that bold plans outlined by Shinzo Abe, who took over as prime minister in December, would succeed in breathing life back into the Japanese economy.

Volatility in the Japanese bond markets, a renewed strengthening of the yen and concerns about the dynamism of China’s economy all have combined in recent days to underline the challenges facing Mr. Abe and the Japanese central bank as they seek to reignite growth.

Analysts have struggled to explain the exact cause of the recent reversal, saying that a range of factors were probably at play and continue to fan nervousness in the market.

“There have been times when the market jumped over 1,000 points in a week. We were bound to see a correction,” Yoshihide Suga, the chief cabinet secretary, told reporters in Tokyo. “But Japan’s economy is recovering steadily. So it is extremely important that we react in a calm manner.”

Investors are also concerned that the U.S. Federal Reserve might reduce its own stimulus measures before too long.

The realization that Mr. Abe’s stimulus efforts — in particular, the structural overhauls that are needed to bolster Japan’s long-term competitiveness — face an uphill struggle also have played a part, analysts said, as did profit-taking after the long rally this year.

“Investors have realized that the Japanese market does not just rise and rise,” said Jun Yunoki, an analyst at Nomura in Tokyo.

Article source: http://www.nytimes.com/2013/05/28/business/global/nikkei-sinks-again-as-investors-doubts-linger.html?partner=rss&emc=rss

Strategies: Japan Starts to Recharge After Two Lost Economic Decades

Envious foreigners called its export-driven economy a “miracle.” Its real estate and stock markets seemed to defy gravity, and its financiers were so flush with cash that they bought skyscrapers, golf courses and corporate empires far from Japan’s shores.

Then the bubble burst. In 1990, Japan began more than 20 years of stagnation and deflation. Invest in Japan? For most foreigners, it was wiser to avoid it. At the end of 1989, the Topix, a k a the Tokyo Stock Price index, reached 2,881. Now it’s less than half that.

It’s possible, at least, that those lost decades are finally over. Japanese markets have become turbocharged again, and are beginning to move markets worldwide. This year alone, the Topix has risen more than 22 percent in dollar terms, far exceeding the gain of the Dow Jones industrial average and nearly every other major stock market. The yen has weakened sharply, trading at more than 100 to the dollar for the first time in four years. That exchange rate should make many Japanese companies more profitable and more competitive. It may also inject inflation into the Japanese economy, encouraging consumers to spend and companies to invest.

“What is happening in Japan is revolutionary,” said Mohamed El-Erian, the chief executive of Pimco, one of the world’s largest bond managers. “Nothing they’ve done since the Second World War comes close in terms of economic experimentation,” he said.

It’s far too soon to judge whether “Abenomics” — the new policies of Prime Minister Shinzo Abe and Haruhiko Kuroda, the Bank of Japan governor — will be successful. But they have already begun to change expectations within Japan and around the world.

Most crucially, there are signs that the policies may be breaking Japan’s debilitating spiral of deflation. In April, Mr. Kuroda declared that Japan would achieve an inflation target of 2 percent within two years — an ambitious goal that he said he would achieve by doubling the country’s monetary base.

The central bank, which has already been holding short-term interest rates near zero, is making direct purchases of long-term bonds and other securities. That program of quantitative easing is enormous, Mr. El-Erian said: “It is much bigger than the Federal Reserve’s in the United States, when you consider the size of the two economies.”

Is the new monetary policy working? It hasn’t been in place long, and no up-to-date inflation data is yet in hand. The latest government figures show that in March, Japan’s consumer price index fell 0.5 percent, annualized, a deflationary reading. But Japan’s bond prices imply that expectations for inflation two years from now have already jumped to well above 1.6 percent.

“It’s not quantifiable yet, but the psyche of the Japanese consumer may actually be changing,” said Taizo Ishida, lead manager of the Matthews Japan fund, a stock mutual fund for American investors. “Anecdotally, you can feel it,” he said. “People are beginning to put money into equity mutual funds in Japan, and consumers are buying luxury goods. But we’ll have to see where this ends up.”

MR. ABE, who faces elections in July in the upper house of the Diet, Japan’s parliament, has not unveiled all the details of his policy, which comprises “three arrows”: monetary easing, fiscal policy and structural reform. Monetary easing is the only one of the three that is substantially under way. It appears to be largely responsible for the yen’s weakening and could have a sharp impact.

Forced for many years to adjust to competitive pressures from overseas, Japanese companies said in a government survey last year that they were profitable at an exchange rate of 84 yen to the dollar, a big change from 1986, when they said they needed a rate of 175 yen to the dollar.

The current rate of more than 100 yen to the dollar will make many export-oriented companies much more profitable, said Eileen Dibb, a portfolio manager and Japan specialist at Pyramis Global Advisors, the institutional arm of Fidelity Investments. Her portfolios include Toyota and Fuji Heavy Industries, and both should benefit from the yen depreciation, she said. While the cheaper yen could heighten trade frictions, Mr. Abe says he would like Japan to join the negotiations for the Trans-Pacific Partnership, an Asia-Pacific free trade pact supported by the Obama administration.

Ms. Dibb is bullish on the Japanese stock market, saying it is still quite reasonably priced even after its recent run. In 1988, for example, the Topix traded at a price-to-book ratio of 6.5, compared with only 1.4 today, yet current earnings are attractive and strengthening. For the first time in years, she says, the outlook is extremely positive. “It’s as though Japan has turned the lights back on,” she said.

Mr. Abe has adopted a stimulative fiscal policy. It may give the economy a short-term boost, but in a speech in April, Christine Lagarde, managing director of the International Monetary Fund, warned that Japan’s fiscal policy “looks increasingly unsustainable,” saying its debt-to-G.D.P. ratio is now nearing an extraordinarily high 245 percent.

Japan has some factors in its favor, however, making it quite different from debt-burdened countries like Greece, said M. Campbell Gunn, portfolio manager of the T. Rowe Price Japan fund. Japan’s debt is overwhelmingly financed by its own citizens, he noted; it is denominated in its own currency, and Japan runs a steady current-account surplus, all of which insulate it from bond market pressure.

Furthermore, he said, Japan can reduce debt by privatizing or more efficiently operating billions of dollars worth of state-owned assets, like the nation’s ports and its postal system, which doubles as a gigantic savings bank. “Japan now is in some ways like the U.K. before Margaret Thatcher,” he said. “There is much that could be done if the government wanted to do it.”

Structural problems, however, are major impediments to economic growth. Japan’s population has been aging and declining in size, said Roger Aliaga-Díaz, a senior economist at Vanguard. Unless Japan permits enough immigration to offset this, he said, demographic constraints are likely to trim gross domestic product by 1.3 percentage points a year. “That’s a big hurdle for Japan,” he said.

Shifts like raising the retirement age and removing impediments to work force participation by women could improve matters, but improvements are likely to be slow in coming, he said.

Still, Japan’s markets have awakened, its economy may be reviving, and the flood of yen is certainly flowing into other markets around the world, Mr. El-Erian said. “This is an ambitious effort,” he said. But, he added, “Japan’s mounting debt load and difficult structural problems make this program a very high-risk and high-reward one.”

Article source: http://www.nytimes.com/2013/05/19/your-money/japan-starts-to-recharge-after-two-lost-economic-decades.html?partner=rss&emc=rss

I.M.F. Lowers Estimates for Global Growth for 2013

In a periodic update to its economic projections, the fund said Tuesday that it expected global growth of about 3.3 percent this year and 4 percent in 2014. That is a reduction of 0.2 percentage point since its January estimate for 2013; it did not change its estimate for next year’s growth.

Still, the report underscored that financial conditions have improved markedly since last year, in no small part because of aggressive monetary easing undertaken by the Federal Reserve, the Bank of Japan and the European Central Bank.

Recession continues to afflict Europe, and the world still struggles with high unemployment, but risks to the downside — in particular from the threat of a country’s leaving the euro zone and from fiscal policy uncertainty in the United States — have faded.

“Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy,” said the report, called the World Economic Outlook. “Policy makers cannot afford to relax their efforts.”

The report again focuses in no small part on the economic troubles emanating from Europe. The fund cut its projections of current-year growth for the euro zone economies of France, Italy and Spain, as well as for Britain, which has also carried out austerity policies and entered a period of economic contraction.

I.M.F. officials have urged stronger European economies with lower borrowing costs, like Germany, to do more to foster growth across the entire region and to move more aggressively to finish a cross-border banking union to shore up investor confidence. The fund and many international economic officials, including Treasury Secretary Jacob J. Lew, are expected to press Europe on its plans for growth again this week.

“Policy should use all prudent measures to support sluggish demand,” the report said. “However, the risks related to high sovereign debt limit the fiscal policy room to maneuver. There is no silver bullet to address all the concerns about demand and debt.”

Still, officials have proposed a broad range of policies to help bolster demand in Europe, including delaying budget cutting in stronger economies, reforming the labor markets and increasing inflation targets.

“The forecast for negative growth in the euro area reflects not only weakness in the periphery but also some weakness in the core,” Olivier Blanchard, the fund’s chief economist, wrote in the report, noting that Germany is expected to have virtually no growth in 2013 and France is expected to have a negative growth rate. He included one ominous warning: “This may call into question the ability of the core to help the periphery, if and when needed.”

On a more positive note, the I.M.F. said that equity prices had risen in a broad market rally, and volatility had fallen to precrisis levels. The spread between government bond yields for periphery and central euro zone economies has diminished as well.

Still, the fund warned that “markets may have moved ahead of the real economy” and noted that improved financial conditions had not, in many cases, translated to better access to credit for consumers and businesses, with lending standards remaining tight. In the euro area, indeed, credit continues to contract and lending conditions continue to tighten, the I.M.F. said, reflecting in part “the poor macroeconomic outlook for the region as a whole.”

The fund lowered its estimate of United States growth this year to 1.9 percent, down 0.2 percentage point from its January forecast. But it said the United States was “in the lead” in seeing an acceleration of growth, in part because Washington policy makers were able to avoid the so-called fiscal cliff of tax increases and spending cuts at the turn of the year.

The I.M.F. also said that the United States had proved too aggressive in carrying out budget cuts, given its still-sluggish rates of growth and high unemployment levels. It said it anticipated that the across-the-board $85 billion in budget cuts known as sequestration would push down growth levels this year and going forward.

“The growth figure for the United States for 2013 may not seem very high, and indeed it is insufficient to make a large dent in the still-high unemployment rate,” Mr. Blanchard said in the report. “But it will be achieved in the face of a very strong, indeed overly strong, fiscal consolidation of about 1.8 percent of G.D.P. Underlying private demand is actually strong, spurred in part by the anticipation of low policy rates under the Federal Reserve’s ‘forward guidance’ and by pent-up demand for housing and durables.”

The fund raised its estimate of growth for Japan, which has recently undertaken an aggressive round of fiscal and monetary stimulus to aid its slow-growing economy. Still, the I.M.F. anticipates an economic growth rate of only about 1.5 percent for this year and next for Japan.

Tokyo’s assertive monetary easing — which has pushed down the value of the yen, thus aiding the country’s exports — has reignited concerns about competitive devaluation, often referred to as currency wars. In the report, the fund acknowledged concerns over Japan’s policy, but called the recent bout of currency complaints “overblown.”

“There seem to be no large deviations of the major currencies from medium-term fundamentals,” it said. “The U.S. dollar and the euro appear moderately overvalued and the renminbi moderately undervalued. The evidence on valuation of the yen is mixed.”

On the whole, emerging economies are “doing well,” the fund said, though growth rates in some big developing countries — in particular China — seem to have declined somewhat from their precrisis levels. Of late, many developing countries have benefited from high commodity prices, low interest rates and money flowing in from abroad in search of returns, the fund said. In the past, such conditions have created asset bubbles, but policy makers seem vigilant about the risks, the I.M.F. added.

Article source: http://www.nytimes.com/2013/04/17/business/economy/imf-lowers-estimates-for-global-growth-for-2013.html?partner=rss&emc=rss

Stocks End Higher

Wall Street stocks rose in a volatile session on Monday as investors were reluctant to make large bets going into an earnings season that is expected to be lackluster.

The Standard Poor’s 500-stock index ended 0.6 percent higher, while the Dow Jones industrial average rose 0.3 percent and the Nasdaq composite index added 0.6 percent.

Earnings forecasts have been scaled back heading into first-quarter reports. Profits from companies in the S.P. 500 are expected to have risen just 1.6 percent from a year ago, according to Thomson Reuters data, down from a 4.3 percent forecast in January.

A weaker-than-expected jobs report on Friday prompted concern that the American economy is in a slow patch.

Despite those headwinds, the loose monetary policy from central banks around the world continues to attract investors to equities, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

“It’s all about easy money, and it’s lifting equities around the globe at this time,” Mr. Cardillo said.

The Bank of Japan started its bond purchases after it announced last week that it would inject about $1.4 trillion into the economy in less than two years.

In the United States, the Federal Reserve’s bond-buying program has been a significant catalyst of the recent rally that has sent major indexes to record levels.

Still, markets in the United States could see a technical correction of about 6 to 8 percent in the latter part of the month as the focus turns to corporate results, Mr. Cardillo said.

Alcoa, JPMorgan Chase and Bed Bath Beyond are among the first major companies set to announce results this week.

Ben S. Bernanke, chairman of the Federal Reserve, will give a speech after markets close on Monday. Investors have been watching for any insight into the Fed’s thinking on how long the central bank will keep its asset purchase program in place as it tries to bolster the economic recovery.

General Electric said it will buy oil field services provider Lufkin Industries for about $3.3 billion, sending Lufkin shares up 38 percent. G.E. slipped 0.2 percent.

Investors will be keeping an eye on the latest developments out of the euro zone after a constitutional court in Portugal overturned key austerity measures in the government’s latest budget. Portugal’s prime minister said the government would cut spending to meet targets agreed with its lenders. European stock markets ended largely unchanged.

Article source: http://www.nytimes.com/2013/04/09/business/daily-stock-market-activity.html?partner=rss&emc=rss

Stocks Turn Higher

Wall Street turned positive Monday after the worst weekly decline of the year, even as investors face the prospect of a lackluster corporate earnings season.

The Standard Poor’s 500-stock index was 0.3 percent higher in afternoon trading, while the Dow Jones industrial average rose 0.1 percent and the Nasdaq composite index added 0.3 percent.

Earnings forecasts have been scaled back heading into first-quarter reports. Earnings from companies in the S.P. 500 are expected to have risen just 1.6 percent from a year ago, according to Thomson Reuters data, down from a 4.3 percent forecast in January.

A weaker-than-expected jobs report on Friday prompted concern that the American economy is in a slow patch.

Despite those headwinds, the loose monetary policy from central banks around the world continues to attract investors to equities, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

“It’s all about easy money, and it’s lifting equities around the globe at this time,” Mr. Cardillo said.

The Bank of Japan started its bond purchases after it announced last week that it would inject about $1.4 trillion into the economy in less than two years.

In the United States, the Federal Reserve’s bond-buying program has been a significant catalyst of the recent rally that has sent major indexes to record levels.

Still, markets in the United States could see a technical correction of about 6 to 8 percent in the latter part of the month as the focus turns to corporate results, Mr. Cardillo said.

Alcoa’s earnings will be the first from a Dow component after Monday’s closing bell. JPMorgan Chase and Bed Bath Beyond are among the major companies set to announce results later in the week.

Ben S. Bernanke, chairman of the Federal Reserve, will give a speech after markets close on Monday. Investors have been watching for any insight into the Fed’s thinking on how long the central bank will keep its asset purchase program in place as it tries to bolster the economic recovery.

General Electric said it will buy oil field services provider Lufkin Industries for about $3.3 billion, sending Lufkin shares up 38 percent. G.E. slipped 0.2 percent.

Investors will be keeping an eye on the latest developments out of the euro zone after a constitutional court in Portugal overturned key austerity measures in the government’s latest budget. Portugal’s prime minister said the government would cut spending to meet targets agreed with its lenders. European stock markets ended largely unchanged.

Article source: http://www.nytimes.com/2013/04/09/business/daily-stock-market-activity.html?partner=rss&emc=rss