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Rupee Continues Decline on Weakness in Indian Economy

September 2, 2013 by

MUMBAI — The Indian rupee began slipping lower in currency markets again on Monday after a two-day respite, as further signs emerged of broad troubles in the Indian economy.

An HSBC survey of purchasing managers at manufacturers across India, released on Monday, showed them to be their gloomiest since March 2009, at the bottom of the global economic downturn. Businesses across the country are bracing for a sharp increase in the regulated price of diesel fuel, as the rupee’s steep drop in August has driven up the Indian cost of crude oil, priced in dollars and almost entirely imported.

The rupee was down another 0.5 percent against the dollar, to 66.08 rupees to the dollar, bringing its decline since early May to almost 20 percent.

Currency traders said that they perceived hints of modest intervention to cushion the decline by the Reserve Bank of India, the country’s central bank, which acts through state-controlled commercial banks when it does intervene so as to camouflage its activity.

The Mumbai stock market showed signs of recovery on Monday, with the benchmark Sensex index rallying 1.43 percent by late afternoon.

Exporters would be expected to benefit from a cheaper rupee. But poor roads, restrictive labor laws and heavy regulation have left India with a manufacturing sector that, although stronger than a decade ago, still struggles to compete with China and other East Asian economies. Indian companies rely heavily on imports for materials and equipment that they cannot buy within India, and the costs of those imports are surging as the rupee falls, limiting gains in Indian competitiveness.

At Challenge Overseas, a manufacturer of trousers on the northern outskirts of Mumbai that exports mainly to the Mideast, the floor and corners of the factory were piled high over the weekend with rolls of gray and black fabric, six feet long and a foot in diameter. But all of the fabric had been imported from China.

“Our owner goes to China every three months,” said Javeri Savia, the general manager of production. “The newer textures and weaves all come from China.”

Like many Indian factories, Challenge also lacks economies of scale. It has just 60 workers to cut, sew and iron its trousers, which sell at wholesale for about 1,000 rupees, or $15, apiece. Similar factories in China often employ several thousand workers. “When you compare with China and all of them, we are peanuts,” Mr. Savia said.

The rupee traded from 52 to 55 to the dollar until early May, when it began a gradual slide that the Indian government tried to arrest through market intervention and other measures, including raising the tax on gold imports. The rupee continued drifting down through the summer, then began falling faster in mid-August when senior government officials made it clear in speeches that they were reluctant to resort to more drastic measures to arrest the rupee’s decline, like sharp increases in interest rates or an imposition of stringent controls on moving large sums of money in and out of the country.

The rupee briefly fell last Wednesday to almost 69 to the dollar, prompting the Reserve Bank of India to supply dollars from its reserves through a local bank to the country’s state-controlled oil refiners and distributors. That industry tends to be India’s biggest buyer of dollars so as to pay for crude oil imports. The rupee slowly crawled back above 66 to the dollar on Thursday and Friday before drifting down a little on Monday.

Paritosh Mathur, the head of fixed-income and currency trading in India for Deutsche Bank, said that volatility in the rupee’s value appeared to be diminishing. He said he saw little chance that the rupee would return to its levels of last spring in the next two or three months, but also little chance that it would test the lows of last Wednesday.

The HSBC index of purchasing managers’ sentiment fell to 48.5 in August, from 50.1 in July. A figure below 50 indicates a contraction in activity. Overall new orders and new export orders declined. Purchasing managers also indicated that they were buying less material for future production and were keeping smaller inventories of finished goods on hand, apparently in anticipation of weak sales.

Leif Eskesen, HSBC’s chief economist for India and Southeast Asia, cut his forecast for Indian economic output to 4 percent for the Indian fiscal year through the end of next March, from a previous forecast of 5.5 percent. He also cut his forecast for the following fiscal year to 5.5 percent, from 6.6 percent.

“The recovery is likely to prove protracted as confidence will only return reluctantly, and the structural reforms will only pass through to growth very slowly,” he said in a research report.

Julian D’Souza, the South Asia director in the Mumbai office of the Conference Board, a group based in New York that issues leading economic indicators, said many manufacturing industries were hobbled by high transport and electricity costs. But auto parts factories tend to have modern equipment and good locations close to ports.

“That’s one area where India can start exporting,” he said.

American and European auto parts makers are already facing heavy competition from China, however, so further exports from India might fan trade tensions.

Neha Thirani Bagri contributed reporting.

Article source: http://www.nytimes.com/2013/09/03/business/global/indian-rupee.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Rupee Drops, and Outlook Grows Darker for India

August 30, 2013 by

India’s economy slowed in early summer to its weakest pace since the bottom of the global economic downturn in 2009, government statistics released Friday evening showed.

The Central Statistics Office in New Delhi said that the economy grew 4.4 percent in the quarter ended June 30, well below economists’ expectations of 4.8 percent. The quarter was the weakest since output grew 3.5 percent in the quarter that ended March 31, 2009.

The accumulating signs of economic distress — slower growth, a widening current-account deficit, higher oil prices and rising inflation in general — suggest that the monthlong fall of the Indian rupee in currency markets may be a symptom of fundamental troubles in the Indian economy and not just part of the broader difficulties experienced by Asian emerging market currencies in recent weeks.

Hints that the Federal Reserve in the United States may soon shift to a tighter monetary policy have prompted global investors to shift billions of dollars out of financial markets from São Paulo to Jakarta to Mumbai, eroding the value of local currencies in developing economies. But the Indian rupee has fallen the fastest of any emerging market currency in the last month, down 8.1 percent. Broader investor disenchantment with emerging markets has been compounded here by worries about India’s economy, the third-largest in Asia after China’s and Japan’s.

Manufacturing and mining have been hit the hardest. A court-ordered halt to most iron ore mining across India for environmental reasons has hurt steel and other sectors; state governments have been raising taxes on the sector, and broader demand has begun to falter.

“The fact is, yes, the manufacturing sector has slowed down,” said Raj K. Singh, the chairman and managing director of the Bharat Petroleum Corporation, an oil refining and marketing company that is two-thirds owned by the Indian government and is one of the country’s largest businesses.

The data was released after stock market and currency trading had ended for the day, despite government promises to stay with the regular Friday morning release. After a week of considerable volatility, the rupee and the Mumbai stock market both had showed modest gains earlier Friday.

India enjoyed annual growth of 8 to 9 percent in the years leading up to the global financial crisis but has struggled to reach 6 percent since then, despite heavy government spending and large fiscal and trade deficits.

From corner stores to corporate boardrooms, the consensus in Mumbai these days is that stagnation may continue over the next few months, although almost no one expects a steep downturn.

Sitting in his office on Friday morning in front of an abstract Indian painting in blues and yellows, Mr. Singh voiced concern about a 7.2 percent drop in nationwide diesel consumption during the first three weeks of August from a year ago. Nationwide diesel consumption was also down 5.9 percent in July from a year ago.

But heavy monsoon rains have limited the need for diesel in irrigation pumps, making the comparison less clear, Mr. Singh cautioned. Rohit Dawar, the top diesel demand expert at the Petroleum Ministry in New Delhi, said in a telephone interview that diesel consumption had been artificially inflated in July and August last year by a peculiarity in government fuel subsidies, since removed, that temporarily made it cheaper to burn diesel instead of other fuels in industrial boilers.

Even allowing for all of these factors, however, “there is a slight slowdown” in diesel demand recently, Mr. Dawar said.

Plentiful monsoon rains, a key indicator for the Indian economy for thousands of years, have produced lush fields that could yet help stabilize broader measures of the economy in the coming months and forestall a steeper slowdown. While World Bank data show that value added in agriculture is only one-sixth of the economy these days, a good harvest could still play an outsize role in limiting recent increases in food prices.

Inflation will probably remain a problem, however, given that India relies almost entirely on imported oil, which becomes more expensive with each drop of the rupee. So important is oil to India’s trade deficit that desperate bidding for scarce dollars by Indian refiners helped drive the rupee briefly to a record low on Wednesday, before the Reserve Bank of India stopped the rout that evening by arranging to transfer dollars from its reserves to oil importers.

“Prices are rising for everything — petrol is more expensive, vegetables are more expensive,” said Bharat Hirji Gada, a local shopkeeper.

India has some advantages compared with European and other Asian countries that have experienced steep economic downturns following currency declines over the last two decades. The biggest advantage may be that the Indian government has long prohibited borrowing in foreign currencies by poor or middle-class households and by small and medium-size businesses.

Foreign debt has been concentrated among blue-chip companies and wealthy individuals. Many of these loans are to borrowers whose revenue is largely denominated in dollars, limiting their currency exposure, said Haseeb A. Drabu, the chief economist for the Essar Group, one of India’s heavy industry giants.

“The bulk of it would be hedged,” he said.

Neha Thirani Bagri contributed reporting.

Article source: http://www.nytimes.com/2013/08/31/business/global/forecast-darkens-for-indian-economy.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Bloomberg Reporters’ Practices Become Crucial Issue for Company

June 13, 2013 by Leave a Comment

“The only journalism that matters is the kind that moves markets,” Mr. Secunda told the senior staff of Bloomberg News during a recent discussion in the seventh-floor auditorium of the company’s Lexington Avenue headquarters, according to one former Bloomberg journalist in attendance.

The question of how exactly some of those Bloomberg reporters may have uncovered market-moving information has become a critical one for the company.

In April, Goldman Sachs complained that a reporter had monitored an executive’s activities on the Bloomberg machine, the ubiquitous financial terminal that contains a mind-boggling array of information about economies, companies, markets and people, including Bloomberg’s own customers. The revelation prompted inquiries from more than 20 customers, including Bank of America, the Federal Reserve, the Treasury Department and the European Central Bank. Daniel L. Doctoroff, chief executive of Bloomberg, apologized, calling the reporting practice a “mistake.”

But interviews with more than 30 current and former Bloomberg employees paint a picture of an aggressive, hyperkinetic organization that not only tolerated but encouraged an unusual symbiotic relationship between the company’s news operation and its business interests, including the use of the terminals to break news.

Many of these reporters say they routinely used the terminal’s function, called the UUID command, to find background information on subscribers, including contact information, when the subscriber had last logged on, and weekly statistics on how often customers used a particular function, like equity shares or currency markets.

Reporters also say they talked to their business-side colleagues to gain early access to company announcements, including company releases and bond prospectuses about to be made public, and queried Bloomberg’s own help desk to find out what pages and features customers might have been using.

“We were told again and again and again, find ways to use what’s on the terminal to write stories,” said one former Bloomberg reporter who, like most employees, was required to sign a strict nondisclosure agreement that prohibits them from speaking about the company. “They never said ‘Oh, please be careful and don’t breach any kind of privacy,’ ” the former reporter said.

A senior Bloomberg executive not authorized to speak for attribution confirmed the reporter’s account. “It’s not like this was some deep Bloomberg secret,” this executive said. “If it’s on the terminal, we’d say go for it.”

In the opaque world of Wall Street where traders tightly protect every shred of information, the privacy breach threatens to undermine Bloomberg’s core terminal business — which takes up 26 floors at Bloomberg’s New York headquarters, compared with four floors for the news unit. Bloomberg leases more than 315,000 of its roughly $20,000-a-year financial data computers, which made up 85 percent of the company’s 2012 revenue of $7.9 billion.

After Goldman complained, Bloomberg immediately shut newsroom access to the UUID function. Mr. Doctoroff promised an independent inquiry to be led by Samuel J. Palmisano, the former chairman and chief executive of I.B.M., who is a board member of Mr. Bloomberg’s charitable group. Mr. Doctoroff also appointed a senior executive to the newly created Bloomberg position of client data compliance officer.

Although Bloomberg has acted swiftly, several people close to the company said executives considered the controversy overblown, fanned by Wall Street banks frustrated with aggressive news coverage and eager to negotiate cheaper rates for terminals. Bloomberg controls more than a third of the $25.5 billion financial data services market, according to Burton-Taylor International Consulting.

Competitors have already pounced. At an investor conference on May 28, Lex Fenwick, chief executive of Dow Jones Company, publisher of The Wall Street Journal, and former chief executive of Bloomberg L.P. introduced a Dow Jones messaging system which, he said, would be “strictly stored on your servers and we can’t see what you’re saying to each other.”

Yvonne Diaz, a spokeswomen for Thomson Reuters, said “there are strict controls in place that prevent any Reuters or other staff outside of the development and customer service groups from accessing” customer data. But in a sign of just how competitive the market for financial news and analytics has become, Thomson Reuters allows a tier of select clients early access, by two seconds, to consumer sentiment data through an agreement with the University of Michigan. The unusual arrangement was first reported by CNBC.

Article source: http://www.nytimes.com/2013/06/14/business/media/bloomberg-reporters-tactics-become-crucial-issue-for-company.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

European Shares Rise in Sparse Trading

May 27, 2013 by Leave a Comment

LONDON — European stocks, bonds and the dollar traded more calmly on Monday after last week’s turbulence, though a 3 percent dive in Japan’s main share index kept investors on edge.

Holidays in the United States and Britain kept European equity and bond markets quieter than usual, but with last week’s declines tempting buyers, the Euro Stoxx 50 rose 1.1 percent, and Italian and Spanish bonds managed their first gains in three sessions.

The dollar was also steadier, though it slid back to 101 against the yen as the latest lurch in Japanese equities encouraged investors who have been unwinding their dollar hedges on share portfolios and heading for bonds.

The 3.2 percent drop on Tokyo’s Nikkei 225 index brought its losses since Wednesday to nearly 10 percent, though the index is still up 36 percent this year.

Last week’s shakeout of equity, bond and currency markets was set off by concerns that the Federal Reserve could wind down its monetary support sooner than had been expected. In addition, there was weak Chinese data, and doubts over how low Japan would allow the yen to go.

But despite the wobble, analysts largely foresee a period of moderation in risk assets, rather than a big correction.

Dan Morris, a global strategist at J.P. Morgan Asset Management, said that a pullback by the Fed would be turbulent, but added, “With fundamental drivers for equities still supportive, investors should tighten their seat belts instead of reaching for the parachute.”

Whereas the Fed appears to be weighing an exit from its crisis measures, the European Central Bank may still have some scope to counter a long-running euro zone recession caused largely by efforts to contain the bloc’s sovereign debt crisis.

On Wednesday, the European Commission will release its review of countries’ debt-cutting policies, which will confirm that France, Spain, Slovenia and others may be given more time to trim their budget deficits. The Organization for Economic Cooperation and Development will publish a review of major economies on the same day.

Three Italian government bond auctions this week will also test demand after the talk of Fed stimulus withdrawal.

Italian and Spanish bonds were caught in the sell-off in risk assets last week, but yields on both have eased back as focus turns to the European Central Bank’s next step.

Jörg Asmussen, who sits on the central bank’s executive board, said that the bank would remain accommodative “as long as needed,” although he sounded cautious about charging banks to put money on deposit at the central bank, something that could help hold down borrowing costs.

“One should be very cautious regarding the discussion if the E.C.B. could introduce negative deposit rates,” Mr. Asmussen said in a speech in Berlin. “This can have advantages, but it can also have disadvantages.”

The mood was again tentative in the commodities markets. Brent crude slipped to $102.62 a barrel, extending last week’s 2 percent drop, as the patchy economic outlook in a well-supplied market pressured prices.

Anxiety in the broader market also helped gold, considered a safe-haven investment, firm up at $1,394.39 an ounce as it built on last week’s best run in a month. Copper, a metal more attuned to growth, fell 0.2 percent.

After disappointing data from China last week dimmed the outlook for global oil demand, the oil producer cartel OPEC was expected to keep policy unchanged at a meeting on Friday.

The shale revolution in the United States, still the biggest oil consumer, may even bring an end to the relentless rise in fuel prices seen over the past decade.

“OPEC is in a hard situation,” said Chakib Khelil, who was Algeria’s oil minister from 1999 to 2010. “The demand for OPEC oil is going down, while increasing demand is being met by others.”

Article source: http://www.nytimes.com/2013/05/28/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Stock Gains Ease After Lackluster U.S. Economic Data

December 23, 2011 by Leave a Comment

LONDON (AP) — European markets closed higher Friday ahead of the Christmas break even though a batch of disappointing U.S. economic figures reined in some of the recent optimism over the state of the world’s largest economy.

Figures showing that consumer spending and personal income rose by a modest 0.1 percent in November were below market expectations, while the headline 3.8 percent increase in durable goods orders last month masked a decline in a crucial investment measure, benefiting from big orders for Boeing aircraft.

The figures offset some of the optimism in markets about the U.S. economy following a run of largely positive data. Since Thursday, investors have taken heart from figures showing that the number of initial jobless claims in the U.S. unexpectedly fell 4,000 last week to 364,000, the lowest level since April 2008.

Those figures had raised hopes that the U.S. economy got through its soft patch earlier this year and may be poised for stronger-than-anticipated growth in the fourth quarter.

“This doesn’t change the overall view too much but it is somewhat deflating,” said Jennifer Lee, an analyst at BMO Capital Markets.

That was evident in the markets, where stocks in Europe gave up many of their earlier gains and Wall Street opened lower than predicted in futures markets. Trading activity was muted as the traditional holiday slowdown began in earnest.

In Europe, Germany’s DAX closed 0.5 percent higher at 5,878.93 while the CAC-40 in France rose 1 percent to 3,102.09. The FTSE 100 index of leading British shares, which only traded for a half day, closed up 1 percent at 5,512.70.

In the U.S., the Dow Jones industrial average was up 0.6 percent at 12,246 while the broader Standard Poor’s 500 index rose the same rate to 1,262.

Trading was fairly lackluster in the currency markets too, with the euro down 0.1 percent at $1.3048 and the dollar 0.1 percent lower at 78.09 yen.

While the U.S. economy has been the dominant driver in markets the past couple of days, Europe’s debt crisis is likely to remain the key market focus next year.

There were reminders Friday of the underlying problems afflicting the 17-nation eurozone.

Figures showed that eurozone banks stashed euro347 billion ($453 billion) overnight with the European Central Bank on Thursday, in another sign that Europe’s debt crisis is still putting pressure on the banking system despite massive central bank support. The figure announced Friday is the highest for 2011, topping euro346.4 billion earlier this month.

The large deposits come despite Wednesday’s massive central bank credit operation, in which the ECB let banks borrow as much as they wanted for up to 3 years. As a result 523 banks took euro489 billion, the largest ECB loan operation in the 13-year history of the euro.

Earlier in Asia, China’s benchmark in Shanghai gained 0.9 percent to 2,204.78 and Hong Kong’s Hang Seng rose 1.4 percent to 18,629.17. Japan’s financial markets were closed for a public holiday.

Oil prices tracked equities higher — benchmark crude for February delivery was up 44 cents to $99.97 a barrel in electronic trading on the New York Mercantile Exchange.

____

Alex Kennedy in Singapore contributed to this report.

Article source: http://feeds.nytimes.com/click.phdo?i=8457b7a1b07008a1770d96042553df12

Filed Under: Economy News Tagged With: , ,

Japan Intervenes in Currency Markets to Weaken the Yen

August 4, 2011 by Leave a Comment

TOKYO — Japan said Thursday that it had intervened in the foreign exchange market, selling yen and buying dollars in a bid to reverse a punishing spike in the value of the Japanese currency.

Japan has been desperate to bulwark its fragile recovery from the March earthquake and tsunami. But even as companies have raced to repair damaged factories and resume production, they have been hit by a surge in the yen that threatens their business overseas.

A strong yen hurts Japan’s export-led economy by making its cars and electronics more expensive overseas, and by eroding the value of overseas earnings when converted into yen.

But the Japanese currency, long considered a safe haven, rose as investors wary of the debt impasse in the United States fled to other currencies. Against the dollar, the yen has surged about 11 percent in the last year, and 4 percent in the last month.

The rise has accelerated an upward trend in the yen that was already squeezing Japanese exporters’ profits. Toyota, Honda and Nissan all recently blamed their sharply lower earnings in the latest quarter in part on the strong yen.

Still, the effect of moves to manipulate foreign exchange markets, especially by a single country, has often been short-lived. Japan acted alone in the intervention on Thursday morning, though Tokyo is in touch with other countries over the maneuver, Yoshihiko Noda, its finance minister, told reporters. He also said he hoped that the Bank of Japan would take steps to support the government’s move.

The Bank of Japan, which has had a sometimes troubled relationship with the government, appeared to support the intervention. The central bank said Thursday morning it would end its regular policy meeting a day early, a sign it could announce additional policy to support the government’s bid to weaken the yen.

In a note to clients, Masaaki Kanno, an economist at JPMorgan Securities, said he expected the bank to announce a further easing of Japan’s monetary policy by extending an asset purchase program that would increase the bank’s reserves, increasing liquidity and helping to dilute the value of the yen.

Article source: http://feeds.nytimes.com/click.phdo?i=c1926900b9d1ba403c627069ba84a5fd

Filed Under: Business News Tagged With: ,

Hedge Funds Seeking Gains in Greek Crisis

July 4, 2011 by Leave a Comment

Algebris, a $1.3 billion fund that focuses on global financial stocks, was down about 7 percent for the year through late June because of shares it held in European financial companies. Those stocks fell sharply recently amid fears they could have losses if Greece defaulted on its debt.

Still, undaunted by the risks that the Greek crisis could spread to other countries, managers at Algebris decided to buy more shares of European financial companies on the cheap.

“The volatility in the market gave us the opportunity to buy a number of stocks of European banks and insurance companies where we think there is tremendous value and the risk of systemic meltdown was very low,” said Eric Halet, a co-founder of the fund.

As Greece’s fiscal turmoil has rattled global equity, bond and currency markets, hedge funds have scrambled to figure out how to make the big score.

Last week, financial markets rebounded sharply on news that the Greek Parliament had approved a tough austerity package, a move that staved off a default and was a condition for further international assistance.

Over the weekend, European ministers agreed to finance Greece through the summer but deferred crucial decisions on a second bailout.

After a two-hour conference call late Saturday, the finance ministers from the 17 euro zone countries said they would sign off on an 8.7 billion euro, or $12.6 billion, loan to Greece, part of a 110 billion euro package agreed upon last year. The board of the International Monetary Fund was expected to approve its part of this installment, 3.3 billion euros, or $4.8 billion, within days.

Without the loans, the Greek government faced the prospect of insolvency in weeks. But with Greece still struggling to shore up its finances, European finance ministers also need to put together a second package of loans to help it through 2014. That bailout is expected to amount to 80 billion to 90 billion euros but, because of conflicts over the extent of private sector involvement in the effort, the package may not be agreed upon until September.

Wolfgang Schäuble, the German finance minister, said that the new program could “be completed before the release of the next tranche in the autumn — provided, as always, that the implementation of the program in Greece takes place as planned,” Reuters reported from Berlin.

“Greece has enough cash over the summer so the very acute worry that Greece would be unable to pay in July has gone,” said Nicolas Véron, senior fellow at Bruegel, an economic research institute in Brussels. “But Europe has not been proactive for some time, and it will probably remain in strong crisis management mode over the next few weeks.”

Constrained by the unpopularity of bailouts at home, political leaders appear able to act only at the 11th hour, when they have no alternative, Mr. Véron said.

“The E.U.’s institutions are not effective, and the bigger the crisis, the less effective they are,” he said. “Discussion is driven by governments accountable to domestic constituencies and not to the E.U. as a whole.”

The twists and turns of the crisis and the whipsaw market activity are making it tough for some hedge funds to maneuver.

While it is possible that a hedge fund received a hefty payday from betting that the euro would rise in value against the dollar or that Greece would not default on its debt, no big winners have emerged, several hedge fund investors and managers said.

Only nine out of the more than 300 hedge funds tracked by HSBC’s private bank through mid-June showed double-digit returns this year, and the best-performer, Jat Capital, which bets on high-flying technology and Internet stocks, was up about 19 percent. In a separate survey, hedge funds tracked by Lyxor Asset Management showed that almost every fund across nearly every strategy lost money in June.

Some investors said that many hedge funds appeared to have sat out much of the euro zone crisis, particularly in bets involving Greek sovereign debt, concluding it was a “no-win situation,” said Gerlof de Vrij, the head of the global asset allocation team at APG Asset Management in the Netherlands, which oversees $395 billion in investments for seven Dutch pension funds.

Stephen Castle contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=bb50a3d3689b68c1fb64664e6fde8519

Filed Under: Business News Tagged With: , ,