June 25, 2024

Central Bank Acts to Strengthen Brazilian Real

Similar moves have been made by central banks in Indonesia and Turkey. The action highlights growing fears on the part of policy makers in these countries that the recent slide in their currencies poses a serious economic threat given the high levels of dollar-denominated debt that their national banks and companies have taken on.

As local currencies weaken, dollar debts increase in value and become increasingly difficult to service.

The real has lost more than 15 percent of its value against the dollar this year as foreign investors as well as locals have sold their reals for dollars.

The Indian rupee, the South African rand, the Turkish lira and the Indonesian rupiah have also lost more than 10 percent against the dollar as the money that once poured into these economies returns to more developed economies in anticipation of higher interest rates in the United States.

“We are in the midst of a significant rebalancing, and the growth outlook for emerging market countries has deteriorated,” said Jens Nordvig, a currency strategist at Nomura in New York.

Earlier this week, the Turkish central bank increased interest rates in a bid to stop the fall of the lira, which is approaching the psychologically crucial hurdle of a dollar-lira rate of 2.00. Indonesia, which like Turkey and Brazil relied on foreign dollars to finance large current-account deficits, also announced on Friday a series of steps to increase the availability of dollars in the markets and the broader economy.

While the measures may have a short-term impact — the real was up more than 1 percent against the dollar on Friday — their long-term effect is uncertain. After years of heady growth, spurred in part by a commodity boom coupled with very low interest rates and stagnation in the United States and Europe, economic momentum is shifting slowly from emerging to developed economies.

Another concern is that as economies in Turkey, Brazil and Indonesia slow, it could become difficult politically for central banks to push rates ever higher.

Recep Tayyip Erdogan, the Turkish prime minister, whose ruling Justice and Development Party faces crucial local elections early next year, has been especially vocal in this regard.

Article source: http://www.nytimes.com/2013/08/24/business/global/brazilian-central-bank-acts-to-strengthen-its-currency.html?partner=rss&emc=rss

Financial Stocks Lift Wall Street

Bank stocks rose more than 4 percent by the close of the trading session, backtracking on the steep losses incurred on Monday that helped send the main stock indexes back into negative territory for the year.

By the end of the day, the Dow Jones industrial average was up 1.58 percent, or 180.05 points, at 11,577.05. The broader Standard Poor’s 500-stock index climbed more than 2 percent, or 24.52 points, to 1,225.38, while the Nasdaq composite index was up by 1.6 percent at 2,657.43.

The Dow finished fractionally below where it started the year, and the Nasdaq was 0.17 percent higher for the year to date.

The Treasury’s 10-year note fell 6/32, to 99 18/32. The yield rose to 2.18 percent, from 2.16 percent late Monday.

“Every day does not have to follow exactly the pattern of a yo-yo, but sometimes that is what happens,” said Lawrence Creatura, a portfolio manager at Federated Investors. “Yesterday’s downdraft was large, and it is reasonable to have investors looking for bargains today.”

Some analysts said the late-day gains might be attributed to exchange-traded funds. A Guardian newspaper report, quoting unidentified diplomats, saying that France and Germany had agreed on a plan to bolster Europe’s rescue fund could also have inspired such a reaction. That was “entirely plausible,” said Brian Gendreau, market strategist for the Cetera Financial Group. He and others noted that the market was highly volatile.

“Markets buy the rumor,” Eric Viloria, a senior currency strategist at Forex.com, said in a research note that referred to the report. “Today’s price action highlights how sensitive the markets are to headlines.”

Investors sifted through news about France, after Moody’s Investors Service said the country’s AAA credit rating was at risk. It was the latest headline to remind investors of the challenges facing Europe.

“Europe continues to be the No. 1 negative,” said Nick Kalivas, vice president for financial research at MF Global. “We  just are not seeing any signs of resolution there.” He said he believed that the comments about France were keeping buyers cautious.

The debt crisis could also have an impact on China, the world’s second-largest economy after the United States. New data showed that growth in China in the third quarter had slowed slightly to 9.1 percent. But Mr. Kalivas said he suspected the data could be “a little bit supportive” of the markets because industrial production and retail sales were firm.

Although the markets have been beset by volatility in recent months, buffeted largely by the instability related to the debt crisis in Europe, corporate results trickling out are a major factor giving investors direction.

Analysts believed investors were studying corporate profits for direction, specifically with banks, although some believed investors were already trading them at a discount. 

“The rumor mill is so rampant,” said Michael A. Mullaney, vice president at the Fiduciary Trust Company. “The bottom line is, the one thing I have been mildly encouraged about, is the earnings reports have been pretty good, so on average that hopefully lends a degree of support for the market.”

Goldman Sachs reported on Tuesday that it had a loss of $428 million in the quarter, compared with a $1.7 billion profit a year ago. Bank of America said it had a $6.2 billion profit, and revenue was up 6.6 percent.

Bank of America was up more than 10 percent at $6.64 and Goldman rose 5.5 percent to $102.25.

Investors have been dissecting the fine print of reports for a glimpse into the future of the economy.

“We are in earnings season now, and managements’ forward-looking comments are likely to dominate other factors,” Mr. Creatura said. “Today, because of some strong announcements, we are seeing a nice bid to the markets.”

The EMC Corporation, for example, said it expected global information technology spending to grow. It rose 5.8 percent to $23.99 after reporting a 28 percent rise in third-quarter earnings. VMware Inc. rose 8.2 percent, to $96.86, after it said net income more than doubled.

But Mr. Creatura said more volatility could be in store for banks, depending on what happened in Europe.

Article source: http://feeds.nytimes.com/click.phdo?i=e74f674490418475978869eb0e2e930e

Wall Street Slump Lingers

The Standard Poor’s 500-stock index was down 2.85 percent, or 32.19 points. The Dow Jones industrial average was off 258.08 points, or 2.36 percent, to close at 10655.30, and the Nasdaq composite index dropped 3.29 percent. The yield on the 10-year Treasury bond fell to 1.75 percent.

European markets fell after Asian stocks closed sharply lower.

Greece’s acknowledgment over the weekend that it would miss its deficit-reduction targets for this year and next, despite additional cuts in the public payroll, weighed on market sentiment, analysts at the French investment bank Crédit Agricole CIB wrote in a note.

Finance ministers from the 17 European Union nations that use the euro were meeting Monday in Luxembourg, but no decision was expected this week on whether to release the next installment of Greece’s bailout package.

The Purchasing Managers’ Index, a survey measuring economic activity in the euro zone, gave a dim outlook of the Continent’s economy. It registered at 48.5, its lowest measure in over two years. A figure of below 50 shows contraction. New orders fell to their lowest levels in 27 months. The only country in the euro zone to show any growth was Germany.

The worsening economic picture in Europe is driving down the euro, said Brian Dolan, chief currency strategist at Forex.com, a unit of the trading firm Gain Capital. It dropped to $1.3281, its lowest level since January.

“The euro zone has no growth solution to their debt crisis, and whatever they do in terms” of establishing a rescue fund, he said, “it’s not going to be a long-term solution,” he said.

Investors are awaiting a meeting of the European Central Bank on Thursday, and many expect the bank to cut interest rates. Analysts say such action could push the euro lower.

The dollar gained against most major currencies, as traders moved out of relatively risky assets. Its price in Swiss francs rose to 0.9183, up from 0.9082 francs. But it fell to 76.67 yen, down from 77.06 yen.

Meanwhile, in the United States, a report from the Institute for Supply Management showed stronger growth in factories in September than had been expected. The index registered 51.6 points, showing expansion — a reading over 50 — for the 26th consecutive month. But the index was still lower than a year ago and new orders contracted slightly, hinting at continued troubles ahead.

Construction spending increased 1.4 percent in August, according to the Commerce Department, driven largely by gains in the public sector.

And General Motors, Ford and Chrysler reported increases in sales of new vehicles last month, one of few areas of sharp growth in the domestic economy.

The stock prices of airlines were driven sharply lower by general concern about the American economy and speculation that AMR, the parent company of American Airlines, may be headed for bankruptcy. The concern about AMR stemmed from a report that an unusually large number of pilots have retired in recent months, said Ray Neidl, an analyst with Maxim Group. AMR’s stock price was down over 33 percent to $1.98. Delta’s stocks were down 11 percent, US Airways Group’s stocks were down almost 16 percent and Alaska Air Group’s shares fell about 9 percent. Airlines share prices are particularly sensitive to fears of economic downturn, because air travel drops sharply in times of economic strain.

Global equities, as tracked by the MSCI World Index, are down 14 percent so far this year, with many major indexes just concluding their worst quarterly drops since the world’s banks were teetering on the brink in 2008.

The broad American market, as measured by the S. P. 500, was down 10 percent in the first three quarters of 2011.

On Monday, the Euro Stoxx 50 index, a barometer of euro zone blue chips, closed down 1.9 percent, while the FTSE 100 index in London gave up 1 percent. The DAX in Frankfurt fell 2.3 percent.

Banks led the declines in Europe. Shares of Dexia, a French-Belgian lender that has struggled since it was bailed out in 2008, had fallen more than 9 percent after Moody’s Investors Service said it was considering a downgrade of the bank’s credit ratings. Investors were concerned about the bank’s exposure to Greek debt.

Asian shares were lower across the board. The Sydney market benchmark index fell 2.8 percent. In Hong Kong, the Hang Seng index closed down 4.4 percent.

Markets in mainland China and South Korea were closed for holidays.

In Japan, the Nikkei 225 stock average closed 1.8 percent lower despite news that business confidence had improved somewhat during the third quarter as the country continued its recovery from the devastating earthquake and tsunami that struck on March 11.

The Bank of Japan’s Tankan, a survey that tracks business sentiment, found confidence among large manufacturers as it rose to plus 2 in September, from minus 9 in June. Though the number remains weak, a reading in positive territory indicates that optimists outweigh pessimists.

American crude oil futures for November delivery were down 2.7 percent, at $76.93 a barrel. Comex gold contracts for December delivery were up 1.87 percent, at $1,654.20 an ounce.

David Jolly, Stephen Castle and Bettina Wassener contributed reporting.

This article has been revised to reflect the following correction:

Correction: October 3, 2011

Because of an editing error, an earlier version of this article misstated the price of oil. It is trading slightly above $77, not $777.

Article source: http://www.nytimes.com/2011/10/04/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

Portugal Says It Has Negotiated a Bailout Loan of $116 Billion

Portugal’s government collapsed last month, sparking a sharp rise in borrowing costs that forced Lisbon to become the third euro zone country to seek a bailout after Greece and Ireland.

Mr. Socrates, who now faces a snap parliamentary election on June 5, hailed the package as a victory, saying it included more lenient terms than those imposed on Greece and Ireland.

The deal gave Portugal more time to meet budget goals which it had previously agreed to.

“The government has obtained a good deal. This is a deal that defends Portugal,” Mr. Socrates said.

He provided few details of what terms the bailout included, saying only “there are no financial assistance programs that are not demanding.”

Filipe Garcia, head of Informação de Mercados Financeiros consulting firm in Porto, said: ”He showed us the bright side of the moon, it is the dark side that remains to be seen, and that includes the interest rate”.

Mr. Socrates said Portugal would need to cut its budget deficit to 5.9 percent of gross domestic product this year, compared with the government’s previous goal of 4.6 percent. The deficit will have to be cut to 4.5 percent in 2012 and 3 percent in 2013.

“Some of the parameters look a little softer than expectations such as the higher deficit target and longer time line,” said Vitaly Serebryakov, currency strategist at Wells Fargo in New York.

Officials from the European Commission, the International Monetary Fund and European Central Bank have been in Lisbon for almost a month to hammer out the agreement with Portugal.

Mr. Socrates said the agreement still has to be presented to opposition parties.

The opposition leader, Pedro Passos Coelho with the Social Democrats, said earlier that he was ready to meet with the lenders.

A new government after the June election will have to enact the terms of the bailout. Mr. Socrates said the loan agreement would not require any changes to the constitution.

The deal is expected to be approved at a meeting of euro zone finance ministers in mid-May, in time for the European rescue fund to raise money for Portugal by June 15, when the country needs to meet a bond redemption of 4.9 billion euros.

Article source: http://feeds.nytimes.com/click.phdo?i=9c219c3ace15fe630efe95b2c70f0836

Wall Street Shrugs Off Death of Bin Laden and Turns Attention to Earnings

The three main indexes initially rose as investors tried to assess the future of global security. But shares lost their momentum as the session wore on.

“The Osama bin Laden situation really had a nice impact at the open,” said Douglas S. Roberts, the chief investment strategist for the Channel Capital Research Institute. “It looks like a lot of that might have been short-covering.”

Jeffrey Kleintop, the chief market strategist for LPL Financial, called the early rise a knee-jerk reaction.

“Then a thoughtful process comes out,” he said, “that maybe the risks have shifted.”

At the close, the Dow Jones industrial average was 3.18 points lower, at 12,807.36, while the broader Standard Poor’s 500-stock index lost 2.39 points, or 0.18 percent, to 1,361.22. The technology-heavy Nasdaq lost 9.46 points, or 0.33, percent, at 2,864.08.

The S. P. health care index was up more than 1 percent after Teva Pharmaceutical Industries said it had agreed to buy the biopharmaceutical company Cephalon for $6.8 billion, a deal unanimously approved by the boards of the two companies.

Teva shares rose more than 3 percent, to $47.27, while Cephalon was up more than 4 percent at $80.11.

The dollar was mixed. The euro rose to $1.4846 from $1.4806 late Friday, while the British pound slipped to $1.6683 from $1.6706. The dollar rose to 81.30 yen, from 81.20 yen.

The dollar has been weak across the board, with United States interest rates low and some central banks beginning to lift rates. Debt limit negotiations in Congress are not helping, said Brian Dolan, the chief currency strategist at Forex.com.

The Treasury Department said it would initiate emergency measures on Friday to keep the federal government’s total borrowing under the maximum allowed by law, as Congress continues to debate the terms of any increase in the debt ceiling.

“It is still a weak dollar environment,” Mr. Dolan said. “That is the significant takeaway: the dollar downtrend is very much intact.”

The Japanese and South Korean markets were already 1 percent higher before President Obama announced late Sunday that American forces had killed Bin Laden in Pakistan.

By the close, the Nikkei 225 index had gained 1.6 percent, to 10,004.20 points, the first time the index closed above 10,000 since the devastating earthquake and tsunami struck the country on March 11.

In Europe, the Euro Stoxx 50 index, a barometer of euro zone blue chips, slipped 0.1 percent. The CAC 40 in Paris rose 1.85 points and the DAX in Frankfurt rose 0.18 percent. London markets were closed for a bank holiday.

On the economic front, the Institute for Supply Management, a trade group of purchasing executives, said its index of manufacturing activity dipped to 60.4 in April but remained above 60 for a fourth month. That was down from 61.2 in March and 61.4 in February, the fastest expansion in nearly seven years. A reading above 50 signals growth.

In addition, construction spending rose 1.4 percent in March, helped by an increase in spending on home-improvement projects.

In other corporate news, Arch Coal said it would buy the International Coal Group in a cash deal worth $3.4 billion that will create one of the world’s largest coal producers. Arch shares fell 2.2 percent to $33.53, while International Coal rose more than 30 percent to $14.43.

Dish Network and the EchoStar Corporation have agreed to pay TiVo $500 million to settle a patent infringement lawsuit involving TiVo’s video recording technology, putting an end to a long and costly legal battle. Stock in TiVo rose more than 3 percent to close at $9.86.

Many analysts cautioned, however, that Bin Laden’s death could stoke, rather than ease, worries about oil supplies and global security in the longer run if it led to retaliatory attacks.

Energy stocks were lower. Crude oil slipped 41 cents to settle at $113.52 a barrel in volatile trading in New York.

Spot gold fell $18.35, to $1,545.35 an ounce.

Silver prices dropped more than 5 percent on Monday, a decline attributed to a decision by the CME Group, which is the parent of the Chicago Board of Trade, to increase the margins for futures trading on silver.

In the bond market, the benchmark 10-year bond gained 2/32, while the yield fell to 3.28 percent, from 3.29 percent late Friday.

David Jolly and Bettina Wassener contributed reporting.

Article source: http://www.nytimes.com/2011/05/03/business/03markets.html?partner=rss&emc=rss