November 14, 2024

Yen Falls Against the Dollar as the Rally Ebbs

TOKYO — Less than a month after the yen breached 100 to the dollar, celebrated as a milestone for this export-loving economy, the yen is back on the wrong side of that symbolic threshold. Shares traded in Tokyo have lost 15 percent of their value since May 23, as a euphoric rally suddenly gave way to nerve-racking market swings.

It is still too early to tell whether the recent southward turn in Japanese markets is a temporary correction, or whether it is the end of the road for a spectacular rally that seemed to foreshadow a resurgence of the Japanese economy after years of deflation and disappointing growth.

But the market retreat reflects a growing anxiety among investors over the program of bold monetary stimulus, fiscal spending and economic reforms instituted by Prime Minister Shinzo Abe, intended to help Japan break out of its economic stupor. The yen, made weaker by these policies, made Japanese exports more competitive globally.

“Until May 23, all attention was on how far the market could rise. But within a week, everyone is talking about how far it could fall,” Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, wrote in a research note published Monday.

The wild market gyrations, Mr. Fujito said, threatened to make predictions from even the most seasoned of market experts almost meaningless.

“Turning to analysts who said just a week ago that stocks might rise to 18,000, or 20,000, is hardly an effective mood-stabilizing move,” he said. At times like these, investors might be wise simply to “wait and see.”

Early Tuesday in Tokyo, the Nikkei 225 index, which is trading around 13,000, slipped 0.5 percent in the opening minutes before a slight rebound, then appeared to lose direction, slinking back into negative territory.

On Monday, the index fell 3.7 percent, the fourth rout in eight days. The dollar was trading at 99.43 yen, after the Japanese currency strengthened overnight, crossing over the 100 yen mark against the dollar for the first time since early May.

Other, immediate factors have propelled recent market moves, analysts say, including comments from United States Federal Reserve officials that seemed to suggest a tightening of monetary policy later this year; a rise in long-term interest rates in both the United States and Japan; profit-taking by overseas hedge funds and other foreign investors who had piled into Japanese equities; and high-frequency trading that has magnified market swings.

But there has also been an increasingly cold-eyed analysis of the risks of Mr. Abe’s economic push. Japan’s central bank has seemingly been caught unaware by volatility in long-term interest rates, brought about by its pump-priming and large-scale purchases of government bonds.

The government pushed through a sizable budget last month, but in the eyes of many investors, that is more of the same from a country that has long poured money into public projects, staving off a deeper decline but with little to show toward long-term, sustainable economic growth.

Article source: http://www.nytimes.com/2013/06/04/business/global/yen-falls-against-the-dollar-as-the-rally-ebbs.html?partner=rss&emc=rss

Global Stocks Rally on Positive Economic News

PARIS — Stocks rose Tuesday in Europe and Asia after strong economic data from China and Germany, and Wall Street appeared headed for a strong opening as investors awaited a slew of important bank earnings.

The Chinese economy, which has been an engine of growth since the financial crisis arrived in 2008, grew at an annual rate of 8.9 percent in the last three months of 2011, down from the 9.1 percent in the third quarter of 2011, but better than many economists had expected.

In Mannheim, the Center for European Economic Research, known by its German initials Z.E.W., reported that its economic sentiment index
increased by 32.2 points in January from last month, reaching a level of minus 21.6 points, its highest point since last July.

It was the largest monthly gain ever for the index, Reuters reported.

“Contrary to repeatedly expressed fears of a recession, the assessment of the financial market experts gives reason for cautious optimism that Germany will only experience a dent in economic activity,” the Z.E.W. president, Wolfgang Franz, said in a statement. He also noted that the European Central Bank’s massive supply of funding to the banking sector last month could have contributed to the uptick.

The institute’s economic expectations index for the euro zone also gained, rising 21.6 points to stand at minus 32.5 points.

Citigroup and Wells Fargo were to announce their earnings later Tuesday, while Goldman Sachs reports on Wednesday and Bank of America on Thursday.

By midday, the Euro Stoxx 50 index, a barometer of euro zone blue chips, was up nearly 2 percent, while the FTSE 100 index in London was up 1.1 percent.

Standard Poor’s 500 index futures rose, suggesting major indexes would bounce higher when New York trading gets under way. U.S. markets were closed Monday for the Martin Luther King holiday.

A successful debt sale in Spain helped European stocks to rally for a second day.

In its first test of the market’s appetite for debt since it was downgraded by S.P. last Friday, Spain on Tuesday sold €4.9 billion, or $6.2 billion, in Treasury bills. It sold 12-month bills priced to yield 2.05 percent, down from 4.05 percent at the previous auction of such securities, in December, and 18-month bills at 2.35 percent, down from 4.23 percent.

The market’s new enthusiasm for riskier assets was reflected in European sovereign bond yields. French 10-year bonds rose in price, despite the Standard Poor’s downgrade Friday that clipped the country’s rating by one notch from the top AAA spot. The yield, which moves in the opposite direction of the price, fell 4 basis points to 2.98 percent.

Italian 10-years fell 14 basis points in yield, to 6.45 percent, while Spain’s 10-years yielded 5.03 percent, down 9 basis points. A basis point is equal to one-hundredth of a percent.

Analysts caution against reading too much into yields and auction results, however, as the European Central Bank has been intermittently intervening in the secondary market since August to help Spain and Italy. And they note that the fear factor in the interbank market remains at extremely elevated levels: European banks deposited a record €501.9 billion overnight Monday at the E.C.B., the central bank said Tuesday.

U.S. crude oil futures rose 2.0 percent to $100.64 a barrel. Comex gold futures rose 1.9 percent to $1,662.40 an ounce.

The dollar was mixed against other major currencies. The euro rose to $1.2788 from $1.2667 late Monday, while the British pound rose to $1.5385 from $1.5325. The dollar fell to 76.60 yen from 76.78 yen, and to 0.9459 Swiss francs from 0.9542 francs.

Asian shares posted solid gains. The Tokyo benchmark Nikkei 225 stock average added 1.1 percent. The Sydney market index S.P./ASX 200 rose 1.7 percent. In Hong Kong, the Hang Seng index added 3.2 percent and in Shanghai the composite index rose 4.2 percent.

Article source: http://www.nytimes.com/2012/01/18/business/global/daily-stock-market-activity.html?partner=rss&emc=rss