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Turkish Skyline Foreshadows Emerging-Market Slowdown

August 20, 2013 by

Today, it stands as a symbol of how far the mighty may fall.

Like the vast majority of new buildings that have blanketed the Istanbul hills in recent years, the Sapphire — at 856 feet it is the tallest in Turkey and among the loftiest in Europe — was built on the back of cheap loans, in dollars, that have flooded Turkey and other fast-growing markets like Brazil, India and South Korea. The money began to flow when the Federal Reserve and other major central banks cut interest rates to the bone in 2009 and cranked up the printing presses in a bid to spur recovery in United States and other advanced industrial nations.

But now, with expectations mounting that the Federal Reserve, led by its departing chairman Ben S. Bernanke, may soon begin to tighten its monetary spigot, Istanbul’s skyline could well be a harbinger of an emerging-market bust brought on by unpaid loans, weakening currencies, and, eventually, the possible failure of developers and banks.

This week, stocks and currencies in several developing Asian markets, including India, Indonesia and Thailand, have been hit hard as global investors continue to withdraw funds from emerging markets in anticipation of the Fed’s move to reduce its stimulus efforts in the United States. Indonesia’s benchmark index, which fell 5 percent on Monday, dropped 3.2 percent more on Tuesday. India’s stock market fell 0.3 percent after sliding 5.6 percent in the previous two trading sessions.

Other worldwide markets are also suffering. Stocks on Wall Street have fallen for four days in a row as borrowing rates climb. The Nikkei 225 index in Japan fell 2.6 percent on Tuesday, hitting its lowest closing level since June 27. South Korea and Hong Kong both fell as well.

Some analysts see it as the markets reacting to an end — real or perceived — of the Bernanke boom.

“What we are witnessing is a huge bubble, a Bernanke bubble if you will,” said Tim Lee of Pi Economics, an independent consultancy based in Greenwich, Conn.

Not everybody is as alarmed as Mr. Lee. Still, 16 years after emerging markets in Asia imploded after local currencies collapsed, even optimists are starting to grow nervous over the rapid accumulation of dollar-denominated debt not just in Turkey but in other now-struggling economies like Brazil, India and South Korea.

As it turned out, some of the biggest beneficiaries of the Fed’s largess were not so much in the developed world, but among the politically connected elite in emerging nations like Turkey, where vanity towers, glitzy shopping malls and even grander projects to come — a third bridge across the Bosporus and a vast new airport — have become representative of Turkey’s new dynamism, economic as well as geopolitical.

What these elites have so far ignored, Mr. Lee warns, is that their obligations carry with them a significant and more pressing danger beyond the risk that the investments may turn sour. That is currency risk.

Unlike the risky loans made to subprime borrowers in the United States or Irish real estate developers in the euro zone, dollar debts taken on by companies erecting skyscrapers in Istanbul, manufacturing steel in India and prospecting for oil in Brazil, need to be largely paid back in dollars by entities that earn most of their revenues in their home currency.

When the Turkish lira or the rupee in India was strong — as these currencies were until recently — local companies had every incentive to borrow in dollars at comparatively lower interest rates.

But when local currencies start to weaken, in line with diminished economic prospects, then the effect is twofold: paying off dollar loans becomes more costly for the borrower and the lender becomes increasingly skittish about his exposure to a fragile currency and may move to reduce or even slash credit lines.

The worst prospect is a currency crash and a deep recession as foreign investors leave the country and locals rush to dump their liras, reals and rupees in favor of dollars.

Article source: http://www.nytimes.com/2013/08/21/business/global/turkish-skyline-foreshadows-emerging-market-slowdown.html?partner=rss&emc=rss

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Nikkei Dives More Than 6 Percent

June 13, 2013 by Leave a Comment

HONG KONG — The battered Japanese stock market lurched into bear market territory Thursday, after a tumble of 6.4 percent took the combined decline in the Nikkei 225 index since a peak on May 23 to more than 21 percent.

A pronounced sell-off in the morning and early afternoon accelerated shortly before the markets closed in Tokyo. The Nikkei ended down more than 840 points at 12,445.38, its lowest level since early April.

Global markets reacted badly at first, with the Euro Stoxx 50, a benchmark for euro zone blue chips, down almost 2 percent in morning trading. But European shares later recovered most of their losses, and stocks on Wall Street opened quietly after new reports showed recent improvements in the American economy.

The drop in Japan on Thursday was one of many sharp declines seen in recent weeks, since a feverish six-month rally in Japanese stocks — incited by optimism over the government’s aggressive efforts to reinvigorate the listless economy — came to an abrupt end.

The Nikkei 225 soared more than 80 percent between mid-November and mid-May, but staged a sudden about-face with a 7.3 percent plunge on May 23.

Sentiment has been fragile and trading volatile ever since, as investors have taken stock of the challenges that face “Abenomics,” the economic policies of Prime Minister Shinzo Abe, and weighed the pros and cons of taking profits after the rally.

A renewed rise in the yen also has eroded a factor that, for months, had worked to support Japanese stocks. The yen weakened substantially between November and May – a welcome development for Japanese exporters as it made their goods less expensive for customers overseas.

But the currency’s move, like that of the stock market, reversed in late May. On Thursday, the yen traded around 94.00 to the American dollar, its strongest level since early April.

In Tokyo, Yoshihide Suga, the chief cabinet secretary, brushed off the market plunge.

“I feel it’s important not to swing from joy to sorrow every time stock prices rise or fall, and keep on doing what we need to do,” Mr. Suga said at a news conference Thursday morning, as shares fell. “The Japanese economy is steadily improving.’’

The Bank of Japan governor, Haruhiko Kuroda, met with Mr. Abe on Thursday to exchange views on the economy, according to local news reports. Mr. Abe told the governor he was determined to do his part in putting a growth plan into action, Mr. Kuroda later told reporters. Mr. Kuroda told the prime minister that the central bank was committed to supporting the Japanese economy through monetary stimulus.

Mr. Kuroda also said he expected markets to soon “calm down to reflect positive developments in the economy,” according to the Nikkei Web site. On Monday, the Japanese government revised its first-quarter gross domestic product figures, saying its economy grew at an annualized pace of 4.1 percent between January and March, better than the 3.5 percent it initially reported. But that upgrade has not been enough to calm investor jitters.

Factors beyond Japan also have helped send markets lower around the world.

In China, which is a key engine of global growth, the flow of economic data in recent weeks has reinforced the picture of an economy that is struggling to regain momentum.

And in the United States, comments on May 22 by Ben S. Bernanke, the chairman of the Federal Reserve, that he and his colleagues might consider paring back their bond-buying programs “in the next few meetings” if the economy shows signs of improvement have helped fan global nervousness. Investors and analysts have struggled to assess the implications of even a small withdrawal of the bond buying that has supported markets in recent years.

In the United States, the Dow Jones industrial average and the Standard Poor’s 500-stock index have sagged 3.2 percent and 4 percent, respectively, in the past three weeks. The DAX in Germany has fallen about 4.5 percent and the CAC 40 in France has dropped more than 6 percent.

Key markets in the Asia-Pacific region have tumbled even more. The Straits Times index in Singapore and the S.P./ASX 200 in Australia have lost more than 9 percent since May 22, and in Hong Kong, the Hang Seng has shed more than 10 percent.

A pessimistic outlook issued Wednesday by the World Bank added to the gloom, with Kaushik Basu, the bank’s chief economist, noting in a news release that “the slowdown in the real economy is turning out to be unusually protracted.”

The bank, based in Washington, cut its forecast for global growth to 2.2 percent from a January forecast of 2.4 percent growth.

In explaining the revision, Mr. Basu cited high unemployment in the developed world and slower-than-expected growth in emerging economies. He also noted that India was expanding at a rate below 6 percent for the first time in a decade.

Hiroko Tabuchi contributed from Tokyo and David Jolly contributed from Paris.

Article source: http://www.nytimes.com/2013/06/14/business/global/asian-stock-markets.html?partner=rss&emc=rss

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Asian Stocks Rally Over Optimism About Europe

October 6, 2011 by Leave a Comment

Global markets have gyrating for months now, and with no sign that the European debt issues will be resolved any time soon, they are likely to remain volatile for the foreseeable future. The feeble state of the U.S. economy and moderating expansion in growth engines like China and India also have compounded the global nervousness.

For the time being, however, the mood has flipped toward the positive, with stock markets in much of Asia rising well over 2 percent on Thursday, and futures pointing to gains in Europe once trading begins.

The Nikkei 225 index closed 1.7 percent higher, and the Taiex in Taiwan rallied 2 percent. In South Korea, the Kospi index finished up 2.6 percent, and the S. P./ASX 200 in Australia gained 3.7 percent.

In Hong Kong, which had been closed for a holiday on Wednesday, the Hang Seng surged 4.7 percent by midafternoon. The mainland Chinese market was closed for a weeklong holiday.

Investors eagerly awaited signs that the European Central Bank could initiate steps to support the beleaguered European economy and financial sector at its monthly policy meeting later on Thursday.

While few economists expect the central bank to lower interest rates outright, other potential tools include purchases of secured debt issues by banks, for example, or an extension of low-interest lending to strapped institutions.

Asian stock markets have been tracking the ups and downs of the U.S. and European markets for months, and Thursday was no exception.

On Wall Street, the Dow Jones industrial average and the Standard Poor’s 500 had ended Wednesday with gains of 1.2 percent and 1.8 percent, respectively.

Investors were encouraged by a report by the Institute for Supply Management that showed that nonmanufacturing businesses continued to grow in September.

Longer term, however, the picture remains as murky as ever, and financial markets continue to face what strategists at HSBC, in their latest quarterly assessment on Thursday, called “an unbearable degree of uncertainty.”

“After falling 22 percent from their April highs, global equities are likely to remain tricky,” Garry Evans, head of global equity strategy at the bank in Hong Kong, wrote. “There are few signs of a bold solution to Europe’s sovereign debt issues and the 23 November deadline for U.S. debt negotiations looms.”

Moreover, he added, economic growth prospects have not bottomed. Although the jury is still out on whether the world will actually tip into another recession, markets will continue to fret that it might, he said.

Article source: http://feeds.nytimes.com/click.phdo?i=bbd96b40082915b40303c82b7ffacf2b

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Asian Stock Markets Continue Downward March

October 3, 2011 by Leave a Comment

Global stock markets have been taking a beating for months now amid fears that an outright debt default by Greece would undermine the European banking system, and as the third quarter ended on Friday, many major indexes had recorded their worst quarterly drops since the financial crisis in 2008.

Monday brought yet more declines.

In Hong Kong, the Hang Seng index, which fell 21.5 percent during the last quarter, started the new quarter with a 4.5 percent drop by midafternoon.

In Taiwan, the Taiex ended 2.9 percent lower, and the key index in Australia shed 2.8 percent.

European markets, too, looked set to fall steeply at the open.

The markets in mainland China and Korea were closed for holidays.

In Japan, the Nikkei 225 index closed 1.8 percent lower despite news that confidence among larger manufacturers 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 Tankan, a quarterly survey that is conducted by the Bank of Japan and is closely watched as a barometer of the Japanese economy’s heath, rose to plus-2 in September, from minus-9 in June.

But the index remained below the pre-quake level, and large companies said they planned to increase capital spending by just 3 percent during the current financial year — less than economists had expected.

The capital expenditure plans show “that the global financial gloom is definitely hurting business confidence in Japan,” Takuji Okubo, an economist at Société Générale in Japan, said in a research note.

The yen’s persistent strength is another factor restraining capital expenditures, he added. The yen has firmed from around 83 per U.S. dollar in January to just above 77 yen on Monday, a troubling development for Japanese exporters, as it has made their goods more expensive for overseas consumers.

The euro, by contrast, has been undermined by the European debt woes. The currency was hovering at around $1.3325 in Asian trading — its lowest level since January — down from $1.3387 at the New York close on Friday.

European finance ministers are due to meet later on Monday, and a succession of other international meetings are planned in coming weeks as policy makers try to stem the crisis.

Greece acknowledged over the weekend that it would miss its deficit-reduction target despite desperate action to slim down its bloated public sector, which also hurt market sentiment on Monday.

The Greek government is in a race against time to convince representatives of the European Commission, the European Central Bank and the International Monetary Fund, known as the troika, that it will make good on pledges to put its financial house in order. Without the release of about €8 billion, or $11 billion, in aid — part of a €110 billion bailout agreement — Greece could run out of money this month and face a default that would shake the euro zone and global markets.

The decision on whether to release the cash is expected to be made on Oct. 13 at an extraordinary meeting of European finance ministers, but it will depend on the troika officials, currently in Athens, issuing a positive report about Greece’s efforts at fiscal overhaul. A chief source of frustration for foreign auditors has been the delays in carrying out reforms and an apparent reluctance by the government to reduce the country’s public payroll.

Niki Kitsantonis contributed reporting from Athens.

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

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Move by Central Banks Lifts Wall Street for 2nd Day

September 16, 2011 by Leave a Comment

Wall Street rose Friday, continuing a rally that lifted markets the previous day, when investors took comfort from efforts by the world’s leading central banks to bolster liquidity in the European banking system.

The European Central Bank and its counterparts in the United States, Britain, Japan and Switzerland opened new lines of credit to European banks, allowing them to borrow dollars for as long as three months, a period that gives them breathing space for the rest of this year.

Analysts cautioned that the step, while providing welcome relief to a range of beleaguered financial institutions, was no panacea for the underlying problem: the crippling debt levels that are weighing on several euro zone countries and threatening to push the hardest-hit among them, Greece, into default.

“It’s an important and gratifying but small step in the right direction,” Andrew Pease, chief investment strategist for Asia Pacific at Russell Investments, said in a conference call Friday.

But he added that, ultimately, more concerted moves were needed toward a more fiscally united Europe.

“Things will likely need to get worse,” he said, before the necessary decisions to “clear the air” would be taken.

Still, investors around the world appeared to greet the announcement with a renewed interest in purchasing stocks.

By early afternoon, the Standard Poor’s 500-stock index was up 6.65 points, or 0.6 percent, to 1,215,76. The Dow Jones industrial average gained 86.66 points, or 0.8 percent, to 11,519.84, and the Nasdaq composite added 14.20 points, or 0.5 percent, to 2,621.27.

In Europe, the Euro Stoxx index of 50 blue chip companies rose 0.2 percent. In Germany, the DAX climbed 1.2 percent, and the CAC 40 in France fell 0.5 percent.

In Japan, the Nikkei 225 index closed 2.3 percent higher. The Kospi in South Korea climbed 3.7 percent, and the benchmark index in Australia finished up 1.9 percent.

In India, where the central bank nudged interest rates up again Friday in a battle against inflation, the Sensex closed 0.3 percent higher. The Hang Seng index rose 1.4 percent in Hong Kong.

The euro was trading at about $1.3796, down about 0.6 percent against the dollar.

The yield on the benchmark 10-year Treasury note fell to 2.071 percent.

Meanwhile, a meeting of European finance ministers and other policy makers in the Polish city of Wroclaw on Friday and Saturday fanned expectations of more determined action to contain the growing sovereign debt crisis.

The United States treasury secretary, Timothy F. Geithner, was also attending, a sign of the sense of urgency surrounding the euro zone debt crisis, analysts said.

A meeting of the Federal Reserve of the United States next week will also be closely watched, amid expectations that the central bank may signal new measures for the lumbering American economy.

“The Fed is under pressure to come up with some sort of additional stimulus. It is also under pressure not to do so,” analysts at the financial services group DBS wrote in a research note published Friday, highlighting the complex pressures facing the American central bank and the internal debate about how best to act. “Still, we expect the Fed will do something, mainly because that’s the Fed’s job. You can’t just say ‘we’re out of ideas’ and walk away.”

Jack Ewing contributed reporting from Frankfurt.

Article source: http://www.nytimes.com/2011/09/17/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

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Asian Markets Gloomy on U.S. Jobs Data

September 5, 2011 by Leave a Comment

The U.S. jobs data, released on Friday, showed that the U.S. economy had added no jobs at all in August, a hugely disappointing figure that renewed worries that the economy may be heading for a recession.

Wall Street reacted with a decline of 2.2 percent on the Dow Jones industrial average and a 2.5 percent fall on the Standard Poor’s 500. The benchmark indexes in several leading European markets slumped more than 3 percent Friday.

The stock markets in Asia followed suit on Monday. In Japan, the Nikkei 225 index sagged 1.7 percent by the lunchtime break in Tokyo.

Exporters like Sony, Panasonic and Sharp, which derive a large part of their earnings from sales in the United States and Europe, fell more than 3 percent.

South Korea and Singapore tumbled 2.5 percent and 2.4 percent, respectively.

The S. P./ASX 200 in Australia and the Hang Seng index in Hong Kong retreated 2.1 percent. In mainland China, the Shanghai composite index slipped 1.1 percent, and in Taiwan, the Taiex dropped 2.5 percent.

S. P. 500 futures were 0.5 percent lower by midmorning in Asia. The U.S. market is closed on Monday for the Labor Day holiday.

Gold, which tends to rise in times of uncertainty, was hovering at around $1,880 an ounce, having risen sharply in U.S. trading on Friday.

Adding to investor jitters were fresh worries about the euro zone’s ability to cohesively respond to its debt crisis, after talks between Greece and its foreign creditors were put on hold Friday and the head of the European Central Bank, Jean-Claude Trichet, warned Italy to stick to its austerity program.

The euro slipped to $1.417 by late morning in Asia, its lowest level against the U.S. dollar in about three weeks.

“Financial markets continue to be stressed about the lack of growth drivers in the global economy,” analysts at DBS said in a research report on Monday. They noted that at present the United States appeared to be the only major economy with an agenda to get fiscal and monetary policies together to support the weak U.S. jobs market.

“Against this background, members at the G-7 meeting on Sept. 9-10 will have a challenging task to restore confidence in the ability of the advanced economies to support growth and jobs, as well as to restore financial stability,” the DBS analysts wrote. “Hence, risk appetite is likely to be low in markets as long as the advanced economies are seen on the defensive on the growth front.”

Matthew Saltmarsh contributed reporting from London.

Article source: http://www.nytimes.com/2011/09/06/business/asian-markets-gloomy-on-us-jobs-data.html?partner=rss&emc=rss

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Wall Street Jumps on Jobs Data; Oil Falls More

May 6, 2011 by Leave a Comment

The government, in its latest snapshot on employment, said the economy added 244,000 jobs overall last month, well above the 185,000 jobs that analysts had forecast. Private employers created 268,000 jobs , the report said.

The unemployment rate rose to 9.0 percent from 8.8 percent in part because it counted more people who resumed looking for work.

Indexes jumped sharply Friday, with the Dow Jones industrial average rising 134.25 points, or 1.1 percent. The broader Standard Poor’s 500-stock index gained 12.95 or 0.97 percent, while the technology heavy Nasdaq rose 35.20, or 1.25 percent.

Wall Street indexes had fallen by 2 percent this week because of increasing worries that the economy was not growing as quickly as previously thought. Payroll processor ADP said Wednesday that companies added fewer jobs than expected in April.

“Recent U.S. data has pointed to a slowdown in U.S. economic activity so jobs growth above expectations was a surprise,” said Neil MacKinnon, global macro strategist at VTB Capital.

Shares were also higher in Europe, where the FTSE 100 in London rose 0.5 percent, and the DAX in Frankfurt added 1.27 percent. In Paris, the CAC 40 gained 1.3 percent.

Crude oil in New York trading was down another 29 cents, to 99.51 a barrel, after dropping $9.44 a barrel, or 8.6 percent on Thursday during a rapid sell-off of commodities.

Friday also marked the one-year anniversary of the “Flash Crash.” Stocks tumbled that day when one large trade overwhelmed the market’s computer servers and sent prices in a tailspin.

Berkshire Hathaway and Fannie Mae are among the companies reporting quarterly results by the end of the day.

Earlier in Asia, Japan’s Nikkei 225 index slid 1.5 percent to 9,859.20. Investors worried about the renewed strength in the yen and its impact on exporters, which are already struggling with destroyed factories, severe parts shortages and power outages since a devastating earthquake and tsunami on March 11.

Hong Kong’s Hang Seng index shed 0.4 percent to 23,159.14. Mainland Chinese shares were mixed. The Shanghai Composite Index lost 0.3 percent to 2,863.89, while the smaller Shenzhen Composite Index gained 0.4 percent to 1,195.31.

Article source: http://www.nytimes.com/2011/05/07/business/global/07markets.html?partner=rss&emc=rss

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Supplier’s Decision Lifts Shares of Japan’s Carmakers

April 23, 2011 by Leave a Comment

The Renesas Electronics Corporation, a provider of microprocessors that control brakes, engines and transmissions, said operations would resume June 15 at its Naka factory in Ibaraki prefecture, where production had been halted after the March 11 earthquake and tsunami.

Renesas said earlier that it intended to restart partial manufacturing at the Naka factory in July. The company said it was working “with more than 2,000 additional support workers dispatched from outside Renesas Electronics companies to help speed up the resumption of production as much as possible.”

“The schedule assumes a stable source of electric power and no further damage from subsequent aftershocks,” the company said.

The news was welcomed by Japan’s automotive sector, which was badly hobbled after the earthquake spawned a tsunami that slammed the northeastern coast, leaving up to 30,000 people dead or missing. The region was host to a vast network of auto parts suppliers that were wiped off the map in the disaster.

Japan’s Nikkei 225 index closed Friday marginally down, less than 4 points, to 9,682.21, with the automakers posting gains. Toyota Motor Corporation rose 3.1 percent, Honda Motor bumped up by 2.3 percent and Nissan Motor jumped 3.6 percent.

The Renesas news came hours before Akio Toyoda, president and chief executive of Toyota, told reporters at a news conference that ’ Toyota would not return to predisaster production levels until the end of the year. The Nikkei was one of a handful of exchanges open in Asia on the Good Friday holiday.

South Korea’s Kospi index was flat at 2,197.82, and mainland China’s Shanghai composite index slid 0.5 percent to 3,010.52 as investors booked profits following a week of gains. The smaller Shenzhen composite index was down 0.6 percent to 1,274.73.

Markets in the United States and Europe were closed Friday ahead of the Easter holiday and will reopen on Monday. Exchanges in Hong Kong, India, the Philippines, Australia, New Zealand and Singapore were also closed.

On Wall Street, strong earnings from large companies like Apple and UnitedHealth lifted stocks broadly higher Thursday. Gains were spread across the market, with all 10 company groups that make up the Standard Poor’s 500-stock index closing the day with gains.

The Dow Jones industrial average rose 52.45 points to close at 12,506 on Thursday. The S. P. rose 7.02 points to 1,337 while the Nasdaq rose 17.65 points to 2,820.

Article source: http://feeds.nytimes.com/click.phdo?i=885ba24c67544ae9002e8ad838562ee9

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