December 5, 2019

Asian Markets Calmed by China Central Bank’s Change in Tone

HONG KONG — Mainland Chinese stocks edged down slightly on Wednesday while many other regional markets climbed, as investors reacted to moves by China’s central bank late Tuesday to assuage concerns about a lingering credit squeeze in the country’s financial system.

The Shanghai composite index, which had plunged 5.3 percent on Monday and gyrated wildly on Tuesday, was down 1.4 percent by noon on Wednesday. Interbank lending rates, which determine how costly it is for banks to borrow money from one another, continued to retreat from last week’s record highs, but remained well above where they have been over the past year.

Late on Tuesday, the People’s Bank of China, which had mostly stood on the sidelines in recent weeks as China’s cash crunch deepened, issued a statement aimed at soothing market nerves but still maintaining pressure on commercial banks to take a more prudent approach to lending.

In its statement, the P.B.O.C. said some larger lenders had already started playing a stabilizing role by injecting capital into the market. The central bank cautioned against risky lending practices but pledged to support banks facing cash shortfalls, adding that it would offset “short-term abnormal volatility, stabilize market expectations and maintain stability in monetary markets.”

Analysts welcomed the change in the central bank’s tone, saying that it could help ease the tumult in China’s financial system and address concerns that the liquidity situation could further impact the country’s slowing economic growth.

The central bank “has fine-tuned its tone to ease the liquidity tightness,” China economists at ANZ in Hong Kong wrote in a research note Tuesday. “The market interest rates are likely to decline significantly in the remaining week, which will help stabilize the market and the real economy.”

Analysts at Citibank noted in a research report that “there has been criticism that P.B.O.C. underestimated the impact of its inaction and artificially created financial risks.” The central bank’s statement on Tuesday “may reduce the chance of a recurrence of the recent episode.”

Markets in much of the rest of the Asia-Pacific region responded favorably to the central bank’s comments, as well as positive new data on the U.S. housing market that was released Tuesday.

In Hong Kong, the Hang Seng Index had climbed 1 percent by midday. The Straits Times Index in Singapore had advanced 0.6 percent, while in Australia the S.P./ASX 200 index had risen 1.4 percent.

Article source: http://www.nytimes.com/2013/06/27/business/global/asian-markets-react-to-china-central-bank.html?partner=rss&emc=rss

Fed Signals Rattle World Markets

But China’s central bank offered some comfort to stressed money markets, relieving Thursday’s crushing liquidity squeeze with “window guidance” to major state banks to resume supplying funds, after indicative interbank rates reached highs above 25 percent on Thursday.

The benchmark weighted-average seven-day bond repurchase rate tumbled 351 basis points to 8.12 percent, and the overnight repo rate fell 378 bps to 7.96 percent.

The two short-term rates hit record highs on Thursday as the central bank again ignored market pressure to inject funds into the market, a move traders and analysts see as an attempt to force banks and other financial institutions to trim non-essential businesses.

Spot gold rebounded with an 0.8 percent rise to $1,287.49 an ounce after touching its lowest since September 2010 of $1,268.89 earlier, after falling more than 5 percent overnight in one of bullion’s biggest routs since the 2008 financial crisis.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.8 percent, after dipping more than 1 percent earlier to its lowest since September. The index closed Thursday down 3.87 percent for its biggest daily percentage fall since November 2011.

Australian shares trimmed earlier losses to fall 0.3 percent while South Korean shares also curbed some losses after skidding 2.4 percent to their lowest in 11 months. Hong Kong and Shanghai shares fell 1.2 percent and 0.8 percent respectively.

Japan’s benchmark Nikkei stock average, which earlier fell more than 2 percent to a one-week low, was last down 0.9 percent.

“Clearly, the Fed tapering is on the table now. There is a reversal of perception in liquidity and it will take some time for investors to digest, rebalance and what not,” said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.

He added, however, that over the longer term financial markets will regain stability starting with the U.S. bond market as the real motivation behind the Fed’s slowing down of stimulus is an improving U.S. budget deficit.

“There are massive buying opportunities coming out of this,” he said.

U.S. Treasuries stabilised in Asia, with the benchmark 10-year yield little changed from late New York levels of 2.42 percent 2.471 percent on Thursday its highest since August 2011 of when Wall Street shed about 2.5 percent and European shares saw their steepest one-day decline in 19 months.

The CBOE Volatility Index, which gauges expected volatility in Wall Street, spiked 23.1 percent to 20.49 on Thursday, its highest close so far this year.

The Australian dollar, often seen as a gauge for risk appetite, also recovered to trade at $0.9235, after taking a harsh beating overnight to touch its lowest in nearly three years of $0.9163. The resource-reliant Aussie was also weighed by a weak Chinese manufacturing activity.

The dollar was likely to remain supported by the prospect of the Fed tapering based on an improving economy, with data on Thursday showing U.S. home resales hit a 3-1/2-year high in May and factory activity in the Mid-Atlantic region rebounded this month.

The dollar was down 0.2 percent against the yen at 97.05, moving away from its 10-week low of 93.75 yen hit last week.

Emerging market currencies were expected to remain pressured by the changing emphasis of the Fed’s stimulus plan.

“The combination of rising asset volatility and a steepening U.S. yield curve will likely weigh on currencies reliant on capital imports,” Morgan Stanley said in a research note.

“Commodity and emerging markets countries with current account deficits and large foreign funding liabilities should see significant pressure, as global rebalancing slows demand for raw materials.”

The Indian rupee slumped to a record low of 59.9850 on Thursday as the country’s record high current account deficit deepened its vulnerability, with the Fed’s signalling a looming end to the cheap money that has funded India’s current account deficit.

U.S. crude futures reversed earlier losses to inch up 0.1 percent to $95.24 a barrel while Brent rose 0.3 percent to $102.45.

(Additional reporting by Jungyoun Park in Seoul; Editing by Eric Meijer)

Article source: http://www.nytimes.com/reuters/2013/06/20/business/20reuters-markets-global.html?partner=rss&emc=rss

Little Movement on Wall Street

Wall Street stocks moved sharply higher on Wednesday as investors awaited a second round of testimony in Congress by the Federal Reserve chairman, Ben S. Bernanke, for clarity on the longevity of the Fed’s economic stimulus program.

The Standard Poor’s 500-stock index added 0.9 percent, the Dow Jones industrial average rose 0.8 percent and the Nasdaq composite jumped 1 percent in afternoon trading.

“Of course, Bernanke is in the spotlight again but I don’t expect him to vary from his comments from yesterday,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

A day earlier, Mr. Bernanke strongly defended the Fed’s monetary stimulus efforts before Congress. His comments eased worries in the financial markets over an early retreat from the Fed’s bond buying program, which had been triggered by minutes of the Fed’s January meeting released a week ago.

His remarks, along with data showing sales of new homes hit a four and a half year high, helped Wall Street stocks rebound Tuesday from their worst decline since November.

Up 6 percent for the year, the S.P. 500 was within reach of record highs a week ago, before the minutes from the Fed’s January meeting were released. Since then, the index has shed 1 percent.

In earnings news, Target posted a lower quarterly profit as sales of food and value-priced items only partially mitigated weakness in holiday spending. The stock fell 1.3 percent.

Dollar Tree reported a higher quarterly profit as the chain controlled costs and as consumer spending improved. The stock rose 10.2 percent.

In Europe, shares rose almost 2 percent, steadying after the previous session’s sharp losses, though jitters over the euro zone kept a lid on gains.

Italy’s 10-year debt costs rose more than half a percentage point at the first longer-term auction since an inconclusive parliamentary election, although they remained below the psychologically important level of 5 percent.

Article source: http://www.nytimes.com/2013/02/28/business/daily-stock-market-activity.html?partner=rss&emc=rss

Optimism on Wall St. Tempered by Hurdles

The doomsday discussions that dominated conversations of late quickly faded as political leaders in Washington first signaled a compromise was close, then finally announced a deal on Sunday night.

Wall Street was hesitant to declare total victory, though, because lawmakers still faced the hurdle of getting a bill through both chambers of Congress.

The optimism was further tempered by the broader economic challenges that continue to confront the United States and global markets.

“The debt ceiling is out of the way, but the current picture is far from rosy,” said Ajay Rajadhyaksha, head of United States fixed-income and securitized strategy at Barclays Capital. “Economic growth is so much weaker than many people thought just six months ago, and we are heading into a period of austerity.”

Analysts and investors warned that the markets could remain turbulent in the weeks ahead. Besides sluggish economic growth, the threat of a ratings downgrade on United States debt and Europe’s continuing financial troubles loom.

Still, the first signs of market reaction to the deal were positive. Stock markets in Japan and South Korea picked up steam as the deal was announced by President Obama, and they rallied close to 2 percent by midday. Futures contracts on the American stock market also jumped, indicating that Wall Street may recoup some of the past week’s losses once trading starts in New York on Monday.

Gold, a traditional haven that struck record highs amid the uncertainty of the past weeks, fell 1 percent to $1,610 an ounce. Oil rose about $1, to $97 a barrel.

In the currencies markets, the dollar gained against the yen and the Swiss franc after falling last week. It was barely changed against the euro.

For Wall Street executives, it was a roller-coaster weekend. Although optimistic that Congress would reach an 11th-hour agreement, bankers had been planning for the worst in case a deal was not struck.

But there was little of the market panic that in the 2008 financial crisis had bankers traders stuck at their desks for much of every weekend. Citigroup, Goldman Sachs and Morgan Stanley executives were monitoring the news from home.

“Everybody still has the fireman boots and fireman hat on, but there is a significant sigh of relief these guys are moving in the right direction,” said one senior Wall Street executive, who spoke on condition of anonymity on Sunday afternoon as the deal was coming together.

At JPMorgan Chase, Jamie Dimon huddled with his senior managers at the bank’s Park Avenue headquarters. Bank executives also set up a war room at an operations center in Columbus, Ohio, to react to customer issues stemming from the political developments — just as they did for natural catastrophes like Hurricane Katrina.

By Sunday night when the deal had been announced, lobbyists and financial executives were almost gleeful. “This is huge,” said Scott E. Talbott of the Financial Services Roundtable, an industry lobbying group. “It provides much-needed certainty during an uncertain economic time.”

Mr. Talbott said his group was still reviewing details of the deal, but would likely move forward with a lobbying blitz over the next two days. “We will light it up with Hill visits, joint-letters, and encourage our member companies to consider contacting members of Congress, too,” he added.

Indeed, BlackRock, the giant asset manager, issued a statement urging lawmakers to take prompt action. “Every day of delay in resolving this situation will erode economic confidence, jeopardize job creation and undermine the credibility of the United States in global financial markets,” it said.

With the deal yet to be approved by lawmakers, Chase announced that it would temporarily waive overdraft fees and other account charges for Social Security recipients, military workers and other federal employees if their government-issued checks were not posted. Last week, the Navy Federal Credit Union pledged that it would advance pay to active military and civilian defense workers in the event of a breach of the debt ceiling.

Investors were hopeful that approval of the deal by Congress would cause the markets to rebound. after tumbling 3.9 percent last week.

“It isn’t a ‘grand bargain’ to cut the deficit — that would have been great for the market,” said Byron Wien, the vice chairman of Blackstone Advisory Partners. But he said that the current blueprint, if passed, at least deals with the debt ceiling and that the government’s bills will be paid.

“This is a positive, but there was so much negative momentum going into the weekend,” he added.

Indeed, some investors cautioned that failure to pass the bill would be catastrophic, recalling how the market dropped precipitously in 2008 when Congress initially voted down a huge bailout package for the nation’s banks. “You are looking at Dow 10,000 if this doesn’t get resolved in a very short period of time,” said M. Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Okla. That would be a 21 percent drop from where the Dow Jones industrial average closed on Friday.

Even as attention has shifted to the domestic fiscal problems, the European Union financial health continues to deteriorate despite a second bailout package it put in place for Greece last month in an effort to stem its sovereign debt crisis. In one sign of worsening trouble, the spreads on credit-default swaps on the debt of Italy and Spain are nearing their widest level of the year. Investors are betting that those countries are becoming more likely to default on their debts.

Meanwhile, new data released on Friday showed the United States economy had experienced a significant slowdown during the first half of 2011, underscoring the weakness of the recovery. And the political mayhem in Washington has done little to bolster consumer confidence, a crucial economic engine.

Daniel J. Arbess, manager of the Xerion fund at Perella Weinberg Partners in New York, said the fiscal problems in the United States and Europe were “chronic and will be persisting” for some time. “Investors need to get used to them,” he said. “No single episode of tension is the ultimate one, nor is any patch the ultimate solution.”

Nelson D. Schwartz, Susanne Craig and Bettina Wassener contributed reporting.

Article source: http://www.nytimes.com/2011/08/01/business/optimism-on-wall-st-tempered-by-hurdles-ahead.html?partner=rss&emc=rss

Portugal Agrees to a $116 Billion Bailout

Mr. Sócrates said in a televised broadcast on Tuesday night that the creditors had agreed to give Portugal more time to cut its budget deficit than initially foreseen by his government. He described the outcome of the negotiations as “a good deal that defends Portugal.”

Still, he provided few details about the agreement, which will still require endorsement from opposition parties. Mr. Sócrates resigned in March after the Parliament refused to endorse additional austerity measures. To break the political deadlock, Portugal is set to hold another general election on June 5.

The political standoff was followed by Portugal’s bailout request in early April after the government also failed to meet its 2010 deficit target and after investors sent its borrowing costs to record highs, heightening concerns about its ability to meet forthcoming refinancing obligations.

Officials from the International Monetary Fund, the European Commission and the European Central Bank then arrived in Lisbon to discuss an aid program that would allow Portugal to receive European Union-led rescue money by June, the month when it faces its toughest refinancing hurdles of this year.

Simonetta Nardin, a spokeswoman for the I.M.F., confirmed that officials representing the international creditors had reached agreement with the Portuguese government “on a comprehensive economic program that could be supported by the E.C., the E.C.B. and the I.M.F.” She added: “We have said from the beginning that it is important that any program should have broad cross-party support and we will continue our engagement with the opposition parties to establish that this is the case.”

The deal will still require approval by the European Union. The European Commission, the executive of the 27-nation union, is hoping to get the measures ready for Europe’s finance ministers to discuss at a meeting on May 16.

However, even if the deal is blessed by the Portuguese opposition, other obstacles remain, most notably in Finland, where a party critical of euro zone bailouts won 19 percent of the vote in an election last month. It has said that it cannot support a Portuguese bailout and it remains unclear when a new Finnish government will be in place.

On Tuesday evening, meanwhile, Mr. Sócrates said he would present the deal to opposition parties and called on them to show “a sense of responsibility and a superior sense of national interest” to ensure Portugal receives emergency financing swiftly.

Mr. Sócrates said that, under the three-year plan, the deficit would need to be lowered to 5.9 percent of gross domestic product this year, 4.5 percent in 2012 and 3 percent in 2013. Last year, his government vowed to stick to a tougher schedule to lower the gap to 4.6 percent this year, 3 percent in 2012 and 2 percent in 2013.

He suggested that creditors had recognized that Portugal faced a less critical situation than other ailing euro economies. “Knowing other external aid programs, Portugal can feel reassured,” he said. Last year, Greece secured a bailout package worth 110 billion euros and Ireland 85 billion euros.

As examples of the relatively lenient terms granted to Portugal, he said the three-year program did not involve more cuts in public sector wages or in the minimum wage, or additional layoffs of state employees.

When the government requested a bailout early last month, Pedro Passos Coelho, the leader of the main Social Democratic opposition party, said that he backed the decision to seek outside help. However, in the run-up to next month’s general election, center-right opposition parties, who are leading in opinion polls, are unlikely to want Mr. Sócrates to reap the political benefit for negotiating a bailout that they blame his government for in the first place.

Stephen Castle contributed reporting.

Article source: http://www.nytimes.com/2011/05/04/business/global/04portugal.html?partner=rss&emc=rss