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Chinese Data, Again, Lifts the Markets

September 10, 2013 by

The stock market rose on Tuesday and oil prices fell as the prospect that the United States would attack Syria appeared to fade.

The Standard Poor’s 500-stock index posted its sixth consecutive gain, its longest winning streak since July.

Investors were relieved that Syria said it was ready to cooperate with a proposal to put its chemical weapons under international control for dismantling. The possibility of resolving the crisis between the United States and Syria without a military attack was also a factor in the stock market’s gain on Monday.

The Dow Jones industrial average rose 127.94 points, or 0.9 percent, to close at 15,191.06. The Standard Poor’s 500 rose 12.28 points, or 0.73 percent, to 1,683.99, and the Nasdaq composite index rose 22.84 points, or 0.62 percent, to 3,729.02.

Crude oil, which settled above $110 a barrel on Friday, lost $2.13, almost 2 percent, to settle at $107.39 a barrel. Even though Syria is not a big oil producer, the possibility of a wider conflict in the Mideast drove oil prices to two-year highs last week.

Despite the recent gains for stocks, Ralph Fogel of Fogel Neale Partners said it was about time for a pullback in the market. He noted that the Dow had more than doubled since the depths of the financial crisis in March 2009.

The years since the crisis have had “almost a straight-up market without a 15 percent correction,” Mr. Fogel said. “That’s a pretty neat move.” He added, “That doesn’t mean you have to have one, but the probability starts to get higher and higher.”

“The next significant move isn’t up 20” percent, he said. “It’s down 20.”

Scott Wren, a senior equity strategist for Wells Fargo Advisors, said investors remained nervous. “A lot of our clients are sitting on too much cash and are kind of paranoid of the market,” he said.

Among the stocks on the move on Tuesday, Apple dropped $11.53, or 2.3 percent, to close at $494.60 after investors were underwhelmed by its new iPhones.

Urban Outfitters fell $4.36, or 10 percent, to $38.35 after saying its sales increases were weaker than earlier in the year.

In the bond market, interest rates moved higher. The 10-year Treasury note fell 14/32, to 96 1/32, while its yield rose to 2.97 percent from 2.91 percent.

Article source: http://www.nytimes.com/2013/09/11/business/daily-stock-market-activity.html?partner=rss&emc=rss

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China Stocks Tumble for Second Straight Day

June 25, 2013 by Leave a Comment

HONG KONG — Chinese stock markets were volatile on Tuesday as nervous investors weighed the lingering impact of a cash crunch that Beijing hoped would rein in soaring lending growth and the financial risks that have accompanied it.

The Shanghai composite index, which had tumbled 5.3 percent on Monday, slumped more than 5 percent by early afternoon before clawing back most of those losses and closing down 0.2 percent. The index has lost nearly 20 percent since early February. The Shenzhen composite index likewise reversed sharp losses, closing 0.2 percent lower on the day, but still more than 15 percent below a high hit in late May.

“The stock markets are continuing to react to the very elevated funding costs,” said Dariusz Kowalczyk, a senior economist and strategist at Crédit Agricole in Hong Kong, referring to a recent surge in interbank lending rates. Those rates determine how costly it is for banks to borrow money from one another, often to cover short-term obligations.

The interbank rates soared to record highs last Thursday, setting off concerns over the health of the Chinese financial system and underlining the Chinese authorities’ determination to steer lenders toward more prudent loans — even if it meant slower overall economic growth.

Interbank lending rates have retreated somewhat since Friday, and continued to do so on Tuesday.

The benchmark overnight lending rate, a gauge of liquidity in the financial market, stood at 5.736 percent. That was down from 6.489 percent on Monday, and well below the record high of 13.44 percent it hit on Thursday, but still above where it had been over the past 18 months — indicating jitters over the impact on the financial system and the already cooling economy persisted on Tuesday.

“Any asset class suffers when money market rates are expensive,” Mr. Kowalczyk said. Although he believed the authorities in Beijing would step in quickly to forestall any wider turmoil in the country’s financial system by injecting cash, “the risks of maintaining the liquidity crunch for longer are not negligible,” he said.

The fact that the People’s Bank of China had allowed interbank lending rates to hit record highs has been widely interpreted as a deliberate effort to force banks to reduce risky lending.

“It is a shot across the bow for those medium-sized banks who had borrowed short to lend long in the unregulated shadow banking system,” analysts at LGT in Hong Kong wrote in a note on Tuesday. “A cash shortage should remind them to be more prudent in their lending.”

As such, many analysts have said such a stance could ultimately be positive in that it could instill more lending discipline and reduce the chances of asset price bubbles and loan defaults that have built up alongside rapid lending growth in the past few months.

Still, the central bank’s tough stance also bears risks.

“We believe the biggest risk comes from the PBOC potentially mishandling the situation,” Ting Lu, China economist at Bank of America Merrill Lynch, wrote in a research note on Tuesday, referring to the People’s Bank of China. “That being said, we believe the PBOC and Chinese policymakers will be aware of the potential dangers and take decisive measures to revive the interbank market, to calm investors and to stabilize the economy.”

Article source: http://www.nytimes.com/2013/06/26/business/global/china-stocks-tumble-for-second-straight-day.html?partner=rss&emc=rss

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Markets Lackluster as Silver Sinks

May 20, 2013 by Leave a Comment

Shares on Wall Street fell slightly on Monday, failing to extend a rally that closed out a fourth consecutive week of gains on Friday.

The Standard Poor’s 500-stock index and the Dow Jones industrial average ended the day 0.1 percent lower. The Nasdaq composite was also 0.1 percent lower.

Smaller businesses were in the limelight Monday as the Russell 2000, an index of small-company stocks, rose above 1,000 points for the first time. The index is outpacing the Dow Jones industrial average and the Standard Poor’s 500-stock index this year. Small stocks are doing well because they are more focused on the United States, which is recovering, and are less exposed to recession-plagued Europe than the large international companies that make up the Dow and the S.P. 500 index.

Investors will be watching the Federal Reserve this week for clues about what it plans to do next with its economic stimulus program. On Wednesday the Federal Reserve chairman, Ben S. Bernanke, will appear before Congress and the central bank will release minutes of its most recent policy meeting.

The Fed is buying $85 billion of bonds every month to keep long-term interest rates low. That has encouraged investors to put money into stocks instead of bonds.

Policy makers are unlikely to cut back on stimulus just yet because economic growth is likely to slow in the second quarter, said Scott Wren, a senior equity strategist at Wells Fargo Advisors. As a consequence, Mr. Wren said, stocks are likely to continue to rise. “At some point, we will see some sort of a pullback, but it doesn’t seem like it’s going to be right now,” he said. “In the near term we’re probably going to trade a little bit higher.”

Earlier in the session, silver had fallen more than 7 percent, to $20.25 an ounce, its lowest level since September 2010. But by afternoon in New York, the price on the Comex had risen 0.4 percent, to $22.71.

The price of gold rose for the first day in eight, as the dollar fell. The precious metal climbed $21, or 1.5 percent, to $1,385, in the afternoon. Gold has slumped this month as its attraction as an alternative investment has faded this year as the dollar has appreciated.

In government bond trading, the yield on the 10-year Treasury note rose to 1.97 percent from 1.93 percent in the afternoon.

Yahoo’s board decided on Sunday to purchase Tumblr, the popular blogging site, for $1.1 billion. Yahoo’s stock was trading 1.3 percent higher.

In Europe, the FTSE 100 index of leading British shares ended the trading day 0.5 percent higher and remained near 13-year highs. Germany’s DAX, which has set a series of record highs, rose 0.7 percent. The CAC 40 in France gained 0.5 percent.

In Asia, stock markets had a strong start to the week. Japan’s Nikkei 225 index jumped 1.5 percent, while Hong Kong’s Hang Seng rose 1.8 percent. Benchmarks in mainland China also rose, but South Korea’s Kospi fell 0.2 percent.

Article source: http://www.nytimes.com/2013/05/21/business/daily-stock-market-activity.html?partner=rss&emc=rss

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Olympus Executives May Seek to Keep Jobs

December 16, 2011 by Leave a Comment

Officers and board members who were not directly implicated in a scheme to cover up past losses should not have to step down, the president, Shuichi Takayama, said at a news conference here, appearing to reverse a promise that management and directors would resign en masse.

Mr. Takayama’s position flouts recent recommendations by a third-party investigative panel, which called the Olympus management “rotten to the core” and urged the entire board to go.

The reluctance of management to step aside has increased investor apprehension about Olympus, which booked a $1.3 billion reduction in net assets on Wednesday as it accounted for the previously hidden losses. It also booked a net loss of 32 billion yen, or $412 million, for the six months through September.

The loss has raised concerns that the company might be forced to sell assets or raise fresh capital, and that it might even be taken over by rivals or funds, analysts said.

Olympus shares, which had trimmed losses in recent weeks, slumped by more than 20 percent on Thursday. “That is shareholder-repugnant,” said Nicholas Smith, a Japan strategist at CLSA Asia-Pacific Markets. “There’s no way they’re going to accept the current board staying on, particularly foreign investors.”

Olympus, which makes medical endoscopes as well as cameras, admitted last month to hiding losses on investments in the 1990s with an elaborate scheme involving offshore money, inflated acquisition payouts and a network of obscure brokers. Regulators and law enforcement authorities on three continents are investigating.

Mr. Takayama said rebuilding the company would require members of the current board to stay. He said the company would call a meeting of shareholders in March or April, where some directors could seek reappointment.

“The current directors are imperative for a solid turnaround,” he said.

Mr. Takayama did not deny that he would continue as president to lead those efforts. Only a few directors have quit after being implicated in the cover-up, including the former chairman and a former executive vice president. Asked why the company would not follow the recommendations of the investigative panel, Mr. Takayama said he felt the guidance was open to interpretation.

“I think there is some wiggle room in whether or not everyone must be replaced at once,” he said.

He also said that Olympus was considering new sources of capital to shore up its balance sheet, though he offered no clues of possible partners and no more details of a turnaround plan.

It was unlikely, Mr. Takayama added, that he or his colleagues could find a way to work with Mr. Woodford, who was fired unanimously by the board in October after blowing the whistle on Olympus’s finances.

Mr. Woodford, a British national who was one of Japan’s few foreign chief executives, is seeking to lead the company again with a fresh slate of executives. He has said the board was tainted in the scandal and has no right to choose its successors.

Mr. Takayama said he had no plans to meet Mr. Woodford, who is in Japan to rally shareholder support for his return bid. “Unfortunately, I have doubts about whether we can work together with Mr. Woodford,” Mr. Takayama said, citing what he said was a combative stance by the ousted chief executive.

Olympus’s frail finances and uncertainty over who will lead the company have undermined investor confidence even as it met a critical deadline on Wednesday to announce second-quarter earnings, clearing a major hurdle to avoiding a delisting by the Tokyo Stock Exchange.

The exchange, however, can still delist Olympus, which is 92 years old, if it deemed the transgressions serious enough. Doing so would be a weighty but potentially contentious decision, given inconsistencies by the Japanese authorities in punishing white-collar crime.

Rating and Investment Information, a Tokyo-based credit research company, said Wednesday that it was slashing its rating of Olympus two levels to BBB-, just one notch above investment grade, with a view to a further downgrade. It said that equity capital had “eroded more than expected” and that there was a possibility of additional losses from shareholder lawsuits.

The company has withdrawn its earnings forecasts for this fiscal year, citing uncertainties ahead.

The verdict on who will lead Olympus will come down to shareholders. Southeastern Asset Management, Olympus’s biggest overseas shareholder, has insisted that the current board go.

But some institutional investors in Japan have indicated they stand by Olympus, including Bank of Mitsubishi UFJ, one of Olympus’s largest lenders and a top shareholder.

Mr. Woodford has said that, if he returned to Olympus, his plan would be to build on investor confidence in fresh management at the company to recapitalize it. He said that he would not support selling stakes to other companies because that would rob Olympus of its independence.

At a news conference Thursday, Mr. Woodford criticized Mr. Takayama’s intention to stay.

“Should that man be the president and custodian of one of Japan’s iconic companies?” he said. “How dare he!”

“It would scare away investors all over the world,” Mr. Woodford said.

Yasuko Kamiizumi contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=7b643ce061091bef69575ff4eba7e688

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Doubt About U.S. and European Leadership Threatens Market

November 20, 2011 by Leave a Comment

With deficit reduction talks all but dead in Washington and several bond auctions by fiscally shaky governments on the Continent this week, market specialists say the coming days may well be treacherous, especially if legislators in the United States do not agree on a plan to reduce the deficit.

That prospect looked increasingly likely. Despite the occasional sharp sell-off in the markets, investors have mostly been hoping for the best. In the United States, that means a blueprint for savings and a respite from wrangling over government spending, while in Europe the hope is that the European Central Bank will do more to shore up faltering borrowers like Italy and Spain.

But in each case, the likelihood of bad news outweighs the chances of a breakthrough, said Adam Parker, Morgan Stanley’s chief United States equity strategist.

“It should make people nervous,” Mr. Parker said. “There is a feedback loop between Europe and the rest of the world and that can slow growth. And the political polarization in Washington is also worrisome to investors.”

As trading volume thins before Thanksgiving on Thursday, all these concerns increase the odds of volatility on Wall Street, said Ronald Florance, director for investment strategies at Wells Fargo Private Bank. “It doesn’t take much to have big moves,” Mr. Florance said. “It wouldn’t surprise me to have 1.5 percent or 2 percent swings in the next few days.”

Stocks closed slightly higher on Friday, after a sharp sell-off earlier in the week caused by rising worries about the impact of surging borrowing costs across Europe. A big bond auction in Spain on Thursday was met with lackluster demand from investors, with yields nearing 7 percent, a record. Meanwhile, yields on Italian bonds also remained stubbornly high, finishing the week at 6.6 percent.

The rising yields increase the likelihood of a recession in Europe, and that could affect some sectors in the United States more than others, said Tobias Levkovich, Citigroup’s chief equity strategist.

“People should be selectively more nervous,” Mr. Levkovich said, noting that for the overall Standard Poor’s 500-stock group of companies, only 9 percent of revenues come from Europe. But that figure is much higher for sectors like automakers, with 30 percent of sales tied to Europe, and household and personal products at 17.5 percent and pharmaceuticals and biotechnology at 15.5 percent. Still, many sectors will be barely affected by a deeper European slowdown in terms of revenues, including telecommunications, food staples and retailing, he said.

While yields have been rising across Europe, threatening economic growth there, for the United States the key is to keep the contagion from spreading west and raising rates here.

That has not happened, Mr. Levkovich said. In the months leading to the collapse of Lehman Brothers in 2008, he noted, borrowing costs for investment-grade corporations in the United States leaped 2 percent. This time, despite the anxiety abroad, rates for big corporate borrowers have increased by less than 20 basis points, about one-tenth as much as before.

As for the special Congressional panel’s effort to find $1.2 trillion in deficit cuts by Wednesday, investors were already discounting the likelihood of a breakthrough. If the committee cannot agree on a plan by then, which seemed to be a near certainty on Sunday, the $1.2 trillion in cuts over 10 years are supposed to take effect automatically beginning in January 2013, with deep reductions in the Pentagon’s budget and domestic programs.

The markets will also be weighing the implications of elections in Spain on Sunday. Polls indicate a victory for the opposition, whose candidates are more likely to impose the austerity measures investors want. A victory by the opposition could give markets a boost, some analysts said, but this is likely to be fleeting because it does not resolve the bigger questions hanging over the euro.

Article source: http://feeds.nytimes.com/click.phdo?i=9018fa324a4d6c6edc801c35ab257e57

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Consumer Confidence Stays Near 2-Year Low

September 28, 2011 by Leave a Comment

The group, the Conference Board, said its sentiment index increased to 45.4 from a revised August reading of 45.2, which was the lowest since April 2009. A report on home prices showed values dropped less than had been forecast in the year ended in July.

The confidence reading signals that hiring has not improved since August, when the economy failed to create jobs and the unemployment rate held at 9.1 percent. Falling stock prices and concern that the crisis in Europe will undermine the global recovery may also be shaking Americans’ resolve, raising the risk that spending will cool during the holiday shopping season.

“Consumers remain very concerned about income, employment and the state of the economy,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston. “All of these factors point to even weaker labor market conditions as we get closer to the end of the year.”

The Standard Poor’s/Case-Shiller index of property values in 20 cities fell 4.1 percent in July compared with the same month in 2010, the group said. The median forecast of 28 economists surveyed by Bloomberg News had projected a 4.4 percent decline. Values were little changed in July from the prior month after adjusting for seasonal changes,.

Investigations into bank foreclosure practices caused lags in processing that may have helped stabilize prices in recent months, said Celia Chen, a housing economist at Moody’s Analytics in West Chester, Pa.

“Due to foreclosure processing delays, fewer distressed sales are occurring relative to normal sales,” Ms. Chen said. “With more distressed homes likely to be sold in coming months, house prices will depreciate further before they stabilize.”

Economists expected that the Conference Board’s September confidence gauge would climb to 46, according to the median forecast in a Bloomberg survey. Estimates ranged from 40 to 49 in the survey of 74 economists. The index averaged 98 during the economic expansion that ended in December 2007.

The Conference Board’s data showed a measure of present conditions declined to 32.5, the lowest since January, from 34.3 in August. The measure of expectations for the next six months rose to 54 from 52.4.

The share of consumers who said jobs were hard to get increased to 50, the highest level since May 1983, from 48.5 in August. That may signal a worsening of the September employment data.

Confidence dropped in six of nine regions, according to the report.

The percentage of respondents in the Conference Board survey expecting more jobs to become available in the next six months rose to 12 percent from 11.8 the previous month.

The proportion expecting their incomes to rise over the next six months decreased to 13.3 percent, the lowest since October, from 14.3 in August.

Article source: http://feeds.nytimes.com/click.phdo?i=d460144c87654519336c03238669486f

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Fundamentally: That Offshore View Is Looking Foggier

May 22, 2011 by Leave a Comment

IN January, conventional wisdom said that three long-term trends were likely to persist in 2011: the dollar would continue to fall, commodities would keep roaring and foreign stocks would outpace domestic ones.

Two of these predictions have gone awry since early May, as the dollar has surged 5 percent against the euro while commodity prices have sunk by more than 19 percent. These developments may also lessen the appeal of foreign stocks, some market strategists say, worsening the odds for the third prediction, too.

So far this year, shares of companies in developed markets overseas have risen 3 percent, less than half the gain of the Standard Poor’s 500 index.

Emerging markets, meanwhile, have had a worse start to the year. Shares of companies in fast-growing economies like India and Brazil have lost value while returns for Chinese stocks have been relatively flat.

Chalk it up to a couple of factors, strategists say. First, China has been stepping on the fiscal brakes, aiming to prevent asset bubbles in its red-hot economy. And central banks throughout the emerging markets — including India and Brazil — have begun to raise interest rates in an effort to slow inflation.

These moves help to account for the recent pullback in commodity prices. Crude oil, for example, is down 13 percent from its peak three weeks ago.

But while lower commodity prices may reduce some inflationary pressure in an economy, they often lead to selling in commodity-related sectors of the market, said Alec Young, international equity strategist at S. P.

International stocks generally have higher correlations with commodities markets than do domestic equities. While energy and materials companies make up less than 16 percent of the S. P. 500 index of domestic stocks, those two categories account for 27 percent of emerging-market stocks.

“For a long time, that was a good thing for the emerging markets,” Mr. Young added. “But right now commodities seem increasingly volatile,” and that could create a headwind for those markets’ shares.

Mark D. Luschini, chief investment strategist at Janney Montgomery Scott, said companies in commodity-producing countries like Russia and Brazil could struggle, not just because of uncertainty in raw material prices, but also because so much of their growth is tied to serving China’s needs. “If China has a hiccup” stemming from its efforts to slow the economy, he said, “it’s going to cause a blowback to all those emerging-market countries.”

Not everyone thinks these stocks are at such risk. James W. Paulsen, chief investment strategist at Wells Capital Management, says the emerging markets have underperformed domestic shares since last fall, when central banks in developing nations began to tighten monetary policies by lifting interest rates.

“But I think they’re just about done doing that,” he said. And many other risks in emerging markets, he added, have already been priced into the market.

On the other hand, Mr. Paulsen said he expected the dollar to at least stabilize as investors realized that the United States economy was likely to accelerate while economies of other large industrialized nations would probably keep slowing.

Europe, with its debt-related problems, is growing at roughly half the pace of the United States while Japan’s economy has been disrupted by the recent earthquake and tsunami. If the dollar strengthens, Mr. Paulsen said, American investors will lose an advantage they have enjoyed in foreign stocks: price appreciation based on a weakening dollar.

ALL of this could make investing in Europe and Japan less appealing. And more uncertainty could also refocus investor attention on valuation, another fundamental factor.

While there is a growing sense that stocks in general are becoming expensive, strategists agree that one market area is still relatively cheap: large, blue-chip companies with little debt and with stable, though unspectacular, earnings growth. This group of so-called high-quality companies would include names like Microsoft and Coca-Cola.

What’s more, the bigger these high-quality stocks are, the cheaper they seem to be, said Ben Inker, head of asset allocation at the asset manager GMO.

Yet for reasons Mr. Inker said he didn’t quite understand, “the domestic market has far more than its share of these types of stocks than foreign markets do.”

That’s just one more reason that foreign investing could be a whole lot harder this year.

Paul J. Lim is a senior editor at Money magazine. E-mail: fund@nytimes.com.

Article source: http://www.nytimes.com/2011/05/22/your-money/22fund.html?partner=rss&emc=rss

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