Aussie, Kiwi Dollars Rally After China Manufacturing Data

The Australian and New Zealand dollars rose, snapping two days of declines, after an increase in a private manufacturing gauge for China bolstered the export prospects for the South Pacific nations.
The so-called Aussie and kiwi advanced against the yen after Japan’s finance minister reiterated that he’s ready counter currency strength. Gains in both currencies were limited before Spain auctions bills today amid renewed concern that Europe’s debt crisis is worsening. The 49.5 preliminary reading for a Chinese purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a final 48.2 for June.
“We’re all feeling a bit gloomy at the moment so the fact that we ended up with a less gloomy number in China is quite encouraging,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc. “The Aussie has taken some heart from that.”
The Australian dollar rose 0.4 percent to $1.0304 as of 3 p.m. in Sydney from yesterday, when it dropped 1.2 percent. The Aussie added 0.3 percent to 80.65 yen from yesterday, when it declined 1.3 percent.
Australia’s 15-year bond yields earlier declined as much as 3.5 basis points to 3.025 percent, the lowest rate on record for the country’s longest-dated bond.
New Zealand’s dollar, known as the kiwi, climbed 0.6 percent to 79.21 U.S. cents from yesterday, when it lost 1.5 percent. The currency gained 0.4 percent to 61.99 yen.

China Data

Along with HSBC and Markit’s PMI gauge, the Conference Board’s leading economic index for China rose 0.1 percent in June to 234.9, according to a statement released today. China is Australia’s biggest trading partner and New Zealand’s second- biggest export market.
In a speech today, Reserve Bank of Australia Governor Glenn Stevens sought to ease concern his nation is vulnerable to shocks from China, a domestic housing slump and global financial stress, saying it remains a “lucky country” with a favorable outlook.
Stevens said he expects Australia’s inflation in the second quarter to be near 2 percent. Economists surveyed by Bloomberg are predicting a 1.3 percent rise in consumer prices last quarter from the same three-month period last year before the Bureau of Statistics release its figures tomorrow. The RBA aims to keep annual underlying inflation in a range of 2 percent to 3 percent.
Demand for the Aussie and kiwi was supported against the yen amid speculation Japan will step in to weaken the nation’s currency. Finance Minister Azumi said the yen’s gain is one- sided and doesn’t reflect economic fundamentals.
“A factor that could be supporting the Aussie and the kiwi is the increased rhetoric from the Japanese policy makers,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “Risk of intervention could be a factor helping risk sentiment in Asia, but the main concern is still in Europe.”

Spain Concerns

The yen tends to strengthen during periods of financial turmoil because Japan’s current-account surplus makes it less reliant on foreign capital. A stronger currency hurts exporters by making their goods more expensive overseas.
The yield on Spain’s 10-year bond jumped to as much as 7.565 percent yesterday, the highest since November 1996, while the cost of insuring against default on the nation’s sovereign debt also soared to a record. Moody’s Investors Service lowered the credit rating outlooks for Germany, the Netherlands and Luxembourg to negative.
“Things in Europe are likely to get worse before they get better,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The contagion effect is ongoing. We expect the Aussie to remain close to parity over the next few months.”

Reymount Investment Products & Services:

Online Forex Trading,

Online CFD Trading,

Precious Metals Trading,

Online Trading Software,

Introducing Brokers(IB),

Individual Trading,

White label Program.

Euro Near 11-Year Low Versus Yen on Spain, Italy Concern

The euro fell for a fifth day against the yen, approaching an 11-year low, amid speculation Europe’s debt crisis is threatening to engulf Spain and Italy.
The 17-nation currency dropped below $1.21 for a second day after Moody’s Investors Service cut its ratings outlook for Germany and the Netherlands yesterday and LCH Clearnet Ltd. raised the extra deposit it demands to trade some Spanish and Italian bonds. The yen rose against most of its major peers as investors sought the safety of Japan’s currency even as the government said it’s ready to combat its strength. Australia’s dollar gained after Chinese manufacturing rose.

 

One euro price signs hang over discounted goods on sale at a "one euro store" in Athens, Greece. 

July 24 (Bloomberg) -- Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA, discusses the outlook for the euro, Federal Reserve monetary policy and investment strategy for the U.S., Australian and Canadian dollars. He speaks with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

July 23 (Bloomberg) -- David Bloom, chief currency strategist at HSBC Holdings Plc., talks about the outlook for the euro, dollar and Nordic currencies. He speaks with Manus Cranny on Bloomberg Television's "Last Word." (Source: Bloomberg)

July 23 (Bloomberg) -- Carl Weinberg, founder and chief economist at High Frequency Economics, talks about Europe's sovereign debt crisis and the region's banks. Weinberg speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)

“The euro is going down, the only question is how far and how fast,” said Geoff Kendrick, head of European currency strategy at Nomura International in London. “The Moody’s downgrade adds to the negativity and the timing isn’t particular helpful given what’s happening in Spain.”
The euro dropped 0.2 percent to 94.78 yen at 9:57 a.m. London time after declining to 94.24 yesterday, the lowest level since November 2000. The single currency was little changed at $1.2113 after falling as low as $1.2092. It slid to $1.2067 yesterday, the weakest since June 2010. The yen rose 0.2 percent to 78.22 per dollar.
The euro has slumped 5.5 percent this year, the worst performance among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen is little changed, and the dollar gained 1.9 percent.

Spain Auction

Spain’s borrowing costs increased as it sold 3.05 billion euros of 84- and 175-day bills. The nation auctioned the 84-day securities at a yield of 2.434 percent compared with 2.362 percent on June 26. The 175-day bill was sold at a yield of 3.691 percent, versus 3.237 percent at the previous sale.
Spain’s benchmark 10-year bonds yield rose as high as 7.58 percent today, a euro-era record. The yields on similar maturity Italian bonds climbed to 6.461 percent, the most since Jan. 18.
Moody’s said yesterday the increasing likelihood of collective support for European countries including Spain and Italy is “adversely” affecting the Aaa credit ratings of Germany and the Netherlands.
“This burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form,” the company said in a statement.
Billionaire hedge-fund manager John Paulson was said to have told clients he sees a 50 percent chance the euro will unravel. An event causing a euro-bloc breakup may happen in three months to two years, Paulson said on a conference call yesterday reviewing second-quarter performance, according to an investor who asked not to be named because the call was private. Paulson, who runs Paulson & Co., said he expected sovereign yield spreads to widen.

Europe Manufacturing

The euro stayed lower against the yen after a report showed the region’s services and manufacturing output shrank for a sixth month in July. A composite index based on a survey of purchasing managers in both industries in the euro area was unchanged at 46.4, the same as in June, Markit Economics said in an initial estimate. A reading below 50 indicates contraction.
Officials from Greece’s troika of international creditors - - the European Commission, European Central Bank and International Monetary Fund -- arrive in Athens today amid doubts the nation will meet the commitments attached to its bailout funding.
The yen advanced against all except two of its 16 major counterparts even as Japan’s Finance Minister Jun Azumi said he is ready to take decisive action on the currency if needed. The yen’s advance doesn’t reflect the nation’s economic fundamentals, he told reporters in Tokyo.
The yen tends to strengthen during periods of financial turmoil because Japan’s current-account surplus makes it less reliant on foreign capital.

‘Gradually Strengthening’

“The Japanese authorities are gradually strengthening verbal rhetoric in an attempt to dampen yen strength in the near term,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Still, with the euro- zone sovereign debt crisis likely to escalate further, safe- haven demand for the yen should remain firm.”
The Australian dollar rose for the first time in three days after an increase in a private manufacturing gauge for China bolstered the export prospects for the South Pacific nation.
HSBC Holdings Plc and Markit Economics said a preliminary July reading of their manufacturing gauge for China increased to 49.5 from a final 48.2 for June. China is Australia’s biggest trading partner.
“We’re all feeling a bit gloomy at the moment, so the fact that we ended up with a less gloomy number in China is quite encouraging,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc. “The Aussie has taken some heart from that.”
The Australian dollar rose 0.3 percent to $1.029 after sliding 1.2 percent yesterday.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Australian, N.Z. Dollars Fall Amid European Debt Concern

The Australian and New Zealand dollars slid for a second day as Asian stocks extended a global equity rout amid concern Europe’s debt crisis is worsening, reducing demand for higher-yielding assets.
The so-called Aussie dollar weakened against the yen before data this week forecast to show Australian inflation eased, giving the Reserve Bank more room to consider reductions in borrowing costs. New Zealand’s currency, known as the kiwi, dropped versus all 16 major peers after Spanish yields rose to a euro-era record and on renewed prospects Greece will exit the currency union.
“The European crisis is far from solved and those concerns are weighing on the market,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest- rate risk-management company. “Risk sentiment is very fragile and very volatile. You’ll likely to see the Aussie and the kiwi follow equities south.”
The Australian dollar fell 0.7 percent to $1.0308 as of 4:20 p.m. in Sydney. The Aussie lost 1.2 percent to 80.49 yen. New Zealand’s dollar declined 0.9 percent to 79.26 U.S. cents. It dropped 1.4 percent to 61.90 yen.
Australia’s government bonds advanced, pushing the yield on the benchmark 10-year security down by as much as 12 basis points, or 0.12 percentage point, to 2.80 percent, the lowest since June 4.
The MSCI Asia Pacific Index (MXAP) of shares fell 1.8 percent, following a 1.3 percent decline in the MSCI World Index (MXWO) on July 20.

Spain Yields

Spain’s benchmark 10-year yield climbed as high as 7.389 percent, a euro-era record. The 7 percent level was the threshold for bailouts of Greece, Ireland and Portugal. Spain is due to sell bills tomorrow maturing in three and six months after the region of Valencia said last week it would tap an emergency-loan fund created by the government.
Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- will arrive in Athens tomorrow amid concern the country will be unable to meet its commitments and reluctance among euro-area states to put up more funds should it fail.
In Australia, consumer prices probably climbed by 1.3 percent last quarter from the same three-month period last year, according to the median estimate of economists surveyed by Bloomberg News before the Bureau of Statistics releases figures on July 25.

Producer Prices

The statistics bureau said today that producer prices rose 1.1 percent in the three months ended June 30 from the second quarter of 2011. That is the lowest growth since June 2010. Economists in a Bloomberg poll expected a 1 percent rise.
“The market is looking for an indication on whether inflation is sufficiently contained to allow the RBA to cut further,” said Rochford’s Averill. “If it comes out very soft, it would certainly be another reason to sell the Aussie.”
Averill expects the Australian dollar to fall to $1.02 this week.
The central bank has reduced its benchmark lending rate to 3.5 percent from 4.75 percent since embarking on a series of rate cuts in November. The RBA aims to keep annual underlying inflation in a range of 2 percent to 3 percent.

RBA Rates

Interest-rate swaps indicate an 86 percent chance the Reserve Bank will lower its key rate by 25 basis points at its next meeting on Aug. 7, according to data compiled by Bloomberg. That compares with a 68 percent chance indicated on July 20. RBA Governor Glenn Stevens is scheduled to speak in Sydney tomorrow.
Futures traders decreased bets that the Australian dollar will gain against its U.S. counterpart, figures from the Washington-based Commodity Futures Trading Commission showed on July 20. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 13,931 on July 17, compared with net longs of 19,065 a week earlier.
Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Oil Drops a Second Day on China Slowdown, Europe Crisis

Oil dropped the most in almost two weeks in New York amid speculation global fuel demand will falter as China’s economy slows and Europe struggles to control its debt crisis.
Futures slid as much as 2.2 percent after a Chinese central bank adviser said the nation’s economy may cool further. International creditors meet in Athens tomorrow amid concern Greece may not meet its bailout targets, and after an aid package for Spain failed to prevent the euro declining to the lowest in more than two years against the dollar. Iraq resumed oil exports to Turkey after an explosion shut a pipeline that carries as much as 350,000 barrels a day, Sumaria News reported July 21, citing an unidentified Iraqi official.
“Europe’s debt crisis is continuing and China is becoming a concern,” Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo, said by phone. “There’s also still a lot of crude-oil supply in the market, so everyone understands the upside for prices will be limited.”
Crude for September delivery fell as much as $2.06 to $89.77 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.78 at 2:40 p.m. Singapore time. The contract decreased 1.2 percent to $91.83 on July 20. Prices are 9.2 percent lower this year.
Brent oil for September settlement on the London-based ICE Futures Europe exchange dropped as much as $2.29, or 2.1 percent, to $104.54 a barrel. The European benchmark crude was at a $14.90 premium to New York-traded West Texas Intermediate grade. The spread was $15 on July 20, the widest in four days.

China Slowdown

A so-called technical “inside day” signals oil’s rally in New York over the past two weeks may be stalling, according to data compiled by Bloomberg. Futures on July 20 traded within the previous day’s price range, creating the candlestick formation. Sell orders may be clustered around chart resistance along the upper Bollinger Band, at about $92.27 a barrel today.
Economic growth in China, the world’s second-largest crude consumer, may slow to 7.4 percent this quarter, according to Song Guoqing, an academic member of the People’s Bank of China monetary policy committee. Gross domestic product expanded 7.6 percent in the three months ended June, the sixth quarterly deceleration and the weakest pace in more than three years. Song made the comments at a forum in Beijing on July 21.
The European Commission, the European Central Bank and the International Monetary Fund will meet to determine the fiscal position of Greece, which has been struggling to hold to obligations tied to 240 billion euros ($291 billion) of rescue funds over the past two years.

Consumer Confidence

The IMF, which indicated in March it won’t commit more money to Greece, will make a decision on its next disbursement in late August at the earliest based on the findings, two fund officials familiar with the situation said in recent days.
Consumer confidence in the euro area this month probably fell to the lowest since February, a Bloomberg News survey showed before data today. The European Union consumed 16 percent of the world’s oil last year, according to BP Plc (BP/)’s annual Statistical Review of World Energy. The U.S. accounted for 21 percent and China for 11 percent.
“The Spanish or European story will result in repeated volatility in the market,” Jarmo Kotilaine, the chief economist at National Commercial Bank in Jeddah, said by phone yesterday. “We are still not clear on what the policy options will be. Demand-erosion concerns keep coming back.”
The Kurdistan Workers’ Party, or PKK, claimed responsibility for the Iraqi explosion, Sumaria News said. The July 20 blast damaged one of two pipelines that transport oil from Kirkuk in northern Iraq to the Turkish port of Ceyhan, the Associated Press reported. Both pipelines were closed, AP said.
Hedge funds increased net-long wagers on oil by 4 percent in the seven days ended July 17 to 133,165 contracts, according to the U.S. Commodity Futures Trading Commission’s weekly report on July 20.
Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Euro Weakens to More Than Two-Year Low on Europe Concern

The 17-nation currency dropped to less than its lifetime average versus the dollar, and slid to the lowest level in more than 11 years against the yen. Japan’s currency strengthened against all 16 of its major counterparts. Six Spanish regions may ask for aid from the central government, El Pais reported, propelling the nation’s 10-year bond yield to a euro-era high. The Swiss franc weakened through 99 centimes per dollar for the first time since December 2010.

Enlarge image

The yen has climbed 8.8 percent over the past three months versus nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes, the best performance. The euro has slumped 5.1 percent, while the dollar has risen 4.1 percent. Photographer: Tomohiro Ohsumi/Bloomberg

July 23 (Bloomberg) -- Ian Stannard, head of European currency strategy at Morgan Stanley, talks about the outlook for the euro after it weakened to a more than two-year low against the dollar. He speaks from London with Caroline Hyde on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Chart: Euro Drops Below Lifetime Average

“I see euro parity against the dollar,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “Spanish yields surging to records indicate a lack of confidence in finding a solution to the crisis, which is weighing on the currency.”
The euro tumbled 0.3 percent to $1.2122 at 6:46 a.m. in New York after falling to $1.2082, the weakest level since June 2010 and below the average of $1.2087 since its inception in 1999. The shared currency dropped 0.7 percent to 94.77 yen. It earlier slid to 94.24 yen, the lowest since November 2000. The yen rose 0.4 percent to 78.17 per dollar.
Catalonia, Castilla-La-Mancha, Murcia, the Canary Islands, the Balearic Islands are among six Spanish regions that have admitted they may ask for aid from the central government after Valencia sought a bailout last week, El Pais reported. The Catalan regional government is trying to negotiate a bridge loan with undisclosed financial entities, the newspaper said.

Spain Bonds

The yield on Spain’s 10-year bond jumped to 7.57 percent, the highest level since the euro was created, while the cost of insuring against default on the nation’s sovereign debt also soared to a record before it auctions bills tomorrow.
If Spanish yields climb toward 8 percent, “you’d get a scenario where the EU and troika basically need to bail out Spain, not just the banking sector but the entire economy,” Craig Ferguson, a currency hedge fund manager at Antipodean Capital Management in Melbourne, said in an interview with Bloomberg Television, referring to the European Union.
The euro has slumped 5.7 percent this year, the worst performance among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen is little changed, and the dollar advanced 1.8 percent.

Greece Concern

The shared currency also dropped before the troika of Greece’s international creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- arrive in Athens tomorrow amid concern the nation will meet its commitments and reluctance among euro-area states to put up more funds should it fail.
The IMF will stop paying rescue aid to Greece as it is already clear the nation will not be able to fulfill its promise to cut debt to 120 percent of annual economic growth in euro terms by 2020, Der Spiegel magazine reported, citing unidentified EU officials.
“The euro is never running out of catalysts to sell,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “The yen is expected to remain strong among the major currencies as the least bad choice.”

Treasuries, Bunds

U.S. Treasuries, German bunds and U.K. gilts all rose as investors sought safer assets. U.S. five-, 10- and 30-year yields declined to records, as did rates on U.K. two-, five- and 10-year gilts, and two- and five-year German debt. The Stoxx Europe 600 Index of shares slid 1.8 percent.
The Swiss franc weakened for a fourth day against the dollar, dropping as much as 0.6 percent 99.39 centimes, the weakest level since Dec. 3, 2010.
“We are eyeing dollar-franc parity on the back of further deterioration in investor confidence in Europe,” said Peter Rosenstreich, the chief currency analyst at Swissquote Bank SA in Geneva.
Russia’s ruble depreciated the most in a month against the dollar and South Africa’s rand fell to a three-week low as the euro-region crisis sapped demand for higher-yielding assets.
The ruble dropped 1.7 percent to 32.5812 per dollar, the sharpest decline since June 21. The rand slipped as much as 1.7 percent to 8.4237 per dollar, the weakest level since June 29.
The euro may find support at $1.2134, the 50 percent retracement of its rally from 2000 to 2008, according to data compiled by Bloomberg based on trading patterns.
Support refers to an area where buy orders may be clustered. The stronger the support level, the more selling is needed to breach it.


Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

S&P 500 Has First Back-to-Back Weekly Gain Since June

U.S. stocks rose for the week, giving the Standard & Poor’s 500 Index its first back-to-back gain since June, as results from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat forecasts and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus.
The benchmark index snapped a three-day rally on the final day amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent to lead energy shares to the biggest weekly gain among 10 S&P 500 groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS) sank more than 9 percent amid disappointing results.
The S&P 500 added 0.4 percent to 1,362.66 during the week, extending its gain for the year to 8.4 percent. The Dow Jones Industrial Average climbed 45.48 points, or 0.4 percent, to 12,822.57, the biggest weekly gain since June 29.
“There is this euphoria that maybe things are starting to turn around,” Linda Bakhshian, a money manager with Federated Investors in Pittsburgh, said in an interview. Her firm oversees $363.6 billion. “Expectations were pulled back. Companies are beating and the market is happy again because things are not that bad.”
Optimism about corporate earnings and monetary stimulus has sent the S&P 500 up 6.6 percent from a low on June 1. Profits (SPX) have exceeded analyst forecasts at about 73 percent of the 118 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg. Apple Inc., Exxon Mobil Corp. and about 170 other S&P 500 companies are scheduled to announce earnings in the coming week.

Earnings Projections

Analysts ratcheted down their projections for second- quarter profits at the start of earnings season, forecasting a decrease of 2.1 percent, compared with an increase of 4.4 percent at the beginning of this year, data compiled by Bloomberg show. By the end of the week, their outlook improved and they now estimate a 1.6 percent decline.
Stocks rose early in the week after Bernanke told senators that the central bank is prepared to act to boost growth if the labor market doesn’t improve. Disappointing data added to evidence the world’s largest economy is slowing, with reports showing that retail sales unexpectedly slid, manufacturing in the Philadelphia region contracted for a third month, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.

‘Boost Growth’

“The assumption is that the Fed is going to continue to try to do what it can to boost growth, or at least continue conditions that could give it a chance,” Dean Gulis, who oversees about $3.5 billion as a fund manager at Loomis Sayles & Co. in Bloomfield Hills, Michigan, said in a telephone interview.
Europe’s debt crisis and concern about a global economic slowdown continued to loom over the markets. The S&P 500 fell 1 percent from a two-month high on the final session of the week after Spain said the recession will extend into next year and the region of Valencia prepared to seek a rescue from the central government. Xinhua News Agency said China will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, intensifying concern an economic slowdown could reduce demand for raw materials.
An S&P 500 index of energy shares advanced 2.6 percent for the week. Baker Hughes (BHI) jumped 16 percent to $45.59. The third- largest oilfield-services company reported per-share profit that beat analysts’ estimates by 30 percent, the most since at least 2001, data compiled by Bloomberg show.

IBM Climbs

Technology companies added 1.9 percent for the second- biggest increase among the 10 groups in the S&P 500. IBM climbed 3.5 percent to $192.45. The world’s biggest computer-services provider boosted its full-year earnings forecast after second- quarter profit beat analysts’ estimates, helped by a decade-long shift to higher-margin software sales.
EBay advanced 12 percent to $44.85 for the biggest gain since September. The world’s largest Internet marketplace reported sales and profit that topped analysts’ estimates as more U.S. consumers shopped for new items on the site.
SanDisk Corp. (SNDK) surged 16 percent, the most since April 2010, to $38.70. The maker of flash memory for mobile devices exceeded analysts’ per-share earnings estimate by 14 percent, the most in a year, according to data compiled by Bloomberg.
Google Inc. (GOOG) climbed 6 percent to $610.82. The owner of the world’s most popular search engine said second-quarter revenue surged 35 percent, helped by its acquisition of Motorola Mobility Holdings and as more users clicked on advertisements.

Intel, AMD

Intel Corp. added 1.1 percent to $25.52. The world’s largest semiconductor maker reported second-quarter profit that topped analysts’ estimates while scaling back its annual sales forecast. Advanced Micro Devices Inc. (AMD), a rival of Intel, tumbled 14 percent to $4.22 after predicting a revenue decline amid market-share losses and diminished demand for personal computers.
Walgreen Co. (WAG) surge 13 percent to $34.60 for the biggest rally since 2000. The largest U.S. drugstore chain renewed a contract to provide Express Scripts Inc. (ESRX) customers with prescriptions, ending a dispute that contributed to an 11 percent decline in the retailer’s quarterly profit.
Financial shares fell 2.4 percent as a group, the most in seven weeks. Wall Street’s five biggest banks reported the worst start to a year since 2008, with combined first-half revenue falling 4.5 percent to $161 billion, the lowest since $135 billion four years ago. The firms blamed the decline on low interest rates and a drop in trading and deal-making.

Headcount Cuts

Bank of America sank 9.6 percent to $7.07 for the biggest loss since November. The lender said demands for buybacks from mortgage-bond investors and insurers surged more than $6 billion in the second quarter to $22.7 billion. Record claims for refunds on faulty mortgages cast doubt on whether improvements in the lender’s real estate operations will last, according to Paul Miller, an analyst at FBR Capital Markets.
Morgan Stanley reported a 50 percent drop in earnings on the biggest decline in trading revenue among Wall Street firms and said it will cut headcount by 4,000 this year. The stock slumped 9 percent to $12.78 for the week.
Chipotle Mexican Grill Inc. (CMG) plunged 19 percent, the most since its 2006 initial public offering, to $316.98 after second- quarter sales trailed analysts’ estimates. Slower U.S. consumer spending hurt the chain’s sales with smaller gains as the year proceeded, Chief Financial Officer Jack Hartung said on an analyst call. Extreme weather may boost food costs later this year and next, Hartung said.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Canada Dollar Gains as Stimulus Bets Fuel Risk-Asset Demand

Canada’s dollar rose against its U.S. counterpart for a second week amid speculation global central banks will take additional steps to sustain wavering economic growth, increasing the demand for riskier assets.
The currency gained for a fifth week versus the euro, the longest streak since January, as the Bank of Canada announced it would hold its benchmark interest rate unchanged. Policy makers indicated interest-rate increases are possible, putting the central bank at odds with counterparts in the U.S., Europe, China and Japan who have been adding monetary stimulus. Retail sales rebounded in May, according to a Bloomberg News survey of economists before the July 24 report.
“There was a buy-the-rumor, sell-the-fact situation this week, particularly after the Federal Reserve gave just enough verbiage to keep hopes alive of some sort of accommodation,” Greg Moore, a currency strategist at Toronto-Dominion Bank, said in a telephone interview.
Canada’s currency, nicknamed the loonie, rose 0.2 percent this week to C$1.0125 per U.S. dollar in Toronto. It touched C$1.2290 against the euro, the strongest since the 17-nation currency began trading in 1999. One Canadian dollar buys 98.77 U.S. cents.

Market Measure

The loonie fell 0.1 percent this week against nine major counterparts, according to the Bloomberg Correlation-Weighted Indexes. It has gained 2.4 percent this year, while the U.S. dollar added 1.4 percent.
Futures traders reversed their bets that the Canadian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed yesterday.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the Canadian dollar compared with those on a gain -- so-called net shorts -- was 1,208 on July 17, compared with net longs of 4,338 the previous week. Futures are agreements to buy or sell assets at a set price and date.
Most government bonds gained, pushing yields on benchmark 10-year debt down two basis points, or 0.02 percentage point, to 1.61 percent. The 2.75 percent securities maturing in June 2022 rose 20 cents to C$110.35.

Bond Sale

The Bank of Canada plans to sell C$2.6 billion ($2.6 billion) of 10-year debt on July 25. The securities will mature June 1, 2023.
Futures on crude oil, Canada’s biggest export, rose for a second week, adding 5 percent to $91.44 a barrel. The Thomson Reuters/Jefferies CRB Commodity index advanced for the fourth week, gaining 3.6 percent.
Canada’s economic recovery will be hindered by weaker global demand for exports, policy makers led by Governor Mark Carney said in a statement July 17. The central bank left the target overnight rate at 1 percent, where it’s been since September 2010.
“The markets are playing the debasement trade,” Stephen Gallo, senior foreign-exchange strategist at Credit Agricole SA in London, said in a telephone interview. “They’re buying the currencies that have positive real interest rates and selling the heck out of the ones with negative real interest rates. It’s ongoing slippage away from the euro.”

Economic Output

The world’s 10th largest economy won’t reach full output until the second half of next year, compared with an April prediction for the first half of 2013, the Ottawa-based central bank said. The Bank of Canada said in its monetary policy report July 18 that consumers and business investment will lead modest economic growth through 2014, while weaker global demand curbs exports. Canada derives about half its export revenue from raw materials.
“While global headwinds are restraining Canadian economic activity, domestic factors are expected to support moderate growth,” policy makers said in a statement. “Some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”
Fed Chairman Ben S. Bernanke told Congress this week the U.S. central bank is ready to take more steps to boost the economy, if necessary. The Fed bought $2.3 trillion of mortgage and Treasury debt from 2008 to 2011 in two rounds of quantitative easing, seeking to cap borrowing costs.

Price Trends

Canada’s consumer price index climbed 1.5 percent in June from a year ago, Statistics Canada said today in Ottawa, compared with a forecast for a 1.7 percent increase in a Bloomberg News survey of economists. The core inflation rate, which excludes eight volatile products, increased 2 percent after a May gain of 1.8 percent. Economists surveyed by Bloomberg forecast the June core rate would increase 2.3 percent.
On a monthly basis, both the total and core price indexes fell 0.4 percent in June. Economists surveyed by Bloomberg predicted consumer prices would fall of 0.2 percent in the month and the core index would decline 0.1 percent.
“Risk sentiment was already weak and this CPI data has put a damper on the Canadian-dollar bulls,” Steve Butler, managing director in Toronto at Scotiabank, said by e-mail. “The market was leaning on CPI coming in slightly higher than expectations.”
Retail sales are forecast to have increased 0.5 percent in May after a 0.5 percent drop in April, according to the median estimate of 17 economists surveyed by Bloomberg News before the Statistics Canada report in Ottawa.
The loonie will end the year at C$1.02 per U.S. dollar, according to median estimate of 44 forecasters surveyed by Bloomberg News.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Euro at 12-Year Low Versus Yen on Crisis; Dollar Drops on Fed

The euro fell for a fourth straight week against the yen, touching the lowest level in almost 12 years, as signs the European debt crisis is worsening damped demand for the shared currency.
The dollar dropped against most major peers as investors added to bets the Federal Reserve will take new steps to stimulate economic expansion that may debase the currency. Data next week is forecast to show U.S. growth slowed. Australia’s dollar climbed as implied volatility fell to an almost five-year low and traders sought higher yields, while the euro slid even as European officials approved an aid package for Spanish banks.
“Uncertainty has increased in the region, giving investors another reason to shun the euro,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said in a telephone interview. “There’s an underlying hope that we could see another round of global stimulus, which is giving investors a reason to pile into higher-yielding assets.”
The 17-nation currency fell 1.6 percent to 95.43 yen yesterday in New York, from 96.98 yen on July 13. It touched 95.35 yen, the weakest since November 2000. The euro declined for a third week versus the dollar, losing 0.8 percent to $1.2157 and reaching $1.2144 yesterday, its weakest since June 2010. The yen advanced for a fourth week against the dollar, its longest winning stretch in a year, gaining 0.9 percent to 78.49.

Net Shorts

Futures traders added to bets the euro will fall against the dollar, Commodity Futures Trading Commission data showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 167,249 on July 17, compared with net shorts of 165,705 a week earlier. Net shorts reached a record 214,418 June 8.
The euro sank to the lowest level since 2008 versus the pound and the weakest on record against the Australian dollar as Spanish borrowing costs approached a euro-era high, fueling speculation Europe’s fiscal turmoil will broaden. The currency remained above its lifetime average of $1.2087, calculated from Jan. 1, 1999, when it began trading, through yesterday.
European finance ministers’ approval yesterday of as much as 100 billion euros ($122 billion) of aid for Spanish banks failed to keep yields on Spain’s 10-year government debt from rising above 7 percent, the threshold level for global bailouts of Greece, Ireland and Portugal. Prime Minister Mariano Rajoy forecast a second year of recession and Valencia became the first region to say it would seek a rescue from the nation.

Yield Gap

Ten-year Spanish bond yields climbed to 7.284 percent yesterday, almost matching the euro-era record 7.285 percent they touched a month ago. The difference between Spanish and German 10-year yields widened to a record 613 basis points, or 6.13 percentage points.
Sterling appreciated 1 percent to 77.83 pence per euro. It reached 77.71 pence yesterday, the strongest since October 2008.
“The market is more concerned about Spain going down the same route as Greece, looking for a sovereign bailout,” Dean Popplewell, an analyst in Toronto at the online currency-trading firm Oanda Corp., said yesterday in a telephone interview. “It doesn’t paint a rosy picture for capital markets.”
Greece, where Europe’s debt crisis began in 2009, was the first euro member to get a rescue package.

Risk Adjusted

The euro’s risk-adjusted loss of 0.69 percent against the dollar this year was the largest among major currencies, the Bloomberg Riskless Ranking showed. The Aussie was the fourth- worst performer, falling 0.16 percent.
The risk-adjusted return, which isn’t annualized, is calculated by dividing total return by volatility, or the degree of daily price variation, giving a measure of income per unit of risk. A higher volatility means the price of an asset can swing dramatically in a short period, increasing the potential for unexpected losses.
Japan’s currency rose versus the greenback as the extra yield investors receive for investing in U.S. two-year debt versus comparable Japanese government bonds dropped, limiting dollar-denominated assets’ appeal. The yield gap was 10 basis points yesterday, compared with 28 basis points on March 20.
Demand for refuge from Europe’s financial turmoil drove government-debt yields to record lows in the U.S., the U.K., Canada, France, Germany and the Netherlands this week.
The yen climbed 8.6 percent over the past three months versus nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes, the best performance. The euro slumped 5.2 percent, the worst. The U.S. and Australian dollars each gained 4.1 percent.

Bernanke ‘Prepared’

The greenback fell against most major counterparts after Fed Chairman Ben S. Bernanke reiterated to Congress this week policy makers are “prepared to take further action as appropriate to promote a stronger economic recovery.” The Fed bought $2.3 trillion of securities from 2008 to 2011 in two rounds of a tactic called quantitative easing.
Growth in U.S. gross domestic product slowed to 1.4 percent from April through June, a Bloomberg News survey forecast before the Commerce Department reports the data July 27. The figure compares with 1.9 percent in the first quarter and 3 percent in the last three months of 2011. Data this week showed unexpected drops in retail sales and Philadelphia-region manufacturing.
“The markets are inching toward expectations that the Fed will have to do something in terms of a policy initiative, whether that’s QE3 or something else,” Robert Sinche, global head of currency strategy at Royal Bank of Scotland Plc’s RBS Securities unit in Stamford, Connecticut, said on July 19. “They’re moving in that direction, which is more broadly dollar-negative.”

Aussie Climbs

Australia’s dollar was the best-performing major currency, rallying 1.5 percent to $1.0378 and gaining 0.6 percent to 81.46 yen. The Aussie rose to A$1.1705 per euro yesterday, a record.
The implied volatility of three-month options on Group of Seven currencies touched 8.32 percent yesterday, the least since November 2007, a JPMorgan Chase & Co. measure showed. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits. The average over the past five years is 12.4 percent.
Australia’s cash target rate is 3.5 percent, while the U.S. benchmark rate is zero to 0.25 percent.
South Africa’s rand weakened against the greenback after the nation’s central bank unexpectedly cut its key interest rate on July 19 to 5 percent, from 5.5 percent. The rand declined 0.3 percent to 8.2868 per dollar.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Canada Dollar Gains as Carney Says Rate Increase Possible

Canada's dollar reached a one-week high against its U.S. counterpart after Bank of Canada policy makers signaled interest-rate increases remain possible even as the nation’s economy cools amid the global slowdown.
Canada’s domestic recovery will be hindered by weaker global demand for exports, policy makers led by Governor Mark Carney said in a statement. The central bank left the target overnight rate unchanged at 1 percent, matching the prediction of all 24 forecasters in a Bloomberg survey. The loonie, as the currency is nicknamed, briefly erased gains after Federal Reserve Chairman Ben S. Bernanke said progress in reducing unemployment is likely to be “frustratingly slow.”
“The bias is still clearly towards tightening, but it’s a very weak tightening bias,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, said in a telephone interview. “Dollar-Canada is still stuck around C$1.0140.”
Canada’s currency strengthened 0.3 percent to C$1.0120 per U.S. dollar at 5 p.m. in Toronto. It touched $1.0119, the strongest level since July 5. One Canadian dollar buys 98.81 U.S. cents.
Government bonds fell, pushing yields on benchmark 10-year bonds up two basis points, or 0.02 percentage point, to 1.64 percent. The yield fell yesterday to a record low 1.598 percent. The price of the 2.75 percent securities maturing in June 2022 fell 23 cents to C$110.08.

Bond Auction

The Bank of Canada is scheduled to release details July 19 on a 10-year note auction on July 25.
Canada’s currency may continue to strengthen against the euro as moving averages trade close to opening levels, according to Toronto-Dominion Bank’s TD Securities unit. Yesterday, the euro rallied from a new-cycle low to form a “key reversal/hammer,” Greg Moore and Osborne, strategists at the firm, wrote in a note to clients today.
If the loonie continues to trade close to opening levels against the shared currency it will signal a return to the euro’s trend lower, the strategists wrote.
The loonie reached a record high of C$1.2365 yesterday, the strongest level since the euro began trading in 1999.
“We have noted before that trend momentum is overwhelmingly bearish here across a range of time frames,” Moore and Osborne wrote. “It will take a much stronger turnaround in this market to convince us that the bear trend is petering out.”
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance is a level on a chart where sell orders may be clustered.

Full Output

The world’s 10th largest economy won’t reach full output until the second half of next year, compared with an April prediction for the first half of 2013, the Ottawa-based central bank said.
“While global headwinds are restraining Canadian economic activity, domestic factors are expected to support moderate growth,” policy makers said in a statement. “Some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”
“It was a balanced statement, maybe a little more hawkish than the market expected,” Blake Jespersen, managing director of institutional foreign exchange sales in Toronto at Bank of Montreal, said in a telephone interview.
Carney’s status as the lone Group of Seven finance leader warning of higher interest rates is pushing the nation’s bond yield curve to the flattest level in four years.

Yield Gap

The difference between two-year and 10-year Canadian government bond yields reached 64.8 basis points on July 13, the narrowest yield curve among the industrialized countries. The gap narrowed to 64.7 basis points on May 15, the least since July 2008. It was 66.6 basis points today.
Carney has said since April that tightening may become warranted, putting him at odds with counterparts in Europe, the U.S., China and Japan who have been adding stimulus. Carney reiterated his stance in the statement accompanying today’s decision in Ottawa.
Investors reduced bets on interest-rate cuts. Trading in overnight index swaps showed about 25 percent odds the Bank of Canada will cut rates by year-end, from about 30 percent yesterday, according to Bloomberg calculations.
“There had been some speculation they would modify the statement to some degree, but they’re loathe to backtrack to any degree that would entrench people to think they’re considering rate cuts,” said TD Securities’ Osborne by phone. “They want to keep that off the radar.”

Bernanke Testimony

Fed Chairman Bernanke said the U.S. central bank is ready to take further action to boost the recovery, while refraining from discussing specific steps.
“The U.S. economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year,” Bernanke said today in testimony for delivery to the Senate Banking Committee in Washington. The Fed is “prepared to take further action as appropriate to promote a stronger economic recovery,” he said.
Canadian factory sales fell for the fourth time in five months in May as temporary shutdowns of oil refineries reduced petroleum output.
Sales dropped 0.4 percent to C$48.7 billion ($48.0 billion) following a revised 1.1 percent decline in April, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News forecast a 0.6 percent gain, based on the median of 18 responses.
The Canadian dollar has gained 2.2 percent this year against its nine counterparts, according to Bloomberg Correlation-Weighted Indexes. The U.S. dollar has risen 1.3 percent.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Euro Falls Before Germany Vote on Spanish Aid; Yen Gains

The euro weakened versus the dollar and yen before German lawmakers vote tomorrow on aid to recapitalize Spanish banks.
The dollar snapped a one-day advance against the yen on speculation the Federal Reserve’s Beige Book assessment of U.S. economic conditions due today may add to recent signs of weakness and before Chairman Ben S. Bernanke testifies before Congress for a second day. Japan’s currency gained versus all but one of its 16 major peers as declines in Asian stocks spurred demand for safer assets.

Enlarge image

Ben S. Bernanke, chairman of the U.S. Federal Reserve. Photographer: Andrew Harrer/Bloomberg

“A worsening of the debt crisis and economic fundamentals is in store for the euro,” said Kengo Suzuki, a foreign- exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “I think the currency is still on a downtrend for the medium- to long-term.”
The euro lost 0.2 percent to $1.2270 as of 6:43 a.m. in London after climbing to $1.2317 yesterday, the strongest level since July 10. It dropped 0.3 percent to 96.88 yen. The dollar fell 0.1 percent to 78.97 yen after gaining 0.2 percent to 79.06 yesterday in New York.
The MSCI Asia Pacific Index (MXAP) of shares retreated 0.7 percent, after rising as much as 0.4 percent.

German Vote

Germany’s Finance Ministry formally asked lawmakers in a letter dated July 16 to support Spanish bank recapitalizations of as much as 100 billion euros ($123 billion) by the European Financial Stability Facility and the transfer of the program to the future European Stability Mechanism.
Chancellor Angela Merkel will get “the majority she needs” at a vote tomorrow, Steffen Seibert, her spokesman, told reporters at a regular government press conference July 13.
The Fed is due to release its Beige Book survey of business conditions in 12 U.S. districts. The U.S. economy was described as growing at a “moderate pace” pace in the central bank’s June survey.
A report from the Commerce Department today may show housing starts climbed to a 745,000 annual pace last month from 708,000 in May, according to the median estimate in a Bloomberg News survey of economists. First-time claims for jobless benefits probably increased to 365,000 in the week ended July 14 from 350,000 in the previous period, a separate poll showed before figures from the Labor Department tomorrow.
Central bank policy makers “are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market,” Bernanke said in response to questions during yesterday’s testimony in Washington. He will appear before a House of Representatives committee today. The Federal Open Market Committee is scheduled to start a two-day policy meeting on July 31.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Asian Currencies Advance on Speculation of More Chinese Stimulus

Asian currencies gained on speculation China’s faltering economy will prompt policy makers to unveil more measures to shore up growth, buoying appetite for riskier assets.
Malaysia’s ringgit and South Korea’s won advanced for a second day after Premier Wen Jiabao said the momentum for a recovery in China isn’t yet in place and the government needs to assess and recognize the problems, Xinhua News Agency reported yesterday. Asian stocks rose before Federal Reserve Chairman Ben S. Bernanke presents his semi-annual report on the U.S. economic outlook to Congress this week.

 

July 16 (Bloomberg) -- Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about the outlook for the pound, dollar and yen. He spoke July 13 with Bloomberg's Niki O'Callaghan in London. (Source: Bloomberg)

“There is some speculation that a high level meeting among policy makers in China will lead to additional supportive measures,” said Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong, a unit of the Bank of Nova Scotia.
The ringgit gained 0.4 percent to 3.1739 per dollar as of 4:24 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The won closed 0.3 percent stronger at 1,147, the Philippine peso rose 0.3 percent to 41.863 and India’s rupee advanced 0.1 percent to 55.0825.
China’s gross domestic product increased 7.6 percent in the second quarter from a year earlier, the slowest pace in more than three years, the government reported July 13. The nation needs to expand consumption and restructure the economy, Vice Premier Li Keqiang said during a tour in central Hubei province, Xinhua reported the next day.

‘Safeguard Growth’

The world’s second-largest economy, including Hong Kong, is the biggest export market for countries such as South Korea, Taiwan and Malaysia. The MSCI Asia Pacific Index (MXAP) of stocks climbed 0.3 percent, following a 1.7 percent rally in the S&P 500 Index of U.S. equities on July 13.
“The won will be supported by U.S. stock gains and expectations for China’s stimulus, but the impact will be limited with global slowdown concerns lingering,” said Cho Young Bok, a Seoul-based currency dealer at Daegu Bank.
Thailand’s baht earlier touched a one-week high of 31.58 per dollar before trading 0.1 percent higher at 31.62. Overseas funds bought $65 million more Thai equities than they sold last week, taking net purchases this month to $118 million, exchange data show.
China’s yuan traded little changed at 6.3787 against the greenback in Shanghai, halting a three-day slide, according to the China Foreign Exchange Trade System. The central bank set its daily fixing rate at 6.3208 versus 6.3247 on July 13.

India Inflation

“China has to act as quickly as possible to safeguard growth,” said Banny Lam, Hong Kong-based chief economist at CCB International Securities Ltd., a unit of China’s second-largest bank. “The hopes of more stimulus measures are supporting the yuan today.”
India’s rupee strengthened for a second day to the highest level since July 4. A government report showed inflation slowed to 7.25 percent in June from a year earlier, versus 7.55 percent in May. Economists predicted a 7.61 percent gain in a Bloomberg News survey.
“The unexpected slowdown of inflation is fantastic news,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong, wrote in an e-mail today. “Despite the still elevated level, it opens the door for a rate cut already in July. The rupee should extend gains on hopes that monetary easing will boost growth, and on inflows into the bond market by foreign investors.”
Elsewhere, Indonesia’s rupiah dropped 0.4 percent to 9,484 per dollar, Taiwan’s dollar was steady at NT$30.01 and the Vietnamese dong was little changed at 20,863.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Euro Near Two-Year Low Before Confidence, Inflation Data

The euro traded 0.6 percent from its lowest level in two years before reports this week that may show stagnating inflation and weakening confidence in the currency bloc as the deepening sovereign crisis curbs growth.
The 17-nation currency weakened versus most of its major peers after German Chancellor Angela Merkel said she hasn’t softened her stance on measures to stem debt contagion that’s prompted five euro states to seek international aid. Demand for the Australian and New Zealand dollars was supported as Asian shares rose and on prospects central banks will add to measures to bolster growth.

 

The euro was little changed at $1.2252 as of 8:31 a.m. in Tokyo after falling 0.3 percent last week. 

 July 16 (Bloomberg) -- Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about the outlook for the pound, dollar and yen. He spoke July 13 with Bloomberg's Niki O'Callaghan in London. (Source: Bloomberg)

“The overall picture is still pretty cautious,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There’s been a recession in the euro zone. I would still like to sell the euro on rallies.”
The euro lost 0.1 percent to $1.2241 as of 6:45 a.m. in London after touching $1.2163 on July 13, the weakest level since June 2010. It bought 96.82 yen, 0.2 percent below last week’s close. Japan’s currency added 0.1 percent to 79.10 per dollar after completing a 0.6 percent advance last week.
Figures from the European Union’s statistics office today may show the annual rate of inflation in the euro area remained at 2.4 percent in June, according to the median forecast in a Bloomberg News survey. That would be in line with an initial estimate on June 29 and unchanged from the reading for May.

Inflation, Confidence

A gauge of investor confidence in Germany, the currency bloc’s biggest economy, probably slid to minus 20 this month from minus 16.9 in June, a separate poll of economists showed. The ZEW Center for European Economic Research will release the data for its index of investor and analyst expectations tomorrow.
Merkel said yesterday in an interview with broadcaster ZDF in Berlin that a banking union involving a financial overseer for the euro area will have to include joint oversight on a “new level.” German lawmakers are scheduled to debate aid to recapitalize Spanish banks this week.
The euro has declined 4 percent in the past three months, the worst-performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen advanced 5.8 percent in the same period, while the dollar climbed 3.9 percent.
Europe’s shared currency may initially drop to a support level at $1.2151 and then toward the “psychologically important” $1.20 level, Mitul Kotecha, Hong Kong-based head of global currency strategy at Credit Agricole Corporate & Investment Bank, wrote in an e-mailed note today. Support is an area where buy orders may be clustered.

Euro Support

The $1.2151 level was last seen on June 14, 2010, according to data compiled by Bloomberg. The euro last touched $1.20 on June 10 in the same year.
Federal Reserve Chairman Ben S. Bernanke will discuss the outlook for the economy and monetary policy in testimony to the U.S. Senate Banking Committee tomorrow. He said on June 20 that policy makers will be prepared to take additional steps if necessary, including additional asset purchases.
Central banks in Brazil and South Korea lowered their benchmark interest rates last week, while the Bank of Japan (8301) unexpectedly expanded its asset-purchase program, its main monetary policy tool. The People’s Bank of China announced the second interest-rate reduction in a month on July 5. The European Central Bank cut its key rate to a record the same day.

Net Shorts

“On the one hand, global data is slowing but on the other, we are getting some offset from policy easing around the world, so that’s limiting the fallout in risk appetite,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. Investors are “extremely short euros, so from that perspective, markets are more sensitive to good news or even a lack of bad news.” A short position is a bet an asset will decline.
The difference in the number of wagers on a decline in the euro compared with those on a gain, known as net shorts, was 165,705 on July 10 compared with 146,177 a week earlier, according to figures from the Washington-based Commodity Futures Trading Commission. Traders have held net short positions in the shared currency since last August, the data show.
Even with the U.K. in its first double-dip recession since 1975, exports to Europe falling and the Bank of England adding to the supply of sterling, the pound rose 2.8 percent the past six months, the best performance in the Bloomberg Correlation- Weighted Indexes.

Pound Strength

The strength of the pound, boosted by investors seeking refuge from the turmoil in the euro area, is frustrating Prime Minister David Cameron’s plan to turn the economy around.
The pound was at 78.61 pence per euro today after earlier reaching 78.54 the strongest level since Nov. 3, 2008.
The Australian and New Zealand currencies maintained gains from last week as Asian stocks advanced.
The so-called Aussie bought $1.0221 after rising 0.9 percent to $1.0226 on July 13. New Zealand’s dollar traded at 79.58 U.S. cents after climbing 0.8 percent to 79.59 cents.
The MSCI Asia Pacific excluding Japan Index of stocks increased 0.3 percent. Japan’s financial markets are closed for a holiday.
The implied volatility of three-month options on Group of Seven currencies touched 9.06 percent, according to a JPMorgan Chase & Co. measure, the lowest since April 30. Lower volatility makes investments in currencies with higher benchmark lending rates more attractive because the risk in such trades is that market moves will erase profits.

Reymount Investment Products & Services: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software, Introducing Brokers(IB), Individual Trading, White label Program.

Yen Rises to Six-Week High Versus Euro on Growth Concern

The yen rose to the strongest level in almost six weeks against the euro as signs global growth is slowing underpinned demand for the relative safety of the Japanese currency.
The dollar appreciated versus all except one of its 16 major counterparts after South Korea unexpectedly cut interest rates and European and Asian stocks declined. Australia’s dollar dropped the most in three weeks after a government report showed employers cut payrolls in June. The yen briefly erased gains after the Bank of Japan (8301) bolstered its asset-purchase fund.

Enlarge image

Pedestrians walk past the Bank of Japan headquarters in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

July 11 (Bloomberg) -- Daragh Maher, a currency strategist at HSBC Holdings Plc, and Greg Peters, chief cross-asset strategist at Morgan Stanley, talk about their investment strategies for currencies, and the outlook for the yen and U.S. dollar. They speak with Sara Eisen and Stephanie Ruhle on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

July 2 (Bloomberg) -- Derek Halpenny, European head of global currency-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about European Central Bank interest rates and the outlook for the euro and dollar. He speaks with Linzie Janis on Bloomberg Television's "On the Move." (Source: Bloomberg)

“We are seeing very significant negative signals being generated by leading indicators, suggesting that the global slowdown is continuing to gain momentum,” said Ian Stannard, chief European currency strategist at Morgan Stanley in London. “All of this is going to keep the yen very well supported.”
The yen climbed 0.7 percent to 96.93 per euro at 10:15 a.m. in London after appreciating to 96.76, the strongest level since June 1. Japan’s currency advanced 0.5 percent to 79.33 per dollar. The dollar gained 0.2 percent to $1.2221 per euro. It earlier climbed to $1.2208, the most since July 2010.
The Bank of Korea unexpectedly cut borrowing costs for the first time in more than three years, lowering the benchmark seven-day repurchase rate by a quarter percentage point to 3 percent. The Stoxx Europe 600 Index of shares fell 0.8 and the MSCI Asia Pacific Index declined 1.6 percent.

China Growth

Figures tomorrow will show China’s gross domestic product growth slowed to an annual 7.7 percent last quarter, from 8.1 percent in the previous three months, a separate Bloomberg survey showed.
“We do have quite a lot of key event risks coming up including Chinese GDP tomorrow, said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “If we get a weaker run of data, then concerns over global growth will again come to the fore, and that is typically positive for the yen.”
Japan’s currency gained 6.9 percent in the past three months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 4.6 percent, and the euro dropped 3.9 percent.
The yen briefly erased its daily advance versus the dollar and euro after the BOJ boosted its purchase program and said it will continue powerful monetary easing.

BOJ Purchases

The BOJ expanded its asset-purchase fund by 5 trillion yen to 45 trillion yen and cut the size of a credit loan facility by the same amount to 25 trillion yen. The central bank held its benchmark rates at between zero to 0.1 percent and left the maturity of government debt it buys unchanged at three years.
“The initial jump we saw in dollar-yen after the BOJ announcement was a mistake,” said Masafumi Yamamoto, chief currency strategist in Tokyo at Barclays Plc in Tokyo. “Today’s decision doesn’t have much material impact on currencies because the BOJ didn’t extend the maturity of bond it purchases to four years or longer, or change the total of its stimulus program.”
Australia’s dollar dropped for the fourth time in five days after the jobless rate rose, increasing speculation the central bank will cut interest rates again as Europe’s clouded outlook restrains global growth.
The number of people employed in Australia fell by 27,000, almost erasing a revised 27,800 job gain in May, the statistics bureau said in Sydney. The jobless rate increased for a second month, to 5.2 percent from 5.1 percent.

‘Much Weaker’

“The jobs numbers were much weaker than expected,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. “That’s bearish for the Aussie dollar.”
Australia’s currency weakened 1 percent to $1.0147 after falling as much as 1.1 percent, the biggest intraday decline since June 21. The Aussie slid 1.6 percent to 80.50 yen.
The euro may extend declines against the dollar, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing Fibonacci analysis.
“The 50 percent retracement, at around $1.21, to the euro’s historical low from the high is within reach, given the drop we saw in the currency” yesterday, said Kikuko Takeda, a senior currency economist at Bank of Tokyo-Mitsubishi in London. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching new high or low.
The retracement level is at $1.2134, based on the low of 82.30 U.S. cents in October 2000 and the high of $1.6038 in July 2008, according to data compiled by Bloomberg. The level was last seen in June 2010.

Reymount Investment Products: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software.

EU’s New Crisis Model Gives Spain More Time for Cuts

European leaders are testing the latest version of their debt crisis strategy in Spain, granting Prime Minister Mariano Rajoy more time to reduce the budget deficit in exchange for deeper spending cuts.
Rajoy yesterday announced 65 billion euros ($80 billion) of austerity measures in a renewed effort to meet European Union budget targets after he was granted a one-year extension on the deadline to meet EU limits.

 

Spanish miners wave banners and shout slogans after marching from Asturias to the capital to protest against government budget cuts in Madrid, Spain. Photographer: Angel Navarrete/Bloomberg

 

July 11 (Bloomberg) -- Juan Fernando Lopez Aguilar, a member of European Parliament and Spain's Socialist Party, talks about the outlook for Spain after Prime Minister Mariano Rajoy announced 65 billion euros ($80 billion) of cuts. He speaks from Brussels with Francine Lacqua and Guy Johnson on Bloomberg Television's "City Central." (Source: Bloomberg)

 

Mariano Rajoy, Spain's prime minister. Photographer: Jock Fistick/Bloomberg

“Europeans are learning from past mistakes,” said Christian Schultz, a senior economist at Berenberg Bank in London and a former European Central Bank official. “The stick is necessary but the carrot is also good.”
Europe’s concession to recession-wracked Spain has raised expectations in Ireland and Portugal that they can win more time to rein in their budget deficits after Germany’s hardball tactics in Greece spurred a rebellion against bailout politics there.
Spanish bonds rose for a third day today. The extra yield investors demand to hold Spanish 10-year debt instead of the benchmark German bunds dropped 4 basis points to 527 basis points at 11:15 a.m. in Madrid.

IMF Role

“People can see that they are serious,” said Javier Morillas, professor of international economics at San Pablo CEU University in Madrid. “I don’t think these are the last measures we’ll see, and they certainly aren’t the last cartridges Rajoy has left.”
Rajoy’s budget package came as Spain finalizes the conditions of a 100 billion-euro bank rescue bank that will allow International Monetary Fund officials to intervene in the process of restructuring the banking system and tightens scrutiny over spending plans.
European leaders also held out the prospect of buying Spanish debt to trim yields as long as Rajoy complies with their conditions, which include transferring powers from the Economy Ministry to the Bank of Spain and bolstering the central bank’s independence.
Rajoy is also seeking additional cuts from the 17 regional governments, which control health and education. Even as Spain’s own access to capital markets is narrowing, the central government is planning to help states fund themselves on markets. Budget Minister Cristobal Montoro meets regional finance chiefs today at 4 p.m. in Madrid to discuss the plan.
Pay cuts and holiday restrictions for public workers will save 6.3 billion euros a year, Deputy Budget Minister Antonio Beteta said yesterday.

Greek Recession

With the extra year, Spain has until 2014 to bring its deficit within the EU’s 3 percent limit. European finance ministers agreed to loosen the 2012 deficit goal to 6.3 percent of GDP from 5.3 percent. Still, ministers urged Spain to step up budget cuts.
Even after the concessions on the timing, Europe’s demands may end up pushing Spain deeper into recession like Greece, which has been in recession since 2008. The Spanish program brings the fiscal tightening for this year to about 65 billion euros, Schultz estimates, after three previous packages.
“Just when you think reason and pragmatism are returning, European policymakers resort to type,” said Dario Perkins, an economist at Lombard Street Research Ltd. in London, in research note. “Significant fiscal tightening was the last thing the economy needed.”

Voter Backlash

Rajoy is already facing a backlash from Spanish voters with unemployment at 25 percent and the economy sliding deeper into its second recession since 2009. Miners who’ve been striking for the past seven weeks clashed with police outside the industry ministry in Madrid yesterday as they demanded the government reinstate subsidies they say are needed to keep their industry alive.
Spain’s two largest unions, Comisiones Obreras and Union General de Trabajadores, called a day of demonstrations for July 19 to protest, saying the cuts target the poor and the middle class without affecting companies or the wealthy.
The premier also scrapped a mortgage rebate, reversing a policy he implemented in December at his second Cabinet meeting to enact an election promise. At the same time, he had raised pensions to meet another pledge. Yesterday, he said he’d present parliament’s pension committee with a bill to make retirement benefits more sustainable.
Even with the new targets, Spain needs to cut the deficit by 2.6 percent of GDP as the economy shrinks. The deficit overshot last year as the economic downturn bit into tax revenue and regions unearthed undeclared bills. The government forecasts a contraction of 1.7 percent this year and Rajoy said today the slump would continue next year.
“We have very little room to choose,” Rajoy told the national parliament in Madrid. “I pledged to cut taxes and now I’m raising them. But the circumstances have changed and I have to adapt to them.”

Reymount Investment Products: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software.

U.S. Corn Growers Farming in Hell as Midwest Heat Spreads

The worst U.S. drought since Ronald Reagan was president is withering the world’s largest corn crop, and the speed of the damage may spur the government to make a record cut in its July estimate for domestic inventories.
Tumbling yields will combine with the greatest-ever global demand to leave U.S. stockpiles on Sept. 1, 2013, at 1.216 billion bushels (30.89 million metric tons), according to the average of 31 analyst estimates compiled by Bloomberg. That’s 35 percent below the U.S. Department of Agriculture’s June 12 forecast, implying the biggest reduction since at least 1973. The USDA updates its harvest and inventory estimates July 11.

Enlarge image

Farmer Andy Stoll looks over drought damaged field corn near his home in Idaville, Indiana, on July 6, 2012. Photographer: Daniel Acker/Bloomberg

Enlarge image

Crops on July 1 were in the worst condition since 1988, and a Midwest heat wave last week set or tied 1,067 temperature records, government data show. Rabobank International said June 28 that corn may rise 15 percent more by December to near a record $8 a bushel. Photographer: Daniel Acker/Bloomberg

Crops on July 1 were in the worst condition since 1988, and a Midwest heat wave last week set or tied 1,067 temperature records, government data show. Prices surged 37 percent in three weeks, and Rabobank International said June 28 that corn may rise 15 percent more by December to near a record $8 a bushel. The gain is threatening to boost food costs the United Nations says fell 15 percent from a record in February 2011 and feed prices for meat producers including Smithfield Foods Inc. (SFD)
“The drought is much worse than last year and approaching the 1988 disaster,” said John Cory, the chief executive officer of Rochester, Indiana-based grain processor Prairie Mills Products LLC. “There are crops that won’t make it. The dairy and livestock industries are going to get hit very hard. People are just beginning to realize the depth of the problem.”

Top Commodities

Corn rallied 18 percent in the month through July 6 on the Chicago Board of Trade to $6.93, trailing only wheat among 24 commodities tracked by the Standard & Poor’s GSCI Spot Index, which rose 2 percent. The MSCI All-Country World Index of equities advanced 4 percent, and the dollar gained 1.3 percent against a basket of six currencies in the period. Treasuries returned 0.5 percent, a Bank of America Corp. index shows. Corn for December delivery in Chicago extended the rally today, gaining 3.6 percent to $7.1825 a bushel.
About 53 percent of the Midwest, where farmers harvested 60 percent of last year’s U.S. crop, had moderate to extreme drought conditions as of July 3, the highest since the government-funded U.S. Drought Monitor in Lincoln, Nebraska, began tracking the data in 2000. In the seven days ended July 6, temperatures in the region averaged as much as 15 degrees Fahrenheit above normal. Soil moisture in Illinois, Indiana, Ohio, Missouri and Kentucky is so low that it ranks in the 10th percentile among all other years since 1895.
Fields are parched just as corn plants began to pollinate, a critical period for determining kernel development and final yields. About 48 percent of the crop in the U.S., the world’s largest grower and exporter, was in good or excellent condition as of July 1, the lowest for that date since 1988 and down from 77 percent on May 18, government data show.

Yield Losses

The USDA may cut its production forecast by 8.3 percent, the biggest July reduction since a drought in 1988 led the government to cut its estimate by 29 percent, a separate Bloomberg survey of 12 analysts showed. Farmers probably will collect 13.559 billion bushels, compared with the USDA’s June estimate for a record 14.79 billion, the survey showed.
Goldman Sachs Group Inc. said July 2 that yields will reach 153.5 bushels an acre, below the USDA estimate for an all-time high of 166.
“Corn yields were falling five bushels a day during the past week” in the driest parts of the Midwest, said Fred Below, a plant biologist at the University of Illinois in Urbana. “You couldn’t choreograph worse weather conditions for pollination. It’s like farming in hell.”

Record Crop

Even with the drought, U.S. production in 2012 is expected to rise 9.7 percent from last year to a record after farmers sowed the most acres since 1937, the survey showed. Higher output would help boost inventories before next year’s harvest, up from what analysts said will be a 16-year low on Sept. 1 of 837 million bushels.
Futures fell 2.2 percent on July 6, the most in two weeks, after the USDA reported a 90 percent drop in export sales in the week ended June 28. U.S. refiners curbed output of corn-based ethanol last week to the lowest since September as gasoline demand weakened, government data show.
Corn’s rally also may stall if Europe’s widening debt crisis and a faltering global economy erode record demand for the grain. The International Monetary Fund will reduce its estimate for growth this year because of weakness in investment, employment and manufacturing in Europe, the U.S., Brazil, India and China, Managing Director Christine Lagarde said July 6.
“The shrinking global economy is the elephant in the room that no one wants to discuss as long as U.S. crops are under siege,” said Dale Durcholz, the senior market analyst for Bloomington, Illinois-based AgriVisor LLC. “Corn demand at $5 is much more robust than when it costs $7.”

Changing Expectations

Corn tumbled into a bear market in September and kept dropping as farmers planted more crops. Robert Manly, the chief financial officer at Smithfield Foods, the largest U.S. pork producer, told analysts on a June 14 conference call that hog- raising costs would “begin to decline starting in the fall.” Corn has surged 39 percent since then, reaching a nine-month high today.
U.S. corn production may drop to 11 billion bushels, the smallest crop in seven years, because the hot, dry weather killed the pollen and rains now may be too late to reverse the damage, according to Cory, the Indiana mill owner and a former investment banker. Prices may reach $9 before demand slows, he said.
World corn use rose to a record every year since 1997 as the expanding economy boosted incomes and the consumption of meat and dairy products from animals raised on the grain. The USDA projected last month a 6.4 percent increase in global demand to 923.39 million tons in the year that starts Sept. 1, the biggest gain in six years. More U.S. output went to ethanol production than livestock feed in 2011 for the first time ever.

Vulnerable Period

While the U.S. harvest is about two months away, the drought reached plants at the most vulnerable period in their growing cycle, said Nick Higgins, a London-based analyst at Rabobank, predicting a 13.488 billion-bushel harvest.
Based on current soil moisture and June temperatures, the drought is probably the worst since 1988, said Joel Widenor, a vice president at the Commodity Weather Group in Bethesda, Maryland. The private forecaster said July 5 that corn output this year will be 13.52 billion bushels, and that hot, dry weather in the next two weeks may reduce yields further.
The drought may spark a rebound in global food prices this month through October, halting a slide that sent costs in June to the lowest level in 21 months, Abdolreza Abbassian, an economist in Rome at the United Nations’ Food & Agriculture Organization, said July 5.

Base Ingredient

“Corn is key because of its widespread use as a base ingredient in so many foods and for its use in feed for livestock,” said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp. “We are at the tipping point.”
In May, retail prices of boneless hams, ground beef and cheese in the U.S. were close to all-time highs set earlier this year, while chicken breast jumped more than 12 percent during the first five months of the year, government data show.
“When people look at rising prices for hamburger, butter, eggs and other protein sources from higher corn costs, that’s when more money ends up in the food basket,” said Minneapolis- based Michael Swanson, a senior agricultural economist at Wells Fargo & Co., the biggest U.S. farm lender. “We were hoping for a break, and we aren’t going to get it.”

Reymount Investment Products: Online Forex Trading, Online CFD Trading, Precious Metals Trading, Online Trading Software.