China Cuts Transaction Fees for Share Trading

Chinese regulators, seeking to arrest a 14 percent slide in the nation’s stock market since hitting this year’s high on March 2, lowered transaction fees on the trading of equities by a fifth.
The 20 percent reduction will take effect Sept. 1 and save investors 600 million yuan ($94 million) in transaction-related fees in the final four months of the year, the China Securities Regulatory Commission said on its website today. Separately, the official Xinhua News Agency reported that China was also considering a cut in the stamp duty imposed on share trading.

 

Employees work on the trading floor of the Shanghai Stock Exchange in Shanghai. Photographer: Kevin Lee/Bloomberg

The reduction follows a July 31 announcement by the Communist Party’s Politburo, made up of the nation’s highest ranking officials, that pledged to continue adjusting policies to ensure stable economic growth. China’s benchmark Shanghai Composite Index (SHCOMP) has slumped this year on concern an economic slowdown is deepening and Europe’s debt crisis is worsening.
“The government wants to be seen doing something politically,” Andy Xie, an independent economist who was formerly Morgan Stanley’s chief Asia economist, said today in a telephone interview. “There’s a confidence crisis in the stock market and there’s a perception that the stock market is a trap and doesn’t reward investors.”
Over the past five years, the Shanghai index has been the worst performer among the world’s 10 biggest stock markets with a 52 percent slide, according to data compiled by Bloomberg. The index dropped 0.6 percent today, as about three stocks fell for each one that gained.

Futures Fees

Chinese economic growth moderated in the second quarter to 7.6 percent, the slowest since 2009.
Trading charges will also be cut as much as 26 percent for futures exchanges in Shanghai, Zhengzhou and Dalian, the securities regulator said today. The China Financial Futures Exchange will reduce transaction fees by 28.57 percent, it said.
As a result, futures market costs may be lowered by 1 billion yuan, the CSRC said.
The Shanghai and Shenzhen bourses earlier lowered fees levied for trading A shares by 25 percent on June 1. The regulator also reduced supervision charges on the nation’s stock and futures exchanges this year.
Fees in China’s financial markets have been cut three times this year, which “alleviates market costs and reflects regulator’s confidence and determination to protect the interest of investors and boost the healthy development of the market,” according to the statement.

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Euro Advances Against Dollar, Yen as ECB Meet

The euro rose against the dollar and the yen, snapping a drop from yesterday, as European Central Bank policy makers meet for the first time since President Mario Draghi pledged to do whatever is needed to protect the currency.
The pound dropped for a third day against the euro as the Bank of England Monetary Policy Committee kept its bond-buying program and interest rates unchanged. The U.S. currency fell versus 13 of its 16 major counterparts even after the Federal Reserve yesterday refrained from expanding monetary easing. Sweden’s krona and Norway’s krone strengthened.

 

ECB officials meeting in Frankfurt will keep the benchmark interest rate at a record low 0.75 percent, according to 51 of 55 economists in a Bloomberg News survey. Photographer: Hannelore Foerster/Bloomberg

3:16

Aug. 1 (Bloomberg) -- Georgios Tsapouris, an investment strategist at Coutts & Co., Steven Bell, chief economist at GLC Ltd., Graham Neilson, chief investment strategist at Cairn Capital Ltd., and Christian Schulz, senior economist at Berenberg Bank, talk about European Central Bank President Mario Draghi and the outlook for monetary policy. Alberto Gallo, head of European macro credit research at Royal Bank of Scotland Group Plc, James Ashley, a senior economist at RBC Capital Markets and Johannes Jooste, a strategist at Bank of America Corp.'s Merrill Lynch Wealth Management unit, also speak. (Source: Bloomberg)

“Many investors are expecting something” after Draghi’s comments last week, said Chris Walker, a currency strategist at UBS AG (UBSN) in London. “There is scope for disappointment if he says something similar to last week today but does not follow up on it. Expectations are maybe too high.”
The euro advanced 0.4 percent to $1.2273 at 12:03 p.m. London time after dropping 0.6 percent yesterday. The 17-nation currency appreciated 0.1 percent to 96.02 yen. The dollar weakened 0.3 percent to 78.23 yen.
ECB officials meeting in Frankfurt will keep the benchmark interest rate at a record low 0.75 percent, according to 51 of 55 economists in a Bloomberg News survey. Four predict a cut to 0.5 percent. The deposit rate will be left at zero, a separate Bloomberg survey shows.
Draghi will hold a press conference at 2:30 p.m. in Frankfurt to explain the central bank’s decision. Any new measures will also be announced then.

High Expectations

“A lot of people are expecting the ECB to announce some sort of ‘shock-and-awe’ policy today,” said Peter Dragicevich, a Sydney-based foreign-exchange economist at Commonwealth Bank of Australia. (CBA) “If the ECB were to disappoint, we expect the euro to fall.”
The Federal Open Market Committee “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” U.S. policy makers said yesterday in a statement at the end of a two-day meeting. Investors had speculated the central bank may signal a third round of asset purchases or so-called quantitative easing.
The U.S. central bank bought $2.3 trillion of securities in two rounds of asset purchases from 2008 to 2011 in a bid to spur growth through lower borrowing costs, and it has said its benchmark interest rate will stay at “exceptionally low levels” at least through late 2014.

U.S. Hiring

The pace of hiring in the U.S. in July will fail to cut the unemployment rate from 8.2 percent, economists said before a Labor Department report tomorrow. The data will show employers added 100,000 jobs last month, according to the median forecast in an economist survey. Employers added an average of 226,000 a month from January through March.
“The FOMC changed the statement fractionally, to downgrade the economic outlook and insert the code-word for policy action at the next meeting,” Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. (NAB), wrote in a note to clients. “If we see more reports that are soft, then if the last two QE cycles are an example, then the dollar can move lower into the meeting and rally afterwards.”
The pound fell against most of its major peers as the Bank of England announced its decision. The Monetary Policy Committee maintained its bond-buying program at 375 billion pounds and left interest rates at a record-low 0.5 percent, in line with the median forecasts in Bloomberg News surveys.
Sterling weakened 0.2 percent to 78.88 pence per euro after dropping to 79.07 pence, the lowest level since July 13.
The euro has depreciated 4.5 percent in the past six months, the worst performance of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 0.2 percent and the dollar strengthened 3.1 percent.
The Swedish krona rose 0.5 percent to 6.7689 per dollar, while Norway’s krone climbed 0.3 percent to 6.0249.

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Canadian Dollar Reaches 2-Month High Before Salaes Data

Canada’s dollar strengthened to almost parity with its U.S. counterpart as stock-index futures advanced before the Federal Reserve concludes its meeting today with a policy statement.
The currency rose to the highest since May yesterday, capping its second monthly advance on speculation the Fed and the European Central Bank will extend measures to stimulate economic growth amid evidence the global recovery is stalling. The so-called loonie rose to the highest since March against the U.K. pound.
“The risk is that expectations have got a bit inflated,” Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada’s RBC Capital Markets unit, said by phone from London. “Selling rallies in risk is the right way to be positioned.”
Canada’s currency strengthened as much as 0.3 percent to C$1.0040 per U.S. dollar, approaching the C$1.0003 it reached yesterday, the strongest level since May 15. It traded at C$1.0016 at 7:57 a.m. in Toronto, up 0.1 percent. One Canadian dollar buys 99.84 cents. It climbed for a fourth day to C$1.5661 against the pound.

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U.S. Stock Futures Advance Before Fed’s Policy Decisions

U.S. stock-index futures advanced, indicating the Standard & Poor’s 500 Index will rebound from two days of declines, as investors awaited the outcome of the Federal Reserve’s two-day policy meeting.
Dow Chemical Co. (DOW) rose 2.6 percent in Germany. Electronic Arts Inc. (EA) gained 1.9 percent after reporting a quarterly loss that was smaller than estimated. Dreamworks Animation SKG Inc. (DWA) fell 8.9 percent after second-quarter earnings missed projections.
Futures on the S&P 500 Index expiring in September climbed 0.3 percent to 1,378.1 at 7:38 a.m. in New York. The equity benchmark rallied 1.3 percent in July, its second successive month of gains, as euro-area policy makers pledged to preserve their common currency and speculation grew central banks will take measures to boost growth. Dow Jones Industrial Average futures added 39 points, or 0.3 percent, to 12,998 today.
Trading in Europe slowed before the Fed’s decision. The number of shares changing hands in Stoxx 600 companies was 35 percent lower than the 30-day average at this time of day, according to data compiled by Bloomberg.
Fed Chairman Ben S. Bernanke will probably forgo announcing a third round of large-scale asset purchases today, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey.
“Bernanke will leave the door open,” Larry Kantor, head of research at Barclays Capital, said on Bloomberg Television’s City Central. “He doesn’t want to disappoint market expectations too much but I don’t see the Fed making any move at all this week.”

Stimulus Timing

Eighty-eight percent of economists say the Federal Open Market Committee will refrain from starting new purchases. Forty-eight percent say the FOMC will announce the buying at its Sept. 12-13 meeting, according to the July 25-27 survey of 58 economists.
Investors should buy stocks before the Fed’s announcement, if history is any guide, according to Bespoke Investment Group LLC. The S&P 500 (SPX) has advanced on 20 out of the past 29 decision days since the Fed pledged to keep interest rates near zero in December 2008, a Bespoke study showed. Fed days accounted for about 38 percent of the equity gauge’s gain during the period, the data show.
A report at 10 a.m. in Washington may show the Institute for Supply Management’s factory index rose to 50.2 last month from 49.7 in June, according to the median estimate of 83 economists surveyed by Bloomberg News. Fifty marks the dividing line between expansion and contraction.

Job Report

Companies probably added 120,000 jobs in July, after hiring 176,000 in June, according to the median estimate of economists surveyed by Bloomberg before ADP Employer Services releases its data today.
Dow Chemical, the biggest U.S. chemical company, rose 2.6 percent to $29.53 in German trading. A gauge of its European peers climbed 0.8 percent. Dow shares have fallen for the past four days in New York.
Electronic Arts gained 1.9 percent to $11.23 in German trading. The second-largest U.S. video-game maker reported a smaller quarterly loss than analysts expected and said it will buy back as much as $500 million in stock.
Allstate Corp. (ALL) may be active. The largest publicly traded U.S. home and auto insurer posted second-quarter profit that exceeded analysts’ estimates as costs tied to natural disasters dropped.
Dreamworks tumbled 9 percent to $17.48 in Germany. The independent film studio reported second-quarter results that missed analysts’ estimates on lower-than-expected results related to “Madagascar 3.”
Net income shrank 63 percent to $12.8 million, or 15 cents a share. Analysts projected 25 cents, according to a Bloomberg survey.

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Aussie Trades Near Four-Month High Before Fed Decision

Australia’s dollar traded 0.4 percent from a four-month high against its U.S. counterpart as demand for riskier assets increased on speculation the Federal Reserve will signal additional stimulus measures when it concludes its meeting today.
The so-called Aussie erased earlier losses of as much as 0.4 percent versus the greenback. The New Zealand dollar advanced on prospects the Fed will implement a further round of quantitative easing, or QE, which would debase the U.S. currency. Demand for the South Pacific nations’ currencies was tempered after reports today indicated a slowdown in manufacturing in China, Australia’s biggest trading partner and New Zealand’s second-largest export destination.
“If the Fed goes ahead with QE, you would certainly expect the Aussie to be among the larger beneficiaries,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The Aussie is finding support from a very broad range of buyers.”
The Australian dollar was at $1.0503 as of 4:17 p.m. in Sydney, unchanged from yesterday, when it climbed as high as $1.0538, the strongest level since March 27. It fell to as low as $1.0464 earlier today. The Aussie was little changed at 82.09 yen. New Zealand’s currency, known as the kiwi, bought 81.17 U.S. cents, 0.4 percent above yesterday’s close. It rose 0.4 percent to 63.44 yen after falling 0.6 percent in the previous two days.
Members of the Federal Open Market Committee will end their meeting today. While they refrained from introducing a third round of asset purchases at their June session, Chairman Ben S. Bernanke indicated last month that it’s an option.

September Meeting

Policy makers will probably wait until their meeting in September to start another round of purchases, according to the median estimates of economists in a Bloomberg News survey.
The MSCI Asia Pacific Index of shares lost 0.4 percent.
Australia’s 10-year government bond yield climbed one basis point, or 0.01 percentage point, to 3.12 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose three basis points to 2.79 percent.
The Aussie earlier declined as reports of weakening domestic manufacturing were compounded with data that showed a similar situation in China.
“The trend that most of the market has been concerned about, which is a moderation or significant slowdown in China’s growth momentum, seems to be still in place,” said Sacha Tihanyi, a strategist at Scotiabank in Hong Kong, a unit of Bank of Nova Scotia. (BNS) “On the margin, today’s Chinese data is not going to be supportive of the Aussie and kiwi.”

Manufacturing Slump

China’s manufacturing Purchasing Managers’ Index fell to 50.1 in July from 50.2 the previous month, according to a report today by the Beijing-based National Bureau of Statistics and the China Federation of Logistics and Purchasing. The figure is the lowest since November and compares with analysts estimates for an advance to 50.5.
The final reading for a separate purchasing managers’ index released by HSBC Holdings Plc and Markit Economics showed the gauge rose to 49.3 last month compared with 48.2 in June.
Australia’s manufacturing index slumped 6.9 points to 40.3, the weakest reading since June 2009 and fifth decrease in six months, according to a survey by the Australian Industry Group and PricewaterhouseCoopers released today.
For the three indexes, a reading below 50 indicates a contraction and above, expansion.

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Gold Seen Gaining in London on Speculation About Monetary Easing

Gold was seen gaining for the first time in three days in London on speculation central banks will signal further steps to support growth.
The Federal Open Market Committee ends a two-day meeting today, while European Central Bank officials convene tomorrow. Italian Prime Minister Mario Monti and French President Francois Hollande said yesterday the two countries are “determined” to do everything to protect the euro zone’s integrity. Gold reached a five-week high of $1,629.35 an ounce on July 27 after ECB President Mario Draghi said he would work to preserve the euro.
“Precious-metals markets are waiting for comments from the ECB and FOMC, to see if any guidance of more decisive action and, ultimately, balance-sheet expansion is given,” Nick Moore, head of commodity research at Royal Bank of Scotland Group Plc in London, said today in a report. “QE3 remains a possibility further ahead,” he said, referring to more quantitative easing.
Immediate-delivery bullion was little changed at $1,614.90 an ounce by 11:32 a.m. in London. Prices gained for a second month in July, increasing 1.1 percent. December-delivery futures were 0.2 percent higher at $1,618 on the Comex in New York.
Gold at the morning “fixing,” used by some mining companies to sell output, slipped to $1,614.75 an ounce in London from $1,622 yesterday afternoon.
Bullion holdings in exchange-traded products expanded 4.8 metric tons to 2,395.4 tons yesterday, data compiled by Bloomberg show. U.S. Mint sales of American Eagle gold coins dropped 49 percent to 30,500 ounces in July, the lowest amount since April, data on the mint’s website showed.
While the Fed refrained from introducing a third round of asset purchases at its June meeting, Chairman Ben S. Bernanke indicated it’s an option. Gold rose about 70 percent as the central bank bought $2.3 trillion of debt in two rounds of quantitative easing that ended in June 2011.
Silver for immediate delivery slipped 0.2 percent to $27.9275 an ounce. Palladium rose 0.2 percent to $590.63 an ounce. Platinum declined 0.5 percent to $1,408.50 an ounce.

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Euro Erases Losses as Shares Pare Drop Before ECB Meeting

The dollar swung between advances and declines against the euro as investors awaited policy decisions from the Federal Reserve and European Central Bank amid mounting evidence that economies around the world are slowing.
The euro pared its gain versus the yen after Bundesbank President Jens Weidmann said that the ECB shouldn’t exceed its mandate. European policy makers announce their next interest- rate decision tomorrow, the first since President Mario Draghi pledged to do whatever it takes to defend the single currency. The pound slid after a report showed U.K. manufacturing shrank the most in more than three years in July, while the yuan fell as a separate report showed Chinese output slowed.

 

The euro bought $1.2295 as of 8:51 a.m. in Tokyo after climbing 0.4 percent yesterday to $1.2304. Photographer: Hannelore Foerster/Bloomberg

“We could get some kind of explosive moves in the dollar on the announcement, whatever it is,” said Eimear Daly, a currency analyst at Monex Europe in London. “In euro-dollar, the market has priced in action from Draghi but they may be beginning to doubt how aggressive he’s willing to be.”
The dollar was little changed at $1.2311 per euro at 10:20 a.m. London time after earlier weakening as much as 0.3 percent and strengthening as much as 0.2 percent. The 17-nation currency was little changed at 96.21 yen, paring a gain of as much as 0.4 percent. The dollar was little changed at 78.15 yen.
The Fed concludes its two-day meeting today.
The ECB’s independence “requires it to respect and not overstep its own mandate,” Weidmann said in an interview with former central bank chief Helmut Schlesinger that was conducted on June 29 and published on the Bundesbank’s website today.
Sterling fell 0.2 percent to $1.5642, and depreciated 0.3 percent to 78.72 pence per euro.
A gauge of U.K. factory output fell to 45.4 from a revised 48.4 in June, London-based Markit Economics said today. The index was weaker than any of the 30 forecasts in a Bloomberg News survey. A reading below 50 indicates contraction.

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