Tag Archives: markets
Stocks Mixed As Syria Worries Weigh
http://www.ft.com/cms/s/0/78a30882-15dc-11e3-b519-00144feabdc0.html#ixzz2e0jj0PQn By Jamie Chisholm Thursday 10:35 BST. Optimism on the global economy is helping nudge many growth-focused assets higher, but the bullishness is contained by worrying over the potential geopolitical fallout of the Syria crisis and some monetary policy uncertainty. Stronger European financials but weaker energy stocks leaves the Stoxx 600 index barely changed after the FTSE Asia-Pacific index rose 0.2 per cent. US index futures point to the S&P 500 on Wall Street opening flat at 1,653. The dollar index is up 0.1 per cent to flirt with one-month highs, while gold is up $1 to $1,392 an ounce. Underpinning investor sentiment is a recent rash of fairly upbeat economic data. Well-received manufacturing and service sector surveys from China and Europe this week have joined with better US figures – such as buoyant car sales in August – to raise hopes of a broadening global recovery. That has lifted industrial commodities of late, and many are mildly firmer again on Thursday, with copper up 0.3 per cent to $3.25 a pound and Brent crude adding 48 cents to $115.39 a barrel. However, oil is also getting support from wariness about the chances of supply disruption should the US attack Syria. The potential for broader political fallout following any such action will be in focus as the G20 meets in Russia, which supports the Damascus government; and fretting over this issue is likely to be suppressing the broader market’s confident tone. China’s vice finance minister has warned that a military strike on Syria would hurt the global economy, and Turkey’s lira, which has been buffeted of late by Syria-linked and emerging market tensions, is 1.3 per cent weaker to trade at a record low of TL2.075 per dollar. Also causing some reticence is possible monetary policy “headline risk”. The session sees strategy announcements from the central banks of Japan, Sweden, the UK and the eurozone – a lot for traders to absorb. Labour market data from the US – in the form of the weekly initial unemployment claims and the ADP private sector jobs survey – will set the scene for Friday’s non-farm payrolls numbers, a report considered crucial in formulating the Federal Reserve’s decision on when to start reducing its bond buying programme. “We expect this Friday’s employment report to seal the deal on a September tapering announcement,” said analysts at Société Générale. US implied borrowing costs are consequently moving up, pulling other highly-rated sovereigns along in their wake. The 10-year Treasury yield is up 4 basis points to 2.93 per cent, flirting with two-year highs, while equivalent duration Bunds are advancing 6bp to show 2.0 per cent for the first time since March 2012. Japanese benchmark bonds are up 1bp at 0.79 per cent after the Bank of Japan concluded its two-day meeting, leaving rates and its asset purchase programme unchanged. In an upbeat statement, the BoJ lifted its assessment of Japan’s economy, which it said appeared to be “recovering moderately”. The yen briefly moved above Y100 versus the dollar, but is now changing hands at Y99.85, just 10 pips weaker on the day. After gaining 5 per cent so far this week, the Nikkei 225 has similarly decided to take time for consolidation, closing up just 0.1 per cent. In Hong Kong, the Hang Seng index was up 1.2 per cent, but on the mainland the Shanghai Composite was down 0.2 per cent, highlighting a mixed session for the region. Australia’s S&P/ASX 200 index lost 0.4 per cent after figures showing a greater than expected trade deficit for July. On the back of below-forecast mineral exports, the deficit reached A$765m after a modest surplus of A$243m in June. “There is nothing here to challenge the growing view that mining investment has already peaked, with little signs of a pick-up in other sectors so far,” said economists with TD Securities. Australia holds its federal election on Saturday, where the opposition Liberal Party candidate is expected to win. The Aussie dollar is seeing some profit taking after bouncing 3 per cent in the past three sessions on reduced expectations for easier monetary policy following stronger than forecast second-quarter GDP data. The Aussie is weaker by 33 pips to US$0.9133. The Indian rupee is moving further away from record lows as the market perceives greater credibility in the Reserve Bank of India’s new chief. Confidence in Raghuram Rajan’s measures to support the currency sees the dollar fall 1.4 per cent to Rs66.14, nudges bond yields lower and has helped boost the Sensex equity gauge by 2.3 per cent. Additional reporting by Sarah Mishkin in Hong Kong Continue reading
FTSE Falls As Syria Unrest Drives Down Markets
27 Aug 2013 | 10:56 Nick Paler The FTSE 100 was off around 1% this morning while oil prices climbed, as unrest in the Middle East threatens to escalate. Returning after the long weekend, investors in the UK were quick to sell stocks after a rough Monday session overseas, amid comments from leading US politicians who said Syria will be held to account if it is found to have used chemical weapons against its own people. The UK’s blue chip index was off 60 points at 6,432 by mid-morning as a result, with stocks also impacted by rising oil prices. International Consolidated Airlines led the fallers, the stock down 3.4%, after the oil price ticked up 0.6% to $111.4 a barrel for Brent crude. European shares were more heavily impacted by Middle East tensions, with both the French CAC 40 and the German DAX off 1.5% and 1.6% respectively. Losses were piling up after falls in the US overnight, with the Dow and the S&P 500 both closing 0.4% lower. As political outrage at Syria threatens to morph into full-blown military intervention, gold prices picked up, with the precious metal climbing above $1,400 for the first time since June. Continue reading
Emerging Market Rout Threatens Wider Global Economy
The $9 trillion (£5.8 trillion) accumulation of foreign bonds by the rising powers of Asia, Latin America and the emerging world risks going into reverse as one country after another is forced to liquidate holdings to shore up its currency, threatening to inflict a credit shock on the global economy. Fears of Fed tightening have pushed borrowing costs worldwide to levels that could threaten global recovery Photo: AFP By Ambrose Evans-Pritchard 8:38PM BST 22 Aug 2013 India’s rupee and Turkey’s lira both crashed to record lows on Thursday following the US Federal Reserve releasing minutes which signalled a wind-down of quantitative easing as soon as next month. Dilma Rousseff, Brazil’s president, held an emergency meeting on Thursday with her top economic officials to halt the real’s slide after it hit a five-year low against the dollar. The central bank chief, Alexandre Tombini, cancelled his trip to the Fed’s Jackson Hole conclave in order “to monitor market activity” amid reports Brazil is preparing direct intervention to stem capital flight. The country has so far relied on futures contracts to defend the real – disguising the erosion of Brazil’s $374bn reserves – but this has failed to deter speculators. “They are moving currency intervention off balance sheet, but the net position is deteriorating all the time,” said Danske Bank’s Lars Christensen. A string of countries have been burning foreign reserves to defend exchange rates, with holdings down 8pc in Ecuador, 6pc in Kazakhstan and Kuwait, and 5.5pc in Indonesia in July alone. Turkey’s reserves have dropped 15pc this year. “Emerging markets are in the eye of the storm,” said Stephen Jen at SLJ Macro Partners. “Their currencies are in grave danger. These things always overshoot.” It was Fed tightening and a rising dollar that set off Latin America’s crisis in the early 1980s and East Asia’s crisis in the mid-1990s. Both episodes were contained, though not easily. Emerging markets have stronger shock absorbers today and largely borrow in their own currencies, making them less vulnerable to a dollar squeeze. However, they now make up half the world economy and are big enough to set off a crisis in the West. Fears of Fed tightening have pushed borrowing costs worldwide to levels that could threaten global recovery. Yields on 10-year bonds jumped 47 basis points to 12.29pc in Brazil on Thursday, 33 points to 9.72pc in Turkey, and 12 points to 8.4pc in South Africa. There had been hopes that the Fed might delay its tapering of bond purchases, chastened by the jump in long-term rates in the US itself. Ten-year US yields – the world’s benchmark price of money – have soared from 1.6pc to 2.9pc since early May. Hans Redeker from Morgan Stanley said a “negative feedback loop” is taking hold as emerging markets are forced to impose austerity and sell reserves to shore up their currencies, the exact opposite of what happened over the past decade as they built up a vast war chest of US and European bonds. The effect of the reserve build-up by China and others was to compress global bond yields, leading to property bubbles and equity booms in the West. The reversal of this process could be painful. “China sold $20bn of US Treasuries in June and others are doing the same thing. We think this is driving up US yields, and German yields are rising even faster,” said Mr Redeker. “This has major implications for the world. The US may be strong to enough to withstand higher rates, but we are not sure about Europe. Our worry is that a sell-off in reserves may push rates to levels that are unjustified for the global economy as a whole, if it has not happened already.” Sovereign bond strategist Nicolas Spiro said India is “caught between the Scylla of faltering growth and the Charybdis of currency depreciation” as hostile markets start to pick off any country with a large current account deficit. He said India’s central bank is playing with fire by reversing its tightening measures to fend off recession. It has instead set off a full-blown currency crisis that is crippling for companies with dollar debts. India is not alone. A string of countries across the world are grappling with variants of the same problem, forced to pick their poison. Continue reading
