ECB could hike rates or pause at next meeting: Lagarde

FRANKFURT — The European Central Bank could hike interest rates again or pause at its next meeting and any decision will depend on the latest data, president Christine Lagarde has said.

The central bank for the 20 countries that use the euro lifted borrowing costs for the ninth consecutive time Thursday as it fights stubbornly high inflation.

But in comments after the meeting, Lagarde fueled expectations the ECB may finally pause its historic hiking campaign soon, saying she had an open mind about future decisions.

In an interview with French daily Le Figaro published Sunday, she stressed no decision had yet been made about what the ECB will do at its next meeting on September 14.

"I hear some people say that the final rate hike will take place in September," she said.

"There could be a further hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive.

"Inflation must return durably to its target."

Decisions would be based on the latest economic and financial data, she said.

The ECB is due to release its latest forecasts, including for eurozone growth and inflation, at the September meeting.

Inflation has been slowing but still came in at 5.5 percent in June -- well above the ECB's two-percent target.

But there have been growing concerns about the impact of rate hikes after the eurozone slipped into recession around the turn of the year, with the economy shrinking for two straight quarters.

But Lagarde said second-quarter economic growth data for Germany, France and Spain, released Friday, were "quite encouraging".

The French and Spanish economies both grew more than expected. The German economy -- Europe's biggest -- stagnated, despite expectations for a slight rebound.

She also shrugged off criticism coming from leaders of some countries, such as Italy, about the rate increases.

"As a central banker you need to have a thick skin," she said.

"And it's essential to keep sight of the objective of lowering inflation and to be as clear as possible about the tools deployed and the intended results."

Agence France-Presse

Global stocks hammered as oil prices push further below $30

NEW YORK, United States—Stock markets around the world fell heavily Friday as investors reacted to new 12-year lows for oil prices and a big drop in Chinese equities.

A 3.6 percent drop in the Shanghai index pushed the Chinese market into an official bear market—defined as a 20 percent fall from a recent high—and sparked a wave of selling that extended from Frankfurt to Moscow to New York.

“Pervasive gloom,” read the title of a Barclays note.

Barclays slashed its forecast for oil prices due to a “worsening” macro outlook and predicted further European Central Bank stimulus in light of deflationary worries. On the positive side, the “pessimism about US growth is overdone in light of solid labor market momentum,” Barclays added.

“The markets are trapped in a vicious circle,” said Alexandre Baradez, an analyst at IG France.

“The session started off poorly with China, which set things off, leading to oil prices falling, then European markets and Wall Street dropping.”

Frankfurt fell 2.4 percent, Paris 2.3 percent and London 1.9 percent. The Dow in the US ended 2.4 percent lower after dropping more than 3.0 percent earlier in the session.

The leading Moscow index dropped 5.8 percent, while Brazil’s Ibovespa index lost 2.4 percent.

Global recession?

The widespread market losses over the start of 2016 has sparked talk of the potential for a global recession.

David Levy, portfolio manager at Kenjol Capital Management, said such a downturn would likely be less severe than in 2008 because fewer assets are overvalued.

“Even if we are in a global recession, I don’t think the damage will be nearly as significant as a 2008-type event,” Levy said.

“But certainly the evidence is giving us a higher probability of recession in 2016 and certainly the market is speaking that it believes that is a possibility.”

US oil benchmark West Texas Intermediate finished at $29.13 a barrel, taking the losses since the beginning of the year to more than 21 percent.

Industrial metals, including copper, also fell, but safe-haven gold gained.

“Investors are shifting funds into areas of perceived safety including gold and government bonds in hopes of protecting themselves,” said Jasper Lawler at CMC Markets UK.

Automakers skid lower
European auto stocks tumbled again, with Renault shedding an additional 3.4 percent after unions reported Thursday that anti-fraud investigators had raided several of the company’s sites.

Renault ended 10.3 percent lower on Thursday on the news, which raised fears of a Volkswagen-type scandal.

Shares in Peugeot, France’s biggest automaker ahead of Renault, fell 2.6 percent in Paris while Renault alliance partner Nissan’s stock closed 1.9 percent lower in Tokyo.

Daimler shares lost 1.9 percent, BMW 2.6 percent and Volkswagen 3.5 percent.

In the US, investors hammered banking shares after Citigroup set aside $250 million in reserves for its energy portfolio and warned of a deeper hit if oil prices fall further.

Citigroup tumbled 6.4 percent, while Wells Fargo, which also reported a higher hit from oil, lost 3.6 percent.

Petroleum and technology were two other weak sectors, while Disney tumbled 5.3 percent following a downgrade by Barclays due to worries about sports network ESPN’s prospects.

Key figures around 2200 GMT

New York – Dow: DOWN 2.4 percent at 15,988.08 (close)

New York – S&P 500: DOWN 2.2 percent at 1,880.29 (close)

New York – Nasdaq Composite: DOWN 3.1 percent at 4,488.42 (close)

London – FTSE 100: DOWN 1.9 percent at 5,804.10 points (close)

Frankfurt – DAX 30: DOWN 2.5 percent at 9, (close)

Paris – CAC 40: DOWN 2.4 percent at 4,210.16 (close)

EURO STOXX 50: DOWN 2.4 percent at 2,952.48 (close)

Tokyo – Nikkei 225: DOWN 0.5 percent at 17,147.11 (close)

Shanghai – Composite: DOWN 3.6 percent at 2,900.97 (close)

Euro/dollar: UP at $1.0916 from $1.0865 Thursday

Dollar/yen: DOWN at 116.96 yen from 118.06 yen

source: business.inquirer.net

Dow, S&P 500 hit record highs after ECB stimulus

NEW YORK–The Dow and the S&P 500 Thursday bolted to new records after the European Central Bank launched aggressive measures to stimulate fragile eurozone growth and avert deflation.

The Dow Jones Industrial Average advanced 98.58 points (0.59 percent) to 16,836.11 while the broad-based S&P 500 rose 12.58 (0.65 percent) to 1,940.46.

The tech-rich Nasdaq Composite Index posted strong gains, leaping 44.58 (1.05 percent) to 4,296.23.

US markets reacted enthusiastically to a series of new measures from the ECB, which lowered all three of its key interest rates, including putting the deposit rate into negative territory for the first time, meaning banks will be charged for depositing their excess cash with the central bank.

“Expectations were for them to take action and the market is applauding the action that has been taken,” said David Levy, portfolio manager at Kenjol Capital Management.

Analysts said the ECB’s new push means liquidity will remain at high levels globally even as the Federal Reserve scales back its asset-purchase stimulus.

Levy said a 1.8 percent gain in the Russell 2000, a leading index of small cap stocks, was particularly bullish.

“It shows confidence in the market that investors are willing to invest in riskier stocks,” he said.

Leading banks had a good day, including Dow member JPMorgan Chase (+1.7 percent), Citigroup (+1.6 percent) and Wells Fargo (+1.2 percent).

General Motors fell 0.7 percent after chief executive Mary Barra announced the company fired 15 employees over the deadly ignition scandal and uncovered a pattern of “incompetence and neglect” behind the debacle.

US telecom giant Sprint is nearing a deal valued at about $32 billion to acquire rival T-Mobile, according to the Wall Street Journal and others. Sprint fell 4.0 percent, while T-Mobile dropped 2.3 percent.

Amazon jumped 5.5 percent on anticipation of a June 18 mystery event with founder Jeff Bezos. Topeka Capital Markets said the buzz is that Amazon will launch a smartphone, which could boost subscriptions to its “Prime” service.

Videogame developer Zynga sank 9.2 percent on concerns about a conference presentation from chief Don Mattrick. Mattrick “seemed slightly less upbeat” than normal about the company’s prospects, said a note from Sterne Agee.

Bond prices rose. The yield on the 10-year US Treasury fell to 2.58 percent from 2.61 percent Wednesday, while the 30-year dropped to 3.43 percent from 3.45 percent. Bond prices and yields move inversely.

source: business.inquirer.net

US stocks up ahead of ECB decision; new S&P 500 record

NEW YORK–US stocks rose Wednesday, pushing the S&P 500 to a record close, following mixed economic data a day ahead of the closely watched meeting of the European Central Bank.

The broad-based S&P 500 rose 3.64 points (0.19 percent) to 1,927.88, nearly three points above Monday’s record close.

The Dow Jones Industrial Average rose 15.19 (0.09 percent) to 16,737.53, while the tech-rich Nasdaq Composite Index advanced 17.56 (0.41 percent) to 4,251.64, helped by a 1.1 percent gain in Apple, its biggest component.

Stocks treaded in negative territory after early US economic data showed a drop in private-sector job creation in May and a jump in the trade deficit in April to a two-year high.

But they turned higher after the Institute for Supply Management said services sector activity surged in May.

The US Federal Reserve’s “Beige Book” report was generally positive, saying all 12 districts of the country saw increasing economic activity in recent weeks.

Investors were girding for the ECB to unveil major stimulus actions on Thursday. Analysts said there is a possibility the market will be disappointed if the measures are less aggressive than expected.

Investors are waiting “for hopefully more action than talk from (ECB president) Mario Draghi,” said Jack Ablin, chief investment officer at BMO Private Bank.

Dow member UnitedHealth Group rose 0.8 percent after announcing a 34 percent increase in its quarterly dividend and the renewal of its share repurchase program.

General Motors jumped 3.6 percent on news that chief executive Mary Barra will hold a news conference Thursday to update the ignition-switch recall. GM is expected to release an internal report on why it took so long to recall the vehicles.

Japan’s Dai-ichi Life Insurance announced it was buying US insurer Protective Life for $5.7 billion. Dai-ichi said the deal was aimed at broadening its overseas business beyond Asia by entering the world’s biggest market for insurance sold to consumers.

Protective Life shot up 18.1 percent. Other insurers also gained, including Prudential Financial (+2.4 percent), Met Life (+3.0 percent) and Dow component Travelers Companies (+1.4 percent).

Drugstore chain Walgreens jumped 4.2 percent after reporting that May sales rose 6.0 percent compared with the year-ago period.

Bond prices fell. The 10-year US Treasury rose to 2.61 percent from 2.59 percent Tuesday, while the 30-year increased to 3.44 percent from 3.43 percent. Bond prices and yields move inversely.

source: business.inquirer.net

Asian shares edge lower, reversing earlier gains

HONG KONG — Asian markets edged lower in holiday-hit trade on Monday, reversing earlier gains that were fuelled by upbeat US and Chinese manufacturing data as well as strong US auto sales.

The euro made a small gain after suffering selling pressure last week on expectations the European Central Bank (ECB) will cut interest rates at its next meeting Thursday.

Sydney slipped 0.38 percent, or 20.6 points, to close at 5,390.5 and Seoul fell 0.70 percent, or 14.25 points to 2,025.17. Shanghai closed flat, dipping 0.07 points to 2,149.63 and Hong Kong gave up 0.26 percent, or 60.17 points, to 23,189.62.

Tokyo and Mumbai were closed for public holidays.

US shares finished on a high Friday after figures showed manufacturing activity grew faster than expected in October. That came hours after China said its own purchasing managers’ index (PMI) came in at its highest level for 18 months.

News that October auto sales from the three largest US manufacturers — Chrysler, Ford and General Motors — saw double-digit percentage gains supported Wall Street Friday. The Dow added 0.45 percent, the S&P 500 tacked on 0.29 percent and the Nasdaq was flat.

Over the weekend data showed signs of growth in China’s services sector, as the official non-manufacturing PMI recorded its strongest reading in 14 months.

In China, attention is turning to a Communist Party policy meeting due to start Saturday, with traders looking for possible economic reforms.

Also, Washington will release third-quarter gross domestic product advanced estimates on Thursday and official October non-farm payrolls figures Friday.

On currency markets the euro ticked up slightly after tumbling last week on expectations the ECB would cut interest rates, after figures showed inflation in the region at a four-year low.

The euro bought $1.3492, compared with $1.3482 in New York but well down from $1.3750 on Wednesday. It was at 133.09 yen against 133.10 yen in New York.

“The eurozone has seen poor results in recent months, and there are serious concerns that the inflation rate has gone too low,” Desmond Chua, market analyst at CMC Markets in Singapore, told AFP.

“Investors will be watching if the ECB president Mario Draghi will indicate further monetary easing in the eurozone, with a new long-term refinancing option a viable option,” he said.

The dollar was at 98.65 yen from 98.69 yen in New York. The greenback is being buoyed by speculation the Federal Reserve will begin winding down its stimulus programme next month after it gave an upbeat assessment of the US economy last week.

Gold dropped to $1,313.15 at 0810 GMT compared with $1,316.15 on Friday.

In other markets:

– Taipei fell 0.41 percent, or 34.04 points, to 8,354.14.

Taiwan Semiconductor Manufacturing Co. was 0.46 percent lower at Tw$109.0 while chip design house MediaTek was up by its 7.0 percent daily limit at Tw$432.5.

– Wellington was flat, edging down 3.16 points to 4,910.68.

Fletcher Building fell 2.34 percent to NZ$9.60, Air New Zealand was off 0.57 percent at NZ$3.52 and telecoms firm Chorus climbed 0.38 percent at NZ$2.63.

– Manila closed 0.64 percent lower, giving up 41.99 points to 6,543.39.

Philippine Long Distance Telephone Co fell 1.60 percent to 2,824 pesos.

source: business.inquirer.net

Global markets: Euro, shares firm ahead of Italian debt sale

LONDON - The euro neared a one-week high against the dollar and European bond markets steadied on Thursday as investors awaited an Italian debt sale that will show whether concerns over Spain are spreading to other debt-laden euro zone nations.

A recent sell-off in Spanish debt has largely calmed down following comments from European Central Bank executive board member Benoit Coeure, who hinted that the central bank might be willing to restart buying of debt in the market.

"Should the Italian auction disappoint, we could see the euro reverse some of its gains," said Ankita Dudani, G-10 currency strategist at RBS Global Banking, who expects the bond sale to go through without much of a hitch.

The euro was up 0.2 percent at $1.3130, while the dollar measured against a basket of major currencies was down 0.2 percent at 79.62.

European equity markets started slightly higher ahead of the Italian bond auction, adding to the previous session's tentative recovery following a week-long slide.

The MSCI world equity index was up 0.2 percent 322.71 after a good start to the US corporate reporting season lifted Wall Street stocks and an Australian employment indicator encouraged the rebound in Asia.

The FTSE Eurofirst index of top European shares rose 0.1 percent to 1034.83 at the start, with Germany's DAX index leading the way, up 0.5 percent.

Safe-haven German bond futures were 6 ticks lower at 139.76, with 10-year cash bond yields up 1 basis point at 1.70 percent.

Italy's borrowing costs are expected to rise by about a full percentage point from a month ago at its 5 billion euro auction of new three-year bonds later, after the rate it pays for one-year money more than doubled at an auction on Wednesday. –Reuters

source: gmanetwork.com

ECB loans out €529.5 billion to European banks

NEW YORK (CNNMoney) -- The European Central Bank announced Wednesday that banks borrowed €529.5 billion, or $712.4 billion, under a highly-anticipated lending program aimed at preventing a credit crunch in Europe.

In its second long-term refinancing operation (LTRO), the ECB offered banks unlimited three-year loans at interest rates as low as 1%. The ECB allotted nearly €500 billion in the first round of the operation in December.

The borrowing was a bit more than expected, as banks were expected to have taken up roughly €500 billion, although estimates ranged from €300 billion to €1 trillion.

"It was exactly the right amount," said Tobias Blattner, eurozone economist for Daiwa Capital Markets. "It was not too high so as to raise concern about the health of banks' balance sheets, but at the same time it was not too low to raise concerns about the ability of banks to continue to purchase the bonds of fiscally stressed countries."

Source: http://money.cnn.com/2012/02/29/markets/ecb_bank_loans/index.htm?hpt=hp_t3