Asia extends stocks rally as dollar drops on Fed rate optimism

HONG KONG –– Asian stocks extended a global rally Thursday and the dollar sank after Federal Reserve boss Jerome Powell flagged a rate hike slowdown and China signaled a softer approach to fighting COVID.

A growing sense of hope that months of sharp monetary tightening around the world is finally reining inflation back from its decades-long highs sent equities surging in November, even as policymakers warned more work had to be done.

And in a much-anticipated speech Wednesday, Powell said the full effects of the Fed's belt-tightening had yet to be felt but that it "makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down".

He signaled the US central bank's December gathering would likely see officials lift borrowing costs by 50 basis points, having pushed them up by a bumper 75 points at the past four meetings.

However, Powell did say policy would need to remain tight "for some time" to restore price stability, echoing comments from other Fed officials who suggested there might not be any cuts until 2024.

Analysts said the reaction to Powell's remarks -- which had been expected to be his most dovish in some time -- highlighted a sense of relief among investors that a long-hoped-for pivot was on the cards.

All 3 main indexes on Wall Street surged, with the Nasdaq leading the way as rate-sensitive tech firms rocketed.

The gains extended November's rally and helped claw back more of the hefty losses suffered for much of 2022.

The dollar also suffered a sell-off, tanking more than 1 percent against the yen to levels not seen since August.

The greenback's losses come after it soared across the board this year as Fed monetary policy diverged more and more from other central banks.

CHINA COVID HOPE

Investors were "putting those nasty thoughts of a bear market to bed as the December Santa Rally springs alive", said Stephen Innes at SPI Asset Management.

"Indeed investors are reveling in the afterglow of moderating Fed signals. And with the Fed done with jumbo hikes, it's seemingly enough to mark the bottom in the bear market and could lead to a sustainable rally."

He added that bets on rates topping 5 percent were fading and the advance in markets could push into the new year, with another slowdown in November inflation potentially fueling a bull rally -- when a market rises 20 percent from its recent low. 

"Still," he warned, "inflation will need to play along."

In another sign of hope, data earlier showed that eurozone inflation eased for the first time in 17 months in November.

Hong Kong led the gains in Asia again, with tech giants including Alibaba and Tencent tracking massive gains in their US-listed stock, while Shanghai ended well up.

Those rallies were also helped by signs that China is edging towards a more pragmatic approach to fighting the coronavirus, having hammered the economy this year with its strict zero-COVID strategy of lockdowns and mass testing.

After widespread unrest against the measures -- and calls for more political freedoms -- authorities have announced moves aimed at loosening some restrictions.

On Wednesday, Vice Premier Sun Chunlan, who heads China's COVID campaign, told the National Health Commission that the fight was entering a new phase as omicron weakens and more people are vaccinated.

Bloomberg News also noted that she did not refer to "dynamic COVID-zero", the term used to explain Beijing's strategy. 

"It is clear that the authorities are setting the stage for COVID measures to be relaxed," said Justin Tang, at United First Partners. "Equity prices will see a boost as China joins the rest of the world in living with COVID."

Among other markets, Tokyo, Sydney and Taipei added more than one percent while Singapore, Seoul, Wellington, Mumbai and Bangkok were also in positive territory.

Key figures around 3:10 p.m. in Manila

Tokyo - Nikkei 225: UP 0.9 percent at 28,226.08 (close)

Hong Kong - Hang Seng Index: UP 1.3 percent at 18,841.88

Shanghai - Composite: UP 0.5 percent at 3,165.47 (close)

Dollar/yen: DOWN at 136.30 yen from 138.03 yen on Wednesday

Euro/dollar: UP at $1.0454 from $1.0408 on Wednesday

Pound/dollar: UP at $1.2114 from $1.2052

Euro/pound: DOWN at 86.30 pence from 86.34 pence

West Texas Intermediate: DOWN 0.5 percent at $80.15 per barrel

Brent North Sea crude: DOWN 0.5 percent at $86.50 per barrel

New York - Dow: UP 2.2 percent at 34,589.77 (close)

London - FTSE 100: UP 0.8 percent at 7,573.05 (close)

Agence France-Presse

Asian markets mostly rise after calm night in China

HONG KONG –– Asian equities rose and the dollar weakened Tuesday as China avoided another night of protests after a weekend of unrest across the country fueled uncertainty in the world's number two economy.

The gains were led by a rally in Hong Kong and Shanghai, with property firms enjoying a much-needed surge on the back of moves to ease funding restrictions on troubled developers.

However, the sentiment was tempered by warnings from top Federal Reserve policymakers that US interest rates would rise further and could go higher than initially thought to fight inflation.

The remarks were partly to blame for big losses of more than 1 percent in Wall Street's 3 main indexes.

China was rocked by demonstrations at the weekend calling for more political freedoms and an end to the country's long-running and economically painful zero-COVID strategy that has seen millions thrown into lockdown for months.

Several arrests were made and security forces were out in force Monday to prevent a repeat of the protests, which were the most widespread since pro-democracy demonstrations were crushed in 1989.

The return of some calm helped Hong Kong stocks rally more than 3 percent and Shanghai more than 1 percent, with some commentators suggesting the unrest could actually help push leaders to ease some of the strict containment measures. 

Property firms were among the best performers after China said it would end a ban on firms raising cash by selling stocks, marking the latest measure to ease pressure on the sector, which has seen several companies collapse and threatens the wider economy.

Sydney, Seoul, Singapore, Wellington, Taipei and Jakarta were also in positive territory, though Tokyo dipped with Manila.

Attention is turning to the United States this week with a number of Fed officials due to speak, including boss Jerome Powell, while Friday sees the release of key jobs data, which could provide an idea about the bank's plans for monetary policy.

Bets on a slowdown in its pace of rate hikes have boosted markets for the past weeks, but some high-ranking members on Monday looked to play down the chances of a more dovish pivot.

St. Louis Fed chief James Bullard warned "markets are underpricing a little bit the risk that the (policy board) will have to be more aggressive rather than less aggressive in order to contain the very substantial inflation that we have in the US".

And Richmond Fed president Thomas Barkin added: "I'm very supportive of a path that is slower, probably longer and potentially higher than where we were before."

The officials indicated borrowing costs would not likely come down until the end of next year or in 2024.

Key figures around 10:30 a.m. in Manila 

Tokyo - Nikkei 225: DOWN 0.6 percent at 27,999.82 (break)

Hong Kong - Hang Seng Index: UP 3.6 percent at 17,920.01

Shanghai - Composite: UP 1.6 percent at 3,128.24

Euro/dollar: UP at $1.0357 from $1.0347 on Monday

Dollar/yen: DOWN at 138.85 yen from 138.87 yen

Pound/dollar: UP at $1.1992 from $1.1952

Euro/pound: DOWN at 86.40 pence from 86.50 pence

West Texas Intermediate: FLAT at $77.24 per barrel

Brent North Sea crude: UP 0.2 percent at $83.34 per barrel

New York - Dow: DOWN 1.5 percent at 33,849.46 (close)

London - FTSE 100: DOWN 0.2 percent at 7,474.02 (close)

Agence France-Presse

Biden admits 'very slight' US recession possibility

WASHINGTON - US President Joe Biden conceded Tuesday that a "slight" recession was a possibility following a downcast IMF economic forecast, amid rising inflation and uncertainty after the Russian invasion of Ukraine.

"I don't think there will be a recession," Biden told CNN. "If it is, it'll be a very slight recession. That is, we’ll move down slightly."

Agence France-Presse

New $100 bill has ink well, more color, 3-D

FORT WORTH, Texas—A glitzier, high-tech version of America’s $100 bill is rolling off the presses and headed for wallets soon.

Despite years of production-related delays, the updated $100 bill has undergone a major makeover that includes a color-changing ink well, 3-D security ribbon, and more texture on Benjamin Franklin’s collar.

The new, more expensive bill is scheduled to enter circulation Oct. 8 and also has a higher calling: It aims to fight back against counterfeiters by using better printers and technology.

The modifications will help people check for fake $100s without going to a bank or using a blacklight, said Michael Lambert, a deputy associate director at the Federal Reserve.

“We try and find security features that can be used at a number of different levels, from more experienced cash handlers … down to the person on the street who really needs to know the security features so they can protect themselves,” Lambert said in an interview Wednesday.

The new $100 bill still bears the image of Franklin, one of America’s Founding Fathers. But it adds part of the Declaration of Independence, written in script from Franklin’s left shoulder to the right edge of the bill. A quill and an ink well are printed behind the text, and a blue ribbon goes down near the center of the bill.

The ink in the well changes colors from copper to green when the bill is turned. A watermark of Franklin also appears on the right side of the bill when it’s held up to light.

The Federal Reserve said in its latest currency budget that it would order 2.5 billion new $100 bills this year. Lambert estimated each new bill costs about 4 cents more to print than the old one, totaling an additional $100 million in costs this year.

The government has redesigned the $5, $10, $20 and $50 bills during the last decade to add security features. The $1 remains the only bill not to get a makeover.

At a federal facility in Fort Worth, 32-bill sheets of money paper are printed, stamped with serial numbers and sliced into individual notes. The notes are sorted into piles 100 deep, banded together and eventually stacked into 4,000-note bricks worth $400,000. Those bricks will be shipped to Federal Reserve banks across the United States for distribution.—Nomaan Merchant

source: business.inquirer.net

US stocks fall for a 4th day

NEW YORK—Wall Street couldn’t shrug off doubts about the US economy and government gridlock on Tuesday.

Mixed economic reports and concern about a government shutdown dragged stocks lower in the final half-hour of trading. They had been positive most of the day.

The modest losses extended the losing streak for the Standard & Poor’s 500 index to four days. It was the longest run of declines in a month. The Dow Jones industrial average also dropped for a fourth straight day.

Investors struggled with conflicting news about the economy on Tuesday. One report showed that home prices in July rose the most in more than seven years. Another showed that Americans’ confidence in the economy slipped in September.

Investors are searching for direction after the Federal Reserve’s surprise decision last Wednesday to keep its stimulus program intact. They had expected a reduction in the Fed’s $85 billion in monthly bond purchases. Investors are now parsing economic reports and comments from Fed officials to gauge the central bank’s next move.

Some are also nervous about political gridlock in Washington. They were concerned that the federal government could shut down because Washington lawmakers appear to be making little progress in budget talks.

“A government shutdown starting next week is looking increasingly likely,” said Jim Russell, a regional investment director at US Bank. “That will not be welcomed by the capital markets.”

But Brad Sorensen, director of market and sector research at Charles Schwab, thought that worries about a government shutdown would ultimately be short-lived.

“Investors are becoming a little bit immune to the games that Washington has started to play,” Sorensen said. “Investors with a stronger stomach should probably buy the dip.”

Stocks, for example, plummeted in the summer of 2011 as lawmakers wrangled about raising the debt ceiling. The market also sagged in October last year before the Presidential elections, on concerns that a divided government would be unable to agree on tax reform. Each time though, backed by the Fed’s economic stimulus, the market came back stronger.

After falling 2 percent in October of last year, the Standard & Poor’s 500 index rose for seven straight months, gaining 15 percent.

On Tuesday, the Dow closed down 66 points, 0.4 percent, to 15,334. The S&P 500 index fell four points, or 0.3 percent, to 1,697. The Nasdaq composite, however, edged up three points, or 0.1 percent, to 3,768.

Stocks edged lower in early trading before moving modestly higher in the late morning and afternoon. Those gains then fizzled out at the end of trading.

Phone company stocks were the biggest decliners among the 10 industry groups that form the S&P 500. Industrial stocks were the biggest gainers.

Before the market opened, a survey showed that home prices rose the most since February 2006. A revival in housing has been one of the bright spots for the economy.

In another key economic gauge, the Conference Board, a New York-based private research group, said that its consumer confidence index dropped to 79.7 in September, down from August’s 81.8.

Consumers’ confidence is closely watched because their spending accounts for 70 percent of US economic activity. Confidence has grown since the Great Recession, but it hasn’t hit a reading of 90, which typically accompanies a healthy economy.

They S&P 500 index is just 28 points below its all-time high reached last Wednesday, when investors were initially thrilled that the Fed extended its economic stimulus. Since then, the market has fallen each day as doubts emerge about the outlook for the economy, and budget negotiations.

In government bond trading, the yield on the 10-year Treasury note rose fell as investors bought bonds. The yield dropped from 2.70 percent late Monday to 2.66 percent, its lowest level in six weeks. The yield on the note is a benchmark for rates of consumer loans.

Among stocks making big moves:

— Software company Red Hat fell $6.20, or 12 percent, to $46.73 after it reported lower-than-expected quarterly billings and issued disappointing revenue forecasts.

—Carnival fell $2.86, or 8 percent, to $34.54 after the cruise ship operator warned revenue could drop more than its prior forecast.

— Applied Materials, a manufacturer of chip-making equipment, rose $1.45, or 9 percent, to $17.45 after it agreed to acquire a rival.

— Facebook rose $1.26, or 3 percent, to $48.45 after Citigroup upgraded the company’s stock to a “buy” recommendation from “neutral.” Facebook should continue to grow, helped by increasing advertising revenue contributions from its mobile website, Citigroup said.—Steve Rothwell

source: business.inquirer.net

Emerging markets facing ‘storm’

MANILA, Philippines–While inclement weather continued to paralyze Philippine markets, Asian emerging markets (EMs) are likewise battling a “storm” arising from a capital flight to developed markets in anticipation of the US Federal Reserve’s tapering of easy money policy.
EMs are continuing to suffer from weaker sentiment in developed markets (DMs) as investors are fearful that Federal Open Market Committee (FOMC) minutes and the Jackson Hole meeting this week might result in policy changes that will divert capital away from the emerging world, investment bank Credit Agricole CIB said in a research note on Tuesday.
Indonesia and India’s assets were under the most pressure due to vulnerability concerns arising from their current account deficits, Credit Agricole said.

In a separate note on Tuesday, Citigroup said the Philippines seemed as the “most insulated” to both US Fed tapering and China slowdown. “It has a very strong net external position, making it more insulated from taper; Philippines weakness has generated a positive income shock via the remittance channel; BSP (Bangko Sentral ng Pilipinas) is still easing liquidity; and it has limited trade linkages to China demand,” Citi said.
Central bankers and policy makers are set to meet in Jackson Hole, Wyoming on August 22 to 24 to discuss global economic and monetary issues.  On the other hand, the minutes of the latest US FOMC meeting were expected to provide more clues to the Fed’s $85 billion monthly bond buying, which many are expecting to taper by next month.

Credit Agricole said the only positive story out of Asia on Tuesday was the announcement that China’s central bank would boost financial support for the economy and fine-tune its policy in the second semester. This suggests sustained stimulus in China in support of a 7.7 percent growth this year, Credit Agricole said.
For its part, Citigroup said growth risks from Fed tapering were likely to impact “deficit” and portfolio-dependent countries more, thus a bigger concern for current account deficit countries like India, Sri Lanka and Indonesia and more recently, Thailand.  It was reported on Tuesday that Thailand had entered recession. Malaysia also looks relatively vulnerable given the large role of portfolio inflows, Citi said.

Infrastructure development is increasingly becoming more attractive to policymakers in emerging economies facing slowing economic growth but there is no automatic growth response to such. Instead, Citi said it will likely further erode the balance sheet strength that used to be a pillar of the EM story for investors.

Citi said the ability of monetary conditions to adjust would vary across Asia. Indonesia was cited as the most under pressure to hike policy rates to mitigate the impact of its external imbalances amid already high inflation, given its pursuit of a less flexible exchange rate policy.

On the other hand, Citi noted that India had unexpectedly pursued measures aimed at curbing currency volatility by tightening liquidity and short-term borrowing costs. Given weak growth and moderating core, Citi said these measures were time-bound.
China growth risks are seen to hurt the more trade-linked economies, with East Asia looking more exposed to China slowdown risk relative to other regions. Citi sees this as a bigger risk to China-trade linked economies such as Singapore, Taiwan and Hong Kong, followed by Korea and Malaysia.
For the near term, Citi said a US growth upturn alongside a resilient Japanese rebound would more than offset the impact of a downside growth risk in China. Over the medium to longer term, it said the prognosis would be “much more uncertain.”

It is in this context that Citi had cited the Philippines as being the “most insulated” to these external headwinds.

source: business.inquirer.net

Stocks fall on Fed worries

Local stocks tumbled for the second straight session Friday as jitters over the tapering of US Federal Reserve’s easy money policy intensified following a better-than-expected American jobs data.

The main-share Philippine Stock Exchange slipped by 54.76 points or 0.83 percent to close at 6,525,95, tracking the bloodbath across regional markets.

For the week, the index was still a net gainer of 121.72 points or 1.9 percent.

Dealers said sentiment was affected by escalating talks over US Fed tapering, which likewise caused an overnight slump in Wall Street. A surprise improvement in US jobless claims alongside rising inflation boosted expectations that the Fed would indeed reduce its $85-billion monthly asset buying starting next month.

Value turnover at the local market yesterday amounted to P5.58 billion. There were only 52 advancers against 92 decliners while 40 stocks were unchanged.

Investors also continued to factor in global fund managers’ adjustment arising from the latest quarterly MSCI index review, which resulted in a cut on SM Investments’ weight. Overall, the Philippines’ weight on MSCI’s emerging market index was pared down to 0.95 percent from 1.02 percent effective Sept. 2.

SM Investments (-1.18 percent) was the second most actively traded stock. “The reduction of MSCI weighting for SM has nothing to do with its business fundamentals. The fall in the share price is an opportunity to buy a growth stock at cheaper price levels,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.
Doris C. Dumlao

source: business.inquirer.net

US stocks sink amid central bank anxiety

NEW YORK—US stocks ended the day solidly lower Tuesday after the Bank of Japan’s status-quo policy decision revived concerns about the winding down of central bank stimulus measures.

The Dow Jones Industrial Average fell 116.57 (0.76 percent) to 15,122.02.

The broad-based S&P 500 dropped 16.68 (1.02 percent) to 1,626.13, while the tech-rich Nasdaq Composite Index sank 36.82 (1.06 percent) to 3,436.95.

The losses came after the Bank of Japan opted to maintain its aggressive asset-purchase program unchanged, saying the world’s third-largest economy was “picking up.”

“The expectation was that Japan would keep increasing it,” said Andrew Fitzpatrick of Hinsdale Associates. “There was a sort of a built-in belief that there was going to be more there.”

The restraint in Japan also raised questions about the US Federal Reserve’s future direction of policy measures ahead of next week’s Federal Open Market Committee meeting.

The Fed has signaled it wants to begin to craft a plan for tapering its $85 billion a month bond-purchase program.

“The threat of the easy money being taken away is enough to scare investors,” said David Levy, Kenjol Capital Management.

Banking stocks recorded outsized losses, including Morgan Stanley (down 3.9 percent) Goldman Sachs (down 2.5 percent) and Wells Fargo (down 1.5 percent).

Other large declines came from General Motors (down 2.3 percent) and American International Group (down 2.2 percent).

Sprint Nextel rose 2.4 percent after SoftBank raised its bid in the hotly contested acquisition battle for the US telecom. Rival bidder Dish Network was up 0.8 percent.

Google shed 1.2 percent after announcing the acquisition of Israeli traffic and mapping application Waze for an undisclosed sum. Several media reports put the price at more than $1 billion.

News Corp. slipped 0.9 percent after shareholders approved a measure to divide the company in two. The company said it is on track to complete the split June 28.

Yoga attire manufacturer Lululemon Athletica plummeted 17.5 percent after announcing that chief executive Christine Day will step down once a new chief is identified.

Bond prices rose. The yield on the 10-year US Treasury slipped to 2.20 percent from 2.22 percent late Monday, while the 30-year dropped to 3.33 percent from 3.37 percent. Bond prices move inversely to yields.

source: business.inquirer.net

Stocks end lower

Local stocks dipped from record-highs Friday on a prospective withdrawal of the liquidity-boosting bond buyback activities of the US Federal Reserve.

The main-share Philippine Stock Exchange index shed 2.35 points or 0.04 percent to close at 6,665.06. The index fell to as low as 6,565.26 for the day but recovered much of the losses before the closing bell.

Given the sharp gains earlier in the week, the index was up 143.42 points or 2.2 percent week-on-week.

On Friday, the index closed in negative territory for the first time in five trading days due to jitters over the US Fed’s prospective moves. There were 94 decliners that overwhelmed 68 advancers while 48 stocks were unchanged.

“This was a delayed reaction to a US correction yesterday (Wednesday in Wall Street) on the possible removal of (US Fed’s) QE (quantitative easing) injection,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.

“I think it’s a combination of several factors, the worst of which is the concern that the US Fed may stop or reduce their stimulus measures earlier than announced. There seems to be a bias toward tightening, or at least a pause in stimulus programs in the major economies,” said Manny Lisbona, deputy chief at PNB Securities.

source: business.inquirer.net