LONDON (Thomson Financial) - The dollar and yen remained softer, while the euro gained ground, after encouraging euro zone and US economic data and a higher open in stock markets helped investors' regain risk appetite.
Equities were helped by US retail sales figures that showed a 0.2 pct monthly rise in October, in line with the market consensus. At the same time PPI was up only 0.1 pct, below expectations for a 0.3 pct rate.
The encouraging news helped further improve risk appetite among investors, who returned to selling lower-yielding currencies like the dollar and the yen in favour of the higher-yielding euro and commodities-based currencies.
"Carry trades are revived due to the return of risk appetite -- courtesy of strong US retail sales," said Ashraf Laidi at CMC Markets.
On top of this, the euro was helped this morning by robust 3Q GDP data, which showed a 0.7 pct quarterly gain for a 2.6 pct yearly rate.
"The data have powered up the euro against the dollar... and with central banks and sovereign wealth funds eyeing an increased allocation into euro-denominated assets, the latest euro zone releases continue to show no considerable drag on growth as has been the case in the US and UK," Laidi said.
Meanwhile, the pound was lower across the board after the Bank of England today gave its clearest indication yet in its Inflation Report that it would need to cut interest rates in the future.
In its official forecasts, the central bank said that interest rates would have to fall to 5.1 pct by the end of 2009 -- in line with market forecasts -- in order to keep inflation within the 2.0 pct target.
When the first cut will be delivered is now the matter of speculation.
"Given near-term inflationary pressures from the surge in oil prices as well as signs that the economy remains resilient, we believe the BoE is unlikely to ease rates next month already," said Matthew Sharratt at Bank of America, who forecasts the first cut in February.
Despite the downside risks to growth, inflationary pressures linger in the economy as oil prices remain near record highs, suggesting more weak UK economic data will be required before the BoE kicks off its monetary easing cycle.
London 1605 GMT London 1340 GMT
US dollar
yen 111.39 down from 111.51
sfr 1.1214 up from 1.1209
Euro
usd 1.4685 down from 1.4694
stg 0.7110 up from 0.7098
sfr 1.6301 down from 1.6470
yen 163.57 down from 163.83
Sterling
usd 2.0652 down from 2.0704
yen 230.04 down from 230.67
sfr 2.3159 down from 2.3186
Australian dollar
usd 0.9009 down from 0.9038
stg 0.4362 down from 0.4363
yen 100.36 down from 100.67
New Zealand dollar
usd 0.7648 down from 0.7658
Wednesday, November 14, 2007
Saturday, November 10, 2007
Argentina Bonds, Stocks Buck Wall Street To Rebound
Of DOW JONES NEWSWIRES
BUENOS AIRES(Dow Jones)--Argentine stocks and bonds rebounded Friday, breaking ranks with Wall Street as pension funds jumped in seeking bargains as they continue to adhere to a government requirement to reduce their exposure to investments in neighboring Brazil.
Meanwhile, the peso closed at ARS3.1275 against the dollar in interbank trading, virtually unchanged from Thursday's close at ARS3.1325.
The Buenos Aires Stock Exchange's benchmark Merval Index ended 2.26% higher at 2,314.23, while the broader General Index rose 2.97% to 128,034.41. Volume rose to ARS218.8 million, with ARS182.9 million of that in local trades.
"Today we saw a small technical rebound," said Pedro Kohn, an analyst with local Bull Market Brokers. Among standouts, Telecom Argentina (TEO) shot up 10.87% to ARS15.80, on stronger-than-expected third-quarter earnings. Among Merval heavyweights, Pampa Holding (PAMP.BA) rose 1.73% to ARS2.94, while steel-tube maker Tenaris (TS) fell a mild 0.66% to ARS75 after taking a hit Thursday on lower-than-expected third-quarter results.
In the local debt market, bonds also gained after sharp losses earlier this week on a U.S.-led flight to quality. Among gainers Friday, the price of the Discount bond in pesos rose to ARS117 from ARS116.20, while the Bocon Pro 12 rose to ARS167.50 from ARS165.50.
Kohn said the day's rebound won't be sustainable if Wall Street's downturn continues for much longer.
Besides, "the government has to fix the problem with INDEC," he said, referring to allegations all year that the government is manipulating monthly inflation data downward. The persistent allegations of manipulation have undermined inflation-linked peso notes, such as the heavily traded Discount note.
BUENOS AIRES(Dow Jones)--Argentine stocks and bonds rebounded Friday, breaking ranks with Wall Street as pension funds jumped in seeking bargains as they continue to adhere to a government requirement to reduce their exposure to investments in neighboring Brazil.
Meanwhile, the peso closed at ARS3.1275 against the dollar in interbank trading, virtually unchanged from Thursday's close at ARS3.1325.
The Buenos Aires Stock Exchange's benchmark Merval Index ended 2.26% higher at 2,314.23, while the broader General Index rose 2.97% to 128,034.41. Volume rose to ARS218.8 million, with ARS182.9 million of that in local trades.
"Today we saw a small technical rebound," said Pedro Kohn, an analyst with local Bull Market Brokers. Among standouts, Telecom Argentina (TEO) shot up 10.87% to ARS15.80, on stronger-than-expected third-quarter earnings. Among Merval heavyweights, Pampa Holding (PAMP.BA) rose 1.73% to ARS2.94, while steel-tube maker Tenaris (TS) fell a mild 0.66% to ARS75 after taking a hit Thursday on lower-than-expected third-quarter results.
In the local debt market, bonds also gained after sharp losses earlier this week on a U.S.-led flight to quality. Among gainers Friday, the price of the Discount bond in pesos rose to ARS117 from ARS116.20, while the Bocon Pro 12 rose to ARS167.50 from ARS165.50.
Kohn said the day's rebound won't be sustainable if Wall Street's downturn continues for much longer.
Besides, "the government has to fix the problem with INDEC," he said, referring to allegations all year that the government is manipulating monthly inflation data downward. The persistent allegations of manipulation have undermined inflation-linked peso notes, such as the heavily traded Discount note.
Thursday, November 8, 2007
Treasurys end mixed amid credit fears
NEW YORK (AP) - Treasury prices closed mixed Wednesday as deepening fears about mortgage-linked assets spurred strong buying of shorter maturities.
Government-backed bonds generally perform well in times of financial crisis. Wednesday's fear was fueled by notes from analysts at Deutsche Bank and Foxx-Pitt Kelton predicting Morgan Stanley will take billions of dollars in new losses on mortgage-linked assets, according to Tom di Galoma, head of Treasury trading at Jefferies & Co.
"The market is being driven by worries about more headline risk," he said.
The worries about subprime contagion were reinforced after a Moody's Investors Service decision downgraded or placed on a watch list for possible downgrade $33 billion in holdings in structured investment vehicles, including several affiliated with Citigroup Inc. SIVs are off-balance sheet entities, some of which are ailing because they invested heavily in below-prime mortgages.
Since credit markets tightened up last August, Treasurys have been one of the few fixed-income assets to attract strong demand as investors have moved away from risky instruments.
Corporate debt markets improved significantly in October, but are under pressure once again this month after mortgage-related turmoil led to the departures of the top executives at Citigroup and Merrill Lynch & Co.
Bonds of banks and brokerages have been hit hardest, and investors in the credit default swap market this week are hedging more heavily against a default on those bonds.
A credit default swap amounts to an insurance policy against a bond default. The costs of buying those contracts rose sharply Wednesday for debt of Citigroup, Wachovia Corp., Morgan Stanley, Wachovia Corp., Washington Mutual Inc., Capital One Financial Corp. and Countrywide Financial Corp., according to derivatives broker Phoenix Partners Group.
Wednesday's price gains were limited by some surprisingly strong Commerce Department data on wholesale sales, which rose 1.3 percent in September, and inventories, which were up 0.8 percent. The figures were above analysts' expectations. Evidence of economic strength weakens demand for low-risk assets.
In addition, the Labor Department said third-quarter productivity increased 4.9 percent. The gain was the biggest in four years and outpaced analysts' expectations.
The benchmark 10-year Treasury note rose 10/32 to close at 103 8/32 with a yield of 4.34 percent, down from 4.38 percent in late trade Tuesday. Prices and yields move in opposite directions.
The 30-year long bond fell 11/32 to 105 7/32 with a yield of 4.67 percent, matching its late Tuesday level.
The 2-year note rose 7/32 to 100 232 with a 3.59 percent yield, down from 3.70 percent late Tuesday.
The yield on the 3-month note fell to 3.48 percent from 3.75 percent Tuesday as the discount rate dropped to 3.40 percent from 3.65 percent.
An afternoon auction of $13 billion in 10-year notes was well-received, but had little impact on trade. The auction attracted strong demand from both foreign and U.S. buyers.
The Treasury market also is being buffeted this week by a mercurial stock market. On Wednesday stocks staged a massive sell-off after the dollar sank to new lows against the euro amid speculation that China will seek to diversify some of its foreign currency stockpiles beyond the greenback.
Unease about the dollar dogged stock markets worldwide and, in the U.S., came a day after stocks finished with a sizable gain.
Government-backed bonds generally perform well in times of financial crisis. Wednesday's fear was fueled by notes from analysts at Deutsche Bank and Foxx-Pitt Kelton predicting Morgan Stanley will take billions of dollars in new losses on mortgage-linked assets, according to Tom di Galoma, head of Treasury trading at Jefferies & Co.
"The market is being driven by worries about more headline risk," he said.
The worries about subprime contagion were reinforced after a Moody's Investors Service decision downgraded or placed on a watch list for possible downgrade $33 billion in holdings in structured investment vehicles, including several affiliated with Citigroup Inc. SIVs are off-balance sheet entities, some of which are ailing because they invested heavily in below-prime mortgages.
Since credit markets tightened up last August, Treasurys have been one of the few fixed-income assets to attract strong demand as investors have moved away from risky instruments.
Corporate debt markets improved significantly in October, but are under pressure once again this month after mortgage-related turmoil led to the departures of the top executives at Citigroup and Merrill Lynch & Co.
Bonds of banks and brokerages have been hit hardest, and investors in the credit default swap market this week are hedging more heavily against a default on those bonds.
A credit default swap amounts to an insurance policy against a bond default. The costs of buying those contracts rose sharply Wednesday for debt of Citigroup, Wachovia Corp., Morgan Stanley, Wachovia Corp., Washington Mutual Inc., Capital One Financial Corp. and Countrywide Financial Corp., according to derivatives broker Phoenix Partners Group.
Wednesday's price gains were limited by some surprisingly strong Commerce Department data on wholesale sales, which rose 1.3 percent in September, and inventories, which were up 0.8 percent. The figures were above analysts' expectations. Evidence of economic strength weakens demand for low-risk assets.
In addition, the Labor Department said third-quarter productivity increased 4.9 percent. The gain was the biggest in four years and outpaced analysts' expectations.
The benchmark 10-year Treasury note rose 10/32 to close at 103 8/32 with a yield of 4.34 percent, down from 4.38 percent in late trade Tuesday. Prices and yields move in opposite directions.
The 30-year long bond fell 11/32 to 105 7/32 with a yield of 4.67 percent, matching its late Tuesday level.
The 2-year note rose 7/32 to 100 232 with a 3.59 percent yield, down from 3.70 percent late Tuesday.
The yield on the 3-month note fell to 3.48 percent from 3.75 percent Tuesday as the discount rate dropped to 3.40 percent from 3.65 percent.
An afternoon auction of $13 billion in 10-year notes was well-received, but had little impact on trade. The auction attracted strong demand from both foreign and U.S. buyers.
The Treasury market also is being buffeted this week by a mercurial stock market. On Wednesday stocks staged a massive sell-off after the dollar sank to new lows against the euro amid speculation that China will seek to diversify some of its foreign currency stockpiles beyond the greenback.
Unease about the dollar dogged stock markets worldwide and, in the U.S., came a day after stocks finished with a sizable gain.
Saturday, November 3, 2007
Loonie Set to Surge Further
The Canadian Dollar, or Loonie, recently cleared a 47-year high against the US Dollar. Its next major milestone is crossing a level last seen in the late 19th century! There are a few reasons for the Loonie’s continued strength, namely interest rate parity and economic strength. As a result of the Fed cutting rates for the second time in as many months, the Canadian benchmark interest rate is now equal to the American federal funds rate, both at 4.5%. In addition, record-breaking oil and commodity prices will ensure that Canada’s economy will expand further, perhaps as the same pace as its currency. Reuters reports:
If the U.S. Central bank signals another rate cut in December, or if it goes against expectations and chops rates by 50 basis points, it could pull the rug out from under an already unsteady U.S. dollar and clear the way for the Canadian currency to shoot higher.
If the U.S. Central bank signals another rate cut in December, or if it goes against expectations and chops rates by 50 basis points, it could pull the rug out from under an already unsteady U.S. dollar and clear the way for the Canadian currency to shoot higher.
Thursday, November 1, 2007
Treasurys drop on Fed statement
Treasury prices caved in Wednesday after the Federal Reserve, while cutting interest rates a quarter point, warned that higher inflation risks could make further reductions unlikely.
The widely expected rate cut left the benchmark federal funds rate at 4.50 percent. But the Fed's accompanying economic assessment statement said higher inflation risks roughly balance out the downside risks to growth from recent credit market problems. The Fed also said "strains in financial markets have eased somewhat on balance."
Analysts said the Fed was putting the markets on notice that Wednesday's rate cut and September's half-point reduction might be all the central bank plans for a while.
"The main reason the bond market does not like the statement is it indicates the Fed is on pause, barring some economic weakness that they don't see and we don't see either," said Alan Tedford, fixed-income portfolio manager at Stephens Capital Management.
The news did not depress other markets in the way it hurt Treasurys. The stock market at first wobbled and then rallied after the news, while the dollar dropped on the rate cut, helping gold futures to top $800 an ounce. Other commodities also gained in after hours trade, including crude futures which neared $94 a barrel.
The benchmark 10-year Treasury note fell 22/32 to 102 6/32 with a yield of 4.47 percent, up from 4.39 percent late Tuesday. Prices and yields move in opposite directions.
The 30-year long bond dropped 1 4/32 to 104 1/32 with a 4.74 percent yield, up from 4.68 percent late Tuesday.
The 2-year note fell 7/32 to 99 14/32 with a 3.92 percent yield, up from 3.81 percent late Tuesday.
The yield on the 3-month note dropped to 3.92 percent from 3.96 percent Tuesday as the discount rate fell to 3.82 percent from 3.87 percent.
Selling pressure in the Treasury market was intensified by rumors this week that the central bank would order a full half percentage point rate decrease, as it did last month. The size of the actual reduction added to investors' disappointment.
"It appears that a significant minority of investors were looking for a half point decrease and/or a clear signal of more eases ahead," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "They got neither."
The Fed statement said core inflation readings have improved modestly this year, but recent increases in energy and commodity prices could increase inflationary pressure.
If the Fed concludes inflation is the primary risk to the economy, it could in theory switch to a bias toward rate increases. However, Stephens Capital's Tedford said this was unlikely as many expect inflationary pressures to ease at the start of 2008.
The next Fed meeting is Dec. 11.
A report released earlier in the session also held hints that the Fed may not feel the need to cut at the December meeting. The government reported brisk economic expansion during the summer despite the rapid deterioration seen in the credit and housing markets.
The Commerce Department's preliminary third-quarter gross domestic product report showed an annual growth rate of 3.9 percent, exceeding the 3.1 percent expected by economists. The advance was the strongest seen in six quarters and was linked to strong consumer activity and business and military spending. It set helped stoke buying of stocks and selling of low-risk Treasurys.
A regional manufacturing report showed some weakness last month. The Chicago purchasing managers index showed a drop to 49.7 this month from 54.2 in September. Readings below 50 show that more companies are contracting than growing.
Separately, the Commerce Department said construction spending rose 0.3 percent in September, when business construction offset the weakness in home building.
The Treasury Department announced it will auction $13 billion in 10-year notes and $5 billion in 30-year bonds next week to refund maturing securities and pay down debt.
The widely expected rate cut left the benchmark federal funds rate at 4.50 percent. But the Fed's accompanying economic assessment statement said higher inflation risks roughly balance out the downside risks to growth from recent credit market problems. The Fed also said "strains in financial markets have eased somewhat on balance."
Analysts said the Fed was putting the markets on notice that Wednesday's rate cut and September's half-point reduction might be all the central bank plans for a while.
"The main reason the bond market does not like the statement is it indicates the Fed is on pause, barring some economic weakness that they don't see and we don't see either," said Alan Tedford, fixed-income portfolio manager at Stephens Capital Management.
The news did not depress other markets in the way it hurt Treasurys. The stock market at first wobbled and then rallied after the news, while the dollar dropped on the rate cut, helping gold futures to top $800 an ounce. Other commodities also gained in after hours trade, including crude futures which neared $94 a barrel.
The benchmark 10-year Treasury note fell 22/32 to 102 6/32 with a yield of 4.47 percent, up from 4.39 percent late Tuesday. Prices and yields move in opposite directions.
The 30-year long bond dropped 1 4/32 to 104 1/32 with a 4.74 percent yield, up from 4.68 percent late Tuesday.
The 2-year note fell 7/32 to 99 14/32 with a 3.92 percent yield, up from 3.81 percent late Tuesday.
The yield on the 3-month note dropped to 3.92 percent from 3.96 percent Tuesday as the discount rate fell to 3.82 percent from 3.87 percent.
Selling pressure in the Treasury market was intensified by rumors this week that the central bank would order a full half percentage point rate decrease, as it did last month. The size of the actual reduction added to investors' disappointment.
"It appears that a significant minority of investors were looking for a half point decrease and/or a clear signal of more eases ahead," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "They got neither."
The Fed statement said core inflation readings have improved modestly this year, but recent increases in energy and commodity prices could increase inflationary pressure.
If the Fed concludes inflation is the primary risk to the economy, it could in theory switch to a bias toward rate increases. However, Stephens Capital's Tedford said this was unlikely as many expect inflationary pressures to ease at the start of 2008.
The next Fed meeting is Dec. 11.
A report released earlier in the session also held hints that the Fed may not feel the need to cut at the December meeting. The government reported brisk economic expansion during the summer despite the rapid deterioration seen in the credit and housing markets.
The Commerce Department's preliminary third-quarter gross domestic product report showed an annual growth rate of 3.9 percent, exceeding the 3.1 percent expected by economists. The advance was the strongest seen in six quarters and was linked to strong consumer activity and business and military spending. It set helped stoke buying of stocks and selling of low-risk Treasurys.
A regional manufacturing report showed some weakness last month. The Chicago purchasing managers index showed a drop to 49.7 this month from 54.2 in September. Readings below 50 show that more companies are contracting than growing.
Separately, the Commerce Department said construction spending rose 0.3 percent in September, when business construction offset the weakness in home building.
The Treasury Department announced it will auction $13 billion in 10-year notes and $5 billion in 30-year bonds next week to refund maturing securities and pay down debt.
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