Filed under: Equities, Economy, Countries & Regions, Asia, Japan

Japanese equities markets were down slightly on Friday under the influence of quarterly earnings reports and other news form the corporate world.

The Nikkei fell 0.3 percent to 16,659.64. The Topix was down 0.2 percent to 1,707.96.

Several sectors and companies bucked the general trend, however. The paper and pulp sector was up 2.3 percent as a whole amid indications that paper manufacturers have begun passing rising materials costs on to consumers. Hokuetsu Paper was up 4.4 percent to ¥641.

On the domestic side, real estate was up 1.4 percent on Japan’s continuing economic recovery and on higher rental fees for premium office space. Tokyu Land gained 1.9 percent to ¥1,153.

Port transport company Utoc Express gained 7.1 percent to ¥530 when shipper Mitsui OSK said it will increase its holdings in Utoc from 31.2 percent to 50 percent. Mitsui OSK, however, dropped 1 percent to ¥1,042 on the news.

Consumer electronics giant Matsushita Electric Industrial gained 2 percent to ¥2,565 as it reported its largest quarterly profit in 14 years. Elsewhere in the electronics sector, however, Hitachi lost 1.5 percent to ¥809 when it said its quarterly profits had dropped by 79.4 percent.

Filed under: Equities, Countries & Regions, Japan, Politics

The Tokyo equities markets were up substantially on the landslide election victory Sunday of Prime Minister Junichiro Kozumi’s Liberal Democratic party, as foreign investors seemed particularly enthusiastic in the post-election buying.

Upward revision of second-quarter gross domestic product figures also helped the markets to their gains. GDP growth was put at 0.8 percent in the second quarter, up from the original figures of 0.3 percent.

The Nikkei 225 was up 1.6 percent to 12,896.43, while the Topix index gained 1.3 percent to 1,309.80.

The LDP won 296 seats in the lower house of parliament, the first single-party majority there in 15 years. In addition the LDP’s coalition partner, the New Komeito party, won 31 seats, bringing administration-friendly seats to more than two-thirds of the lower house.

Analysts say that this all but guarantees that the prime minister’s postal privatization bill will pass when it is reintroduced in the autumn.

Filed under: Bonds, Countries & Regions, US, Europe, UK, Japan

Prices on US Treasury bonds were up and yields fell to their lowest levels in a month on Tuesday, mostly on figures showing that the sales of existing homes had fallen by 2.7 percent in July.

In midday trading in New York, the 10-year Treasury bond had lost 3.1 basis points to a yield of 4.176 percent, while the 2-year bond dropped 3 basis points to yield 3.988 percent.

In Europe, meanwhile, yields on eurozone government bonds were up with the news that the
ZEW index of investor confidence had risen from 37 in July to 50 in August.

Yields on the 2-year Schatz gained 4 basis points to 2.210 percent as yields on the 10-year Bund rose by 0.8 basis points to 3.171 percent.

Still, some analysts wanted to wait for the numbers from the Ifo business sentiment index, due out on Wednesday, before committing to confidence that the eurozone economy is getting better.

Yields on UK gilts were down after an initial rise, as investors anticipated release of the CBI industrial trends survey.

The 2-year gilt fell fractionally to a yield of 4.194 percent, while the 10-year gilt lost 1.9 basis points to yield 4.245 percent.

In Japan, yields on the 10-year government bond lost 2 basis points to 1.450 percent.

Filed under: Equities, Economy, Countries & Regions, Japan

Strong investment from foreign sources helped send Japanese equity markets back to near record levels on Thursday.

The Nikkei 225 gained 0.3 percent to close at 12,307.37 and the Topix ended the day up by 0.2 percent to 1,252.94.

Foreigners purchased ¥721.9bn ($6.58bn) worth of shares in Japanese companies last week, the ninth week in a row that foreigners were net purchasers of Japanese equities.

In those 9 weeks, foreign buyers have purchased over ¥Y3,000bn ($24.37bn). On the year so far, foreign investors have bought ¥5996bn ($54.7bn) worth of Japanese equities.

Analysts say that foreign investors have taken the position that economic reform will continue no matter which party comes out on top in elections scheduled for September 11 and that the amount of foreign inflows show that investors believe that domestic demand has grown to a point where it can sustain the Japanese economy.

Meanwhile, Goldman Sachs predicted that Prime Minister Junichiro Koizumi would remain in power after the elections and that the ruling LDP would win 241 seats in the lower house of parliament, only 8 fewer than it holds currently.

Filed under: Bonds, Economy, Countries & Regions, US, Europe, UK, Japan

Yields on Japanese government bonds jumped to a five-month high yield of 1.475 percent on Thursday as a result of continuing optimism about the Asian nation’s economic recovery and on speculation that the Bank of Japan’s zero interest rate policy might end early in 2006.

The two-year government bond yield rose to a one-year high. Yields fell, however on US Treasury bonds.

Weak retail sales were one factor in the higher bond prices, but investors were waiting for the results of the sales of $13 billion in 10-year bonds, so prices did not go too high.

Sales of 3- and 5-year bonds earlier in the week saw generally good demand, but bids from overseas and institutional buyers were unexpectedly low, at 25 percent.

The weaker demand could mean that yields will have to go higher before foreign buyers will be attracted to the market again.

Analysts are watching bond prices and yields carefully, as they are currently defying the conventional wisdom that as interest rates rise, prices fall and yields rise.

On Thursday, however, the 10-year Treasury bond lost 0.6 basis points as yields fell to 4.39 percent, while 2-year yields were at 4.116 percent, 0.4 basis points lower.

Meanwhile, yields on eurozone government bonds were down as prices rose. The 10-year Bund lost 0.7 basis points to yield 3.336 percent.

In the UK, however, yields were up on the 10-year gilt, which gained 0.5 basis points to yield 4.401 percent.

Filed under: Equities, Countries & Regions, Japan

The Japanese equities markets were up on Wednesday on heavy foreign buying as the Asian nation’s political turmoil began to ease.

The Nikkei 225 gained 1.7 percent to 12,098.08, its highest close since April 2004, while the Topix index closed 1.8 percent higher at 1,227,85, its highest close in four years.

Foreign buyers seemed to be accepting analysts’ opinions that Japan’s political troubles will not have any significant negative impact on the economy and could in fact be a positive factor in long-term economic growth.

There was also good news on several fronts. Machinery orders were strong, corporate goods price data pointed to an end of deflation, and the Cabinet Office monthly report contained a more positive assessment of the economy.

Foreign investors were especially interested in the machinery, steel, and textile sectors. Nippon Steel gained 1.4 percent to ¥292, and textile manufacturer Unitika was up 1.3 percent to ¥531. Quarterly reports also led to increases in share values. Mitsubishi Materials was up 6 percent on the day to ¥316 on the strength of its quarterly profits, which were reported on Monday.

Japan’s second biggest property developer, Mitsubishi Estate, gained 3.5 percent to ¥1,304 on a positive quarterly report. In the chemicals sector, Showa Denko gained 6 percent to ¥299 on a tripling of profits in the first half.

Retailers were up on the day as well, on reports that the political situation could delay implementation of a hike in the consumption tax. Department store chain Mitsukoshi added 2.7 percent to ¥531.

Filed under: Economy, Countries & Regions, UK

The Bank of England’s monetary policy committee cut the UK interest rate by a quarter of a percentage point on Thursday to 4.5 percent.

It was the first rate cut in two years and exactly one year since the rate has moved at all.

Although it made the rate cut, the Bank was careful to say that this was not the beginning of a series of cuts, explaining that while the cut was appropriate in the short term, recent gains in equity prices and declines in the currency exchange rate should stimulate economic activity in the longer term.

One analyst said that he expects the new rate to hold through the end of the year, and another said that while rates might fall more later, the Bank was not in a great hurry to push through more declines.

Business leaders greeted the rate cut with approval and urged that more cuts be made later in the year on the basis that lower interest rates will stimulate economic growth and increase the confidence of both business and consumers.

Meanwhile in the eurozone, the European Central Bank let interest rates there remain the same, at 2 percent, on evidence that the economy in the region is improving.

Filed under: Bonds, Countries & Regions, US, Europe, UK, Japan

Government bond markets around the world were mixed, with yields up some places, down in others, and some simply standing pat.

In the United States, the 2-year Treasury bond was about even at a yield of 4.052 percent, while the 10-year bond gained 2.2 basis points to yield 4.338 percent late in the trading day in New York. The 10-year bond had reached a 3-month high yield of 4.348 percent earlier in the day.

The Treasury Department was expected to announce that it would issue new 30-year bonds. Existing 30-year bonds were yielding 4.552 percent, their highest level since May.

In the eurozone, the 10-year Bund gained 3 basis points to yield 3.33 percent, a two-week high. Signs of inflationary pressure eliminated any lingering possibility that the European Central Bank will cut interest rates when it meets later in the week.

Last week, some analysts held out hope that rates would be cut in consideration of the eurozone’s faltering economy and especially in light of expectations that UK interest rates will be cut when the Bank of England meets, also later this week.

Gilt prices in the UK initially fell, but rallied back to around Monday’s levels amid new security warnings in London.

Meanwhile in Japan, the 10-year government bond gained 2 basis points to yield 1.365 percent despite growing concerns of a political crisis over the prime minister’s plan to privatize the post office and his threat to call elections if the upper house of parliament does not vote to approve the plan on Friday.

Also a factor in bond prices was debate over the belief of the governor of Japan’s central bank that inflation will return by the end of this year or early next year.

Filed under: Equities, Markets, Countries & Regions, UK

The FTSE 100 reached its highest level in 44 months to close at 5,327.5, a gain of 36.7 points on the day.

The FTSE 250 was up as well, closing at 7,636.6. 2.6 billion shares were traded on the day.

The FTSE 100’s gains were helped by advances in mining stocks and on the expectation that the Bank of England will lower UK interest rates when its monetary policy committee meets later in the week.

Shares in mining companies were higher on new record high prices for copper brought about by production interruptions in Zambia and Chile that raised the possibility of tight supplies becoming even tighter.

BHP Billiton was up 2.5 percent to 810p, Antofagasta gained 1.6 percent to £13.46, Rio Tinto added 2.1 percent to £19.15, and Xstrata rose by 1.7 percent to £12.13.

In the air transportation sector, Ryanair gained 1.8 percent on record high quarterly earnings, even though it raised cautions about results for the rest of the year due to high fuel costs.

Fund manager Amvescap lost 1.6 percent to 420p on results that were a bit below predictions. Other fund managers saw gains on the day after rumors that CI Financial might be readying a hostile takeover of Amvescap. Henderson Group gained 3.1 percent to 67 ½p, Rathbone Brothers was up 1.3 percent to 847 ½p, and Schroders added 1.2 percent to 869 ½p.

Filed under: Commodities, Oil, Countries & Regions, Middle East, Politics

Crude oil prices rose above $61 per barrel on Monday after Saudi Arabia reported the death of King Fahd. He will be succeeded by Crown Prince Abdullah, his half brother, who has been acting ruler since King Fahd suffered a stroke in 1995.

Because of this continuity of rule, Saudi Arabia’s oil policies are not expected to change, and most analysts believe that oil prices will not be materially affected by the king’s death in the long run.

Saudi Arabia’s long-held oil policy has been to keep the world’s markets well-supplied. Some called the rise in prices on Monday after the announcement of the king’s death “psychological” in nature.

The death of the Saudi Arabian king was not the only factor in Monday’s price hikes, with refinery problems in the United States causing more concerns that strong demands might not be able to be met.

Prices for West Texas Intermediate crude were up to $61.23 at one point during the day, but remained below the all-time high of $62.10, which was reached on July 7.

Filed under: Companies, Countries & Regions, US, China

According to a United States Department of Agriculture report dated July 14 and released on Wednesday, the demand for frozen French fries in China will grow by 20 percent per year for the next five years as Western-style fast food restaurants expand in that Asian nation.

Additionally, French fries are becoming more popular on hotel menus in China, the report says. China will import 83,000 tonnes of frozen French fries in 2005, significantly higher than the 69,548 tonnes that were imported last year.

While China is increasing its own production of frozen French fries, it has not been able to keep up with the demand, said to be in excess of 100,000 tonnes. More than two-thirds of that amount are imported. Leading the expansion of the foreign presence in the fast-food sector in China, are Kentucky Fried Chicken, with 1,200 restaurants there at the end of 2004 and expectations of double digit growth.

McDonald’s has around 600 restaurants in China and is planning an aggressive campaign of expansion. According to the USDA report, the only factor that might slow down the exploding demand for French fries in China is a recent report from the World Health Organization that found the presence of a carcinogen, acrylamide, in both French fries and potato chips.

Filed under: Equities, Markets, Countries & Regions, Japan

In Tokyo, equities markets hit a four-month high, as export-dependent stocks did well once again on good employment news from the United States.

Sony rose 1.3 percent to ¥3,940. Office equipment maker Canon gained 0.5 percent to ¥5,920. Carmakers were also up, as Honda gained 0.6 percent to ¥5,520, Toyota was up 0.7 percent to ¥4,130, and Nissan added 0.5 percent to ¥1,124.

Three home centre chains, Kahma, Daiki, and Homac, announced that they will merge by September of 2006.

The merger will create the largest retailer in the sector, with assets of around ¥433 billion.

Shares in Kahma rose 3.1 percent to ¥1,771 after the announcement, while Daiki was up 9.6 percent to ¥1,274, and Homac gained 9.8 percent to ¥1,143.

The retail sub index grew by 0.4 percent on news of the deal. Nippon Television Network was up 3.5 percent to Y15,940 on a report that it will begin paid internet broadcasting in October.

Filed under: Forex, Markets, Countries & Regions, Americas

Brazil’s currency has surged to a 39-month high against the US dollar on news of a poll that shows the approval rate of President Luiz Inacio Lula da Silva rising despite the current political scandal.

The Brazilian real, which has gained 13.4 percent against the dollar this year, was up 0.21 percent to R2.336 in relation to the dollar after hitting a high of R2.331 earlier in the day.

The poll, from the National Transport Confederation showed that Mr. Lula’s popularity was at 40.3 percent in July, up from 39.8 percent in May.

While the poll has a 3 percentage point margin of error, it’s results indicate that resurging economic growth has offset the effect of the money-for-votes scandal that resulted in the resignation of a presidential aide and the executive directors of the ruling Workers Party.

The scandal first made news on June 6, and since then stocks have dropped over 5 percent as of the close of trade on Monday.

Analysts were surprised by the outcome of the poll, but believe that it will be good for the stock market.

The Bovespa index in Sao Paulo was up 1.2 percent in early afternoon trade on Tuesday to 29,316 on news of the poll.

Filed under: Economy, Countries & Regions, Americas

While the Bank of Canada has kept its overnight interest rate steady at 2.5 percent this month, unchanged since October, it said on Tuesday that interest rates would have to rise “in the near future.”

That statement was interpreted to mean that rates will likely rise at the next two opportunities, which will come on September 7 and October 18.

The bank will release its Monetary Policy Report on Thursday, detailing the reasons behind its statement on interest rates.

The Canadian dollar rose to its highest value in relation to the US dollar in three and a half months just before the bank’s announcement, to C$1.2034, while bond prices fell in anticipation of the higher interest rates.

Some analysts see the possibility that Canadian interest rates will now rise at all three possible opportunities for the rest of the year, in December as well as on the September and October dates.

Although this is the first time that the bank has explicitly stated that rates will rise soon, it had said in April that the prospect of higher rates at some point was there.

The bank also said that it expects the economy to continue at near capacity this year and next, and that it expects inflation, now at 1.6 percent in Canada, to return to 2 percent by the end of next year.

Filed under: Bonds, Countries & Regions, US, Europe, UK

By late morning in New York on Monday, 10-year US Treasury bonds had advanced by 5.1 basis points to a yield of 4.146 percent, after an early sell-off that had yields up to 4.154 percent.

Investors are anticipating a number of reports due to be released this week, including consumer and producer inflation data, retail sales figures, as well as the University of Michigan’s consumer confidence survey.

Treasury announced an auction of $13 billion in five-year bonds, down from an availability of $14 billion in the last sale of five-year paper.

Also announced was a sale of $9 billion in new 10-year inflation-protected securities, or Tips.

These announcements were seen as reflecting the possibility of a lower deficit than had been predicted.

In the eurozone, the 2-year Schatz rose 4.9 basis points to yield 2.187 percent, while the 10-year Bund rose 4.1 basis points to yield 3.226 percent.

Good economic news out of France further reduced the possibility of eurozone interest rate cuts in the near future.

In the UK, the 2-year gilt gained 5.9 basis points to yield 4.101 percent and the 10-year gilt was up 7.1 basis points to a yield of 4.291 percent.

Prices on gilts fell as the stock markets were up and investors backed off from their search for safe investments after Thursday’s bombings in London.

Filed under: Euro, Economy, Countries & Regions, Europe, UK

The euro fell to its lowest value in relation to the US dollar in fourteen months as it stood at $1.1869 against the greenback on Tuesday.

One factor in the euro’s continuing weakness is the contrast between last week’s ninth consecutive rise in US interest rates by the Federal Reserve and discussions in the UK and the eurozone concerning possible interest rate cuts as a way to strengthen European economies.

In fact, the European parliament has added to pressure on the European Central Bank to cut interest rates by rejecting a report that approved of the bank’s policy by saying that ECB is too focused on stability while not taking into consideration the importance of economic growth.

The ECB has not raised interest rates in two years.

Another factor in the weakness of the euro is continuing speculation that the eurozone could break up, or at the least that a few nations might leave.

Meanwhile, sterling also lost value to the dollar as it stood at $1.7504, its lowest level in over a year ahead of a 2-day meeting of the Bank of England to begin on Wednesday.

Although a UK cut in interest rates is not expected to emerge from this meeting, such a move could come as early as next month.

Filed under: Bonds, Countries & Regions, US

Trade in US Treasury bonds was hesitant on Monday ahead of a 2-day meeting of the US Federal Reserve scheduled to begin on Tuesday.

Interest rates are expected to be raised a quarter of a point to 3.25 percent during the meeting. Yields on 2-year Treasuries rose 0.9 basis points to yield 3.588 percent while yields dropped and prices rose in longer-dated bonds.

The 10-year issue lost 1.7 basis points to a yield of 3.902 percent, while 30-year bonds fell 3 basis points to yield 4.193 percent.

A tightening supply of government bonds helped raise the prices on longer-term issues.

The Treasury announced that it would only sell $20 billion worth of 3-year bonds on Tuesday. This is down from $22 billion in May and $24 billion in April.

Additionally, an announcement is expected in August concerning whether the Treasury will once again begin to issue 30-year bonds. It suspended the issuance of 30-year notes in 2001.

Filed under: Companies, Countries & Regions, South Korea

South Korea is looking at the possibility of suspending Deutsche Bank from engaging in derivatives trading for three months on accusations that the bank had not adequately advised state-run companies of the risks involved in investing in derivatives.

The allegations emerged from a tax investigation into foreign private equity funds operating in the Asian nation.

The investigation, by the Financial Supervisory Service, had included not only Deutsche Bank, Germany’s biggest bank, but BNP Paribas, Barclays Capital, and JP Morgan, has been criticized as the beginning of a crackdown on foreign capital.

The FSS began its investigation in February, looking into whether the banks had signed derivatives contracts with state-run companies that contained terms unfavorable to those Korean companies, and whether they had been warned of the risks inherent in the deals.

One contract in question was a currency option with Korea Highway Corp. The deal was worth Won115.5 billion ($114 million). While FSS officials would not enumerate the losses likely on the contract, an official with Korean Highway Corp said that there had been no irregularities with the contract, that there had been a warning on risks, and that the company is making a profit on the deal.

Filed under: Economy, Countries & Regions, US

Orders for durable goods in the United States were lower than expected in May but the housing market remained healthy, according to new data.

According to one analyst, the slowdown in new durable goods orders implies a coming production slowdown, although this could be compensated for by orders that have not yet been filled.

Orders were up 5.5 percent overall, but most of that figure was due to a 165 percent increase in civilian aircraft orders. Discounting that sector, orders were actually down by 2.3 percent.

The biggest decline came in computers, where orders were down by 7 percent. Machinery orders declined by 1.9 percent, while non-defense capital goods shipments fell 0.7 percent.

While industrial activity seemed to slow, the US housing market seemed to be doing very well at just below record levels. New home sales were up in May by 2.1 percent, and they are expected to remain at present levels for the foreseeable future, at least until mortgage rates go up significantly.

The strong tempo of home building has started to slow down the rise in new home prices, and resale prices may begin to slow their rise soon as supply has begun to rise.

Filed under: Economy, Countries & Regions, Japan

In Japan on Friday, two government officials expressed fears that rising oil prices could hurt Japan’s recent economic growth.

Economics minister Heizo Takanaka said that while there are signs that the nation’s economy is showing signs of coming out of a “soft patch,” oil price rises are putting that recovery at risk.

In separate remarks, chief cabinet secretary Hiroyuki Hosoda said that rising oil prices concerned him because of their negative effect on global economic development. According to economists, Japan is not affected directly by oil price hikes as much as many other large economies.

However, there might be an indirect effect as a global economy weakened by rising oil prices might lessen demand for Japanese goods, although recent data suggests that Japan is less reliant on overseas demand than it was previously.

There is also an idea that Japan is not affected so much by oil prices because it was affected so much by high prices in the 1970s. This is partly due to the fact that high prices in the ‘70s influenced manufacturers to pursue energy efficient practices and partly due to the fact that the appreciation in the value of the yen has cut the proportion of the gross domestic product going to oil imports.