Asia stocks fall on China jitters, yen gains

Date Jan 27 2010 15:59:11 Source:Reuters

SINGAPORE (Reuters) - Asian stocks fell for the eighth straight day on Wednesday on fears that China''s heightened efforts to rein in soaring credit growth could hamper the global economic recovery.


European stocks were set to follow Asia lower, with financial spreadbetters expecting key indexes in Britain, Germany and France to open as much as 0.6 percent lower, while U.S. stock futures were little changed.

Investors were cautious ahead of the conclusion of a two-day policy meeting by the U.S. Federal Reserve later in the day.

The meeting is expected to yield little in terms of a near-term policy shift. But traders will scour a Fed statement afterwards for clues on how much longer it may leave its ultra-low interest rates and easy money policy in place, and for updates on the health of the U.S. economy.

The meeting is taking place amid a fierce Senate debate over whether Chairman Ben Bernanke should be appointed for a second term, which has also weighed on investor confidence this week.

The euro fell to a nine-month low of 125.31 yen as investors continued to cut risky trades amid a host of unsettling factors.

Besides worries that Chinese imports may slow as policymakers try to keep the economy from overheating, investors have been plagued by worries about Greece''s high debt levels and a proposal from the White House that could break up some huge investment banks, which could slash their profits.

Data on Tuesday showed U.S. consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November prices, giving a mixed view of its economic recovery.

The MSCI index of Asia Pacific stocks outside Japan fell 1 percent on Wednesday, surrendering brief early gains. The index has lost around 9 percent in the past two weeks, nearing the 10 percent level that is typically used to define a stock market correction.

The index slid 2 percent on Tuesday to its lowest in two months after China implemented a rise in bank reserve requirements to curb loan growth.

China''s largest bank, ICBC, said on Wednesday it has stopped rolling over some loans after a surge in credit at the start of the year, in the latest evidence that banks may finally be heeding a government-directed clampdown.

Japan''s Nikkei average fell 0.7 percent to its lowest in five weeks, while South Korean stocks shed 0.7 percent to a seven-week low with sentiment weighed by reports North and South Korean forces exchanged artillery fire.

Many investors had been pricing in a smoother and stronger economic rebound this year, which would justify higher share valuations.

Now that questions are growing about the pace and depth of a recovery, share prices are highly vulnerable to a correction, especially after many global indexes have rallied more than 60 percent from lows seen in March last year.

Tech shares, which helped lead the strong global equities rally over the last year, have been among the hardest hit by profit taking in recent sessions as investors fear demand for flat screen TVs and other gadgets may weaken if the global recovery stumbles.

In Seoul, LG Electronics Inc fell almost 1.9 percent to an eight-week low after posting a weaker-than-expected quarterly net profit. Taiwan''s tech-heavy index dropped 0.5 percent to a two-month closing low, after slumping 3.5 percent on Tuesday, on fears that China''s tightening measures will curb the island''s exports to the mainland.

Analysts believe much of the fears over China''s tightening are overdone, saying Beijing will largely stick to a pro-growth stance even as it tries to head off inflation risks and boom-bust swings in the economy.

"It is highly unlikely, in my opinion, that Beijing will drive the economy into a growth recession just to contain inflation," Stephen Jen, managing director of macroeconomics and currencies at Bluegold Capital Management, said in a note.

Nevertheless, shares in Shanghai and Hong Kong remained under heavy pressure.

The Shanghai Composite Index fell 1.1 percent, closing below the key psychological support level of 3,000 points for the first time since October, despite upbeat earnings estimates from two major banks. Hong Kong''s Hang Seng index lost 0.8 percent.


The yen, seen as a safer haven in times of market turmoil, firmed broadly currencies as investors dumped high-risk assets. The U.S. dollar fell 0.4 percent to 89.25 yen, but rose 0.2 percent against a basket of major currencies.

However, the high-yielding Australian dollar rose to $0.9045 after fourth-quarter inflation rose faster than expected as the cost of housing, recreation and food all climbed.

The data set the stage for a fourth straight increase in interest rates by the central bank at a meeting next week.

Gold prices steadied near $1,100 an ounce, supported by consistent retail demand from Asia, while oil futures prices fell 10 cents to $74.62 a barrel.

(Reporting by Kevin Yao; Editing by Kim Coghill)

Roubini Never More Pessimistic on Euro Area, Calls Spain a Risk

Date Jan 27 2010 14:49:41 Source:Bloomberg

Jan. 27 (Bloomberg) -- New York University Professor Nouriel Roubini said he’s never been more pessimistic about the future of European monetary union, saying Spain poses a looming threat to the euro region holding together.

“Down the line, not this year or two years from now, we could have a breakup of the monetary union,” Roubini said in a Bloomberg Radio interview from the World Economic Forum’s annual meeting in Davos, Switzerland. “It’s a rising risk.”

Roubini’s concern contrasts with the view of European Central Bank President Jean-Claude Trichet who said it’s “absurd” to imagine that the 16-nation euro area could splinter. Speculation of a breakup has mounted in financial markets as Greece struggles to cut the continent’s biggest budget deficit and countries from Spain to Ireland face rising debt burdens.

“The euro zone could drift essentially with a bifurcation, with a strong center and a weaker periphery and eventually some countries might exit the monetary union,” said Roubini, who predicted the recent financial crisis a year before it began. “This is the very first test” of the single currency bloc.

Economies including Spain and Greece are threatened by fiscal imbalances and declining competitiveness, Roubini said. Membership in the euro means they can no longer devalue the currency to export their way out of recession, he said.

Commission Deadline

The Greek budget deficit ran more than four times the European Union limit of 3 percent of gross domestic product last year and Greece is one of 13 nations facing deadlines from the European Commission to cut its shortfall. The country’s debt is set to top 120 percent of GDP this year, the highest in the euro region and twice the limit for adopting the single currency.

Trichet on Jan. 14 dismissed as an “absurd hypothesis” the argument that Greece could be forced to exit the euro area. The country should remain in the union where its problems “will be unequivocally easier to solve,” central bank governor George Provopoulos said in the Financial Times on Jan. 22.

Roubini said for all the focus on Greece, Spain may eventually pose a bigger threat to the euro zone because it’s the region’s fourth-largest economy and has higher unemployment and weaker banks. Spain’s jobless rate is more than 19 percent, almost twice the EU average.

“If Greece goes under that’s a problem for the euro zone,” he said. “If Spain goes under it’s a disaster.”


Bond Vigilantes


Roubini described rising sovereign risk as a “new phenomenon” for advanced economies that will complicate their recoveries from the worst global recession since World War II.

So-called bond vigilantes, or investors who punish governments by dumping their debt, “have been asleep at the wheel,” outside of Europe, Roubini said. The risk premium investors demand to buy 10-year Greek debt over comparable German bonds rose to an 11-year high of 312 basis points on Jan. 22.

“Eventually they could wake up” in Japan and the U.S. and sell off their bonds as they did with Greece.

“We have a massive fiscal problems in most of the advanced economies, and we’re not really dealing with it,” he said.

After Standard & Poor’s yesterday lowered its sovereign credit rating outlook on Japan, Roubini said he was “worried” about the world’s second-largest economy as its debt mounts, deflation returns and population ages. While it can currently finance itself thanks to domestic savers, at some point they may “flee the yen,” pushing up borrowing costs and crippling the economy, he said.

Stunned Wall Street Firms Don’t Want to Wage War on Obama

Date Jan 27 2010 14:48:55 Source:Bloomberg

Jan. 27 (Bloomberg) -- When Treasury Secretary Timothy F. Geithner and White House adviser Valerie Jarrett hosted a private dinner with the leaders of six banks to discuss financial regulation on Jan. 20, the bankers soon changed the subject. The president needed to stop demonizing Wall Street, they told Jarrett, according to three people familiar with the meeting.

What the executives, including Brian Moynihan, the chief executive officer of Bank of America Corp., and Robert Kelly, the chief executive of Bank of New York Mellon Corp., didn’t know was that President Barack Obama, who had proposed a new tax on the biggest banks six days earlier, was about to strike again.

After leaving the meeting around 9 p.m., the executives learned that Obama would ask Congress the next day to ban commercial banks from running proprietary trading operations, owning hedge funds, and rapidly increasing market share. In his remarks, Obama indicated his willingness to go to the mat with the industry: “So if these folks want a fight, it’s a fight I’m ready to have.”

Industry officials said they were stunned. “We did not know it was coming, that’s for sure,” said Scott Talbott, a lobbyist for the Financial Services Roundtable, which represents large banks and insurance companies and whose chairman, Richard Davis, the CEO of U.S. Bancorp, also attended the dinner.


‘Don’t Want to Fight’


Now the firms and their chiefs, confronting a wave of public anger against their bonuses awarded in the wake of the financial industry bailout, are trying to devise a strategy to fight both the proposed new limits on banks’ size and activities as well as the bank tax. While they are still plotting tactics, one thing has become clear: The banks don’t want to go to war with the commander-in-chief.

“We don’t want to fight the administration,” said Rob Nichols, whose trade group, the Financial Services Forum, represents the chief executive officers of the largest financial companies. “We just want to sit at the table and have a productive conversation about the kinds of reforms needed to address the real causes of the recent crisis.”

That the president’s top advisers failed to give the financial executives a heads-up, even while reporters were being briefed on the plan, underscores how strained the banks’ relationship with the administration has become.


Political Attack


Some Wall Street executives are seething over what they see as a political attack by the president after the Democratic Party lost the late Senator Edward M. Kennedy’s U.S. Senate seat in Massachusetts, according to interviews with a half-dozen people who work for or consult with the largest financial firms and who declined to be named in order to speak freely.

They are equally concerned that they will remain targets for the rest of the year, the people said, and are willing to take steps to try to prevent that from happening. Some of the executives dining with Geithner and Jarrett indicated that Obama’s bank tax would be a small price to pay if it made the taint of the Troubled Asset Relief Program go away, according to one attendee.

As a goodwill gesture, some executives whose firms are members of the Financial Services Forum agreed, at the Treasury’s request late last week, to contact senators and urge them to confirm Federal Reserve Chairman Ben S. Bernanke, the people said. Nichols declined to comment.


Slow the Momentum


The banks are not hanging up their lobbying spurs, and instead are counting on allies in Congress to slow the momentum. Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, has scheduled hearings for Feb. 2 on the president’s plan to limit the size and scope of commercial banks. Volcker has agreed to testify. While the lobbyists predict the tax, which Obama would levy on financial companies with more than $50 billion in assets to raise up to $117 billion over 12 years, will easily pass the House, they say it will be toned down in the Senate.

The administration’s renewed push against the industry has caused a fissure in what has often been a unified industry front. Many smaller banks, for instance, aren’t opposed to the trading and size limits in Obama’s plan.

Wall Street firms “are ramping up their lobbying machines like there is no tomorrow,” said Camden Fine, president of the Independent Community Bankers of America. “I’m sure they feel threatened, but when you get down to it, they brought this on themselves.”

Obama hasn’t shied away from criticizing bankers in recent weeks. Former Fed Chairman Paul Volcker, who had trouble getting the president to accept tougher restrictions on the financial services industry than his administration first proposed, stood behind him for the Jan. 21 announcement.


‘Every Single Dime’


Earlier this month, when Obama called for a tax on large banks, he said his aim was to recover “every single dime” of the $700 billion financial rescue, even if it meant taxing large banks that had repaid their TARP money with interest. At the same press conference, Obama challenged bank CEOs to stop “sending a phalanx of lobbyists to fight this proposal, or employing an army of lawyers and accountants to help evade the fee.”

The increasingly strident comments are “unfortunate,” said Fine, of the community bankers. “If the populist rhetoric intensifies, then there is a danger that the entire banking industry, including community banks, could be vilified.”

The Obama administration plans to keep its distance from Wall Street. As the Treasury begins to draft the legislation they will send to the Senate on bank size and trading restrictions, the agency doesn’t plan to consult the industry, said Deputy Secretary Neal Wolin.

He argued that the administration has been tough and direct with financial firms since it began pushing for changes to oversight in the wake of the subprime crisis. “We’ve not been shy in expressing our views,” he said. “We’ve not minced words with them.”

Japan Exports Rise 12.1%, First Increase Since Lehman Collapse

Date Jan 27 2010 14:48:10 Source:Bloomberg

Jan. 27 (Bloomberg) -- Japan’s exports rose for the first time since Lehman Brothers Holdings Inc. collapsed 15 months ago, adding to signs that the world’s second-largest economy is recovering from the global recession.

Japanese manufacturers from Honda Motor Co. to Fuji Xerox Co. are benefiting from renewed demand in emerging nations including China, where gross domestic product expanded at the fastest pace since 2007 last quarter. The booming economy in Japan’s largest overseas market may help offset weak demand at home weighed down by falling wages and deflation.

“Shipments to Asia, especially China, have been growing a lot and these are strong results,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “It’s safe to say that exports were strong” in the fourth quarter.

The improvement in exports last month was partly due to a favorable year-on-year comparison. In December 2008, shipments abroad tumbled 35 percent as global trade froze in the aftermath of Lehman Brothers’ collapse in September. From a month earlier, exports rose a seasonally adjusted 2.5 percent in December, today’s report showed.


Stronger Yen


The yen climbed to 89.25 against the dollar at 3:08 p.m. in Tokyo after touching 89.14, the strongest in five weeks. While the currency is weaker than the 14-year high of 84.83 reached in November, it has advanced 4 percent this year, threatening profits earned abroad. The Nikkei 225 Stock Average dropped 0.7 percent, a fourth straight decline.

Exporters are leading the recovery while Prime Minister Yukio Hatoyama runs out of options for spurring spending at home because of the country’s swelling debt burden. Standard & Poor’s yesterday cut the outlook on Japan’s AA credit rating, saying the government lacks a plan to rein in budget deficits.

Finance Minister Naoto Kan said the government’s mid-term fiscal strategy to be released by June will help to maintain investors’ confidence. “We need to keep yields around the current level by maintaining markets’ trust in our fiscal health,” he told parliament today.

The yield on Japan’s 10-year bond fell one basis point to 1.31 percent today.

Demand from Asia led the resurgence in trade. Shipments to the region advanced 31.2 percent from a year earlier, the fastest pace since February 2000. Exports to China climbed 42.8 percent, the most in almost three years, led by record demand for automobiles. Exports to the U.S. fell 7.6 percent, while shipments to Europe rose 1.4 percent, the first gain in 17 months.


Global Trade Rebound


Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide.

Fuji Xerox, Japan’s biggest maker of color copiers, expects sales to recover as early as September, helped by growth in China and increased demand for printers in the U.S., President Tadahito Yamamoto said on Jan. 15.

Honda Motor’s venture with Dongfeng Motor Group Co. will invest 1.15 billion yuan to build a second plant in China as vehicle demand rises in the world’s largest car market. The plant, with an initial annual capacity of 60,000 vehicles, will start production in the second half of 2012, Honda said.

“In coming months, the export recovery may lose some of its speed since the rally so far has been so fast, but on the whole, exports will keep growing,” Dai-Ichi’s Shinke said. “Asian economies, particularly China, will keep expanding, and Japan will benefit from that.”


China Plant


Imports slid 5.5 percent in December from a year earlier, the smallest drop in 14 months, today’s report showed. Japan posted a trade surplus for an 11th straight month, totaling 545.3 billion yen ($6.1 billion).

Bank of Japan Governor Masaaki Shirakawa said yesterday the economy is likely to lose momentum as global stimulus spending fades. His board left interest rates at 0.1 percent and pledged to maintain an “extremely accommodative” policy.

The governor told lawmakers today that it’s “critical” that the central bank works to overcome price declines. Hatoyama said at the same session that Japan’s deflation remains “mild” and isn’t spiraling out of control.

“The economy will slow in the first half of 2010 due to weak domestic demand,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “Evidence of deteriorating consumer confidence is consistent with this view.”

In 2009, exports fell 33 percent, the biggest drop since comparable figures were made available in 1979. China surpassed the U.S. as Japan’s largest export market for the first time on an annual basis, the report showed.

Apple''s Tablet: App Makers Target Business Use

Date Jan 27 2010 14:46:41 Source:BusinessWeek

In early February, an Apple (AAPL) rep is scheduled to pay a visit to the Cincinnati offices of Western & Southern Financial Group. Employees have been clamoring for the company to provide support for Apple''s iPhone and Mac computers, says Doug Ross, chief technology officer at the fund manager, with $43 billion in assets. So he''s eager to hear Apple''s pitch. Ross also looks forward to discussing a new type of device altogether: "I think he''s going to show us a tablet," Ross says.

A flat, touchscreen computer like the one Apple is expected to introduce Jan. 27 could help wean Western & Southern workers off their reliance on three-ring binders filled with paper and noisy laptops that can be a distraction during meetings, Ross says. "I would love to have [documents] in an electronic form that people could interact with in a friendly way."

Before the Jan. 27 introduction, most speculation and reports on the tablet focused on ways it will be used to showcase books, newspapers, and entertainment. Yet, Apple''s new creation may also have an impact in cubicles and boardrooms. "This is going to be huge for business," says Bruce Francis, vice-president for corporate strategy at (CRM), which created an application that makes its software-based tools available on Apple''s iPhone. "Apple has blown through the barriers with the iPhone, and the same thing is going to happen with the tablet."

Software programmers are all too happy to help. In a January survey of more than 500 software developers conducted by mobile app-making service Appcelerator, about 49% of respondents identified business as a category of application they would be interested in creating for the tablet. That was the most popular response, followed by productivity (47%), entertainment (44%), and social networking (42%). Apple is likely to offer a new version of its App Store and tools for creating apps sized to fit the tablet, says Appcelerator CEO Jeff Haynie.

iPhone Snubbed by Many Businesses
IT experts say Apple hasn''t traditionally gone to great lengths to cater to business users. "Apple has been widely criticized for not paying enough attention to core business foundation needs in the areas of security, management, and telephony," says Ken Dulaney, analyst at Gartner (IT). While Apple has made security improvements to the iPhone, and added support for Microsoft''s (MSFT) e-mail service for businesses, Dulaney says IT managers often snub the iPhone because it lacks features standard on other mobile computers, such as the ability to run multiple applications at once. "Apple has been unwilling to go the extra step that Microsoft and [Research In Motion (RIMM), maker of the BlackBerry] have gone to support the enterprise," he says.

Still, third-party application developers have helped drive use of the iPhone in the workplace, and many plan to get behind the tablet. "The bigger the screen, the easier it will be to type and manipulate data," saysMichael Simon, CEO of LogMeIn (LOGM), a company that lets customers access their PCs remotely, through mobile applications. LogMeIn, which counts professionals like doctors, lawyers, and small business owners among its users, held an initial share sale last year. It has generated more than $1 million in sales of its most popular iPhone application, which costs $29.99. Simon says he will watch the Jan. 27 Apple announcement closely.

Engineers at Evernote, an online service for storing photos and personal notes on many devices, are creating mockups of a 10-inch digital screen to test the possibilities of the tablet. "If you''re holding something roughly the size of a magazine in your hand, how would you want to use it?" asks Phil Libin, Evernote''s CEO. The team at Mobiata, maker of the popular iPhone travel app FlightTrack, is testing the idea of running multiple functions within the same screen., an enterprise take on microblogging services like Twitter, might be turned into a tablet application that displays photos and video alongside 140-character messages. The makers of ProOnGo, a mobile app that lets users take pictures of receipts and organize expenses, are holding out hope that the tablet comes with a camera.

Higher-Priced Apps
A bigger Apple device could mean more powerful—and profitable—apps. "Price points can be higher in the tablet than they are in the iPhone," says Alan Masarek, chief executive of Quickoffice. For years, his company has sold mobile software compatible with Microsoft''s Office for the PC. With the increased capabilities promised by the tablet, Quickoffice could charge more than the $7.99 it does for the iPhone version.

Tablet computing could eventually pose broader changes to the way people do business, says Raju Vegesna, an executive at Zoho. The Pleasanton (Calif.) maker of online productivity applications plans to release at least two apps for the iPhone in February, and may start planning versions for Apple''s tablet as soon as this week. Businesses make up about 60% of Zoho''s customers.

Vegesna says touchscreen technology could be used increasingly in business if devices like Apple''s tablet catch on. "If the keyboard and the mouse are going away in computing, that''s going to be a huge change," he says. "And that means there is a great opportunity for [software] vendors big and small."