USD down as American data improve

FXstreet.com (Buenos Aires) - Dollar close the American mostly lower, against European rivals, particularly against Euro and Swiss Franc that extended earlier gains Tuesday, on encouraging U.S. data that boosted risk appetite. However, Wall Street slipped and close barely red, after a choppy session. Richmond Fed's regional manufacturing index improved in April to -9 from a previous reading of -20, while US consumers' confidence of the economy rose to its highest point of the year, 39.2 from a previous also revised to the upside, 26.9.

Earlier today in Europe, executive ECB board member Bini Smaghi cautioned against further aggressive interest-rate cuts in the euro zone,(next meeting is programmed for May 7th), despite other members previous comments, while in the U.S., the FOMC is expected to leave its funds rate unchanged near the zero mark on Wednesday.

Asian session activity could be limited by Japan’s bank holiday.

UPDATE: Asian Shares Rise Amid Japan Holiday, But ANZ Drops

UPDATE: Asian Shares Rise Amid Japan Holiday, But ANZ Drops

(Adds information, quotes, updates/adds market levels)

SINGAPORE (Dow Jones)--Asian share markets were broadly higher Wednesday as investors started to look past the swine flu headlines. Trade was subdued amid a Japanese holiday, and Australia and New Zealand Banking Group fell after its first half net profit dropped 28%.

Australia's S&P/ASX 200 was up 0.3% with South Korea's Kospi Composite up 1.6% and Hong Kong's Hang Seng Index 1.6% higher. U.S. stock futures were up a tad.

Better-than-expected U.S. consumer data helped support Wall Street late Tuesday, with indexes ending only mildly lower.

But "despite this late flurry, markets remain jittery and with the (swine) flu outbreak set to worsen, it is going to be developments here that will result in shares being kept under pressure," said David Jones, Chief Market Strategist at IG Index.

The New Zealand health ministry confirmed that students who recently returned from Mexico had been infected with swine flu. Australia was testing 91 people for the flu and had introduced new powers to isolate and detain suspected sufferers.

"The market seems a bit lost at the moment," said Macquarie Private Wealth associate director David Halliday. "It's been a bit schizophrenic lately on the swine flu and stress test news." But he said the markets would rise in the absence of significantly worse news. "A lot of bears might get exhausted by the fact the market's not having a pullback."

Other analysts noted Wall Street had shown some resilience to bad news of late. Southern Cross Equities Director Charlie Aitken said "markets need to (move) to the upside to suck in all the non-believers and shorters."

Taiwan's main stock index was 0.3% higher, New Zealand's NZX-50 flat, Singapore's Straits Times index up 0.7%, Malaysia's benchmark index down 0.1%, the Philippines' main index 0.2% higher and Indonesian shares up 0.7%. The Shanghai Composite index had gained 0.3%.

In Australia, ANZ slumped 6.3% after its first half report, hit by escalating charges for bad loans. It added the outlook for bad loans remained difficult going into the second half and extending into 2010, forcing it to scrap its previous guidance on provisions.

Other bank stocks were weak in Sydney, with National Australia Bank down 4.1% and Bank of Queensland falling 4.3%.

Miners were lower in Australia on falls in base metal prices, with Newcrest off 1.9% and Rio Tinto slipping 1.4%. Fortescue was down 3.7% after the iron ore miner cut its annual production guidance by 15%.

Patersons head of Sydney retail trading, Chris Blair, said traders in Sydney were awaiting results from other big Australian banks, and the commentary from the Federal Open Market Committee after its meeting Wednesday. "We're not going to do anything unless Wall Street rallies."

Hong Kong stocks were staging a rebound after a two-day selloff. Sinopec was 2.9% higher and Bank of Communications was up 3.1%, after both posted strong first quarter results, while carrier Cathay Pacific rebounded 1.4% after heavy selling earlier this week.

Bank and technology stocks were higher in Korea after falls on Tuesday, with Shinhan Financial up 2.3% and Samsung Electronics up 0.7%. Korean Air bounced from its weaker open and was up 1.5%.

In China, car makers were boosted by talk Beijing may further cut taxes on auto purchases, in a bid to lift demand. SAIC Motor was up 5.7% and Chongqing Changan Automobile added 3.8%.

Currency markets were quiet with Japan closed, though the yen slipped after its recent gains. The U.S. dollar was at Y96.78, from Y96.40 late in New York, and the euro at Y127.38, vs Y126.70, while the single currency was hovering near $1.3146.

Sue Trinh, a strategist at RBC Capital Markets, said the dollar's gains against the yen were linked to short-covering. She noted that attempts to drive the dollar-yen pair lower had lost steam with "zero follow through," forcing positions to be squared.

Spot gold was down $2.90 from New York, at $890.40 a troy ounce, in a choppy market.

LME three-month copper was at $4,192 a metric ton, up $7 from London levels after falling 3.6% there. "The base metals rally in the last few weeks was based on a lessening of pessimism, and that has run out of steam. There's now a more considered view," said Commonwealth Bank of Australia analyst David Moore.

June Nymex crude oil futures were 64 cents lower at $49.28 a barrel on Globex, after falling 22 cents in New York.

-Rosalind Mathieson and Colin Ng, Dow Jones Newswires; +65-6415-4140; rosalind.mathieson@dowjones.com

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April 28, 2009 23:07 ET (03:07 GMT)

GLOBAL MARKETS: European Stocks Seen Just Up, Eyes On Banks

GLOBAL MARKETS: European Stocks Seen Just Up, Eyes On Banks

  By Kimberly Vlach
  Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--European stocks are expected to open modestly higher, supported by an almost flat close on Wall Street, even though traders remain cautious ahead of details of the capital requirements of the U.S. banks and the impact on the global economy should further injections be required.

"Financial stocks are going to remain squarely in focus after yesterday's reports of more capital being required at Citigroup and Bank of America," said Matt Buckland, a trader at CMC Markets. "The outlook for the sector as a whole remains far from encouraging."

Nonetheless, he expects London's FTSE 100 index to open 15 points higher at 4111, with Frankfurt's DAX index up 17 points at 4624. He sees Paris's CAC-40 index rising 17 points to 3068.

On Wall Street Wednesday, stocks fell heading into the close, erasing the session's gains, as traders succumbed to fears that several banks, even those too big to fail, will be required to raise capital as a result of the stress tests.

The Dow Jones Industrial Average closed 0.1% lower at 8016.95 and the Standard & Poor's 500 index finished down 0.3% at 855.16.

Both Bank of America and Citigroup fell more than 5% after The Wall Street Journal reported that the two banks were told by the government that they may need to raise more capital. Results of the banks' stress tests, being conducted by federal regulators, are expected to reveal the haves and have-nots of the banking sector.

In Europe too, the banking crisis continues to take its toll, with Societe Generale chairman Daniel Bouton saying in a statement early Wednesday that he has quit his position at the French bank.

In the statement, Bouton said he has "decided to put an end to (his) mandate as chairman of the board of directors of Societe Generale as of May 6," and that a new chairman will be elected at a board meeting on the same day.

On Monday, the bank denied a report that it could lose up to EUR10 billion at its asset management unit.

Nonetheless, investor concerns surrounding the entire global banking sector remain high.

Earlier in Asia, stock indexes were mostly higher as worries about swine flu receded. Hong Kong's Hang Seng index was 2.0% higher and China's Shanghai SEE 180 index was 2.3% up. Japan was closed for a public holiday.

Elsewhere, in the currency markets, the dollar and the yen eased back after their recent gains. The euro climbed to $1.3195 at 0620 GMT from $1.3149 in late New York business Tuesday. But the dollar rose to Y96.87 from Y96.45.

Spot gold was down $1.62 from New York, at $895.00 per troy ounce, in a choppy market, while June Nymex crude oil futures were barely changed from New York at $49.90 per barrel.

-By Kimberly Vlach, Dow Jones Newswires; +44-20-7842-9352; kimberly.vlach@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=vV6ro2ZV050qOZbQiXWzFA%3D%3D. You can use this link on the day this article is published and the following day.

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April 29, 2009 02:24 ET (06:24 GMT)


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ECB Outlook: It’s Time to Cut Interest Rates

In the days leading up to the European Central Bank’s rate decision on July 3rd, 2008, many political leaders around Europe publically pleaded for the ECB to leave interest rates unchanged. Among others, French President Sarkozy voiced the opinion that the recent rise in inflation was due primarily to the spike in commodity prices.¹ As such, Sarkozy suggested that though hiking interest rates would not really help in lowering inflation, it would adversely impact growth. The ECB went ahead and hiked interest rates anyway, and looking back now, a month and a half later, we can begin to asses two issues: whether the rate hike was the right choice, and what the ECB should do now.

Looking at the statistics over the past few months here, there are several main points to take away. The first is that President Sarkozy’s nightmare seems to have become reality; growth has suffered. In the Euro-Zone, as well as in its three largest economies, Gross Domestic Product (GDP) fell in the second quarter. However, the second chart (showing Consumer Price Index) indicates that inflation has either slowed or halted its rise in these same economies.

Given that the ECB is bound to target inflation first and foremost, the above statistics would imply that the recent rate hike was the correct move – though clearly not without consequences. Inflation has slowed in its rise, and while next months’ numbers will bring about more clarity to the situation, it seems that the rate hike had its desired impact. Now, the more prudent question is if the long-term repercussions of the hike will outweigh the benefits. Will the rate hike facilitate Europe’s slide into recession? It is certainly possible. Italy is already on the brink of recession, and France’s large decline in growth indicates that it is also in trouble.

One important note about the CPI numbers is regarding the source of the recent slowdown in the rise of inflation. As the price of oil started to fall around the same time as the rate hike, it is unclear which – or both – influenced inflation. As it is probable that both events have had an impact, it is unknown just how useful the rate hike has been thus far in thwarting inflation’s rise. However, considering the magnitude of oil’s fall in recent weeks, it is safe to assume that it has had a sizeable impact on the slowing of the rise of inflation. The fall in oil price will help alleviate inflationary pressures anyway; hence the ECB should switch focus to the other problem of falling growth.

At this point, the best move for the ECB would now be to cut rates. While the ECB was founded with an inflation-targeting mentality, it is too dangerous to ignore growth at this time. The US (seemingly) has recently skirted around a recession by aggressively slashing rates and supporting wounded members of the banking system. By admitting the problem early on, the US avoided significant damage to the financial sector, with only one of the largest banks going under. Europe, however, has taken a different path, and now finds itself on the precipice of recession. This proposition to focus on spurring growth comes from the belief that the inflation problem can largely solve itself as long as energy costs continue to fall. With oil prices down over 20% from their all-time high, it seems apparent that this fall in price will eventually be filtered down to consumers.

Proponents of the ECB’s generally “hawkish” nature would certainly throw out economic theories such as the J-Curve to support their position. This theory suggests that through a devaluation, a country can actually increase their trade balance (and hence GDP) via increased exports and decreased imports. There is potential for this to occur, but that would involve a devaluation of the Euro that many Europeans would certainly love to avoid. Furthermore, this process of GDP rising on its own could take an unacceptable length of time. Just recently, the ECB finally admitted the problems that the Euro-Zone now faces.² It is time that the ECB make a bold move and cut rates, sending a signal to the markets that they will not stand by and watch Europe sink into recession.

1. http://www.reuters.com/article/gc04/idUSL3045627720080630
2. http://news.bbc.co.uk/1/hi/business/1388781.stm

U.S. Economy Reports Push Down the Australian and NZ Dollar

The Aussie and the kiwi lost ground against major currencies as producer prices and retail sales fell in the United States, changing the speculations about the global crisis that «the worst is behind us».

New Zealand Dollar Falls on Growing Recession Concerns

The kiwi had its worst week in a two-month period against the yen as slumping growth in China indicates that the recession is far from its ending.

Euro Falls as ECB President Fails to Improve Economic Confidence

The euro fell this Friday against major currencies and hit a one-month low against the dollar after ECB President Jean Paul Trichet failed attempt to unite the bank’s policy makers towards a common direction.

Unexpected Drop in Inflation Rate Pushes Canadian Dollar Down

The Canadian dollar had the second day of losses against the greenback after a report indicating that the inflation slowed during the last month.

Pounds Weakens on Pessimism Regarding British Economy

The Confederation of British Industry is expecting the economy to contract even further than previous forecasts, such pessimism brought the pound to a one-week low against the greenback.

Euro Continues to Fall on ECB Policy Disagreement

The euro weakened against the yen and slid to a one-month low against the U.S. dollar as the ECB policy makers are failing to reach a consensus to fight the growing recession in the bloc.