Utilities Pop on Anticipation of Cheap Energy
By Jonathan Burgos
July 7 (Bloomberg) — Most Asian stocks declined, led by commodity companies, on lower oil and metal prices. Utilities advanced on optimism energy costs will drop.
Rio Tinto Group Ltd., the world’s third-biggest mining company, declined 2.7 percent in Sydney, while Inpex Corp., Japan’s largest oil explorer, dropped 1.5 percent. Tokyo Electric Power Co., Asia’s largest utility, added 1.2 percent. Samsung Electronics Co., the world’s largest maker of computer- memory chips, gained 1.4 percent after BNP Paribas recommended investors buy the stock.
“Volumes are light and commodities are tumbling, which is encouraging investors to stay on the sidelines until they can get a fix on the direction of the economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
The MSCI Asia Pacific Index lost 0.5 percent to 101.66 at 10:51 a.m. in Tokyo, with four stocks declining for every three that rose. The measure has slipped 3.4 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 44 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 0.4 percent to 9,642.75. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, fell 2.3 percent after shipping rates fell for a fourth day. Australia’s S&P/ASX 200 Index declined 0.5 percent, while China’s Shanghai Composite Index sank 1.1 percent.
Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The measure gained 0.3 percent yesterday as Moody’s Investors Service said it may lift Brazil’s debt rating…..
Yen Strengthens Against The Euro on Recovery Risk
By Ron Harui and Yasuhiko Seki
July 7 (Bloomberg) — The yen rose against the euro, South African rand and Australian dollar after European finance ministers said risks to the recovery remain, spurring demand for the relative safety of Japan’s currency.
The yen strengthened against all 16 major currencies after Luxembourg Finance Minister Jean-Claude Juncker said at a meeting of euro-area counterparts that “we are still in the middle of the crisis.” The euro fell for a fourth day against the yen on speculation overseas investors, including some in Japan, will bring home income from redemption and coupon payments on 37 billion euros ($51.7 billion) in European bonds due this week, according to Nomura International Plc.
“It’s natural that European policy makers aren’t confident in their economic recovery, as the region is nowhere near that stage yet,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The trend to avoid risk is likely to persist. It’s a negative for the euro and a positive for the yen.”
The yen rose to 133.08 against the euro as of 11:08 a.m. in Tokyo from 133.34 in New York yesterday. It gained 0.5 percent to 11.9540 per rand, and advanced 0.3 percent to 75.83 versus the Australian dollar. Japan’s currency traded at 95.34 per dollar from 95.35. The euro was at $1.3957 from $1.3984.
The yen may advance to 132.50 per euro and 94.60 versus the dollar today, Ishikawa said. The yen typically strengthens in times of financial turmoil as Japan’s trade surplus means the nation does not have to rely on overseas lenders.
Forecast Cut….
G-8 Lose Clout as Debt Burdens Rise
By James G. Neuger
July 7 (Bloomberg) — The world’s most affluent nations will take decades to work off the biggest buildup in debt since World War II. The political costs may be permanent, laid bare at this week’s Group of Eight summit of leading industrial powers.
Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, more than triple the 35 percent of the main emerging economies including China, the International Monetary Fund forecasts.
The run-up in debt is hastening a power shift that saps the industrial world’s authority to impose its economic doctrine, currency arrangements or greenhouse-gas reduction strategies. Even some G-8 officials acknowledge that the group has lost its grip amid the global recession they spawned.
The eight-nation forum that starts tomorrow in L’Aquila, Italy is “a lot less relevant given its makeup and given developments in the world,” French Finance Minister Christine Lagarde said July 5. “Big players, like emerging economies, India, China or Mexico, are invited, but they’re given only a jump seat outside of the main summit.”
The industrial world is beset by the harshest economic conditions in a lifetime: a projected U.S. budget deficit of 13.6 percent of GDP in 2009, unmatched since World War II; an annualized 14.2 percent contraction in Japanese GDP in the first quarter, also the worst since the war; in the first three months of 2009, German exports had their steepest quarterly decline since 1970 when the data were first compiled.
Market Capitalization…
UBS Expects Metal Prices To Drop As China’s Stock Piling is Largely Over
By Jesse Riseborough
July 7 (Bloomberg) — Metals prices, which have risen 39 percent this year in London, will decline this quarter as re- stocking in China nears completion, according to UBS AG.
“China’s re-stock appears complete, whereas the Western World is unlikely to experience similarly strong restocking activity ahead of its seasonal summer slowdown,” UBS analysts led by Sydney-based Glyn Lawcock said in a report dated yesterday. “The magnitude of the recent metal price recovery has in our view been exacerbated by the re-entry of commodity index, Chinese and speculative funds.”
The price of copper will drop 17 percent this quarter, nickel 15 percent and zinc 10 percent ahead of an “economic recovery,” later this year, UBS said. “We now expect key commodity prices to enter the next cyclical upswing by late-2009 and to peak in 2011.”
New Zealand Business Confidence Rises
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