Japan’s Machine Orders Fall For a Third Month of Falling Exports
By Jason Clenfield and Keiko Ujikane
July 8 (Bloomberg) — Japanese machine orders unexpectedly fell for a third month and the current-account surplus narrowed because of plunging exports, stoking concern that the economy will struggle to emerge from its worst postwar recession.
Orders, an indicator of spending by companies in the next three to six months, declined 3 percent in May from April, the Cabinet Office said today in Tokyo. The current-account excess shrank 34.3 percent from a year ago, the Finance Ministry said.
Stocks slumped for a sixth day on speculation that corporate earnings are unlikely to improve amid a dearth of demand at home and abroad. Mounting evidence that Japan’s revival will falter may prompt the central bank to extend its unprecedented credit programs as soon as next week.
“It’s still difficult to have any confidence that the economy’s rebound will continue through this year,” said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. “Given the economy’s weakness, the Bank of Japan will probably decide to extend all of its emergency measures beyond their expiration at the end of September.”
The Nikkei 225 Stock Average slid 1.8 percent at the lunch break in Tokyo. Bonds rose, sending the yield on the benchmark 10-year bond 1.5 basis points lower to 1.29 percent. The yen strengthened to a five-week high of 94.50 against the dollar as investors sought the relative safety of the currency on concern the worldwide slump will be prolonged.
The median estimate of 25 economists surveyed by Bloomberg was for machinery orders to increase 2 percent. The decline, which was bigger than the predictions of all but two of those analysts, took the value of bookings to 668.2 billion yen, the lowest since comparable data became available in April 1987.
Exports Worsen…
BoJ Hints @ More Lending To Ease The Liquidity Crunch
By Masahiro Hidaka and Mayumi Otsuma
July 8 (Bloomberg) — The Bank of Japan may extend its emergency-credit programs as soon as next week as policy makers await evidence that banks are increasing lending to companies.
Officials may want to decide on the matter months before the programs expire at the end of September to quell any speculation they’re ready to scale back their efforts, said Masaaki Kanno, who worked at Japan’s central bank from 1974 to 1999 and served as a senior adviser on research and statistics. The Bank of Japan’s board next meets July 14-15 in Tokyo.
The debate reflects concern that the world’s second-biggest economy will struggle to emerge from its deepest postwar slump, and is a contrast from the U.S., where the Federal Reserve has already taken steps toward ending emergency-credit measures. BOJ Governor Masaaki Shirakawa this week said many companies are still struggling to borrow, after the bank’s quarterly Tankan survey last week showed access to credit remains constrained.
“Policy makers may conclude the bank had better decide on the extension this month if they need to do so anyway,” said Kanno, who is now chief economist in Tokyo at JPMorgan Chase & Co. “Making such an announcement in July can work as an anchor to prevent premature speculation about an exit policy.”
The Bank of Japan started purchasing commercial paper and corporate bonds this year, after lowering the overnight lending rate to 0.1 percent in December. Policy makers also offered unlimited loans to commercial banks at 0.1 percent in exchange for approved collateral. The three programs are scheduled to expire on Sept. 30.
Tankan Report…
Asian Stocks Decline Led By Finance & Commodities
By Patrick Rial and Kotaro Tsunetomi
July 8 (Bloomberg) — Asian stocks fell for a sixth day, led by finance and mining companies, as an unexpected drop in Japanese machinery orders fanned concern a global economic recovery will falter.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by value, sank 2.9 percent after the nation’s bank lending slowed. BHP Billiton Ltd., the world’s largest mining company, lost 2.3 percent in Sydney on lower oil and copper prices. Honda Motor Co., which gets 45 percent of its sales in North America, slumped 4 percent in Tokyo as a stronger yen threatened the value of overseas revenue.
“The economic rebound won’t be rapid,” said Masaru Hamasaki, a Tokyo-based senior strategist at Toyota Asset Management Co., which oversees $14 billion. “It will take time, and share prices are beginning to reflect that.”
The MSCI Asia Pacific Index dropped 1.2 percent to 100.59 at 10:50 a.m. in Tokyo, taking its six-day decline to 2.5 percent. The index has fallen 4.4 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 42 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average fell 1.8 percent. Australia’s S&P/ASX 200 Index declined 1.1 percent, erasing this year’s gains. Indonesia’s stock market is closed today for presidential elections.
South Korea’s Kospi lost 0.7 percent. Samsung Electronics Co., Asia’s largest maker of computer-memory chips, fell 0.9 percent in Seoul as researcher Gartner Inc. predicted spending on information technology will drop. Tokyo Electron Ltd., the world’s second-largest maker of semiconductor equipment, sank 5 percent on a Credit Suisse Group AG downgrade.
U.S. Earnings…
Crude Tumbles in Asia After New York Trade
By Christian Schmollinger and Ben Sharples
July 8 (Bloomberg) — Crude oil fell, poised for the longest losing streak since December, as equities slumped and an industry report showed an increase in U.S. fuel inventories.
Oil declined for a sixth day after the American Petroleum Institute said gasoline supplies rose 767,000 barrels to 212.4 million last week. U.S. stocks fell on concern technology spending will slow and second-quarter earnings will fail to justify a four-month rally in equities.
“The drop in equities is showing that people were over- optimistic on the economy,” said Clarence Chu, a trader with options dealers Hudson Energy Capital in Singapore. “Usually for this time of year we should be getting a draw in gasoline so if it’s building that’s a bad sign.”
Crude oil for August delivery fell as much as 94 cents, or 1.5 percent, to $61.99 a barrel on the New York Mercantile Exchange, the lowest intraday price since May 26. Oil was at $62.23 a barrel at 10:26 a.m. Singapore time.
Oil in New York has declined 15 percent from an eight-month intraday high of $73.38 reached June 30 as higher U.S. unemployment raised concern that the economy of the world’s biggest energy-consuming country will be slow to recover….
Technical Analysis Say’s FXP is a Buy
By Shiyin Chen
July 8 (Bloomberg) — Chinese stocks may be headed for a “sizeable correction” after a so-called momentum indicator for the Shanghai Composite Index advanced to the highest in at least five months.
The 14-day relative strength index, or RSI, for the Shanghai Composite climbed to 83 this week, above the 70 threshold that signals to technical analysts an asset or market is poised to fall. Its RSI, which compares the magnitude of recent gains to losses, last breached the 80 level in February. The stock gauge sank as much as 13 percent in the next two weeks.
“The RSI shows that the market is in a pretty overbought situation,” said Barole Shiu, a Hong Kong-based technical analyst at UOB-Kay Hian Ltd. “If history repeats itself, there’s a very strong chance we’ll see a sizeable correction.”
The Shanghai Composite has rallied 70 percent this year, the world’s best performing major market, as improving loans, investment and manufacturing data suggest that the government’s 4 trillion yuan ($585 billion) stimulus package is reviving the world’s third-largest economy.
At the stock measure’s peak in October 2007, its RSI reached 79.6, a level not seen again until this year. The Shanghai Composite plunged 72 percent in the following 12 months before rebounding, according to data tracked by Bloomberg.
Shiu said the Shanghai A Share Index, the Chinese stock gauge he tracks, may fall at least 200 points, or 6 percent, before finding a support at around 3,000. The measure, which tracks only yuan-denominated shares traded on the larger of China’s two stock exchanges, yesterday closed at 3,243.29. Its RSI climbed to 83.1 on July 6.
“The Shanghai Composite moves in more or less a similar pattern to the Shanghai A Share Index,” he said.
Copper Imports To China Expected To Drop by 64%
By Bloomberg News
July 7 (Bloomberg) — Copper imports by China may plunge 64 percent in the second half after record shipments this year led to excess stocks, UBS AG said.
China, the world’s largest consumer of the metal, may cut refined copper imports to around 100,000 metric tons a month in July to December, from an average of 280,000 tons in the first five months, UBS analysts led by Peter Hickson said in an e- mailed report dated July 6.
There are “clear indications that China is now overstocked” as the Strategic Reserve Bureau is offering up to 100,000 tons of copper to the market and traders are preparing for exports of the metal, the UBS report said.
Chinese imports “couldn’t decrease so sharply in the second half,” Yang Gang, a trader at LG International Corp., said from Shanghai today. Many long-term contracts have been booked and importing copper as a way to obtain finance is very active too, he said, referring to the credit terms traders can obtain from banks.
Copper, used in construction and power grids, has dropped 9 percent from the year’s high of $5,388 a ton on the London Metal Exchange on concern that China may slow purchases. The country’s record shipments lifted prices 60 percent this year, closing the gap between London and Shanghai rates and making it unprofitable to import the metal into China.
Stockpile Estimates…
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