Dollar idles after tumble from 19-month peak; Aussie firm before RBA

TOKYO - The US dollar nursed its wounds on Tuesday following its biggest drop in nearly three weeks against major peers, as Federal Reserve policymakers allayed investor fears of a very rapid tightening of monetary policy.

The Australian dollar remained firm after its biggest jump in eight months overnight ahead of a Reserve Bank of Australia policy decision later on Tuesday, with expectation building that Governor Philip Lowe will capitulate on his prior conviction that an interest rate rise this year was unlikely.

The dollar index, which measures the greenback against six rivals, ticked 0.05 percent higher to 96.715, barely making a dent in Monday's 0.59 percent tumble. It was at an almost 19-month high of 97.441 at the end of last week, as investors pondered chances the Fed could raise rates by 50 basis points in March.

Trading in Asian hours may be subdued with several markets on holiday for the Lunar New Year.

A chorus of Fed officials on Monday backed a lift-off in rates in March, but spoke cautiously about what might follow.

Money markets price in a quarter-point rise for March, and four more by year-end.

"Recent Fed remarks appeared to push back on the odds of a 50bp rate hike in March," putting the focus on economic data this week for clues on the pace of policy tightening, including the closely watched monthly payrolls report on Friday, TD Securities strategists wrote in a note.

US payrolls are forecast to show a gain of 153,000 jobs for January, down from 199,000 in December, with the unemployment rate holding steady at 3.9 percent, according to a Reuters poll.

Meanwhile, the Aussie was little changed at $0.7067 after soaring 1.06 percent on Monday, its biggest gain since early June.

Australian inflation is surging at the fastest annual pace since 2014, suggesting price pressures are not as benign and transitory as policymakers thought they would be.

"It is impractical and unlikely the RBA can continue to hold a dovish stance," the TD Securities strategists wrote, predicting a hike in August or earlier.

A Reuters poll of economists puts the odds of a first hike in November.

The Bank of England holds its policy meeting on Thursday, with a Reuters poll predicting a second rate hike in less than two months after UK inflation jumped to its highest in nearly 30 years.

The European Central Bank also meets on Thursday. While no policy change is expected, analysts said the Fed's looming rate hikes will narrow the ECB's window for action.

The euro slipped 0.11 percent to $1.12235, following a 0.80 percent jump on Monday.

Sterling was flat at $1.34385 after gaining 0.33 percent in the previous session.

The greenback was little changed at 115.125 yen.

(Editing by Jacqueline Wong)

-reuters

Wall Street edges higher; US Fed meeting in focus

The three major U.S. stock indexes edged higher on Tuesday, logging closing records, with financial stocks providing the biggest boost a day ahead of the Federal Reserve's concluding statement from its two-day policy meeting.

The U.S. central bank is expected to announce when it will begin paring its bond holdings, and while a September interest rate increase is not expected, investors will closely study Fed Chair Janet Yellen's views on inflation for clues whether the Fed will raise rates in December.

"It seems the market is holding its breath and waiting for what the Fed has to say regarding the economy and any future interest rate hikes," said Ryan Detrick, senior market strategist for LPL Financial.

"The market could throw a little bit of a fit if they push (balance sheet reduction) back. It could hurt financials and the overall market might not like the uncertainty," he added.

Six of the 11 major S&P sectors closed higher, with the financial sector's 0.8 percent gain providing the biggest boost. The sector has risen in seven of the last eight sessions, clocking a 6 percent rise in that time.

If the Fed reduces its balance sheet, investors are betting that would lift yields for longer-term treasuries, which could boost bank profits, Detrick said.

The Dow Jones Industrial Average rose 39.45 points, or 0.18 percent, to 22,370.8, clocking its sixth straight record close. The S&P 500 gained 2.78 points, or 0.11 percent, to 2,506.65, hitting its fifth record closing high in the last six sessions.

The Nasdaq Composite added 6.68 points, or 0.1 percent, to 6,461.32, also squeaking out a record closing high, slightly above its Sept. 13 close.

The biggest percentage gain was the telecom services sector's 2.3 percent jump on merger and acquisition speculation.

The biggest U.S. telephone operators, Verizon and AT&T, rose more than 2 percent, providing the second- and third-biggest individual stock boosts for the S&P. Shares of smaller wireless carrier T-Mobile rose 5.9 percent and Sprint jumped 6.8 percent, following a report they were in active merger talks.

The healthcare index was one of the biggest laggards, with declines in insurers such as United Health , which fell 1.8 percent due to the latest efforts in Washington to overhaul Obamacare.

Best Buy fell 8 percent after the No. 1 U.S. electronics retailer forecast fiscal 2021 adjusted earnings well below Wall Street estimates. The stock was one of the biggest drags on the consumer discretionary index.

Tesla fell 2.6 percent after Jefferies started coverage of the electric car maker's stock with an "underperform" rating.

Advancing issues outnumbered declining ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored advancers.

About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data. — Reuters

Wall Street clings to records, helped by banks; tech falters

The S&P 500 ended slightly higher on Monday as financial stocks rose ahead of a Federal Reserve meeting, but the Nasdaq pared gains sharply as technology stocks lost ground late in the session.

Five of the 11 major S&P sectors ended lower. Rising U.S. Treasury yields boosted financial stocks, as higher interest rates tend to lift bank profits, but rate-sensitive sectors such as utilities were the weakest.

The Fed meeting, which starts Tuesday, is expected to yield details on how the central bank will unwind its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.

After pushing the S&P above its 2,500-point milestone last week, investors were holding their fire as they awaited more clues on the timing of the next rate hike from Fed Chair Janet Yellen.

"You just had that little momentum spurt after it went through 2,500 but it is kind of running out of steam and is going to bide its time until Wednesday, when they listen to Janet" said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.

However, the Dow still clocked a closing record for the fifth day in a row while the S&P had a closing record for the second consecutive session.

"There's momentum in the market. There's lots of cash. Even though the Fed's about to reduce their balance sheet, you continue to have incredibly aggressive monetary policy. That continues to lead to money flowing into the market almost in an indiscriminate fashion," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

The Dow Jones Industrial Average rose 63.01 points, or 0.28 percent, to 22,331.35, the S&P 500 gained 3.64 points, or 0.15 percent, to 2,503.87 and the Nasdaq Composite added 6.17 points, or 0.1 percent, to 6,454.64.

Big technology stocks such as Microsoft and Google parent Alphabet came under pressure late in the session after Amazon said it would move to charging businesses in one-second increments for use of its servers.

"That competes with Google and Microsoft, and it's going to weigh on the entire tech space" because of price competition, said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Microsoft shares ended down 0.2 percent while Alphabet was off 0.6 percent, with both stocks seeing a pickup in volume late in the day.

Advancing issues outnumbered declining ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.55-to-1 ratio favored advancers.

About 5.97 billion shares changed hands on U.S. exchanges on Monday, compared with the 5.91 billion average for the last 20 sessions. — Reuters

US Fed raises key rate to 1.0-1.25%, signals one more hike in 2017

WASHINGTON, United States — The US Federal Reserve raised its benchmark interest rate by a quarter point to 1.0-1.25 percent on Wednesday and signaled another increase remains likely this year, despite the recent spate of weak economic data.

In explaining this second rate hike of 2017 and plans for more increases in the coming months, Federal Reserve Chair Janet Yellen said the move reflected the progress in the world’s largest economy, which continues to add jobs at a solid pace.

“The economy is doing well, is showing resilience,” Yellen said in her quarterly press conference.

“We have a very strong labor market, an unemployment rate that’s declined to levels we have not seen since 2001. And even with some moderation in the pace of job growth, we have a labor market that continues to strengthen.”

And despite recent tepid price pressures, the Fed expects inflation to pick up — eventually, citing “one-off reductions” in certain categories such as cell phone services and prescription drugs as the reason for the recent lower readings.

Those factors mean the Fed’s preferred inflation measure will remain below the two percent target for some time, but will gradually rise to the target level over “the medium term.”

But coming on a day when the consumer price index and retail sales fell, in large part due to falling food and gasoline prices, but with widespread declines in other categories, some economists are saying the Fed is no longer basing its decision on the data, as it has repeatedly said.

“The third rate hike in seven months, coming not long after a relatively poor Q1 GDP print, suggests the Fed has become less data-dependent in its monetary policy decisions,” Fitch Ratings Chief Economist Brian Coulton said.

One FOMC member, Minneapolis Federal Reserve Bank President Neel Kashkari, dissented from the decision, preferring to keep policy on hold for now.
Third hike coming?

Analysts in recent weeks have become increasingly doubtful there would be a third rate increase later this year, as inflation, consumption and other economic data have indicated the weakness seen in the first quarter has continued.

Fed futures markets now put the chances for another rate increase this year to below 50 percent.

Chris Low of FTN Financial said the Fed “compromised” by continuing the rate increases despite falling inflation, but “the market expects the Fed to take a break.”

However, Yellen said business and household confidence remain quite strong, and echoed the statement from the Fed’s policy-setting Federal Open Market Committee, which repeated its confidence that the economy will continue to expand “at a moderate pace” even with further gradual rate increases.

Asked about the criticism, Yellen said, “I don’t think …the Fed’s credibility has been impaired.”

She once again said the path of interest rates “is not a pre-set course,” but the Fed’s quarterly projections show they still anticipate making a third rate increase this year, with the median federal funds rate ending 2017 at 1.4 percent.

That would be followed by three rate increases in 2018 and three more in 2019, with the key rate at 2.9 percent by the end of that period.
Forecasts

In their quarterly projections, Fed officials saw the economy growing slightly faster than previously forecast, with GDP up 2.2 percent this year, a tenth of a percentage point higher than forecast in March.

But the estimate for the central bank’s preferred measure of inflation, the PCE price index, was cut three-tenths to 1.6 percent, while the core PCE, which excludes volatile food and energy prices, was cut two-tenths to 1.7 percent, according to the Summary of Economic Projections.

The Fed now sees the unemployment rate ending the year at 4.3 percent, where it sits currently, rather than the 4.5 percent previously expected.

The central bank also confirmed that it will begin later this year to implement a plan to reduce the size of its investment holdings, which were built up to record levels during the financial crisis to help support the economy, especially once interest rates reached zero.

As long as the economy “evolves broadly as expected,” the plan “would gradually reduce the Federal Reserve’s securities holdings,” the FOMC statement said. CBB

source: business.inquirer.net

US jobs machine keep stock market humming

World stock markets were mostly higher Friday as investors welcomed strong US jobs data which all but sealed a Federal Reserve rate hike next week.

Wall Street and most European equity markets traded firm in response to the American economy generating 235,000 new jobs in February, well above what economists had forecast.

This was the missing piece of the puzzle Fed watchers were waiting for to make tighter credit a near-certainty when the US central bankers meet next week.

Lower-than-expected wage rises kept a few doubts alive, but mostly the jobs report hit the spot, analysts said.

Upbeat New York helped key European markets hold onto most of their early gains. London and Paris were up at the end of European trading, but Frankfurt slipped a smidgen into negative territory just before the closing bell.

Earlier, Japan’s Nikkei jumped 1.5 percent, with declines in the yen boosting exporters.

“Today’s US jobs report was more than adequate to justify a rate hike next week,” said Craig Erlam at Oanda.

‘Won’t bottle it’

“The only thing standing in the way of a rate hike now is the Fed itself,” he said, “but after its efforts over the last few weeks, surely even it won’t bottle it now.”

Higher interest rates are not in themselves reason for cheer in the stock market as borrowing costs rise, but analysts said rate rises are a much-needed token of Fed confidence in the US economy in times of uncertainty, including over President Donald Trump’s economic program.

“After all, monetary policy is set to be tightened further against the backdrop of strengthening US and global economies,” said Oliver Jones at Capital Economics.

Investors are “still unwilling to bet against higher prices despite strong odds of a rate increase in the US next week,” LCG analyst Jasper Lawler said of global stock markets.

Elsewhere, oil prices were back on a slippery slope, having earlier Friday recovered ground after sharp mid-week losses. US oil prices dropped 79 cents to $48.49 per barrel, its lowest level since late November.

Worries about a global supply glut, increased US production and questions about an OPEC-Russia led drive to cut output are keeping oil traders on edge.

Key figures around 2200 GMT

New York – Dow: UP 0.2 percent at 20,902.98 (close)
New York – S&P 500: UP 0.3 percent at 2,372.60 (close)
New York – Nasdaq: UP 0.4 percent at 5,861.73 (close)
London – FTSE 100: UP 0.4 percent at 7,343.08 (close)
Frankfurt – DAX 30: DOWN 0.1 percent at 11.963.18 (close)
Paris – CAC 40: UP 0.2 percent at 4,993.32 (close)
EURO STOXX 50: UP 0.3 percent at 3,420.54
Tokyo – Nikkei 225: UP 1.5 percent at 19,604.61 (close)
Hong Kong – Hang Seng: UP 0.3 percent at 23,568.67 (close)
Shanghai – Composite: DOWN 0.1 percent at 3,212.76 (close)
Euro/dollar: UP at $1.0672 from $1.0576 Thursday
Pound/dollar: UP at $1.2169 from $1.2162
Dollar/yen: DOWN at 114.78 yen from 114.98 yen
Oil – Brent North Sea: DOWN 82 cents at $51.37 per barrel
Oil – West Texas Intermediate: DOWN 79 cents at $48.49 per barrel

source: business.inquirer.net

Wall Street set to open higher on robust jobs data

U.S. stocks looked set to open higher on Friday after an upbeat monthly jobs report underscored the strength of the U.S. economy and firmed the odds for the first interest rate hike this year.

The Labor Department data showed 235,000 jobs were added in the public and private sectors in February, blowing past economists' average estimate of 190,000 as the construction industry recorded its largest gain in nearly 10 years.

Unemployment rate stood at 4.7 percent, while average earnings edged up 0.2 percent.

"I suspect that there is a positive impact from milder weather in February which may have skewed this number to the high side," said Alan Gayle, director of asset allocation at Ridgeworth Investments in Atlanta, Georgia.

"But the operative message is that the jobs market continues to strengthen, and that is likely to give the FOMC a green light to raise rates when they meet next week."

A slew of recent robust data has encouraged the Federal Reserve to turn more hawkish on interest rates.

The odds of a rate hike during the Fed's meeting next week edged up to 89.7 percent after the report, according to Reuters data.

Fed Chair Janet Yellen's conference after the two-day meeting next week will be closely watched for clues on the pace of future rate hikes.

Dow e-minis were up 88 points, or 0.42 percent, at 8:32 a.m. ET (1332 GMT), with 18,690 contracts changing hands.

S&P 500 e-minis were up 10.5 points, or 0.44 percent, with 191,460 contracts traded.

Nasdaq 100 e-minis were up 21 points, or 0.39 percent, on volume of 15,479 contracts.

In the 49 days of Donald Trump's presidency, the Dow Jones Industrial Average broke above 20,000 points and the S&P 500 crossed $20 trillion in market value on bets that he would usher in an era of tax cuts, simpler regulations and higher infrastructure spending.

However, the lack of detail on Trump's plans has raised questions about valuations and taken the heat off the post-election rally.

Wall Street closed little changed on Thursday as a late rebound in oil prices cut losses in the energy sector. Oil was up 0.7 percent on Friday.

Shares of big U.S. banks, including Goldman Sachs, Bank of America and Morgan Stanley, were up more than 1 percent in premarket trading.

Alexandria Real Estate Equities was off 5 percent at $108.04 after the REIT priced an offering of 6.1 million shares at $108.55 per share - a 4.5 percent discount to its Thursday close.

Finisar Corp dropped 17 percent to $29.11 after the network equipment maker issued disappointing revenue and profit forecasts for the current quarter. — Reuters

source: gmanetwork.com

Trump fears hang over global stocks

NEW YORK, United States — Wall Street stocks were pressured for a second session in a row Tuesday on a combination of worries about Trump administration policies and disappointing earnings.

Markets in Japan and Europe dropped with analysts citing worries about Trump’s controversial executive order on immigration. Fresh comments criticizing Germany from a White House economic advisor also dented sentiment on European bourses, analysts said.

“It’s a combination of disappointing earnings, Trump worries and macro news,” said Peter Cardillo, chief market economist at First Standard Financial.

US stocks were down most of the day, but finished above session lows. The stock moves came ahead of a Federal Reserve policy decision Wednesday that is expected to keep interest rates unchanged.

Among those to report disappointing results were oil giant ExxonMobil, which suffered a nearly 40 percent fall in fourth-quarter earnings to $1.7 billion and announced it was writing down the value of some assets due to low oil and natural gas prices.

Package shipping giant UPS was another loser, slumping nearly seven percent as it reported a loss of $239 million in the fourth quarter and projected weaker-than-expected 2017 profits due in part to ramped-up capital investments to improve e-commerce business.

Offsetting those declines was the benign response of pharma stocks to Trump comments in a meeting of top industry executives, reiterating a pledge to lower drug prices, but also saying he would work to slash regulations to streamline the drug-approval process. Most pharma equities ended higher.

Meanwhile, European markets reacted nervously to the latest broadside from a Trump economic advisor Peter Navarro, bashing Germany for exploiting an undervalued euro to take advantage of its trading partners.

Frankfurt dropped 1.3 percent, while Paris lost 0.8 percent.

The Navarro comments also boosted the euro against the dollar, analysts said.

“The Trump administration appears to be targeting currencies as part of its goal of realigning global trade back in favor of the US worker,” said London Capital Group analyst Jasper Lawler.

“Trump’s team criticizing the euro in the context of Brexit and populist candidates in upcoming European elections puts ‘eurozone breakup risk’ at the highest since the bloc’s inception,” he said.

Markets already were jittery after Trump’s much criticized executive order suspending the arrival of all refugees for a minimum of 120 days, Syrian refugees indefinitely and barring citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen for 90 days.

“Trump is proving to be even more erratic and unpredictable than many feared,” said XTB analyst David Cheetham. CBB

source: business.inquirer.net

Fed to raise rates as Trump economy looms

WASHINGTON, United States — There is little room for doubt that the US Federal Reserve will raise the benchmark interest rate in the coming week for only the second time in a decade.

With unemployment at a nine-year low, jobs being created at an average of 180,000 per month, the economy growing at better than three percent in the most recent quarter and some signs of a pickup in inflation, the writing is on the wall.

Some members of the Federal Open Market Committee, which sets the key federal funds rate, the basis for mortgage and lending rates, have even cautioned that failing to raise rates in December could harm the central bank’s credibility, given expectations set by policymakers in recent months.

“All the necessary and sufficient conditions are there,” Mark Zandi, chief economist at Moody’s Analytics, told AFP.

With a rate hike assumed, the question remains whether Wednesday’s move will be the first in a series.

That was what central bankers thought was going to happen a year ago, when they announced the start of the “normalization” of interest rates after keeping them at zero in the wake of the 2008 financial crisis.

‘Normalization’ under Trump?

But the Fed’s efforts to turn the page on monetary stimulus with gradual tightening quickly went off track, despite forecasts for up to four rate hikes in 2016.

Seven times this year, the FOMC declined to raise rates, impeded by poor US economic data, Britain’s shock June vote to exit the European Union, and above all by fears of interrupting a fragile recovery.

And analysts said there were no guarantees 2017 would see the beginning of a tightening cycle either, given uncertainties in geopolitics and the yet-to-be-determined policies of President-elect Donald Trump, who shocked the world last month by winning the US election while offering proposals scant on specifics.

A Wall Street Journal poll of economists this week put the Federal funds rate at an average of 1.26 percent by December 2017, implying four rate increases. A Reuters poll projects three rate increases.

Stocks have rallied since Trump’s win, with major indices repeatedly setting records on investor expectations that Trump will cut taxes and offer fiscal stimulus, including infrastructure spending — programs the would fuel growth and inflation, and make rate hikes more likely.

The ratings agency Fitch also said it expected US debts and deficits to rise under a likely Trump stimulus plan.

But William Dudley, the influential FOMC vice chair and president of the New York Federal Reserve Bank, said in a speech Monday that Trump’s victory created “considerable” uncertainty and it was too early to say whether the Fed’s plan for gradual tightening would have to be adjusted.

Shifting dynamics in Washington

Fed futures do not expect a sudden rush of higher rates: the CME FedWatch tool does not forsee a 2017 rate hike before June.

Zandi of Moody’s Analytics said he was looking for three rate increases next year, with policymakers waiting at least until spring to see what the Trump administration would do.

But the upset Trump victory changed things, he said.

“With the election, I think the political dynamics have shifted,” said Zandi, who in June produced a report critical of Trump policy proposals. “I think there’s a good chance that we get some form of fiscal stimulus next year that’s deficit financed.”

“That argues for a more rapid normalization of interest rates,” he said. “I’m sure we’ll have reticent Republicans who don’t want to deficit spend. I think they’ll be more willing to buy into the argument that the stimulus that Trump proposes will lead to supply-side benefits, to a bigger economy.”

But Zandi said uncertain geopolitical developments on the horizon — far right victories in European elections and threats to European integration for example — could throw the Fed off track again.

Jim Glassman, managing director and chief economist for commercial banking at JP Morgan Chase, said he believed the Fed missed an opportunity by putting off rate hikes in 2016 as its worst fears failed to materialize.

“I think the economy’s doing fine,” he told AFP. “The Fed taking its foot off the gas is not going to derail the US economy.” CBB

source: business.inquirer.net

World stocks drift as Fed rate outlook eases on service data

HONG KONG — World stock markets meandered Wednesday after a weak report on U.S. service companies added to expectations that the Fed won’t move anytime soon to raise interest rates.

KEEPING SCORE: European shares posted small gains in early trading. France’s CAC 40 rose 0.3 percent to 4,541.80 and Germany’s DAX rose 0.3 percent to 10,717.28. Britain’s FTSE 100 edged up less than 0.1 percent to 6,828.08. U.S. stocks were poised to open slightly higher, with Dow futures up 0.1 percent to 18,532.00 and broader S&P 500 futures rising 0.1 percent to 2,185.60.

U.S. SERVICES DATA: A private monthly survey found that U.S. services companies expanded in August at the slowest pace in more than six years. The Institute for Supply Management’s services index came in at its lowest level since February 2010. Last month’s decline was also the biggest since late 2008, when the U.S. was gripped by a recession amid the global crisis. While Federal Reserve chief Janet Yellen had said last month that the case for raising rates was becoming stronger, the numbers add to other recent evidence that the U.S. economy is still shaky and reduce expectations for such a move.

ANALYST INSIGHT: The latest figures are “highlighting a continuing concern that the recovery in the U.S. economy may be losing steam,” said Nicholas Teo at KGI Fraser Securities in Singapore. “This, together with last week’s lower than expected payroll numbers, may in turn deny Mrs. Yellen of the confirmation she needs to lift rates later this month.”

ASIA’S DAY: Japan’s benchmark Nikkei 225 index lost 0.4 percent to finish at 17,012.44 as the latest U.S. data pushed the yen higher, hurting shares of the country’s export manufacturers. South Korea’s Kospi fell 0.2 percent to 2,061.88 and Hong Kong’s Hang Seng dipped 0.2 percent to 23,741.81. The Shanghai Composite Index in mainland China climbed less than 0.1 percent to 3,091.93 and Australia’s S&P/ASX 200 rose 0.2 percent to 5,424.20.

ENERGY: Benchmark U.S. crude oil futures added 46 cents to $45.29 in electronic trading in the New York Mercantile Exchange. The contract added 39 cents to settle at $44.83 a barrel in New York. Brent crude, the benchmark for international oil prices, rose 54 cents to $47.80 a barrel in London.

CURRENCIES: The dollar sank to 101.66 yen from 101.99 yen in late trading Tuesday. The euro slipped to $1.1239 from $1.1246. TVJ

source: business.inquirer.net

World stocks drift as Fed rate outlook eases on service data

HONG KONG — World stock markets meandered Wednesday after a weak report on U.S. service companies added to expectations that the Fed won’t move anytime soon to raise interest rates.

KEEPING SCORE: European shares posted small gains in early trading. France’s CAC 40 rose 0.3 percent to 4,541.80 and Germany’s DAX rose 0.3 percent to 10,717.28. Britain’s FTSE 100 edged up less than 0.1 percent to 6,828.08. U.S. stocks were poised to open slightly higher, with Dow futures up 0.1 percent to 18,532.00 and broader S&P 500 futures rising 0.1 percent to 2,185.60.

U.S. SERVICES DATA: A private monthly survey found that U.S. services companies expanded in August at the slowest pace in more than six years. The Institute for Supply Management’s services index came in at its lowest level since February 2010. Last month’s decline was also the biggest since late 2008, when the U.S. was gripped by a recession amid the global crisis. While Federal Reserve chief Janet Yellen had said last month that the case for raising rates was becoming stronger, the numbers add to other recent evidence that the U.S. economy is still shaky and reduce expectations for such a move.

ANALYST INSIGHT: The latest figures are “highlighting a continuing concern that the recovery in the U.S. economy may be losing steam,” said Nicholas Teo at KGI Fraser Securities in Singapore. “This, together with last week’s lower than expected payroll numbers, may in turn deny Mrs. Yellen of the confirmation she needs to lift rates later this month.”

ASIA’S DAY: Japan’s benchmark Nikkei 225 index lost 0.4 percent to finish at 17,012.44 as the latest U.S. data pushed the yen higher, hurting shares of the country’s export manufacturers. South Korea’s Kospi fell 0.2 percent to 2,061.88 and Hong Kong’s Hang Seng dipped 0.2 percent to 23,741.81. The Shanghai Composite Index in mainland China climbed less than 0.1 percent to 3,091.93 and Australia’s S&P/ASX 200 rose 0.2 percent to 5,424.20.

ENERGY: Benchmark U.S. crude oil futures added 46 cents to $45.29 in electronic trading in the New York Mercantile Exchange. The contract added 39 cents to settle at $44.83 a barrel in New York. Brent crude, the benchmark for international oil prices, rose 54 cents to $47.80 a barrel in London.

CURRENCIES: The dollar sank to 101.66 yen from 101.99 yen in late trading Tuesday. The euro slipped to $1.1239 from $1.1246. TVJ

source: business.inquirer.net

Stocks down slightly after 5-day winning streak

NEW YORK — Stocks are falling slightly in morning trading Friday as the market breaks a five-day winning streak that sent major indexes to fresh highs. Bond yields climbed. Technology and consumer discretionary stocks are dropping the most.

KEEPING SCORE: The Dow Jones industrial average fell 2 points, or less than 0.1 percent, to 18,504 at 11:32 a.m. Eastern time. The Standard & Poor’s 500 index lost 3 points, or 0.2 percent, to 2,161. The Nasdaq composite fell 6 points, or 0.1 percent, to 5,028.

THE QUOTE: After the recent gains, “you have to be concerned. Are we going to see more slowing of the global economy?” said Bill Stone, chief investment officer at PNC Asset Management. “What is going to be the real impact of Brexit?”

SUPPLEMENT SURGE: Herbalife rose $9.21, or nearly 16 percent, to $68.57 after The Federal Trade Commission decided not to classify the nutritional supplements company as a pyramid scheme, as was alleged by investor Bill Ackman. The company did agreed, however, to pay $200 million to resolve allegations that it deceived consumers.

BANK BLUES: Wells Fargo fell $1.21, or 2.5 percent, to $47.73 after the consumer banking giant reported that second-quarter earnings fell.

INFLATION CHECK: The Labor Department reported consumer prices rose a modest 1 percent in June from a year ago, well below the Federal Reserve’s 2 percent inflation target. The Fed, which meets July 26-27, wants to see evidence that inflation is ticking up before raising interest rates.

SHOPPING MORE: The Commerce Department reported that U.S. retail sales rose a robust 2.7 percent in June from a year earlier. Consumer spending accounts for about two-third of economic output in the U.S., much higher than in many other developed countries.

ATTACK IN FRANCE: Trading was subdued in Europe after a man drove a truck into crowds celebrating Bastille Day along the beachfront of Nice, killing at least 84 people.

EUROPE SLIPS: France’s CAC-40 was down 0.6 percent while Germany’s DAX fell 0.2 percent. Britain’s FTSE 100 was flat.

TRAVEL SLUMP: Travel-related stocks fell in the wake of the attack. Cruise operator Royal Caribbean fell $1.26, or 1.8 percent, to $70.63 and Delta Air Lines fell 97 cents, or 2.4 percent, to $40.01.

CHINA GROWTH: The Chinese government says its economy expanded at a steady 6.7 percent in the April-June period as spending on construction by state-owned companies in the world’s second-largest economy helped compensate for weak private sector demand.

ASIA’S DAY: Japan’s Nikkei 225 rose 0.7 percent. The Hang Seng index in Hong Kong climbed 0.5 percent and South Korea’s Kospi index added 0.4 percent.

BONDS AND CURRENCIES: Bond prices fell. The yield on the 10-year Treasury note rose to 1.59 percent from 1.54 percent. The euro fell to $1.1076 from $1.1123 and the dollar rose to 105.93 yen from 105.43 yen.

ENERGY: Benchmark U.S. crude rose 38 cents to $46.06 a barrel in New York, while Brent crude, a standard for international oil prices, rose 44 cents to $47.81 a barrel in London. TVJ

source: business.inquirer.net

Global stocks decline ahead of Fed meeting

BEIJING — Global stocks declined Wednesday as investors awaited this week’s U.S. Federal Reserve meeting, expecting possible insights into the state of global growth and future Fed moves.

KEEPING SCORE: In early trading, Britain’s FTSE 100 fell 0.6 percent to 6,136.50, France’s CAC-40 fell 0.5 percent to 4,482.50 and Germany’s DAX shed 0.4 percent to 9,945.74. On Monday, the DAX rose 1.4 percent and the CAC-40 and FTSE both added 0.4 percent. On Wall Street, futures for the Dow Jones industrial average and Standard & Poor’s 500 index both declined 0.4 percent.

ASIA’S DAY: Tokyo’s Nikkei 225 lost 0.7 percent to 17,117.07 and Hong Kong’s Hang Seng declined 0.7 percent to 20,288.77. Sydney’s S&P ASX 200 fell 1.4 percent to 5,111.40 and India’s Sensex retreated 0.9 percent to 24,580.54. Seoul’s Kospi was off 0.1 percent at 1,969.97 and Taiwan, Singapore, Bangkok and Jakarta also fell. The Shanghai Composite Index gained 0.2 percent to 2,864.37 and New Zealand also rose.

WATCHING THE FED: The Federal Reserve’s Federal Open Market Committee meets Tuesday and Wednesday. Investors don’t expect a rate hike but are watching for indications of possible future Fed moves. In December the Fed raised interest rates for the first time in almost a decade, but it left them unchanged in January.

ANALYST’S TAKE: “The most anticipated item on the U.S. economic calendar this week is the FOMC meeting, even though policy will almost certainly be left on hold. With no change in rates, the focus will be entirely on forward guidance,” said Jim O’Sullivan of High-Frequency Economics in a report.

JAPAN CENTRAL BANK: The Bank of Japan left its monetary policy unchanged Tuesday but downgraded its assessment of conditions in the world’s third-largest economy, citing risks from weaker growth in China and other emerging economies and volatility in financial markets, among other factors.

CURRENCY: The dollar slipped to 112.99 from 113.79 yen. The euro edged up to $1.1108 from Monday’s $1.1105.

ENERGY: Benchmark U.S. crude shed 82 cents to $36.36 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.32 on Monday to close at $37.18. Brent crude, used to price international oils, lost 84 cents to $38.69 per barrel in London. On Monday, the contract declined 86 cents to $39.53. TVJ

source: business.inquirer.net

Asian stocks subdued as oil resumes fall

TOKYO - Asian stocks were subdued on Tuesday, with Japanese and South Korean equities slipping, after crude oil prices resumed their slide and cooled investor sentiment.

MSCI's broadest index of Asia-Pacific shares outside Japan were effectively unchanged, and looked set for a loss of around 12 percent for the year.

Japan's Nikkei lost 0.3 percent and South Korea's KOSPI fell 0.4 percent. Australian stocks bucked the trend and rose 0.4 percent.

On Monday, prices of both Brent and US crude dropped more than 3 percent , reversing a brief rebound and dragging US energy shares down 1.8 percent as the worst performing of the major S&P sectors.

Brent was at $36.60 a barrel, near an 11-year low of $35.98 struck last week.

The Dow dipped 0.1 percent and the S&P 500 lost 0.2 percent overnight after trading resumed following the Christmas break, but activity is expected to remain thin until after the long New Year holiday weekend.

In currencies, the dollar edged down 0.1 percent to 120.33 yen, within striking distance of a two-month low of 120.05 struck late last week.

The greenback has been sapped by profit taking after the Federal Reserve this month hiked interest rates for the first time in nine years. The currency market will wait for the Fed to send fresh signals about when the second rate hike could take place in 2016 for potential dollar support.

The euro nudged up 0.1 percent to $1.0977.

The dollar fared better against its Canadian counterpart, which was weighed down as crude oil prices weakened again.

The Canadian dollar stood little changed at C$1.3894 to the greenback after losing 0.7 percent overnight. The loonie fell to an 11-year low of C$1.4003 against the dollar earlier this month.

"We are looking for USD/CAD to break 1.40 and head towards 1.45 in the first half of 2016. The oil industry is experiencing its biggest downturn since the 1990s and prices could fall another $10 a barrel before bottoming," wrote Kathy Lien, managing director at BK Asset Management.

The Australian dollar gained 0.2 percent to $0.7262 while the New Zealand dollar rose 0.2 percent to $0.6859. Both currencies were confined to a narrow range ahead of the year's end. —Reuters

Dividend payers get a break from Fed decision

NEW YORK - The Federal Reserve's decision not to hike interest rates may have brought renewed volatility and a stock market selloff, but it also carved out breathing room for a couple of sectors: dividend payers and housing stocks.

With 10-year Treasuries now yielding around 2.14 percent, the 2.2 percent dividend yield of the overall S&P 500 should appeal to income-hungry investors who are convinced interest rates will stay low for a while.

Some sectors' yields are much higher. Telecommunication services companies are yielding 5.35 percent, for example.

Utilities and real estate investment trusts (REITs) have gained ground since the Fed announced its decision. The S&P utility index, though down slightly on Friday, was the best-performing sector since the Fed announcement.

"We could be in a lower-for-longer environment, and ... some of the stocks that have yield components, whether it's REITs or utilities and other dividend stocks that have sold off, maybe those will eventually find a footing here and get some flow," said Stephen Gutch, senior portfolio manager at Federated Investors in Rochester, New York.

"They're fairly valued for a higher-rate environment, so I think they're attractive right now."

Since they compete with bonds, big dividend-paying stocks have benefited in recent years from the ultra-low interest rate environment, with the S&P utility index registering a 24.3 percent gain in 2014, the best of any S&P sector.

But this year, utilities have retreated as Treasury yields rose on the prospect of a Fed rate hike. With the Fed now holding off, the sector may fall back into favor.

"When I look at utilities that are yielding in the 4-percent range, I think they're priced for what I'd call a normal 10-year Treasury yield - call it 4 or 5 percent - because with utilities you're still going to get some earnings growth," said Josh Peters, director of equity income strategy at Morningstar. "I'd have a similar take on REITs."

Although dividend payers provide a certain measure of protection in volatile markets, they are by no means sheltered from the market's ups and downs. Volatility most likely will stick around, analysts say, as investors reassess the prospects for interest rates and global economic growth.

"We believe we have moved from a market where one should simply buy the dips, to one in which one ought to also sell rallies," Peter Cecchini, chief market strategist at Cantor Fitzgerald in New York, wrote in a research note.

Another area of the market that could benefit from the low-for-longer rate environment is the housing sector, with prospects of continuing low rates helping mortgage seekers.

As the jobs market and income growth improve, demand for housing should rise as well, Fed Chair Janet Yellen said on Thursday.

Housing shares have outperformed the broader market this year, with the PHLX housing index up 10.9 percent, compared with the S&P 500's decline of 4.5 percent.

Next week, reports on existing and new home sales could move stocks like Lennar or PulteGroup. — Reuters

US economy: Consumer spending bolsters second-quarter growth

WASHINGTON -  U.S. economic growth accelerated in the second quarter as solid consumer spending offset the drag from weak business spending on equipment, suggesting a steady momentum that could bring the Federal Reserve closer to hiking interest rates this year.

Gross domestic product expanded at a 2.3 percent annual rate, the Commerce Department said on Thursday. First-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, was revised up to show it rising at a 0.6 percent rate.

The revision to first-quarter growth reflected steps taken by the government to refine the seasonal adjustment for some components of GDP, which economists said left residual seasonality in the data, as well as new source data.

The Fed on Wednesday described the economy as expanding "moderately" while upgrading its view of the labor market and saying housing had shown "additional" improvement. The Fed's assessment left the door open for a possible hike in interest rates in September, which would be the first rise since 2006.

A separate report showed first-time applications for state unemployment benefits increased 12,000 last week to a seasonally adjusted 267,000. However, claims remained not too far from their cycle lows.

The dollar extended gains against a basket of currencies, while prices for U.S. Treasury debt fell slightly.

Though second-quarter GDP growth was a bit below economists' expectations for a 2.6 percent rate, the growth composition pointed to firming domestic fundamentals.

A measure of private domestic demand, which excludes trade, inventories and government expenditures, increased at a 2.5 percent rate after rising at a 2.0 percent pace at the start of the year.

Growth in the second quarter was boosted by consumer spending as households used some of the windfall from cheaper gasoline in late 2014 and early this year to go shopping. The strengthening labor market also encouraged consumers to loosen their purse strings.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 2.9 percent rate from a downwardly revised 1.8 percent pace in the first quarter. Consumer spending was previously reported to have increased at a 2.1 percent rate at the start of the year.

The saving rate fell to 4.8 percent from 5.2 percent.

ENERGY DRAG PERSISTS

Housing also supported the economy in the second quarter, as did exports, and state and local government spending.

However, the energy sector continued to weigh on growth as it struggles with the lingering effects of deep spending cuts by oil-field companies like Schlumberger (SLB.N) and Halliburton (HAL.N) in the aftermath of a more than 60 percent plunge in crude oil prices last year.

Business spending on structures fell at a 1.6 percent rate after stumbling 7.4 percent at the start of the year. Investment on equipment fell at a 4.1 percent rate.

Spending on mining exploration, wells and shafts plunged at a 68.2 percent rate, the largest decline since the second quarter of 1986. This category dropped at a 44.5 percent pace in the first quarter.

But there are signs that the energy spending rout might be nearing an end. Data last Friday showed U.S. energy firms added 21 oil rigs last week, marking the third increase over the past 33 weeks.

Schlumberger said last week it believed the North American rig count may be bottoming and that a slow rise in both land drilling and completion activity could occur in the second half of the year.

Exports rebounded in the second quarter, despite a strong dollar, while imports rose moderately. That left a smaller trade deficit that added 0.13 percentage point to GDP growth.

Inventory investment slowed after the first quarter's brisk pace. Businesses accumulated $110.0 billion worth of merchandise, down from $112.8 billion in the first quarter, good news for the remainder of the year.

With oil prices rising during the second quarter and consumer spending picking up, inflation accelerated sharply.

The personal consumption expenditures price index rebounded at a 2.2 percent rate, the fastest since the first quarter of 2012, after falling at a 1.9 percent rate at the start of the year. Excluding food and energy, prices increased at a 1.8 percent pace.  — Reuters

Yellen says economy on track, defends Fed 'transparency'

WASHINGTON - Federal Reserve Chair Janet Yellen said on Wednesday the U.S. central bank remains on track to raise interest rates this year, with labor markets expected to steadily improve and turmoil abroad unlikely to throw the U.S. economy off track.

"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate," Yellen said in testimony prepared for the U.S. House of Representatives Financial Services Committee, affirming the view of a central bank prepared to gradually raise rates after more than six years at a near-zero level.

Labor markets are "not yet consistent with maximum employment," she said. "Greece remains difficult. And China continues to grapple with the challenges posed by high debt, weak property markets, and volatile financial conditions."

Still, "looking forward, prospects are favorable for further improvement in the U.S. labor market and the economy more broadly."

Her written statement to the committee is to be followed by a hearing later Wednesday morning. The statement largely tracked her recent public comments, as well as the most recent policy statement by the Fed's policy-setting committee.

She did, however, include an explicit defense of the Fed's "transparency and accountability," detailing the central bank's flow of information to financial markets and its press conference and audit schedules as evidence it does not need further congressional oversight.

She will likely be questioned on that very point from members of the Republican-led House committee. House members were critical of the Fed at her previous appearance before them in February. In the intervening months some lawmakers have expressed frustration over the fact that the Fed has not released all of the material Congress has requested as part of an investigation of the possible leak of information from the central bank to an economic consulting company in 2012.

Yellen has said the Fed had declined to send the information because a separate Justice Department probe is ongoing.

Yellen's statement was submitted to the committee along with a lengthier report from the Fed board on the state of the economy and financial markets.

That report included more detail on what the United States faces as it tries to go its own way in a weakened world economy. The expectation that the Fed will diverge from Europe, Japan and other central banks and begin raising rates has pushed up the value of the dollar, and driven down exports and U.S. growth, making the Fed's outlook less certain, the report said.

The report also noted concerns about a possible liquidity crisis if bond markets become stressed, an issue some investors and market analysts have cited as a potential source of future trouble. The staff report said that while there is some evidence bond markets are not as "deep" or liquid as they used to be, there is not convincing evidence of "notable deteriorations."  — Reuters

Trade deficit widens; weakness abroad fuels export drop

WASHINGTON  - The U.S. trade deficit widened in May, fueled by a drop in exports that could heighten concerns over weak overseas demand and a strong U.S. dollar.

The Commerce Department reported on Tuesday that the trade gap grew $1.2 billion to $41.9 billion. That was less than the $42.6 billion deficit expected by analysts and suggests Wall Street economists may slightly raise their forecasts for economic growth in the second quarter.

But the drop in exports in May highlights a change in the tenor of economic growth since the United States exited the 2007-2009 recession. The economy relied more on export-led industries such as manufacturing early in the recovery, but growth is increasingly coming from domestic drivers like construction and services as the economic cycle matures.

Exports fell $1.5 billion, or 0.8 percent, to $188.6 billion in May, led by a drop in overseas sales of U.S.-made capital goods. Imports fell by about $300 million, or 0.1 percent, to $230.5 billion.

Prices for U.S. Treasuries rose after the data, while U.S. stock index futures were unchanged. The dollar gained against a basket of currencies.

Since the middle of last year when the Federal Reserve made clear it was planning to raise interest rates to keep the economy from eventually overheating, the dollar has strengthened, making U.S. exports less competitive.

Since that time, Europe's economy also has been on shaky ground and the European Central Bank has eased monetary policy, causing the euro to weaken against the dollar. European policymakers are currently fighting a debt crisis in Greece that threatens to rip apart the continent's monetary union.

Exports of goods to Germany fell 6.0 percent in May from the prior month, according to non-seasonally adjusted figures. Sales fell 4.2 percent to France, 2.1 percent to Mexico and 3.0 percent to Japan.

The U.S. economy contracted at a 0.2 percent annual rate in the first quarter, hit by bad weather, a strong dollar, spending cuts in the energy sector and disruptions at West Coast ports.

Other economic data, including figures on hiring and consumer spending, have pointed to a rebound during the second quarter, and a firming domestic economy could encourage the Fed to raise rates later this year.

In May, the drop in imports came as purchases from China rose 9.5 percent. That could fan further criticism from U.S. manufacturers that Chinese firms are using a cheap currency and unfair subsidies to gain market share in America.

At the same time, U.S. net imports of oil fell to $5.8 billion in May, the lowest level since 2002.  — Reuters

Dollar up despite US rate hike uncertainty

Tokyo, Japan – The dollar ticked higher on Tuesday despite comments from a Federal Reserve official that cast doubt on a mid-year interest rate hike, while Greece's bailout woes held back the euro.

In Tokyo, the greenback bought ¥119.45, up from ¥119.22 in New York and sharply higher from ¥118.62 in Tokyo earlier Monday.

The euro was mixed, slipping to $1.0724 from $1.0741 while it strengthened slightly to ¥128.07 against ¥128.05 in US trade.

The rise in the dollar came despite a key Federal Reserve official suggesting a US rate hike could be pushed back beyond mid-year.

New York Fed President William C. Dudley said recent inflation data was not strong enough to warrant a near-term rise, even though economic growth was healthy.

"The Fed will likely start tightening later in the year, and there’s a strong appetite in Japan for foreign portfolio and direct investments,” said Taisuke Tanaka, Deutsche Bank's chief currency strategist in Tokyo.

“We continue to recommend buying the dollar-yen on dips.”

The euro remained under pressure after falling Monday on growing worries about Greece's future in the eurozone, as Athens looks to secure billions of euros in bailout cash to pay its enormous debts.

With its creditors refusing to extend a repayment deadline while also haggling over its bailout reforms, the Greek government has ordered all public agencies to hand over their financial reserves.

“Markets are recognizing Greece as a risk factor as everybody knows the tight financing situation,” Keisuke Hino, a foreign-exchange trader at Mizuho Bank, told Bloomberg News.

"Markets expect a default to be avoided but they have to keep the risk in mind.” – Agence France-Presse

source: gmanetwork.com

Wall St little changed after Yellen comments

NEW YORK - US stocks were little changed on Friday, in the wake of comments from Federal Reserve Chair Janet Yellen.

Stocks showed muted reaction to comments from the Fed chair who, in a speech at a central banking conference in Jackson Hole, Wyoming, said US labor markets remain hampered by the effects of the Great Recession and that the Federal Reserve should move cautiously in determining when interest rates should rise.

"The reaction was a few weeks ago when the GDP number came out," said Michael Marrale, head of research, sales and trading at ITG in New York.

"At that point I thought you'd have some who step up and would want to sell the news in anticipation of a rate hike coming sooner than expected at that time, so I think people have already positioned for that."

Investors will also monitor the situation in Ukraine after authorities there said trucks from a Russian aid convoy had crossed into Ukraine without permission, a move it described as a "direct invasion" of its territory.

The S&P 500 has risen for four straight sessions to start the week, its longest streak in two months, rallying to a record closing high of 1,992.37 on positive economic data. The benchmark index is up 1.9 percent for the week, on track for its best week in four months.

The Dow Jones industrial average fell 14.58 points or 0.09 percent, to 17,024.91, the S&P 500 lost 2.62 points or 0.13 percent, to 1,989.75 and the Nasdaq Composite added 4.88 points or 0.11 percent, to 4,536.99.

Retailers moved higher, led by a 5.9 percent advance in Ross Stores to $73.32 after the apparel and home fashion retailer posted second-quarter results. The S&P retail index gained 0.3 percent and was on track for its best week since late February.

Foot Locker climbed 2.7 percent to $53.98 after the athletic footwear and apparel retailer reported second-quarter earnings.

Aeropostale shares slumped 8.7 percent to $3.57. The teen apparel retailer reported a drop in same-store sales and a second-quarter loss a day earlier.

GameStop Corp reported that quarterly revenue surged 25 percent over the prior year, topping expectations and sending shares up 6.1 percent to $42.97.

Peregrine Semiconductor shares jumped 61.1 percent to $12.39 after Murata Electronics North America said it would buy the rest of chipmaker it does not already own for $12.50 per share. — Reuters

Wall Street opens flat ahead of Yellen testimony

NEW YORK - U.S. stocks opened flat on Thursday after initial jobless claims data pointed to a possible strengthening in the labor market and ahead of testimony by Federal Reserve Chair Janet Yellen.

The Dow Jones industrial average .DJI was up 3.31 points, or 0.02 percent, at 16,521.85. The Standard & Poor's 500 Index .SPX was down 1.75 points, or 0.09 percent, at 1,876.46. The Nasdaq Composite Index .IXIC was down 15.52 points, or 0.38 percent, at 4,052.16.

The Nasdaq was pressured again by weakness in Internet stocks. Priceline (PCLN.O) fell 3.2 percent to $1,095 while TripAdvisor Inc (TRIP.O) was off 2.1 percent to $82.19.  — Reuters

source: gmanetwork.com