Today's Financial News Courtesy of the Financial Times

Today's Financial News Courtesy of the Financial Times


Stocks struggle for gains as traders remain cautious
Copyright The Financial Times Limited 2010
Published: September 7 2010 07:40 | Last updated: September 10 2010 16:46
http://www.ft.com/cms/s/0/9ebb052e-ba4a-11df-8e5c-00144feab49a.html


Friday 16:35 BST. Traders seem somewhat disorientated by the cackle of catalysts claiming their attention, with US and European stocks struggling to make significant headway after Asia provided a mixed backdrop.

The FTSE All-World index is up 0.2 per cent, but industrial metals have a softer bias. The S&P 500 on Wall Street is up 0.4 per cent as a surging oil price helps energy shares, and Treasury yields are at their highest in a month following a week of mediocre auctions.

The yen, one of the market’s favoured risk proxies, has fluctuated throughout the session, a modulation symptomatic of a market where traders are struggling to process a jumbled batch of conflicting signals.

For example, New York’s 0.5 per cent advance on Thursday was aided by news weekly initial jobless claims had fallen by 27,000 to 451,000, reviving hopes the US economy was improving. However, closer inspection showed that a number of states had estimated their claims data because of the Labor Day holiday, prompting some investors to question the report’s worth.

The Vital Statistics

Looks like we were wrong when we said at the beginning of the week that the post Labor Day market would mark the end of summer trading on Wall Street, writes Jamie Chisholm. Activity has remained subdued, partly because Thursday’s observance of Jewish New Year encouraged light attendance. The stats speaks for themselves. According to Thomson Reuters, the average daily NYSE volume over the past 12 months has been 1.2bn shares. Even during August the volume was 1bn. But the average for Tuesday, Wednesday and Thursday this week is just 850m. If similarly soft volumes persist next week it may suggest the declines are more structural than seasonal – an environment in which stocks could struggle to rally.

Next came news that Deutsche Bank was lining up a €9bn equity offering, a move that reminded traders of the balance sheet difficulties that the eurozone banking system is still believed to face – despite the all clear given to the majority of institutions after this summer’s stress tests.

There was better news regarding the recently revived eurozone default fears after Norway’s sovereign wealth fund said it was snapping up so-called “peripheral” debt.

Today, Canada added more jobs than forecast in August, while stronger than originally thought Japanese second-quarter growth was also a positive – but it came with news that the government thinks the economy requires another $11bn stimulus package.

Even trade data suggesting improved Chinese domestic consumption carried a bitter aftertaste. The nation’s trade surplus narrowed sharply as imports rose. But the pace of export growth slowed, causing some to fear cooling demand abroad.

Meanwhile, investors are also becoming concerned about why Beijing has decided to release inflation and production data over the weekend rather than on Monday, with some pessimists fretting about a nasty shock in the numbers or a monetary policy announcement that could spook the markets.

Finally, traders in the US have been growing increasingly wary of this years 9/11 anniversary, particularly as tensions have been raised by the proposed Koran-burning furore.

☼ Factors to Watch. Investors may well be exercised by this weekend’s action, which along with the Chinese data includes a meeting of global regulatory chiefs in Basel, Switzerland, on Sunday, designed to approve a set of new capital and liquidity measures for banks. ☼

● Europe. Bourses have pulled back from initial declines but trading remains cautious. The FTSE Eurofirst 300 is off 0.1 per cent, weighed down by banks following the Deutsche Bank reports, but supported by autos.

The FTSE 100 in London added 0.1 per cent as oils and miners underperformed while defensives such as tobacco and pharma moved ahead.

● Forex. The yen fell as risk appetite increased in early Asian trading. It later pared those losses as European desks took over and is now moving down again as the US dominates the action. It is currently down 0.4 per cent versus the dollar to Y84.18 in an otherwise fairly lacklustre currency market.

The US dollar index is down 0.1 per cent at 82.61, as the euro gains 0.3 per cent versus the buck to $1.2732. Sterling seems little concerned by softer than expected producer prices data.

● Rates. Highly-rated sovereign bonds saw a swift reversal as US pit trading got under way. A disappointing $13bn auction of 30-year notes on Thursday has revitalised speculation that the long bull in bonds may be on the turn.

The yield on 30-year paper is up 5bp to 3.89 per cent, its highest since August 13. The US 10-year yield is up 5bp at 2.81 per cent, while the Bund equivalent is up 7bp to 2.40 per cent.

Yields on eurozone peripheral bonds are mostly higher as sovereign debt worries nag. Portuguese 10-year yields are up 8bp to 5.86 per cent, just shy of their highest levels in 5 months as this week’s well-received auction is soon forgotten.

● Commodities. Copper is lower for a second day in a row, off 0.4 per cent to $7,540 a tonne. Other metals had managed to eke out gains but they have since succumbed and are slipping into the red.

However, oil is up 2.7 per cent to $76.29 a barrel, after a leak shut the biggest pipeline supplying Canadian oil to refineries in the US Midwest and to a key storage hub in Oklahoma, according to Reuters.

Gold is down 0.1 per cent to $1,247 an ounce as investors become frustrated by the bullion’s inability to beak the peak of $1,265 with which it has flirted over recent sessions.

● Asia-Pacific. The region’s shares hit a four-month high after investors took heart from the US jobs data and better-than-anticipated revised economic growth figures from Japan. However, those gains were pared as the session progressed, and trading was thinned by several South East Asian nations being closed for the Eid holiday.

The FTSE Asia-Pacific Index climbed 0.5 per cent, helped primarily by a good showing in Tokyo. Japan’s Nikkei 225 at one point jumped 2.1 per cent as exporters enjoyed a softer yen. However, the yen’s move back below Y94 to the dollar and a softer tone elsewhere in the region has left the Nikkei 225 up 1.6 per cent.

China’s Shanghai Composite added 0.3 per cent as investors absorb the trade data and remain wary ahead of this weekend’s economic reports. Hong Kong’s Hang Seng rose 0.4 per cent.

Australia’s S&P/ASX 200 fell 0.4 per cent as miners tracked the overnight fall in metals prices.

Follow Jamie Chisholm’s market comments on Twitter: @JamieAChisholm





US wholesale inventories jump in July
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: September 10 2010 15:39 | Last updated: September 10 2010 15:39
http://www.ft.com/cms/s/0/c717ac30-bce7-11df-89ef-00144feab49a.html


US wholesalers replenished their stocks at the fastest pace in two years in July in a sign that consumer demand may be picking up in the US.

Commerce department figures on Friday showed that wholesale inventories jumped by 1.3 per cent in July to $405bn. That followed an uptick of 0.3 per cent the prior month and far exceeded economists’ expectations of a 0.4 per cent increase from June to July.

In July, an 11.6 per cent surge in inventories of farm products provided the biggest boost. Since July 2009, inventories have climbed by 2.5 per cent.

The rise in inventories easily outpaced a more modest increase in sales in July. Sales at wholesalers grew by 0.6 per cent to $350.1bn thanks to growing demand for machinery and hardware.

Analysts keep a close watch on inventories as a measure of future output in the US economy. Rapid rebuilding of depleted stockpiles helped swing the economy to positive growth earlier this year.

The Federal Reserve’s latest Beige Book report revealed that US businesses said their inventories remain at “desired levels” in spite of slower sales and that they are practising “tight inventory management”.

Meanwhile, the inventory-to-sales ratio ticked up to 1.16 in July from 1.15 the prior month.







China trade surplus in surprise drop
By Geoff Dyer in Beijing
Copyright The Financial Times Limited 2010
Published: September 10 2010 05:47 | Last updated: September 10 2010 17:06
http://www.ft.com/cms/s/0/43a98376-bc8f-11df-a42b-00144feab49a.html


China’s trade surplus dropped in August after imports grew at a faster rate than expected, an indication that domestic demand could be rebounding after several months of slowdown.

The trade surplus fell from $28.7bn in July to $20.03bn last month as a result of the surging imports, although analysts said the level of the surplus remained high enough to keep political pressure on Beijing over its exchange rate policy.

Politicians in the US have stepped up their criticism of what they see as China’s undervalued exchange rate in recent weeks, raising new fears that the argument could lead to a trade dispute.

Perhaps in response, Beijing allowed its currency to appreciate by a relatively fast pace of 0.5 per cent this week, taking the total increase in the value of the renminbi to 0.95 per cent since it abandoned the dollar peg in June.

The acceleration in imports, which increased by 35.2 per cent in August over the year before, has added to the uncertainty about the current direction of economic policy in China.

In order to prevent the economy from overheating, Beijing has in recent months called for inefficient factories to be closed, launched a clampdown on property speculation and pushed banks to rein in lending.

However, rising imports of a number of commodities could reflect a new drive for more infrastructure investment to prevent a sharp economic slowdown.

“Domestic demand for raw materials and capital goods recovered as the central government sped up approval of infrastructure projects in central and western China and accelerated disbursement of investment funds,” said Xu Jian, an economist at China International Capital Corporation in Beijing.

Moreover, figures collected by consultancy Soufun show that property sales have rebounded strongly in recent weeks while prices remain flat, which has led some analysts to suggest that local governments in parts of the country are not implementing Beijing’s restrictions on mortgages.

Yet while some economists believe that policy is being quietly loosened, there was speculation on Friday that Beijing might shortly announce an interest rate hike to reinforce its efforts to cool the property market and to limit inflation.

“Frankly they haven’t let the currency move very much so far,” Tim Geithner, US Treasury secretary, told Bloomberg Television this week. “They know they’re just at the beginning of that process and I think we’d like to see them move more quickly.”