Asian stocks fell for a second day after weaker growth in U.S. payrolls and manufacturing added to evidence of a slowdown in the world’s largest economy and as the yen rose, curbing the earnings outlook for Japanese exporters.
BHP Billiton Ltd. (BHP), the world’s largest mining company, lost 1 percent, leading raw-materials shares lower as metals prices declined. Toyota Motor Corp., the world’s biggest carmaker, slid 1.4 percent. Takeda Pharmaceutical Co. gained 2.3 percent in Tokyo after a judge threw out a $6.5 million damages verdict over its Actos diabetes drug.
A visitor walks past a logo displayed on a window at the Tokyo Stock Exchange in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg
May 2 (Bloomberg) -- Wayne Bowers, chief investment officer of international markets at Northern Trust Global Investments Ltd., talks about global stocks and his investment strategy. He also discusses the outlook for monetary policies of the Federal Reserve, the European Central Bank and the Bank of Japan. He speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
May 1 (Bloomberg) -- Adrian van Tiggelen, chief equity strategist at ING Investment Management, discusses stocks strategy. He talks from The Hague, Netherlands, with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
May 1 (Bloomberg) -- Yuuki Sakurai, president of Fukoku Capital Management Inc. in Tokyo, talks about Japan's financial markets, government and central bank policies. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
April 26 (Bloomberg) -- Herald Van Der Linde, head of equity strategy for Asia Pacific at HSBC Holding Plc in Hong Kong, talks about the outlook for the region's stocks and his investment strategy. He speaks with Rishaad Salamat on Bloomberg Television's "Asia Edge." (Source: Bloomberg)
The MSCI Asia Pacific Index fell 0.3 percent to 140.94 as of 12:15 p.m. in Tokyo, with five stocks falling for every three that rose. Seven of the 10 industry groups on the gauge retreated. Markets in China reopened after a holiday.
“We all know that things are getting a little bit slower,” said Sydney-based Kumar Palghat, a money manager and founder of Kapstream Capital, which oversees at least $5.2 billion. “It’s way too early for the Fed to even contemplate removing stimulus.”
Japan’s Nikkei 225 Stock Average retreated 0.5 percent and the broader Topix Index lost 0.3 percent. Australia’s S&P/ASX 200 Index sank 0.7 percent, extending losses as a government report showed building permits unexpectedly dropped in March. New Zealand’s NSX 50 Index fell 0.7 percent. South Korea’s Kospi index slipped 0.3 percent and Taiwan’s Taiex Index rose 0.3 percent.
Hong Kong’s Hang Seng retreated 0.3 percent and China’s Shanghai Composite lost 0.1 percent as a private gauge of Chinese manufacturing declined last month, adding to signs that growth in the world’s second-biggest economy will cool for a second straight quarter.
The regional MSCI Asia Pacific gauge climbed 9.3 percent this year through yesterday amid optimism Japan will deploy more measures to beat deflation and that policy makers in the U.S. and China remain on standby to buoy growth.
Futures on the Standard & Poor’s 500 Index rose 0.3 percent today, indicating U.S. markets will rebound from yesterday’s decline following slower growth in American payrolls. The S&P 500 yesterday dropped 0.9 percent, retreating from a record high.
The Fed will maintain its bond buying at $85 billion a month, the Federal Open Market Committee said at the conclusion of a two-day meeting in Washington yesterday. It left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
Reports yesterday showed U.S. companies added fewer workers than forecast in April and the Institute for Supply Management’s factory index fell to 50.7 in April from 51.3 in March. The Labor Department publishes its jobs and unemployment report on May 3. It may show combined payrolls for companies and government agencies increased by 148,000 workers in April after rising 88,000 in March, according to a survey of economists by Bloomberg.
Raw-materials shares fell as the London Metals Exchange Index of six base metals lost 3.2 percent yesterday, the most in more than four months. The index entered a bear market on April 23, commonly defined as a retreat of more than 20 percent from its most recent peak. BHP Billiton dropped 1 percent to A$31.86 and Rio Tinto Group slid 1 percent to A$54.47.
Toyota Motor retreated 1.4 percent to 5,470 yen, paring this year’s 37 percent advance. Nissan Motor Co. (7201) declined 2.3 percent to 976 yen. The yen strengthened to 97.35 per dollar, a sixth day of gains.
Takeda Pharmaceutical advanced 2.3 percent to 5,340 yen in Tokyo. A Los Angeles state court judge ruled attorneys weren’t able to properly link a former telephone-company worker’s bladder cancer to his Actos use, a Takeda diabetes drug.
DBS Group Holdings Ltd. rose 3.6 percent to S$17.37 in Singapore after Southeast Asia’s largest bank posted an unexpected increase in profit as fees, commissions and trading income rose.
April 2 (Bloomberg) -- Kumar Palghat, managing director and founder of Kapstream Capital in Sydney, talks about global central banks' monetary policies and financial markets. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
May 1 (Bloomberg) -- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, discusses today’s statement by the Federal Open Market Committee on its fiscal policy and the outlook for the U.S. economy. The Fed said it will maintain its bond buying at a pace of $85 billion a month and is prepared to raise or lower the level of purchases as economic conditions evolve. (Source: Bloomberg)
May 1 (Bloomberg) -- Bloomberg's Michael McKee, TF Market Advisors' Jeremy Hill, Graham Fisher & Co'.s Josh Rosner and Cantor Fitzgerald's Brian Edmonds discuss Federal Reserve monetary policy on Bloomberg Television's "Street Smart." (Source: Bloomberg)
“The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes,” theFederal Open Market Committee said today at the conclusion of a two-day meeting in Washington.
Chairman Ben S. Bernanke is pressing on with his effort to boost employment as 11.7 million Americans remain jobless almost four years into the expansion. Today’s statement highlights the option to boost purchases in response to data showing economic growth is slowing, in contrast with discussion of the timing of a reduction in the pace of buying at the Fed’s March meeting.
“The statement gives them flexibility on the upside and the downside,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The whole debate had centered on when to taper off. Given some of the latest data, the Fed could be more aggressive in its policy.”
The Fed repeated that bond buying will continue “until the outlook for the labor market has improved substantially.” It also left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
The bar for increasing the pace of purchases “is high,” and growth hasn’t slowed enough to trigger a boost, said Julia Coronado, chief economist for North America at BNP Paribas in New York.
“We would have to be in a significant economic deterioration,” said Coronado, a former Fed economist. “More than likely they will just stay the course much longer than they thought.”
Stocks and Treasury yields remained lower after the statement. The Standard & Poor’s 500 Index fell 0.9 percent at the close of trading to 1,582.70, while the yield on the 10-year Treasury note slid to 1.63 percent in New York, the lowest of the year, from 1.67 percent yesterday.
The central bank said today that it expects “economic growth will proceed at a moderate pace, and the unemployment rate will gradually decline.”
The Fed said that fiscal policy “is restraining economic growth.” In its previous statement, the committee said fiscal policy has “become somewhat more restrictive.”
The committee also said it “anticipates that inflation over the medium term likely will run at or below its 2 percent objective.”
Policy makers such as St. Louis Fed President James Bullard have voiced concern about inflation running below their longer- run target of 2 percent. Their preferred gauge of inflation rose 1 percent from a year earlier in March, and Bullard was one of three regional Fed bank presidents who said last month that disinflation may warrant stepped-up stimulus.
Bullard has proposed the Fed alter purchases by $10 billion to $15 billion per meeting depending on the outlook for the economy. Fed Vice Chairman Janet Yellen and New York Fed President William C. Dudley have backed the idea of adjusting purchases, without providing an estimate of how much to shrink or enlarge them at each step.
The purchases will remain divided between $40 billion a month of mortgage-backed securities and $45 billion a month of Treasury securities. The central bank also will continue reinvesting the proceeds from maturing debt, according to today’s statement.
Kansas City Fed President Esther George dissented for the third meeting in a row, saying the continued “high level of monetary accommodation increased the risks of future economic and financial imbalances.”
None of the 47 economists in an April 25-29 Bloomberg survey expected the central bank to alter the pace of purchases at today’s meeting. Only one of the economists surveyed expected the Fed to expand purchases, and the others said the Fed’s first move would be to shrink or end them entirely.
Fed officials are seeking to avert a repeat of the last three years, when a summer slump scuttled optimism about the economy’s strength. In each of those instances, the Fed planned to end stimulus programs early in the year, only to boost accommodation after growth lagged behind its forecasts.
The economy expanded at a 2.5 percent annualized rate in the first quarter, the Commerce Department said last week. The gain followed a 0.4 percent fourth-quarter advance, and it trailed the 3 percent gain that was the median estimate of 86 economists surveyed by Bloomberg.
Recent reports on retail sales, factory production and household spending have pointed to a slowdown in economic growth this quarter.
“There’s a pretty broad set of indicators pointing toward deceleration as we go into the second quarter,” said Keith Hembre, who helps oversee $125 billion as chief economist at Nuveen Asset Management LLC in Minneapolis and a former researcher at the Minneapolis Fed. “It reflects a fairly tepid pace of underlying demand growth, weakness abroad and the slowdown and cutbacks in government spending.”
Automatic federal spending cuts known as sequestration took effect on March 1. If no action is taken by Congress, spending will be reduced by $85 billion this year and $1.2 trillion over nine years. Consumers are also contending with a two percentage point increase in the payroll taxthat took effect in January.
Companies added 119,000 workers in April, the fewest since September, followed a revised 131,000 gain in March that was smaller than initially estimated, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 37 economists surveyed by Bloomberg projected a 150,000 advance.
By hiring fewer employees, companies are signaling they expect demand will deteriorate as reductions in the federal budget and higher taxes weigh on the expansion.
The Labor Department on May 3 will probably say the unemployment rate in April remained unchanged at 7.6 percent as employers added 145,000 workers to payrolls, according to the median estimate in a Bloomberg survey. Payroll growth slid to 88,000 in March from 268,000 the month before.
Manufacturing has shown signs of weakness. The Institute for Supply Management’s factory index fell to 50.7 in April from the prior month’s 51.3, the Tempe, Arizona-based group said today. Economists projected a reading of 50.5 for the gauge, according to the Bloomberg survey median. Fifty is the dividing line between expansion and contraction.
Retail sales dropped in March by the most in nine months, pointing to a slowdown in consumer spending as the first quarter drew to a close, according to a Commerce Department report.
Housing is a bright spot as Fed purchases of bonds push down mortgage rates to near-record lows. The S&P/Case-Shiller index of home values in 20 cities surged 9.3 percent in February from a year earlier, the most since May 2006.
“That certainly will help the economy,” Robert Shiller, the Yale University economics professor who co-created the index, said yesterday in a Bloomberg Radio interview. “It will lift a lot of households that are currently underwater.”
New-home construction in the U.S. climbed in March to the highest level in almost five years, propelled by a surge in multifamily building. Starts climbed 7 percent to a 1.04 million annual rate, the Commerce Department said April 16. Work on multifamily homes jumped 31 percent.
The construction rebound helped Weyerhaeuser Co. (WY) exceed profit and sales estimates in the first quarter. The lumber producer, based in Federal Way, Washington, said housing will probably become a bigger part of its business.
“The U.S. housing market continues its recovery towards long-term trend demand levels,” Chief Executive Officer Dan Fulton said on an April 26 conference call. “The drop in available home inventory is leading to price increases in most markets and increasing demand for new homes, resulting in an increase in housing starts.”