Stocks, Copper Retreat on World Bank Forecast; Dollar, Yen Rise
June 22 (Bloomberg) -- Stocks and commodities fell while the yen, the dollar and Treasuries rose after the World Bank said the global economy will shrink 2.9 percent this year, a deeper recession than it predicted in March.
The Dow Jones Stoxx 600 Index of European shares slid 1.2 percent at 12:10 p.m. in London, while Standard & Poor’s 500 Index futures slipped 0.7 percent. The yen strengthened 0.9 percent against the euro and the dollar rose 0.7 percent. The yield on the benchmark 10-year Treasury dropped four basis points to 3.74 percent.
A flight of capital from developing nations will increase the numbers of the poor and the unemployed, the Washington-based World Bank said in a report today. The projection for a deeper slump than the 1.7 percent contraction forecast in March follows a three-month, 44 percent rally that drove the price-earnings ratio on the MSCI World Index to the highest level in four years.
“The green-shoots story is largely priced in,” Lena Komileva, an economist in London at Tullett Prebon Plc, wrote in a note today. “Judging by the general commentary in recent days focus has started to shift from the overall positive direction of the economic surveys,” she said. That’s “consistent with weak demand, pressured producer profit margins, high unemployment and weaker labor wages,” Komileva wrote.
All 19 industry groups in Europe’s Stoxx 600 fell, with a gauge of basic-resource producers slipping 1.1 percent even after Xstrata Plc proposed a “merger of equals” with Anglo American Plc. London-based Anglo climbed 6.5 percent, while Xstrata of Zug, Switzerland slipped 3.7 percent. Anglo’s rise gave it a market value of 22.7 billion pounds ($37.3 billion).
Relative Value
The Stoxx 600 trades at 24.6 times profit, near the most expensive level since March 2004, weekly Bloomberg data show. The MSCI World Index of 23 developed countries had a ratio of 18.2 on June 12, a level not seen since 2004.
Companies in the S&P 500 traded at 15.5 times profit on June 2, the highest multiple to earnings in eight months, Bloomberg data show. The benchmark index for U.S. equities was valued as low as 10.1 times profit on March 9, the cheapest since 1985, after the collapse of New York-based Lehman Brothers Holdings Inc. helped send the benchmark index for U.S. equities to a 17-month, 57 percent decline.
Copper and aluminum dropped in London on the World Bank forecast and speculation that China, the biggest user, may buy less of the metals. Copper fell 3.6 percent to $4,850 a metric ton, trimming its 2009 advance to 58 percent. Aluminum retreated 3.7 percent to $1,618.75 a ton. Crude oil fell for a second day, dropping 1.6 percent to $68.41 a barrel in New York trading.
World Bank, IMF
The World Bank said that while a global recovery may begin this year, impoverished economies will lag behind rich nations. Global growth will be 2 percent next year, down from a 2.3 percent prediction in March, the bank said.
The Washington-based bank is more pessimistic than its sister organization, the International Monetary Fund. The IMF, which is forecasting a global contraction of only 1.3 percent this year and growth of 2.4 percent in 2010, said June 19 that it plans to revise estimates “modestly upward.”
German business confidence rose for a third month in June, data from the Ifo institute in Munich showed today, providing further evidence that the recession in Europe’s largest economy is easing. Analysts covering S&P 500 companies began to boost 2009 profit estimates for the first time this year in May as economists predicted the U.S. economy will start to expand next quarter, weekly data compiled by Bloomberg show.
Soros, Roubini
Billionaire hedge-fund manager George Soros told Polish television station TVN24 on June 20 that the worst of the global financial crisis “is behind us.” Nouriel Roubini, the New York University economics professor who predicted the meltdown, said at a conference in Paris today that the “crisis is not over” and there is a risk of a double-dip recession.
“We are not convinced that the risk-appetite phase is coming to an end,” Derek Halpenny, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in an e- mailed report today. “There is certainly a degree of caution that did not exist a few weeks ago, but further positive economic data seems very likely.”
Stocks, commodities and credit markets have recovered on signs the $12.8 trillion pledged by the U.S. government and the Federal Reserve will rescue the financial system from almost $1.5 trillion in losses and writedowns at banks and lead the world out of recession. The Libor-OIS spread, which measures banks’ willingness to lend, has narrowed to 37 basis points, from a record 364 basis points in October.
Treasuries, Fed
Treasuries advanced for a second day as the World Bank forecast made it more likely the Fed will keep interest rates near zero for longer.
Traders reduced bets the central bank will raise borrowing costs, according to futures on the Chicago Board of Trade. There’s a 44 percent chance of a reduction by the end of the year, down from more than 55 percent a week ago.
The Fed is scheduled to purchase Treasuries due from December 2013 to April 2016 today, as part of plan to lower borrowing costs and revive the economy. Policy makers may signal at a meeting on June 24 that the Fed will buy more debt, said Akira Takei, a manager at the international bond investment department at Mizuho Asset Management Co. in Tokyo.
The U.S. government will auction $104 billion of two-year, five-year and seven-year securities this week. That’s $3 billion more than the last sale of similar-maturity notes.
ECB Rates
European Central Bank Governing Council member Ewald Nowotny said the bank is likely to keep interest rates steady for at least the rest of the year. The ECB won’t substantially alter its assessment of the economic outlook and “therefore I also don’t see a likelihood for rate changes,” Nowotny, who heads Austria’s central bank, said in an interview in Vienna on June 19.
Borrowing costs “are not going up anywhere, anytime soon, because the combined actions and interest of governments and central banks will make sure they don’t,” Steve Major, chief strategist at HSBC Holdings Plc in London, wrote in a research note today. “The post-bubble economic backdrop is likely to result in both persistently high unemployment and low inflation,” which will drive down yields, he wrote.
The yen gained versus all 16 major currencies as traders sought a refuge from financial turmoil. The Australian and New Zealand dollars fell the most against the dollar and the yen.
Russian stocks sank for a fourth day, leading emerging markets lower, as falling commodity prices dragged down raw- materials producers. The Micex Index dropped 3.5 percent and the ruble weakened 0.8 percent against the dollar after oil slid.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9SbC.TTg2Hk
June 22 (Bloomberg) -- Stocks and commodities fell while the yen, the dollar and Treasuries rose after the World Bank said the global economy will shrink 2.9 percent this year, a deeper recession than it predicted in March.
The Dow Jones Stoxx 600 Index of European shares slid 1.2 percent at 12:10 p.m. in London, while Standard & Poor’s 500 Index futures slipped 0.7 percent. The yen strengthened 0.9 percent against the euro and the dollar rose 0.7 percent. The yield on the benchmark 10-year Treasury dropped four basis points to 3.74 percent.
A flight of capital from developing nations will increase the numbers of the poor and the unemployed, the Washington-based World Bank said in a report today. The projection for a deeper slump than the 1.7 percent contraction forecast in March follows a three-month, 44 percent rally that drove the price-earnings ratio on the MSCI World Index to the highest level in four years.
“The green-shoots story is largely priced in,” Lena Komileva, an economist in London at Tullett Prebon Plc, wrote in a note today. “Judging by the general commentary in recent days focus has started to shift from the overall positive direction of the economic surveys,” she said. That’s “consistent with weak demand, pressured producer profit margins, high unemployment and weaker labor wages,” Komileva wrote.
All 19 industry groups in Europe’s Stoxx 600 fell, with a gauge of basic-resource producers slipping 1.1 percent even after Xstrata Plc proposed a “merger of equals” with Anglo American Plc. London-based Anglo climbed 6.5 percent, while Xstrata of Zug, Switzerland slipped 3.7 percent. Anglo’s rise gave it a market value of 22.7 billion pounds ($37.3 billion).
Relative Value
The Stoxx 600 trades at 24.6 times profit, near the most expensive level since March 2004, weekly Bloomberg data show. The MSCI World Index of 23 developed countries had a ratio of 18.2 on June 12, a level not seen since 2004.
Companies in the S&P 500 traded at 15.5 times profit on June 2, the highest multiple to earnings in eight months, Bloomberg data show. The benchmark index for U.S. equities was valued as low as 10.1 times profit on March 9, the cheapest since 1985, after the collapse of New York-based Lehman Brothers Holdings Inc. helped send the benchmark index for U.S. equities to a 17-month, 57 percent decline.
Copper and aluminum dropped in London on the World Bank forecast and speculation that China, the biggest user, may buy less of the metals. Copper fell 3.6 percent to $4,850 a metric ton, trimming its 2009 advance to 58 percent. Aluminum retreated 3.7 percent to $1,618.75 a ton. Crude oil fell for a second day, dropping 1.6 percent to $68.41 a barrel in New York trading.
World Bank, IMF
The World Bank said that while a global recovery may begin this year, impoverished economies will lag behind rich nations. Global growth will be 2 percent next year, down from a 2.3 percent prediction in March, the bank said.
The Washington-based bank is more pessimistic than its sister organization, the International Monetary Fund. The IMF, which is forecasting a global contraction of only 1.3 percent this year and growth of 2.4 percent in 2010, said June 19 that it plans to revise estimates “modestly upward.”
German business confidence rose for a third month in June, data from the Ifo institute in Munich showed today, providing further evidence that the recession in Europe’s largest economy is easing. Analysts covering S&P 500 companies began to boost 2009 profit estimates for the first time this year in May as economists predicted the U.S. economy will start to expand next quarter, weekly data compiled by Bloomberg show.
Soros, Roubini
Billionaire hedge-fund manager George Soros told Polish television station TVN24 on June 20 that the worst of the global financial crisis “is behind us.” Nouriel Roubini, the New York University economics professor who predicted the meltdown, said at a conference in Paris today that the “crisis is not over” and there is a risk of a double-dip recession.
“We are not convinced that the risk-appetite phase is coming to an end,” Derek Halpenny, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in an e- mailed report today. “There is certainly a degree of caution that did not exist a few weeks ago, but further positive economic data seems very likely.”
Stocks, commodities and credit markets have recovered on signs the $12.8 trillion pledged by the U.S. government and the Federal Reserve will rescue the financial system from almost $1.5 trillion in losses and writedowns at banks and lead the world out of recession. The Libor-OIS spread, which measures banks’ willingness to lend, has narrowed to 37 basis points, from a record 364 basis points in October.
Treasuries, Fed
Treasuries advanced for a second day as the World Bank forecast made it more likely the Fed will keep interest rates near zero for longer.
Traders reduced bets the central bank will raise borrowing costs, according to futures on the Chicago Board of Trade. There’s a 44 percent chance of a reduction by the end of the year, down from more than 55 percent a week ago.
The Fed is scheduled to purchase Treasuries due from December 2013 to April 2016 today, as part of plan to lower borrowing costs and revive the economy. Policy makers may signal at a meeting on June 24 that the Fed will buy more debt, said Akira Takei, a manager at the international bond investment department at Mizuho Asset Management Co. in Tokyo.
The U.S. government will auction $104 billion of two-year, five-year and seven-year securities this week. That’s $3 billion more than the last sale of similar-maturity notes.
ECB Rates
European Central Bank Governing Council member Ewald Nowotny said the bank is likely to keep interest rates steady for at least the rest of the year. The ECB won’t substantially alter its assessment of the economic outlook and “therefore I also don’t see a likelihood for rate changes,” Nowotny, who heads Austria’s central bank, said in an interview in Vienna on June 19.
Borrowing costs “are not going up anywhere, anytime soon, because the combined actions and interest of governments and central banks will make sure they don’t,” Steve Major, chief strategist at HSBC Holdings Plc in London, wrote in a research note today. “The post-bubble economic backdrop is likely to result in both persistently high unemployment and low inflation,” which will drive down yields, he wrote.
The yen gained versus all 16 major currencies as traders sought a refuge from financial turmoil. The Australian and New Zealand dollars fell the most against the dollar and the yen.
Russian stocks sank for a fourth day, leading emerging markets lower, as falling commodity prices dragged down raw- materials producers. The Micex Index dropped 3.5 percent and the ruble weakened 0.8 percent against the dollar after oil slid.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9SbC.TTg2Hk