EMERGING MARKETS-Latam currencies drop for 2nd day on U.S. data

EMERGING MARKETS-Latam currencies drop for 2nd day on U.S. data
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Tue Nov 26, 2013 12:30pm EST

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 SAO PAULO, Nov 26 (Reuters) - Latin American currencies weakened for a second consecutive session on Tuesday as strong U.S. housing data supported the case for an early withdrawal of U.S. stimulus, which could hurt investors" appetite for risk assets. Brazil"s real led losses in the region as investors, worried about a deterioration in the country"s fiscal fundamentals, have been punishing the currency harder. Other currencies also suffered after reports showed permits for future U.S. home construction rose to the highest level in nearly 5-1/2 years in October, while U.S. single-family home prices in September posted their strongest annualized gain in 7-1/2 years. "Today we have a slightly more negative risk perception by foreign investors," said Flavio Serrano, senior economist with Espirito Santo Investment Bank in Sao Paulo. * Brazil"s real lost 0.5 percent, crossing the mark of 2.3 per dollar, which seems to be a key resistance level as it is also its 14-day moving average. * Investors in the Brazilian real are bracing for Friday"s release of the government"s fiscal performance for October, after an unexpected primary deficit of 9 billion reais in September fanned concerns about President Dilma Rousseff"s commitment to fiscal targets. * Cushioning losses in the real were expectations that foreign oil companies will bring dollars from abroad to pay for a signing bonus related to an exploration concession for the offshore oil area of Libra. The deadline for the bonus payment is Wednesday. * Losses in the real were also curbed by regular central bank auctions of currency swaps, derivatives that mimic a sale of dollars in the futures market. On Tuesday the bank sold 10,000 swaps through its daily intervention program and another 20,000 swaps to roll over similar contracts that expire on Dec. 2. * Mexico"s peso lost 0.15 percent to 13.0640 per dollar, crossing without much conviction its 14-day moving average of 13.05 per dollar. * The Chilean peso lost 0.2 percent as the price of copper, the country"s main export product, slid 0.4 percent on the London Metal Exchange. Latin American currencies at 1645 GMT: Currencies daily % YTD % change change Latest Brazil real 2.2975 -0.48 -11.21 Mexico peso 13.0640 -0.15 -1.53 Chile peso 522.0000 -0.21 -8.30 Colombia peso 1926.0000 -0.06 -8.31 Peru sol 2.8030 0.00 -8.99 Argentina peso 6.0925 -0.16 -19.37 Argentina peso 9.8300 0.92 -31.03 





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EMERGING MARKETS-Brazil leads Latam currencies lower on Fed worries

EMERGING MARKETS-Brazil leads Latam currencies lower on Fed worries
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Fri Nov 1, 2013 11:20am EDT





 RIO DE JANEIRO, Nov 1 (Reuters) - The Brazilian real led Latin American currencies down on Friday as investors tested new technical levels after the currency sold off about 2 percent in the previous session on fears of an early withdrawal of U.S. stimulus. Concerns that the U.S. Federal Reserve may start winding down its bond-buying program this year, potentially reducing the flow of dollars seeking higher yields in emerging markets, have caused Latin American currencies to weaken in the past few days. Those fears were on the rise again on Friday after data showed the U.S. manufacturing sector expanded at its fastest pace in 2-1/2 years last month. * The Brazilian real weakened to as much as 2.2593 per dollar, briefly crossing its 100-day simple moving average, considered by analysts as a key resistance level for the currency. * The real had already weakened nearly 2 percent on Thursday, breaking key resistance marks that encouraged investors to test weaker levels for the currency. * Traders expect the real to strengthen back to the level of 2.2 per dollar in coming days, however, as dollars as foreign oil companies send dollars into the country to pay for a signing bonus related to a concession to explore the offshore oil area of Libra. * In an apparent attempt to cushion the real"s losses, central bank monetary policy director Aldo Luis Mendes stressed that the bank"s current intervention program in foreign exchange markets has no set date to end. * The Mexican peso slid 0.3 percent to 13.0550 per dollar, its weakest level in three weeks, also weighed by data showing the country"s factories remained stagnant in October despite recent interest-rate cuts by the central bank. Latin America FX prices at 1505 GMT: Currencies daily % YTD % change change Latest Brazil real 2.2467 -0.58 -9.20 Mexico peso 13.0550 -0.26 -1.46 Chile peso 506.9000 0.36 -5.56 Colombia peso 1899.4000 -0.37 -7.02 Peru sol 2.7720 -0.51 -7.97 Argentina peso 5.9175 -0.08 -16.98 Argentina peso 9.8600 0.61 -31.24 





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Emerging Senate proposal focus in budget battle

Speaker of the House John Boehner, R-Ohio, arrives at the Capitol to meet with fellow Republicans at an early closed-door caucus, in Washington, Saturday, Oct. 12, 2013. The federal government remains partially shut down and faces a first-ever default between Oct. 17 and the end of the month. (AP Photo/J. Scott Applewhite)

Speaker of the House John Boehner, R-Ohio, arrives at the Capitol to meet with fellow Republicans at an early closed-door caucus, in Washington, Saturday, Oct. 12, 2013. The federal government remains partially shut down and faces a first-ever default between Oct. 17 and the end of the month. (AP Photo/J. Scott Applewhite)

House Majority Leader Eric Cantor, R-Va., arrives to join Speaker of the House John Boehner, R-Ohio, and fellow Republicans for an early closed-door meeting in the basement of the Capitol in Washington, Saturday, Oct. 12, 2013. The federal government remains partially shut down and faces a first-ever default between Oct. 17 and the end of the month. (AP Photo/J. Scott Applewhite)

House Minority Whip Steny Hoyer of Maryland gestures towards the House floor as he gathers with House Democrats in Statuary Hall before they file onto the House chamber to sign a petition to re-open the government on Capitol Hill in Washington, Saturday, Oct. 12, 2013. (AP Photo/Charles Dharapak)

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WASHINGTON (AP) — A bipartisan group of senators is polishing a plan that would reopen the government and prevent an unprecedented default on the country’s bills, while talks between the White House and House Republicans for a way out of the financial mess have stalled.

Senators planned to vote Saturday on a Democratic measure to lift the government’s borrowing cap through the end of next year. Republicans were poised to reject it.

Senate leaders were keeping close watch on the work by the bipartisan group. An emerging proposal by Sen. Susan Collins, R-Maine, and others would pair a six-month plan to keep the government open with an increase in the government’s borrowing limit through January.

House Republicans received an update from Speaker John Boehner of Ohio before beginning their weekend session: “There is no deal or negotiations going on,” he told colleagues, according to Rep. Richard Hudson of North Carolina.

The shutdown limped into its 12th day and an ominous deadline neared: The Obama administration says the government will bump up against its borrowing limit next Thursday, raising the specter of an unprecedented default.

“It doesn’t have to be this way. It’s not supposed to be this way,” President Barack Obama said in his weekly radio and Internet address Saturday. “Manufacturing crises to extract massive concessions isn’t how our democracy works, and we have to stop it. Politics is a battle of ideas, but you advance those ideas through elections and legislation — not extortion.”

Obama has turned away a House plan to link the reopening of the government — and a companion measure to temporarily increase the government’s borrowing cap — to concessions on the budget.

In the face of disastrous opinion polls, GOP leaders have signaled they will make sure the debt limit is increased with minimal damage to the financial markets. But they’re still seeking concessions as a condition for reopening the government.

Obama met Senate Republicans on Friday and heard a pitch from Collins on raising the debt limit until the end of January, reopening the government, and cutting the health care law at its periphery.

The plan also would strengthen income verification for people receiving subsidies through the health care law and set up a broader set of budget talks.

The Collins proposal would delay for two years a medical-device tax that helps finance the health care law, and it would subject millions of individuals eligible for subsidies to purchase health insurance under the program to stronger income verification.

Collins said Obama said the proposal “was constructive, but I don’t want to give the impression that he endorsed it.”

Associated Press

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Emerging Senate proposal focus in budget battle

Emerging markets hit after Fed, data lifts European shares

1 of 7. A pedestrian holding an umbrella walks past a stock quotation board displaying various stock prices outside a brokerage in Tokyo July 29, 2013.

Credit: Reuters/Yuya Shino

By Wayne Cole

SYDNEY | Wed Aug 21, 2013 10:30pm EDT

SYDNEY (Reuters) – Asian markets were thrown a lifeline on Thursday when surprisingly strong data on China’s huge manufacturing sector helped offset rising U.S. bond yields, lifting currencies and shares from deep early lows.

Assets across the region had been under heavy pressure after minutes from the Federal Reserve’s July policy meeting showed it was still on track to start tapering stimulus as early as next month, sending Treasury yields to two-year highs.

But hopes for a pick-up in China were rekindled when HSBC said its preliminary purchasing managers’ index rose to 50.1 in August, a five-month high and just above the 50 level that separates growth from contraction.

“This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies’ restocking activities, despite the continuous external weakness,” said Hongbin Qu, chief China economist at HSBC.

“We expect further filtering-through, which is likely to deliver some upside surprises to China’s growth in the coming months.”

The prospect of an improvement in the world’s second biggest economy helped Shanghai shares recoup early losses to trade 0.4 percent firmer .SSEC. Japan’s Nikkei .N225 clawed its way back to flat having been down over 1.3 percent.

Also helping was a Reuters poll showing Japanese manufacturers’ optimism improved to the highest level in three years, as a weak yen boosted earnings for exporters of textiles, chemicals, steel and other metals.

Elsewhere in the region shares were still down, but off their lows. The MSCI’s index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.7 percent easier, while Korean stocks halved their losses to be down 0.5 percent .KS11.

The Philippine market, which had been closed by bad weather the last few days, caught up with the action by shedding 6.6 percent .PSI.

The upbeat Chinese news also helped lift the Australian dollar half a cent to $ 0.8990. Around 70 percent of Australia’s exports go to Asia and its currency is free- floating and liquid, so investors often use it as a proxy against emerging market risk.

Other currencies in the region also benefited, though most remained down on the day. Malaysia’s ringgit fell to its lowest in more than three years before steadying somewhat at 3.3145 per dollar.

WATCHING US YIELDS

Markets from India to Indonesia have been under intense stress from expectations Western investors will repatriate funds now that yields at home are rising.

Expectations of economic recovery in the United States and Europe also tends to make assets there more attractive, heightening the competition for global savings.

The prospect of the Fed tapering its stimulus in the next few months sent 10-year U.S. Treasury yields up to 2.92 percent, a level last seen in July 2011. The break of a major chart bulwark at 2.90 percent could see the market quickly test 3 percent, which itself is a huge psychological marker.

Treasury yields tend to set the benchmark for borrowing costs across the globe, so the rise will make it more difficult for indebted countries and companies to pay their bills.

“Given that the recent capital outflows have been mainly triggered by yield differentials, the higher Treasury yields mean that there is unlikely to be a quick turnaround in Asian currencies, especially those economies with current account deficits,” said Frances Cheung, a strategist with Credit Agricole in Hong Kong.

She listed India, Indonesia, Malaysia and Thailand as the most vulnerable. “The story about capital outflows could persist for a while.”

The prospect of further increases in U.S. yields gave the U.S. dollar a lift across the board. The euro was back at $ 1.3338, from a high of $ 1.3452 on Wednesday, while the dollar pushed higher to 98.20 yen.

The dollar index, which measures the greenback versus a basket of six currencies, rose to 81.493 .DXY, from a low of 80.896.

Commodities rallied in the wake of the Chinese data. Gold was hovering at $ 1,364.36 an ounce and copper bounced 1 percent to $ 7,332.0 a ton.

U.S. crude oil futures were off a slim 6 cents at $ 103.78 a barrel, while Brent crude oil eased 22 cents to $ 109.59.

(Editing by Eric Meijer)

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Reuters: Business News

Emerging markets hit after Fed, data lifts European shares

Police State : NSA tracking and the emerging Militarized Police in America (Jul 29, 2013)

Honda first-quarter profit lower than expected, cautious on emerging markets

Visitors look at a Honda Motor Co’s car displayed outside the company showroom in Tokyo April 26, 2013.

Credit: Reuters/Yuya Shino

By Yoko Kubota

TOKYO | Wed Jul 31, 2013 4:11am EDT

TOKYO (Reuters) – Honda Motor Co (7267.T) announced a lower than expected 5.1 percent rise in quarterly operating profit after sales in Japan dropped following the end of subsidies and as it lagged behind rivals in selling profitable SUVs and pickups in the U.S.

Japan’s third-biggest automaker saw strong April-June sales in Asia, including its fourth biggest market Thailand, but Executive Vice President Tetsuo Iwamura sounded a note of caution about unexpected swings in emerging markets.

Honda posted an operating profit of 185.0 billion yen ($ 1.9 billion) for its April-June first quarter, compared with 176.01 billion yen a year earlier.

The result was below the average estimate of 209.3 billion yen in a Thomson Reuters I/B/E/S poll of four analysts.

For its fiscal year ending in March 2014, Honda stuck to its forecast for 780 billion yen, lower than 840.0 billion yen, the mean of estimates by 21 analysts.

Honda, the fifth biggest carmaker in the United States, sold 745,578 vehicles there in the first half of the year, up 6 percent from the same period a year ago, helped by strong sales of the popular Accord sedan.

The United States is Honda’s biggest market, accounting for about 40 percent of Honda’s global vehicle sales. Its market share shrunk 0.1 percentage point during the same period to 9.5 percent.

“Pickups and SUVs are growing in the U.S. market, helping the Detroit-based carmakers… Our light-truck supply was relatively low, but we are introducing a new model,” Iwamura told reporters, referring to the MDX, a SUV by Honda’s luxury brand Acura.

Shares in Honda have soared nearly 60 percent since mid-November, when expectations were growing that Shinzo Abe would take over as prime minister to implement his bold economic policies and help weaken the yen.

CAUTIOUS ON EMERGING MARKETS

Sales in Japan, Honda’s second biggest market, dropped by 24 percent in the first quarter to 140,000 vehicles after government subsidies for green cars ended late last year.

Honda, which has set an aggressive goal to expand global annual sales to 6 million vehicles by March 2017 from the current 4 million, is facing expansion costs as it is building multiple new plants or expanding capacity at existing factories.

Its capital expenditure spending in the first quarter jumped 78.6 percent year-on-year to 171 billion yen.

Honda’s new Yorii plant in Japan has started to operate earlier this month, while its new plant in Mexico is set to start operations in 2014. It is also planning new plants or expansions in multiple countries including Thailand and China.

“At times we see various big unexpected moves in emerging markets so we are cautious. But automobile and motorbike demand will certainly grow there so we will continue to build foundations for success,” Iwamura said.

Honda saw Thai April-June sales jump nearly 30 percent from a year ago to around 59,000 vehicles as it still has some 100,000 orders from before end-2012 when the government still offered subsidies for first-time car buyers.

While sales in Southeast Asia’s biggest car market have been dropping in the recent months and Honda expects some cancellations of the existing orders, Iwamura said the company aims to retain demand by introducing new models.

Japan’s biggest automaker Toyota Motor Corp (7203.T) is set to release its April-June earnings results on Friday. Last week, Japan’s second biggest carmaker Nissan Motor Co (7201.T) booked 108.1 billion yen in quarterly operating profit, up 23 percent from a year ago.

(Editing by Jeremy Laurence)

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Reuters: Business News

Honda first-quarter profit lower than expected, cautious on emerging markets

"THE KENNEDY ASSASSINATION: BEYOND CONSPIRACY" (ABC-TV)(PART 5)

Fierce Selloff in Emerging Market Currencies; India Intervenes to Stop Plunge in Rupee; Brazil Steps Up Real Intervention; Root Cause of Crisis

I’s hard not to laugh at the irony of recent central bank currency actions.

• After complaining for years about the strength of the Real, the Brazilian central bank stepped up intervention actions hoping to stop a plunge in the currency.


• Turkey now attempts to attract capital after taking measures for the past four years to stop the flow of money into the country.


• In India, the central bank seeks to stop a plunge in the Rupee which is at a record low of record low 58.95 to the dollar.

The Wall Street Journal reports Emerging-Market Currencies See Turnaround After Hefty Losses

The South African rand and other emerging-market currencies reversed course to gain against the dollar Tuesday after suffering heavy losses earlier in the session.

These currencies have plummeted rapidly in June, dragged down by expectations the Federal Reserve will taper its bond-buying program later this year. Ultra-accommodative U.S. monetary policy had helped drive investors to seek higher yields in emerging markets in recent years, analysts say.

India’s central bank dove into foreign exchange markets Tuesday to stop the rupee’s slide at a record low of INR58.95 to the dollar. Pressured to attract capital to the country, a top Indian economic official promised a new round of measures to allow foreign investment in currently restricted parts of the economy. The rupee pared losses against the dollar but still fell 0.3% on the day to trade at INR58.34 per dollar.

Turkey’s central bank on Tuesday announced new measures to attract capital after spending much of the past four years trying to stop too much money from flooding into its economy. That helped to stem the lira’s fall to near a multi-year low against the dollar as police moved in on protesters in Istanbul. Turkey’s capital measures echoed Brazil’s move earlier this month to eliminate a 6% tax on foreigners’ bond investments.

Brazil’s central bank stepped up intervention in the face of the rapid currency depreciation that began on May 28, with a series of foreign exchange swap auctions, including two on Tuesday.

Emerging Market Assets Suffer in Fierce Sell-Off

The Financial Times reports Emerging market assets suffer in fierce sell-off.

Emerging market currencies, stocks and bonds suffered a fierce sell-off on Tuesday on rising investor concerns over the prospect of the US Federal Reserve reining in its programme of bond-buying to drive down long-term interest rates.

The South African rand and the Brazilian real touched four-year lows against the US dollar on Tuesday, and the Indian rupee fell to a record low. Even relatively robust countries like the Philippines and Mexico – long favourites of investors – have been hit by a spate of selling.

The FTSE Emerging Markets index fell 1.7 per cent on Tuesday, taking its decline since its May peak to more than 10 per cent. Shares in Brazil – one of the four big emerging markets – closed 3 per cent in São Paulo on Tuesday. That pulled Brazilian shares into bear market territory – a drop of more than 20 per cent from a peak this year.

Both international and local currency emerging market bonds have been pummelled, sending borrowing costs higher.

Benoit Anne, a senior strategist at Société Générale, said central bank money had arguably inflated a bubble in emerging markets, which was now unravelling as investors priced in a change in Fed policy. “This will not be a short-lived sell-off,” he predicted.

Emerging market fund managers have also been hit by investor redemptions. Asset managers that focus on international bonds last week suffered the biggest investor withdrawal since mid-2007, according to EPFR. Emerging market equity funds were hit with the biggest redemptions since 2011. 

Cause of the Selloff

Both the Financial Times and the Wall Street Journal pinned the blame on the possibility the Fed would stop its QE programs later this year.

I rather doubt that is the cause, and I also doubt the Fed is going to stop QE any time soon.

Instead, I propose this is what happens when bubbles burst. And a huge part of numerous bubbles was widespread belief the growth in China and India will last forever. Hot money plowed into emerging market countries and also commodity producing countries.

Australia is another casualty of the coming bust of China. For details please see Australian Dollar Plunges as Home Loans Dive; Australia Insolvencies Hit Record; Worst is Yet to Come.

To be sure insane amounts of liquidity fueled various bubbles in stocks, in bonds, in emerging markets, but with the global economy rapidly slowing, and with much of Europe in an outright economic depression, the Fed is not that likely to curtail QE soon.

If the Fed does slow QE, it will not be because the US economy is strengthening, but rather realization by the Fed (not admitted of course) that various stock and bond market bubbles pose serious economic risks if allowed to grow bigger.

Root Cause of Crisis

By the way, all this extremely volatile currency action, as well as various equity and bond market bubbles, can be pinned entirely on central banks, fractional reserve lending, and lack of a gold standard.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com 

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Fierce Selloff in Emerging Market Currencies; India Intervenes to Stop Plunge in Rupee; Brazil Steps Up Real Intervention; Root Cause of Crisis