Monday, February 23, 2009
Baking stocks across the region cheer news that the U.S. may secure the future of Citigroup
Stock market in Asian region welcomed the news of US Government owning as much as 40% of Citigroup which helped bolster bank stocks to take drivers seat in leading the region for positive start of the week.
Most of the regional markets spurted after a report released by the Wall Street Journal, stating that the Citigroup executives are discussing with US officials a scenario in which a substantial portion of the $US45 billion or A$69.2 billion in preferred shares held by the US government, amounting to a 7.8% stake in Citigroup, would convert into common stock.
Meanwhile on Wall Street, the U.S. stocks ended Friday's choppy trading session lower, amid new concerns over the U.S. banking sector and the government's long-term role in its future. The Dow closed down 100 points or 1.34% at 7,366, the Nasdaq lost 2 points or 0.11% to 1,441, and the S&P 500 fell 9 points or 1.14% to finish at 770.
In the commodity market, crude oil traded near $40 a barrel in New York as traders weighed the risk of a deepening global recession against government measures to revive economic growth. Crude oil for April delivery was at $40.41 a barrel, up 38 cents, in after-hours electronic trading on the New York Mercantile Exchange at 8.59 a.m. London time. It earlier fell as much as 50 cents, or 1.3%, to $39.53 a barrel.
Brent crude oil for April settlement was at $41.80 a barrel, up 9 cents, on London's ICE Futures Europe exchange at 8.59 a.m. London time. It earlier declined as much as 39 cents, or 0.9%, to $41.50 a barrel
Spot gold fell to $US986.20 per ounce, down 1.6% from New York's notional close on Friday. On Friday, gold rose as high as $US1007.70, the highest since 18 March 2008, as nervous investors piled into the yellow metal amid tumbling stock markets. Gold last topped $US1, 000 in March as Bear Stearns failed and was rescued. Comex April gold futures jumped $US25.70, or 2.6%, to $US1, 002.20 an ounce after touching $US1, 007.70, the highest since March 18.
In the currency market, the Japanese yen was quoted at 93.035 against the US dollar.
The Hong Kong dollar was trading at HK$ 7.7528 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.
In Sydney trades, the Australian dollar rose as investors sold the U.S. currency on speculation President Barack Obama's government will increase its ownership of Citigroup. Australia's currency rose 1.5% to 64.92 U.S. cents from 63.94 cents in New York late last week.
In Wellington trades, the New Zealand dollar ended the day at US51.25c from US50.92c during the early hours and US50.36c on Friday.
The South Korean currency gained for the first time in 10 sessions on Monday as investor sentiment was eased by rising stock prices and Asian countries' agreement to expand a regional currency swap fund. The local currency closed at 1,489 won to the greenback, up 17 won, or 1.1%, from the previous session's close. The Korean currency rose as high as 1,480 won at one point with its value falling 15.4% against the dollar so far this year.
The Taiwan dollar pulled back from a near six-year low on Monday as exporters and foreign funds took advantage of the weak local currency to buy in, while stable regional currencies provided further support. The greenback closed the day at NT$ 34.685, after dropping to NT$34.808 on Friday.
Coming back in equities, in Japan, stock market ended in the negative territory witnesses its second dip in a row on the first trading day of the week. Japanese Nikkei 225 Stock Average index dipped down 40.22 points, or 0.54%, to 7,376.16, while the broader Topix lost 4.25 points, or 0.57%, to 735.28.
In Mainland China, the equities ended higher led by property and banking shares. The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, rose 1.96% or 44.30 points to 2,305.78 points after fluctuating between 2,313.59 and 2,219.71 points. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange extended 3.61% or 303.92 points to 8,727.70 points, after touching an intraday low of 8,372.56 points.
In Hong Kong, stock market closed sharply higher, as investors concentrated on the reports the U.S. government might expand its stake in troubled banking giant Citigroup to ease the financial crisis. The Hang Seng Index continued to move upward as it ended sharply higher 475.93 points, or 3.75%, to 13,175.10, while the Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, shoot up by 240.69 points, or 3.41% to 7,307.01.
On the economic front, Hong Kong's inflation rate in January, including the impact of temporary waivers on public services, jumped to 3.1%, but the increase was mainly due to a distortion caused by a waiver on property rates. Underlying inflation, which excludes temporary factors, eased to 4.5% from 4.6% in January, the government said. As a concession on rates, a form of property tax was in effect in January 2007 and January 2008, but not in December 2007, inflation jumped from 2.1% in December.
In Australia, the stock market started a week with a little optimism, as market tried to recover from early lows after news of US Government may end up owning as much as 40% of Citigroup helped bolster bank stocks. The benchmark S&P/ASX200 ended the day down 51.20 points, or 1.5%, to 3,351.20, while the broader All Ordinaries decreased 48.90 points, or 1.50%, to 3,304.10.
On the economic front, the markets have very little economic reports to digest in today's trading.
In New Zealand, equities fell down to commence the first trading session of the week in the negative region registering its sixth consecutive loss. The benchmark NZX50 fell down 1.49% or 38.394 points to close at 2538.286. The NZX 15 declined 1.45% or 69.533 points to 4723.088.
In South Korea, stock market closed the session sharply higher, as investors picked up beaten-down shares following a report that the U.S. government might increase its stakes in the troubled banking giant Citigroup, easing concerns over a looming financial crisis. The Korea Composite Stock Price Index jumped 33.60 points or 3.15% closing the day at 1,099.55.
On the economic front, export price index fell by 3.4% while import price index decreased by 1.8% month-on-month in January 2009. The export price index declined by 3.4% from the previous month, as prices of metal products, transport equipment, electric equipment, and general machinery and equipment went down due to a sustained decrease in demand affected by global economic recession and falling exchange rates.
The import price index fell by 1.8% month-on-month, as prices of intermediate fell by 2.9% while consumer declined by 1.4%. Capital goods corrected by 0.8% and raw materials fell by 0.1%. All declined in response to decreased demand resulting from falling exchange rates and economic recession, offsetting a rise in global oil prices.
In other news, South Korea is unlikely to face another financial crisis similar to the one a decade ago, as the country's economic fundamentals are sound, a former U.S. treasury secretary said Monday. "I think that at least the probability of something we experience in 1998 is way too low," Robert Rubin told in a press conference here after attending an international forum. "Fundamentally, there are differences in circumstances."
In Philippines, equities ended the recent string of losses as the Asian markets eyed the late rebound in the US stocks and marginal gains in select Asian markets. The Philippine Stock Exchange index rose 9.60 points or 0.51% to 1,891.04 while the all shares climbed 5.09 points or 0.42% 1,223.77.
In Taiwan, stock market finished the session on a higher side, as DRAM makers such as Powerchip jumping after a report that the government will present a consolidation plan for the battered industry this week. The financial sector stocks remained subdued as sharp declines of U.S. banking shares weighed and due to concerns that lower interest rates will further hurt company profits. The main Taiex share index ended higher by 40.84 points or 0.92% at 4,477.78.
On the political economic front, the Vice Premier Chiu Cheng-hsiung said that Taiwan's plan to sign a comprehensive economic cooperation agreement (CECA) with China is purely an economic issue that is not necessarily directly related to politics. Chiu said the CECA plan, which comes under the portfolio of the Ministry of Economic Affairs, is aimed mainly at enabling Taiwan to meet the challenges that would arise from the ASEAN Plus China agreement set to take effect in 2010.
Meanwhile, Mainland Affairs Council Chairwoman Lai Shin-yuan said Sunday that Taiwan's plan to sign CECA with China is purely an economic matter and does not involve national sovereignty issues.
Economics Minister Yiin Chii-ming rejected opposition fears about a wide-ranging trade agreement with China Monday by describing it as just another free trade agreement.
The opposition Democratic Progressive Party says signing a Comprehensive Economic Cooperation Agreement (CECA) with China amounts to giving away Taiwan's sovereignty. DPP critics have been quoting a Washington Post report describing CECA as a significant step on the road to unification.
In India, the stock markets were closed on the account of public holiday.
Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.21% or 1.88 points to 887.83, while Indonesia's Jakarta composite increased by 15.50 points or 1.19% to 1,312.44. In Thailand, the Thai Stock exchange added 0.32 points or 0.07% to 434.99.
In other regional market, banks helped Europe stocks on Monday bounce off the worst close in nearly six years, rising on reports that Citigroup wouldn't be fully nationalized and that Royal Bank of Scotland would break itself in half. The U.K. FTSE 100 rose 1.7% to 3,955.50, the German DAX 30 added 1.9% to 4,088.78, and the French CAC 40 rose 2% to 2,804.25.
Gold crosses $1,000 mark once again
Bullion metal prices ended higher on Friday, 20 February, 2009. With this rise, gold was back above $1,000 level roughly after a year. Deep recession fears have been increasing the appeal of the precious metals as a safe haven against alternatives since past few days.
Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.
On Friday, Comex Gold for April delivery rose $25.7 (2.6%) to close at $1,002.2 an ounce on the New York Mercantile Exchange. During the day, it rose to a high of $1,007.7. For the week, gold ended roughly higher by 5.5%. For January, 2009, gold had gained 3.9%. Year to date, gold prices are higher by 13.6%.
On 17 March, 2008 prices had skyrocketed to a high of $1,034/ounce. But prices have dropped significantly (11%) since then.
On Friday, Comex silver futures for March delivery rose 55 cents (4%) to end at $14.49 an ounce. Year to date, silver has climbed 28.5% this year. For 2008, silver had lost 24%.
The World Gold Council reported this week that demand for gold surpassed $100 billion last year for the first time ever, amid increased industrial and jewelry consumption and investors' purchase of the metal as a safe haven. Gold demand - including jewelry consumption, industrial demand and identifiable investments such as bars, coins and gold exchange-traded funds - hit $102 billion in 2008, up 29% from a year ago. In tonnage terms, gold demand rose 4% to 3,659 tons.
In 2008, gold prices ended higher by 5.5%. The dollar index had gained 12% that year.
Last year, the weakening dollar and higher global demand for raw materials had led to records for commodities including gold. Gold reached a record in March 2008 as a U.S. housing slump and credit crisis spurred the Federal Reserve to slash borrowing costs. In the last move, the Federal Reserve has cuts its target bank lending rate to 0.25% from 5.25% in September, 2007. The Fed did it in nine steps.
Prior to 2008, gold had witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. Silver had climbed 16% in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.