The Star Online: Business
The Star Online: Business |
- Asian shares end seven-day winning streak
- Greece, markets satisfied by EU-IMF Greek debt deal
- Obama promotes tax agenda, Congress in stand-off
| Asian shares end seven-day winning streak Posted: 27 Nov 2012 07:30 PM PST TOKYO (Reuters) - Asian shares ended a seven-day winning streak on Wednesday and commodities eased as investors fretted that lack of progress in talks on U.S. budget woes risked putting the world's largest economy into recession. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, retreating from Tuesday's nearly three-week highs, with materials and energy sectors leading the declines. Shares in resource-reliant Australian dropped 0.4 percent, easing from two-week highs, dragged lower by top miners on weaker gold and oil prices. Australia's Bureau of Resources and Energy Economics said committed investment in major resources and energy projects, the main driver of Australian growth, still rose to A$268.4 billion ($280.5 billion) at October 31 from A$260.8 billion at end-April, but the rise partly reflected higher project costs and masked a fall in the number of projects. A fall in commodity prices due to a drop-off in Chinese demand also weighed on shares. "Markets don't really provide any sort of compelling investment value here at present because the grey cloud of uncertainty still overhangs the economic climate, in particular across Europe and the U.S., but also filtering into this part of the world as well," Jamie Spiteri, senior dealer at Shaw Stockbroking, said of Australian shares. U.S. stocks slid overnight after Senate Majority Leader Harry Reid expressed disappointment over little progress in dealing with the approaching "fiscal cliff" of deep cuts in government spending and big tax hikes early next year. The Shanghai Composite Index slid 0.7 percent to its lowest in nearly four years, extending losses after closing below 2,000 points for the first time since January 2009. The weak Chinese stock market, along with doubts over the U.S. ability to resolve its fiscal crisis, strengthened demand for sovereign debt, helping to push the 10-year Japanese government bond futures price to a 9-1/2-year high of 144.79. "Although recent Chinese economic data is showing signs of improvement, Shanghai share prices seem to suggest that it is still far from a full-fledged recovery," said Takeo Okuhara, fund manager at Daiwa SB Investments. Japan's Nikkei stock average fell 0.8 percent, after closing on Tuesday at a seven-month high. The Nikkei had risen 8.8 percent over the past two weeks since the government announced a December 16 election. Japan's main opposition party is forecast to win power, and investors expect it will force the Bank of Japan into aggressive easing. EUROPE LACKS CONFIDENCE Tuesday's agreement by international lenders to cut Greece's debt offered relief that the country has averted an imminent bankruptcy, but skepticism over the lack of details on how Athens will carry out budget reforms to meet its new debt targets capped a rise in European shares and the euro. The agreement on Greece is good news but it does not address medium-term financing and debt sustainability issues, Barclays Capital analysts said in a note. "The uncertainty brought by this approach makes European assets, including the EUR, vulnerable to global growth risks. For that reason, we think the European muddle through amplifies the market's response to the fiscal cliff discussion in the US." The euro was down 0.1 percent to $1.2932, slipping from a peak of $1.3010 hit on the Greece news on Tuesday, its highest level since October 31. Worries over the fiscal crisis overshadowed positive U.S. economic data that showed improvement in durable orders, the real estate sector and consumer confidence, which hit a 4-1/2-year high in November. The dollar dropped 0.3 percent against the yen to 81.88. U.S. crude futures were down 0.1 percent at $87.14 a barrel and Brent held steady at $109.90. Spot gold inched down 0.1 percent to $1,740.75 an ounce after slipping on Tuesday for a second session. Investors were sidelined in Asian credit markets, keeping the spreads on the iTraxx Asia ex-Japan investment-grade index little changed from Tuesday's levels.
|
| Greece, markets satisfied by EU-IMF Greek debt deal Posted: 27 Nov 2012 07:23 PM PST BRUSSELS: The Greek government and financial markets were cheered on Tuesday by an agreement between euro zone finance ministers and the International Monetary Fund to reduce Greece's debt, paving the way for the release of urgently needed aid loans. The deal, clinched at the third attempt after weeks of wrangling, removes the biggest risk of a sovereign default in the euro zone for now, ensuring the near-bankrupt country will stay afloat at least until after a 2013 German general election. "Tomorrow, a new day starts for all Greeks," Prime Minister Antonis Samaras told reporters at 3 a.m. in Athens after staying up to follow the tense Brussels negotiations. After 12 hours of talks, international lenders agreed on a package of measures to reduce Greek debt by more than 40 billion euros, projected to cut it to 124 percent of gross domestic product by 2020. In an additional new promise, ministers committed to taking further steps to lower Greece's debt to "significantly below 110 percent" in 2022. That was a veiled acknowledgement that some write-off of loans may be necessary in 2016, the point when Greece is forecast to reach a primary budget surplus, although Germany and its northern allies continue to reject such a step publicly. Analyst Alex White of JP Morgan called it "another moment of creative ambiguity' to match the June (EU) Summit deal on legacy bank assets; i.e. a statement from which all sides can take a degree of comfort". The euro strengthened, European shares climbed to near a three-week high and safe haven German bonds fell on Tuesday, after the agreement to reduce Greek debt and release loans to keep the economy afloat. "The political will to reward the Greek austerity and reform measures has already been there for a while. Now, this political will has finally been supplemented by financial support," economist Carsten Brzeski of ING said. PARLIAMENTARY APPROVAL To reduce the debt pile, ministers agreed to cut the interest rate on official loans, extend the maturity of Greece's loans from the EFSF bailout fund by 15 years to 30 years, and grant a 10-year interest repayment deferral on those loans. German Finance Minister Wolfgang Schaeuble said Athens had to come close to achieving a primary surplus, where state income covers its expenditure, excluding the huge debt repayments. "When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt," Schaeuble said. Eurogroup Chairman Jean-Claude Juncker said ministers would formally approve the release of a major aid instalment needed to recapitalise Greece's teetering banks and enable the government to pay wages, pensions and suppliers on December 13 - after those national parliaments that need to approve the package do so. The German and Dutch lower houses of parliament and the Grand Committee of the Finnish parliament have to endorse the deal. Losing no time, Schaeuble said he had asked German lawmakers to vote on the package this week. Greece will receive 43.7 billion euros in four instalments once it fulfils all conditions. The 34.4 billion euro December payment will comprise 23.8 billion for banks and 10.6 billion in budget assistance. The IMF's share, less than a third of the total, will be paid out only once a buy-back of Greek debt has occurred in the coming weeks, but IMF Managing Director Christine Lagarde said the Fund had no intention of pulling out of the programme. Austrian Chancellor Werner Faymann welcomed the deal but said Greece still had a long way to go to get its finances and economy into shape. Vice Chancellor Michael Spindelegger told reporters the important thing had been keeping the IMF on board. "It had threatened to go in a direction that the IMF would exit Greek financing. This was averted and this is decisive for us Europeans," he said. The debt buy-back was the part of the package on which the least detail was disclosed, to try to avoid giving hedge funds an opportunity to push up prices. Officials have previously talked of a 10 billion euro programme to buy debt back from private investors at about 35 cents in the euro. The ministers promised to hand back 11 billion euros in profits accruing to their national central banks from European Central Bank purchases of discounted Greek government bonds in the secondary market. BETTER FUTURE The deal substantially reduces the risk of a Greek exit from the single currency area, unless political turmoil were to bring down Samaras's pro-bailout coalition and pass power to radical leftists or rightists. The biggest opposition party, the hard left SYRIZA, which now leads Samaras's centre-right New Democracy in opinion polls, dismissed the deal and said it fell short of what was needed to make Greece's debt affordable. Greece, where the euro zone's debt crisis erupted in late 2009, is proportionately the currency area's most heavily indebted country, despite a big cut this year in the value of privately-held debt. Its economy has shrunk by nearly 25 percent in five years. Negotiations had been stalled over how Greece's debt, forecast to peak at 190-200 percent of GDP in the coming two years, could be cut to a more bearable 120 percent by 2020. The agreed figure fell slightly short of that goal, and the IMF insisted that euro zone ministers should make a firm commitment to further steps to reduce the debt if Athens faithfully implements its budget and reform programme. The main question remains whether Greek debt can become affordable without euro zone governments having to write off some of the loans they have made to Athens. Germany and its northern European allies have hitherto rejected any idea of forgiving official loans to Athens, but European Union officials believe that line may soften after next September's German general election. Schaeuble told reporters that it was legally impossible for Germany and other countries to forgive debt while simultaneously giving new loan guarantees. That did not explicitly preclude debt relief at a later stage, once Greece completes its adjustment programme and no longer needs new loans. But senior conservative German lawmaker Gerda Hasselfeldt said there was no legal possibility for a debt "haircut" for Greece in the future either. At Germany's insistence, earmarked revenue and aid payments will go into a strengthened "segregated account" to ensure that Greece services its debts. A source familiar with IMF thinking said a loan write-off once Greece has fulfilled its programme would be the simplest way to make its debt viable, but other methods such as forgoing interest payments, or lending at below market rates and extending maturities could all help. German central bank governor Jens Weidmann has suggested that Greece could "earn" a reduction in debt it owes to euro zone governments in a few years if it diligently implements all the agreed reforms. The European Commission backs that view. The ministers agreed to reduce interest on already extended bilateral loans in stages from the current 150 basis points above financing costs to 50 bps. - Reuters
|
| Obama promotes tax agenda, Congress in stand-off Posted: 27 Nov 2012 07:19 PM PST WASHINGTON: President Barack Obama on Tuesday launched a public relations push for his bid to raise taxes on wealthy Americans, but U.S. lawmakers remained deadlocked over dramatic, year-end tax increases and spending cuts known as the "fiscal cliff." At the White House, small business leaders emerged from a one-hour meeting with Obama to voice support for his goal of extending low tax rates for the middle class beyond the end of the year, while letting rates rise for wealthier taxpayers. The business owners urged Obama "to fight to keep the middle-class tax cuts," said Lew Prince, co-founder of Vintage Vinyl, an independent music store in St. Louis, Mo. "What grows jobs in America is consumers spending money, and the average person needs that two or three thousand dollars a year in his pocket to help drive the economy," Prince told reporters at the White House. Republicans want to extend low tax rates - enacted a decade ago under the administration of former Republican President George W. Bush - for all taxpayers, including households earning more than $250,000 a year. Raising tax rates on the wealthy would discourage investment and hiring at a time of high unemployment, Republicans say. Congressional Democrats allied with the president showed no sign of backing down from his stance on raising taxes for the wealthy. But both sides have softened on some long-held positions: Republicans have been showing a willingness to consider new revenue increases while Democrats have relaxed their hard line against new savings to the costly government-run Medicare and Medicaid healthcare programs. With just a month left before the Bush tax cuts expire and automatic spending cuts begin to take hold, markets were anxious about predictions that falling off the "fiscal cliff" could trigger another recession. "There remains no clarity on the ultimate status on the Bush tax cuts, which have to be resolved before you can move forward with the remainder of the fiscal cliff," said Chris Krueger, an analyst at Guggenheim Securities' Washington Research Group. MARKETS DOWN MODESTLY Stock prices declined modestly despite government reports that planned U.S. business spending rose again in October and that single-family home prices rose again in September. Despite a mild sell-off in stocks, the Dow Jones industrial average closed at about 12,878, up 14 percent from a year ago. Brian Gardner, an analyst at financial firm Keefe Bruyette & Woods, said a limited deal would likely be struck to avert the fiscal cliff, with larger fiscal issues pushed into 2013. "Fiscal cliff headlines could have the biggest impact on the market," he said. "Over the coming weeks, we expect many headlines that will raise and then dash investors' hopes ... The next three weeks could be a bumpy ride." Fresh from his November 6 re-election, Obama was set to hold another meeting with business executives from larger companies on Wednesday and then to travel to a toy factory in Pennsylvania on Friday to press his case on taxes. Chief executives from Goldman Sachs, Deloitte LLP, Caterpillar Inc, Yahoo Inc, and Comcast Corp were among the group of leaders set to meet with the president, the White House said. Senate Republican leader Mitch McConnell ripped into Obama for planning to take his agenda on the road. "Rather than sitting down with lawmakers of both parties and working out an agreement, he's back out on the campaign trail," McConnell roared on the Senate floor. "We already know the president is a very good campaigner. What we don't know is whether he has the leadership qualities necessary to lead his party to a bipartisan agreement." Obama last met with congressional leaders on November 16. A follow-up session was not expected this week, but could come next week, congressional aides said. In the interim, little progress was made over the holidays in meetings between the staffs of the White House and Republican Speaker of the House of Representatives John Boehner, aides said. LEADERS CANVAS RANKS Ron Bonjean, a former aide to Republican leaders in the House and Senate, said leaders were still checking with their rank-and-file members to gauge what concessions they might be able to stomach. In a week or so, Bonjean said, "the level of intensity will go up" with more meetings. Senate Democratic leader Harry Reid said he was disappointed there has been "little progress" on a deal to avoid the "fiscal cliff" and warned that "we only have a couple weeks to get something done. Despite frustration, Reid said he was optimistic lawmakers would avoid plunging off the "cliff," a convergence of an estimated $600 billion in tax increases and spending cuts. "I'm extremely hopeful, and I do not believe that the Republicans are going to allow us to go over the cliff," he said. While Republicans have not shifted from their opposition to tax rate increases, a few have publicly disavowed a no-new-taxes pledge to which most of them have adhered for years, putting tax revenues, if not higher rates, on the negotiating table. Also on Tuesday, Dick Durbin, a senior Senate Democrat and close Obama ally, urged fellow liberals to consider reforming Medicare and Medicaid, signaling possible compromise in an area where Democrats have steadfastly resisted change. "Progressives should be willing to talk about ways to ensure the long-term viability of Medicare and Medicaid" for the elderly and poor, Durbin said in excerpts from a speech. But he added that Medicare and Medicaid should not be part of the current negotiations on averting the fiscal cliff. On that front, Durbin stood firmly with Obama, urging extension of middle-class tax cuts for 98 percent of Americans. - Reuters
|
| You are subscribed to email updates from The Star Online: Business To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
0 ulasan:
Catat Ulasan