Euro Falls on Bank Funds Concern; Asian Steelmakers Rally on Obama's Plans
Euro Falls on Bank Funds Concern
Hannelore Foerster/Bloomberg
The euro dropped 0.5 percent to $1.2818 at 12:20 p.m. in Tokyo from $1.2876 in New York yesterday, the biggest decline since Aug. 30.
The euro dropped 0.5 percent to $1.2818 at 12:20 p.m. in Tokyo from $1.2876 in New York yesterday, the biggest decline since Aug. 30. Photographer: Hannelore Foerster/Bloomberg
Sept. 7 (Bloomberg) -- Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd., talks about his investment strategy and the outlook for improving corporate dividends. Lenhoff speaks from London on Bloomberg Television's "On the Move" with Francine Lacqua. Brewin Dolphin oversees $33 billion. (Source: Bloomberg)
The euro weakened against 14 of 16 major counterparts on speculation European banks may need to raise more capital. Asian steelmakers gained after President Barack Obama proposed $50 billion to improve U.S. infrastructure.
The euro dropped 0.6 percent to $1.2805 at 3 p.m. in Tokyo from $1.2876 in New York yesterday, the biggest decline since Aug. 30. The MSCI Asia Pacific Index lost 0.3 percent at 121.51 after rallying 4.6 percent in four days. Standard & Poor’s 500 index futures were little changed and those for the Euro Stoxx 50 decreased 0.3 percent. U.S. markets were closed yesterday. Japanese government bonds rose for the first time in five days.
Obama proposed spending on transportation projects to spur the world’s biggest economy before JPMorgan Chase & Co. said that it sees “further upside” for China steelmakers. A group of German banks said new rules may force Germany’s 10 biggest lenders to raise $135 billion of capital. Europe’s largest banks hold more than 134 billion euros in Greek, Portuguese and Spanish government bonds, according to a Bloomberg News tally.
“Obama’s plan is helping steelmakers,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages $85 billion. “The recovery from the 2008 recession was going to be on the back of physical infrastructure spending, and this is what we are seeing in the U.S. and emerging economies.”
The index of materials stocks including steelmakers on China’s CSI 300 Index rose 1.3 percent, leading gains among the measure’s 10 industry groups. Maanshan Iron & Steel Co. jumped 7.8 percent in Shanghai. Posco, the world’s third-biggest steelmaker, jumped 4.7 percent in Seoul, set for its biggest gain since June 21, Hyundai Steel Co. climbed 5.1 percent and Dongkuk Steel Mill Co. added 2.7 percent.
China Steel
Benchmark hot-rolled coil steel prices in China, the metal’s biggest consumer, rose 3.5 percent yesterday as steelmakers in Hebei province shut mills after the local government limited electricity to reach power efficiency targets. In the U.S., Obama’s proposals call for an “infrastructure bank” and seek money to rebuild 150,000 miles (241,400 kilometers) of roads, construct and maintain 4,000 miles of rail and overhaul 150 miles of runways.
The euro weakened amid renewed concern sovereign-debt risk will hinder the fiscal health of European banks, denting prospects for the region’s economic recovery. The single currency weakened to 107.67 yen from 108.42 yen. The dollar traded at 84.11 yen from 84.21 yen.
Greece Risk
Greece still faces “substantial” default risk as insolvency prevents the nation from repaying its debt when its bailout program expires in three years, Pacific Investment Management Co. fund manager Andrew Bosomworth said yesterday.
The yen was among the biggest gainers among the major currencies today as sovereign debt concern boosted demand for so-called refuge currencies.
Japanese automakers fell on concern the yen’s strength against the euro will hurt the value of European sales. Nissan Motor Co. lost 1.8 percent, while Honda Motor Co. slipped 1.4 percent. Nintendo, the world’s largest maker of video-game consoles, declined 1 percent.
The Bank of Japan kept borrowing costs and the size of its liquidity injections unchanged. Governor Masaaki Shirakawa and his board left the bank-loan facility at 30 trillion yen ($356 billion) after boosting it by 10 trillion yen at an Aug. 30 emergency meeting, the central bank said. Policy makers held the benchmark overnight rate at 0.1 percent.
JGBs Gain
Ten-year Japanese bond yields fell 4.5 basis points from an 11-week high to 1.140 percent after a key supporter of Ichiro Ozawa, the head of the ruling Democratic Party of Japan’s largest faction, said his chances of replacing Prime Minister Naoto Kan have declined.
Reserve Bank of Australia Governor Glenn Stevens kept the overnight cash rate target at 4.5 percent for a fourth month, the central bank said, as concern that the global recovery may falter trumped evidence of accelerating expansion at home.
“The domestic economy by itself demands higher interest rates,” Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, said ahead of today’s decision. “What’s stopping the RBA is the global economic uncertainty.”
The Australian dollar extended declines after Prime Minister Julia Gillard won the backing of key independent lawmakers, allowing her Labor Party to retain government and pursue a tax on mining companies. The Australian currency slid to 91.37 U.S. cents in Sydney, from 91.76 cents yesterday in New York.
Won Weakens
South Korea’s won fell for the first time in five days, dropping 0.5 percent to 1,176.70 per dollar, on speculation the central bank intervened to curb appreciation that may hurt exports. The won retreated from its strongest level in four weeks after policy makers were suspected of buying dollars in the foreign-exchange market yesterday, said Ha Joon Woo, a currency dealer at Daegu Bank in Seoul.
Copper dropped for the first time in five days as London Metal Exchange contracts for three-month delivery fell 1.2 percent to $7,619 a metric ton.
Oil slid for a second day in New York, declining 1.1 percent to $73.81 a barrel on speculation that fuel demand will decline as the U.S. summer peak consumption season ends. Yesterday’s Labor Day holiday marks the end of the peak driving season. Refiners often idle units for maintenance in September and October as gasoline demand drops and before heating-oil use increases. U.S. crude inventories last week rose to the highest point since June, the Energy Department said.
The Markit iTraxx Asia index of credit-default swaps on 50 investment-grade borrowers outside Japan rose 3.5 basis points to 116 basis points in Singapore, Royal Bank of Scotland Group Plc prices show. The risk benchmark is headed for its biggest increase since Aug. 31 and its highest close since Sept. 4, according to CMA in New York.
To contact the reporters on this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net Shani Raja in Sydney at sraja4@bloomberg.net
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