Bonds rally on subdued inflation outlook, Asian stocks retreat
Friday, 13 November 2009
TOKYO, Nov 12 (Bloomberg): Japanese and US government bonds rose after central bank officials signalled inflation doesn't pose a threat and Japan reported a 10th month of declines in producer prices. Asian stocks fell, reversing earlier gains.
Japan's benchmark 10-year bond yield declined 5.6 basis points to 1.37 per cent. The rate on US Treasuries of similar maturity fell 6.7 basis points to 3.42 per cent after Federal Reserve officials indicated near-zero interest rates will be maintained. Bonds also rose as China's Premier Wen Jiabao said the world faces a "slow and bumpy" recovery.
South Korea's central bank left interest rates on hold for a ninth month at two per cent today to underpin growth. Bank of England Governor Mervyn King said yesterday he has an "open mind" on further bond purchases, a signal officials aren't ready to withdraw stimulus yet.
The Fed cut its target for overnight loans to a range of zero to 0.25 per cent in December and reiterated a pledge to keep borrowing costs at a record low for an "extended period" last week. US consumer prices rose 0.2 per cent in September from the previous month, a second month of slowing inflation.
Costs Japanese companies pay for energy and unfinished goods tumbled 6.7 per cent in October from a year earlier, the Bank of Japan said today.
The central bank last month forecast that both wholesale and consumer prices will continue to fall through the year ending March 2012, which would mark the third year of declines.
Japan's producer prices "have moved into a new phase of 'home-made' deflation linked to a lack of domestic demand," said Kyohei Morita, chief economist at Barclays Capital in Tokyo. "Deflation may become less speedy but could also become more sticky."
Most Asian stocks fell as losses in Japanese drugmakers countered advances among mining companies and automakers.
Hisamitsu Pharmaceutical Co and Tsumura & Co sank at least 7 per cent in Tokyo after a government committee advised cutting drug prices to trim medical expenses. Honda Motor Co, Japan's second-biggest carmaker, jumped 1.8 per cent after Goldman Sachs Group Inc recommended buying the stock.
Japan's Nikkei 225 Stock Average fell 0.7 per cent to 9,804.49 in Tokyo. Australia's S&P/ASX 200 Index dropped 0.2 per cent even as the government posted an unexpected increase in jobs last month. The Kospi Index sank 1.4 per cent in South Korea. Futures on the Standard & Poor's 500 Index lost 0.4 per cent.
China's Shanghai Composite Index lost 0.1 per cent, while the Hang Seng Index in Hong Kong fell one per cent. The Hang Seng earlier rallied to a level 100 per cent above its low this year on March 9.
China's economic growth in the second half of this year will exceed 9 percent, Yu Bin, director of the macroeconomic research department of the State Council's Development Research Centre, said today.
Newcrest Mining Ltd, Australia's biggest gold mining company, rose 0.7 per cent to A$35.58. Zijin Mining Group Co., China's largest gold producer, added 0.1 per cent to 9.73 yuan. Rio Tinto Group, the world's No 3 mining company, climbed 1.8 to A$69.84 per cent in Sydney.
The Dollar Index, which measures the greenback against a basket of six currencies, was little-changed and earlier fell to the lowest since Aug 7, 2008. US Treasury Secretary Timothy Geithner said in a Wall Street Journal column today with the finance ministers of Indonesia and Singapore that Asia-Pacific nations need "market-oriented" currencies that are in line with economic fundamentals to encourage new sources of growth.
The Australian dollar advanced to as high as 93.70 US cents, a level not seen since August 2008, after the jobs report. New Zealand's currency appreciated to as much as 74.42 US cents as a report showed retail sales unexpectedly rose last quarter and Finance Minister Bill English said the country can afford to start withdrawing stimulus.
Japan's benchmark 10-year bond yield declined 5.6 basis points to 1.37 per cent. The rate on US Treasuries of similar maturity fell 6.7 basis points to 3.42 per cent after Federal Reserve officials indicated near-zero interest rates will be maintained. Bonds also rose as China's Premier Wen Jiabao said the world faces a "slow and bumpy" recovery.
South Korea's central bank left interest rates on hold for a ninth month at two per cent today to underpin growth. Bank of England Governor Mervyn King said yesterday he has an "open mind" on further bond purchases, a signal officials aren't ready to withdraw stimulus yet.
The Fed cut its target for overnight loans to a range of zero to 0.25 per cent in December and reiterated a pledge to keep borrowing costs at a record low for an "extended period" last week. US consumer prices rose 0.2 per cent in September from the previous month, a second month of slowing inflation.
Costs Japanese companies pay for energy and unfinished goods tumbled 6.7 per cent in October from a year earlier, the Bank of Japan said today.
The central bank last month forecast that both wholesale and consumer prices will continue to fall through the year ending March 2012, which would mark the third year of declines.
Japan's producer prices "have moved into a new phase of 'home-made' deflation linked to a lack of domestic demand," said Kyohei Morita, chief economist at Barclays Capital in Tokyo. "Deflation may become less speedy but could also become more sticky."
Most Asian stocks fell as losses in Japanese drugmakers countered advances among mining companies and automakers.
Hisamitsu Pharmaceutical Co and Tsumura & Co sank at least 7 per cent in Tokyo after a government committee advised cutting drug prices to trim medical expenses. Honda Motor Co, Japan's second-biggest carmaker, jumped 1.8 per cent after Goldman Sachs Group Inc recommended buying the stock.
Japan's Nikkei 225 Stock Average fell 0.7 per cent to 9,804.49 in Tokyo. Australia's S&P/ASX 200 Index dropped 0.2 per cent even as the government posted an unexpected increase in jobs last month. The Kospi Index sank 1.4 per cent in South Korea. Futures on the Standard & Poor's 500 Index lost 0.4 per cent.
China's Shanghai Composite Index lost 0.1 per cent, while the Hang Seng Index in Hong Kong fell one per cent. The Hang Seng earlier rallied to a level 100 per cent above its low this year on March 9.
China's economic growth in the second half of this year will exceed 9 percent, Yu Bin, director of the macroeconomic research department of the State Council's Development Research Centre, said today.
Newcrest Mining Ltd, Australia's biggest gold mining company, rose 0.7 per cent to A$35.58. Zijin Mining Group Co., China's largest gold producer, added 0.1 per cent to 9.73 yuan. Rio Tinto Group, the world's No 3 mining company, climbed 1.8 to A$69.84 per cent in Sydney.
The Dollar Index, which measures the greenback against a basket of six currencies, was little-changed and earlier fell to the lowest since Aug 7, 2008. US Treasury Secretary Timothy Geithner said in a Wall Street Journal column today with the finance ministers of Indonesia and Singapore that Asia-Pacific nations need "market-oriented" currencies that are in line with economic fundamentals to encourage new sources of growth.
The Australian dollar advanced to as high as 93.70 US cents, a level not seen since August 2008, after the jobs report. New Zealand's currency appreciated to as much as 74.42 US cents as a report showed retail sales unexpectedly rose last quarter and Finance Minister Bill English said the country can afford to start withdrawing stimulus.