To control money supply and curb rising prices, the People’s Bank of China has raised interest rate on bank deposits by 27 basis points to 3.6%, and the lending rates by 18 basis points, to 7.02% from 6.84%, fourth time this year.
Stocks steadily strengthened after the Federal Reserve’s recent interest rate cut, but failed to meet with the anticipated promises. Market is continuously being hurt by the debt market - to alleviate the ongoing credit crunch and to calm the market precariousness, another rate cut is hoping round the corner.
The Federal Reserve, which lowered its rates last week and gave huge relief rally in the stock market, has yet to solve the liquidity squeeze in fixed-income markets. Proof of this came to the fore, when market registered massive buying on Monday and Tuesday trading, but on the contrary government-backed securities went down sharply.
However, today market responds well and starts business from yesterday at 2.3% up. The NZSX-50 benchmark index surged 12.72 points to 3995, on the stability in credit markets. The Nikkei jumped 3%, while Britain’s FTSEurofirst 300 index advanced 0.6% to 1481.90. The Dow Jones gains 42.27 points, and rose to 13,121.35. However the Standard & Poor’s 500 Index could not benefited from the other markets and dips by 0.03% to 1445.55, whereas NASDAQ shots up by 0.14% and closed at 2508.59.
After wobbly session, market response is satisfactory, but to maintain it further, market analysts want another rate cut. Still, US short-dated Treasury security prices gained on the credit concerns, fortify the notion of another cut, wherein benchmark indices in Japan and Europe rebounded on the chance of more action by the Fed.
To shape the further strategy, Senate Banking Committee Chairman Christopher Dodd is discussing all aspect of market with Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson.
Via: Stuff
Federal regulators filed civil fraud charges against Sentinel Management Group, accused of fraud and misappropriation of clients’ assets, including using customers’ securities to obtain a loan of up to a half-billion dollars.
The Securities and Exchange Commission arraigned Sentinel for misleading clients by providing wrong information about the market value and selling securities without their knowledge in violation of the Investment Advisers Act. In the complaint, the SEC accuses Sentinel for transferring at least $679.5m in securities from client investment accounts to Sentinel’s proprietary “house” account. Sentinel also used securities from client accounts as collateral to obtain a $321m line of credit as well as additional leveraged financing.
SEC alleges that Sentinel’s fraudulent conduct has placed its clients at risk of irreparable loss. Sentinel officials didn’t comment on the SEC action.
Earlier, Sentinel has filed for Chapter 11 bankruptcy protection, as two of its customers, Farr Financial Inc. and Velocity Futures, filled a petition against Sentinel’s decision of selling assets at below market rates and without obtaining the needed approval.
Via: USA-Today
NASDAQ decided to sell its stake in London Stock Exchange after failing to buy it. US stock exchange has around 31% shares in the London Stock Exchange, which are worth £797m ($1.58bn).
Earlier, NASDAQ sought to buy it and proposed a bid. To make the deal look more respectable, NASDAQ bought shares in LSE for £11 each, but shareholders foiled its all steps and rejected the offer in February. However, by selling LSE’s stakes NASDAQ could make profit of more than $240m.
After failing to buy LSE, the second-biggest U.S. equity exchange is preparing a new bid for OMX of Sweden, which is already proposed by Borse Dubai. After disheartening from the LSE, OMX is a good chance to fulfill its dream to expand in European markets as it has exchanges in Sweden, Denmark, Finland and Iceland and the Baltic nations.
NASDAQ is looking for a buyer for its LSE’s stake and would use about $1 billion of the proceeds to retire debt and the rest to buyback shares. The sale will increase earnings per share by as much as 35 cents next year. NASDAQ stocks rose 2% to $32 in New York, whereas LSE shares gained 2.4% to £13 in London.
Via: BBC
The Nikkei stock exchange showed signs of recovery after hurt by the US subprime mortgage. It rose 458.80 points, or 3%, to 15,732.48, which is the biggest one-day percentage gain in 13 months.
Market responded well as dollar got strength and traded near ¥114.70 a dollar, notably it fell to year low ¥111.60 on the last closing.
The TOPIX was up 2.92%, or 43.18 points, at 1,523.57. Due to the subprime fiasco, it was down by some 9.4% last week, which was its biggest one-week fall since September 1990. However, with the rejuvenation, market is ready to bounce back and the TOPIX is ready to break above 1,600, but the index may feel stagnation after achieving 16k, due to low growth in the major sectors.
The biggest contributors are Canon Inc, which soar 7.6% to ¥5,810 ($50.81), but on Friday it had lost 8.6%, Toyota Motor Corp’s stakes surged 4.2% to ¥6,450 ($56.43) it also lost 7.2% earlier, while Daikin Industries’ shares increase by 8.9% to ¥4,770 ($41.73).
Financial stocks also did good business as Mizuho Financial Group Inc. gained 5.1% to ¥664,000 (5,809.38) and Mitsubishi UFJ Financial Group added another 2.8% to ¥1.09 (0.01) million.
Apart from the financial and technology sector, Energy stocks also surge as Nippon Oil Corp traded at ¥885 ($7.74), which is 6.9% better to the previous trading.
Moreover, steel sector boosts from the market improvement and Nippon Steel Corp. jumped by 4.3% to ¥745 (6.52), whereas JFE Holdings Inc. improved by 4% to ¥7,060 (61.77).
On the first working day of the week, Japanese stock exchange successfully rebounded from a plunge, after the Federal Reserve’s move to cut its discount rate, which eased fears about credit crunch and successfully encourage buyers to buy across the board. In the market, trade was at normal levels with 2.2 billion shares, compared with a daily average volume of 2.1 billion shares in July, which kindle the hope of end of subprime generated apprehension.
Via: Reuters
The US subprime mortgage monster has already eaten up many markets. All major central banks have come up to protect their economies. Western economies seem to have somewhat left the darker period behind, but budding Asian economies seem tied in the knot of subprime elf.
Wall Street shows signs of recovery - as market succeeds in wining back investors confidence, hoping that European markets slowly and steadily feel the ease as US markets and rebound after month of ruckus.
While trading, the Wall Street saw dramatic recovery as the Dow Jones clawed back more than 300 points. Shares also strengthen over the rumor of Federal Reserve rate cut.
Despite, gains in the US market, Asian markets are facing stiff falls. To alleviate the currency crunch, the Bank of Japan has pumped funds into the banking system. Japanese Bank has intervened thrice in the money market as recently it injected $10.7bn.
Japanese economy can feel the heat, as investors are worried about a slowdown in the US economy that will hit exports from Asia. In the middle of all rumpuses, there is speculation that the Bank of Japan is raising interest rates next week, which could create mishmash in the market - that could mar the small investors.
It’s not only Nikkei in Tokyo, which is down by 4.2% or 674.3 points at 15,474.15, but all major Asian markets that are feeling heat from the subprime’s flame. Hang Seng is down by 3.3% or 688.8 points at 19983.6, whereas Indian Sensex is down 421.86 points or 2.94% at 13936.35, (it’s notable that Sensex was at business at over 15,500, only a week before).
It was long speculated that the Subprime woes would not affect developing Asian region. But market volatility proved all speculations wrong. Taking lesson from the plunging Asian market and weighted business with west, Australia is taking precautions; the Australian central bank is intervening to support its currency for the first time in six years. New Zealand has already cleared its intention of intervening in the market, while southeast nations are weighing the market precariousness, before taking any step.
Via: BBC
The Bank of Japan is withdrawing $5bn funds it poured into the money market in the past two working days amid signs that the liquidity crunch may not be as bad as it was initially conceived, with the calm slowly returning to global financial markets.
The Bank of Japan has injected money over the concern of US subprime woes, which has paralyzed many economies, but after experiencing improvement in the market and ample liquidity in Japanese market, central bank retrieved fund from the money market.
Bank is withdrawing funds through sales of treasury notes. While selling, the overnight call rate dropped to around 0.4%, below the BoJ’s target of 0.5%, showing there is ample liquidity in the market. BoJ confirmed the withdrawal of injected funds, due to the rates continued to trade at levels lower than perceived and not relatively making any effect on the money market.
Japan also has less concern about liquidity as a sharp drop in rates that took place an hour ago and the central bank’s precautions action automatically guard Japanese liquidity problem. It is generally believed that Japanese financial institutions have only limited exposure to the subprime market, and the Bank of Japan apparently conducted the liquidity injection for the sake of a concerted action with the US and Europe.
BOJ also has the lowest interest rates of any major country and its monetary policy aimed at stimulating the country with easy credit after years of deflation and economic depression. It’s also rumor that Japan is planning to raise it benchmark rates by 0.50 to 0.75, to curtail its borrowers purchasing rate.
Via: AFP
Asian banks are taking initial step to avoid the market precariousness as the US subprime woes are continuously affecting major markets.
Being a highly developing region, Asia assumes to be less affected from the existing crises, but Asian nations aren’t taking any chances and are ready to face the problem strategically as well as economically.
After ECB and American bank, Asian banks are pumping money in the market, Bank of Japan has announced that it will inject $5.1bn into the banking system, to fuel the liquidity, whereas others major banks such as central banks in South Korea, the Philippines, Singapore, Indonesia, India, and Malaysia are assessing the market inclination and are ready to take appropriate step at the right time.
Central bankers from Asia to the United States had managed to restore an uneasy calm to financial markets by injecting billions of dollars into money markets that had almost seized up. The Asia-Pacific region is still awash in cash, with gross capital inflows into East Asia totaling $269 billion in 2006, however policy makers are not in a mood to give chance to market volatility.
Asian major players have already taken precautions as south Asia’s growing economy India has restricted lending this year by ordering banks to put more deposits aside on three occasions, while the Bank of Korea on Aug. 9 unexpectedly raised its benchmark interest rate. Although, China’s market mishmash is pinching the populace as the Chinese authority is planning to increase its benchmark rates, notably the fourth time in a year, but has still failed on its forefront to keep money flow under check.
Although, Asia seems safe from the crises, yet western economies are still under scanner, despite pumping extra cash into the financial system as global stock markets fell and high-yielding currencies lost their values.
US Federal Reserve has already injected $35bn so far, but the volatility still prevailed in the market. To curb the crises as early as possible, the US regulators are scrutinizing the books of some top Wall Street brokers and investment banks for subprime mortgage losses.
Due to the subprime woes, World stock markets have shed over 7% since they hit record highs only a month ago. Investors are afraid to invest in the market and they are rushing to buy government bonds, unwind yen-financed carry trades.
All major banks are taking emergency action to underline the risk that a global liquidity crunch was more serious than anticipated, but the desirable results are still far. In currency trading, the dollar also down 0.35%, while euro has shown some sign of gain, but still market volatility is hitting banks and corporates’ profit, as the crisis does not allow to make any corporate takeover deal.
Via: Yahoo
China’s monthly inflation has accelerated to the highest level in more than 10 years as increasing food prices are continuously hurting the economy and fueling the speculation of another interest rates hike.
In a monthly report, the National Bureau of Statistics disclose that consumer prices soared 5.6% in July from a year earlier, after gaining 4.4% in June against analysts maiden 4.6% forecast.
The food prices were the major contributor to inflation as its costs raised 15.4% after a shortage of meat supply and bad weather destroyed crops, while non-food items rose only 0.9 percent.
Chinese leaders are trying urgently to curb the sharp rise in food prices, which has hit the country’s poor majority hard. Chinese people have a relatively low disposable income and food accounts for a major part in people’s daily spending. In 2006, the disposal annual income for urban residents stood at 11,759 Yuan and at 3,587 Yuan for rural residents.
Weighing the problem of rising pork prices, Beijing has promised free vaccinations for pigs and other aid to farmers to raise pork production. National Development and Reform Commission, the country’s top price regulator, has ordered a crackdown on the manipulation of food prices, after several industry associations and firms announced plans to raise prices, including instant noodles and Chinese fast-food chains.
In the middle of inflation, policy makers are adamant to take all possible measures to keep the basic stability in prices as they are planning to increase interest rate again. China has raised interest rates three times so far this year, with the last one on July 20 when the benchmark one-year deposit rate rose to 3.33%.
To curve the volatility, the European Central Bank has decided to monitor the conditions on the euro market as U.S. subprime mortgage losses continued to shake credit markets.
Earlier, ECB has pumped 94.8 billion euros ($130.2 billion) in cash into the eurozone banking market to allay fears about a sub-prime credit crunch. Bank’s intervention pumped euro’s rate to 4.19%, against ECB’s benchmark refinancing rate of 4%.
The ECB made the money available in the form of loans, an offer taken up by 49 banks and other financial institutions.
Bank intervene in the market after French bank BNP Paribas suspended three investment funds worth 2bn euros ($2.73bn), due to worries in the US sub-prime mortgage sector. Other banks have also suspended funds with sub-prime investments. US lenders are suffering from the sharp rise in defaults on higher-risk mortgages and due to it; fear is looming high that the financial repercussions of this slump can crunch the European too.
Some market experts oppose the bank’s strategy to restore the liquidity in the market, whereas the larger section support ECB’s plan. The ECB, itself described the move as a “fine-tuning operation” for the banking market, which is the bank’s single largest intervention in the banking sector since 9/11 attacks on the US in 2001.
Investors are not trading at the moment as they’re just hoping ECB’s intervene again.
Via: Reuters
