Archive for March, 2009

Asian shares extend rally, caution sets in (Reuters)

Tuesday, March 31st, 2009 | Finance News

HONG KONG (Reuters) –
Asian stocks started the new quarter with more gains after an impressive performance in March on expectations the frail global economy is about to bottom out and hopes the financial system was on the mend.

However, the safe-haven yen also rose on concerns about the fate of General Motors Corp (GM.N) and Chrysler, in a possible sign that more bad news could spur investors to ditch riskier assets just as quickly as they piled in on March.

Oil prices dropped more than 2 percent, dragged down by an industry report showing a larger-than-expected rise in U.S. crude stocks, while gold prices held firm.

Leaders from the G20 group of the world's biggest economies meet on Thursday with little hope they will find concrete solutions to the worst global economic crisis in decades.

Evidence of economic weakness abound. Data on Wednesday showed Japanese business confidence tumbled to a record low, while reports on Tuesday showed plunging U.S. home prices and consumer confidence holding at just above record lows.

Still, deep interest rate cuts by major central banks -- with the European Central Bank expected to cut its benchmark again on Thursday -- and stimulus measures are at least comforting stock markets in Asia, which enjoyed in March their best month in a decade.

"The market environment has turned fairly positive. Easier monetary policy worldwide have allowed more liquidity to flow into markets," said Kwak Joong-bo, a market analyst at Hana Daetoo Securities in Seoul.

The MSCI index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.7 percent as of 11:30 p.m. EDT, building on gains of 14.6 percent in March.

Financial shares such as National Australia Bank (NAB.AX) and KB Financial Group (105560.KS) were among the leading gainers.

Although banks in the region did not hold as many of the junk investments that hurt some of their global rivals, their shares have suffered nonetheless on concerns about the broader financial system.

"People are feeling a lot more confident about banks," said Chris Halls, a fund manager with Argo Investments Ltd in Australia.

South Korean auto makers such as Hyundai Motor (005380.KS) also surged on hopes they will gain market share at the expense of struggling U.S. rivals.

GM warned on Tuesday there was a rising chance it could file for bankruptcy by June, as Fiat SpA (FIA.MI) and Chrysler executives met in a race to complete a tie-up the U.S. government says Chrysler needs to survive.

U.S. stock futures had been hit during Asia trade on Wednesday after Bloomberg reported U.S. President Barack Obama had decided on a pre-packaged bankruptcy for GM. A senior administration official later called that report "inaccurate.


The concerns over U.S. auto makers did not prevent Asian shares from extending their winning streak with markets in Japan (.N225), South Korea (.KS11) and Taiwan (.TWII) leading with gains of nearly 2 percent.

Currency investors were more cautious, sending the safe-haven yen higher.

The dollar index (.DXY), a gauge of its performance against six major currencies, rose 0.3 percent to 85.773 (.DXY), but off an earlier high of 85.940. But the dollar fell 0.4 percent from late New York trade to 98.60 yen after tumbling as low as 98.21 yen on trading platform EBS.

The New Zealand dollar fell more than 2 percent and its debt rallied strongly after the country's central bank warned the outlook for the recession-hit economy remained weak and the bank would be keeping rates low for some time.

"Investors fear that RBNZ may adopt unconventional methods of easing monetary policy, if financial conditions continue to tighten," said Bank of NZ currency strategist Danica Hampton.

The NZ dollar fell to a low of $0.5558, from $0.5700 before the statement. It was trading at $0.5576/80 at 9 p.m. EDT.

U.S., British and Japanese central banks have turned to unconventional steps to pump funds into their economies, including outright buying of government and corporate debt.

It is not clear whether the European Central Bank will follow suit, though analysts do widely expect it to cut its main interest rate by 50 basis points to a record low of 1 percent at its policy meeting on Thursday.

The euro was down 0.5 percent to $1.3185.

In commodity markets, U.S. crude for May delivery slid $1.20 to $48.50 on a report from the American Petroleum Institute showing U.S. crude stocks rose by a greater-than-expected 3.3 million barrels in the week to March 27.

Gold held firm at $920.35 an ounce from its New York's notional close of $917.15 on Tuesday.


Obama in demand as G20 seeks answer to crisis (Reuters)

Tuesday, March 31st, 2009 | Finance News

LONDON (Reuters) –
World leaders meet on Wednesday under intense pressure to produce a morale-boosting response to the worst economic downturn seen since the 1930s.

They will have their work cut out at a G20 summit where U.S. President Barack Obama makes his first major international sortie, under perhaps more pressure than anyone to show that the country where the crisis began can lead the way out.

Washington is pushing hard for other governments to pump more money into economic stimulus programs while France and Germany say they do not want this to distract from the need to regulate and rein in financial market excess.

Obama, also seeking to thaw relations with Moscow and muster support for a new strategy in Afghanistan, meets Russia's Dimitry Medvedev and China's Hu Jintao among others before the G20 leaders all get together for dinner at Buckingham Palace.

Police are on alert to avert any violence from planned protests, one by anti-war groups and another that, according to websites, will head into London's City district, a symbol of the financial market system that now attracts much public anger.

British Prime Minister Gordon Brown, host to the G20 leaders whose economies account for more than 80 percent of world trade and economic output, is determined to declare a success when it all ends on Thursday, despite some clear difficulties.

French President Nicolas Sarkozy says this time the leaders, who held a first crisis summit in November, must do more than renew pledges to restore growth and crack down on financial market excess.

In a commentary for publication by newspapers, Sarkozy said governments had made "gigantic efforts" in response to the economic crisis but that much work still needed to be done to prevent other such disasters.

"Failure is not an option, the world would not understand it and history would not forgive us for it," he said, adding it could take meetings beyond London to get all the way there.

Media reports on Tuesday suggested Sarkozy was willing to go as far as storming out of the summit if he did not get his way, and his finance minister said he would not sign off on something he did not approve, but officials back in Paris laughed off the idea of a dramatic exit.


Sarkozy and German Chancellor Angela Merkel are pushing hard for visible results on regulation, such as closer tabs on hedge funds and credit rating agencies and naming and shaming of tax havens if they fail to bow to pressure and end bank secrecy.

Those are not the only demands.

China and Russia want the West to give them more say over matters of global economic importance and have gone as far as to suggest the dollar should one day be dropped as the world's main reserve currency, though the latter is not seen as an issue the summit will broach in any depth.

The rest of the developing world is hoping aid flows will not dry up as governments elsewhere pump trillions of dollars of public money into bank rescues and tax breaks or big building projects to support demand and jobs.

They got a reminder of the gravity of the situation from the Organization for Economic Co-operation and Development.

The OECD said on Tuesday the economies of its 30 members, most of which are wealthy industrialized ones, would shrink by 4.3 percent in 2009, costing 25 million jobs.

That is about half of the worldwide job losses that the International Labour Organization is forecasting in the next year or so as international trade slumps and companies fold.

To limit the fallout, the G20 leaders are expected to more than double the $250 billion available to the International Monetary Fund to help countries pushed to the brink.

(Editing by Ralph Gowling)


Health nominee Sebelius reveals tax errors (Reuters)

Tuesday, March 31st, 2009 | Finance News

WASHINGTON (Reuters) –
Kathleen Sebelius, named as U.S. health secretary by President Barack Obama, became his latest nominee to reveal income tax issues, saying on Tuesday she paid nearly $8,000 to settle errors over three years.

Sebelius, the governor of Kansas, must pass a confirmation process in Congress before she can lead Obama's overhaul of the $2.5 trillion U.S. healthcare sector to cut costs and provide coverage to an estimated 46 million uninsured Americans.

"Unintentional errors" involving charitable contributions, mortgage interest and business expenses were revealed in a review of her and her husband's tax returns by a certified accountant, prompting them to file amended returns, Sebelius wrote to top members of the Senate Finance Committee.

"As a result of these amendments to our 2005, 2006 and 2007 returns, we paid a total of $7,040 in additional tax and $878 in interest," she said in the letter to Max Baucus, the Democratic head of the committee, and Charles Grassley, its ranking Republican.

Before Sebelius, Obama's first choice as health secretary -- former Senate Democratic leader Tom Daschle -- withdrew after he acknowledged he delayed payment of some $140,000 in taxes and fines.

Treasury Secretary Timothy Geithner's nomination was criticized for late payment of $34,000 in taxes but he was eventually confirmed.

Baucus said he supported the nomination of Sebelius, who is due to testify to his committee on Thursday.

"Congress is going to need a strong partner at the Department of Health and Human Services to achieve comprehensive health reform this year, and we have that partner in Governor Sebelius," Baucus said in a statement.

A spokeswoman for Grassley said the senator "generally reserves judgment on nominees until the vetting process, including the nomination hearing, is completed."

(Reporting by John O'Callaghan; editing by Mohammad Zargham)