Asian Stocks Slump on U.S. Economic Concern and flight to safety in US bonds

[Guest guest]

Dear friends,

 

The stock markets in Asia have continued to decline. The Nikkei lost

3,3% of its value today and Emerging Markets also dropped. While this

is in reaction to the developments in the USA on Friday, it is not

likely to help the US or European markets today. The second news story

is that a flight to the safety of US bonds has accelerated. These

investors are evidently also betting on a Fed rate cut. The third news

story is about central bank heads, including US Fed Chairman, Ben

Bernanke, warning investors not to count on a interest rate cut to

boost liquidity in case of market turmoil.

 

A prediction of a stock market decline in the USA has been made based

on the SAMVA USA chart. We have in the last week seen what amounts to

the beginning of such an event.

 

Best wishes,

 

Thor

 

1.

Asian Stocks Slump on U.S. Economic Concern; Toyota, HSBC Slide

By Stuart Kelly and Makiko Suzuki

 

March 5 (Bloomberg) -- Asian stocks tumbled, extending a global

selloff that wiped $1.5 trillion from the value of global equities, on

concern U.S. growth will stall.

 

Toyota Motor Corp. led Japan's stocks to the biggest decline in almost

nine months after a government report showed consumer confidence

dropped in the U.S., Asia's biggest export market. HSBC Holdings Plc,

the third-largest bank, slumped after the Sunday Times said it will

write off $11 billion to cover mounting losses in America.

 

``Investors may remain bearish all week as expectations over solid

U.S. consumption have dropped,'' said Masaaki Endo, who helps oversee

$10 billion at Norinchukin Zenkyoren Asset Management Co. in Tokyo.

``The global plunge made people sensitive to risk.''

 

The Morgan Stanley Capital International Asia-Pacific Index slid 2.9

percent to 138.64 at 3:01 p.m. in Tokyo, its lowest since Jan. 11. The

measure fell 3.5 percent last week, the most since July. Just 21 of

its 1,069 stocks advanced.

 

U.S. stocks had their worst week since January 2003, sliding to a

three-month low on March 2. Futures on the Standard & Poor's 500 Index

recently fell 0.7 percent. Nasdaq Composite Index futures declined 1

percent.

 

Japan's Nikkei 225 Stock Average lost 3.3 percent, the most since

June. Sony Corp. and Canon Inc. led declines as the yen rose against

the dollar and euro, reducing the value of overseas sales. Other

markets open fell. Thailand is closed for a holiday.

 

China Minsheng Banking Corp. led China's stocks lower after Premier

Wen Jiabao said the country will take more steps to curb investment

and slow economic growth.

 

Falling Confidence

 

U.S. stocks dropped after a decline in consumer confidence magnified

the risk that profit growth will be wiped out by a recession. All

three U.S. benchmarks erased their year-to-date gains as about $837

billion of market value was lost in the world's biggest economy.

 

A worldwide stock-market rout began in China on Feb. 27 amid concern

the government would tighten investment controls. Last week the S & P's

500 Index fell 4.4 percent while the Nasdaq dropped 5.9 percent.

 

Toyota, the world's second-biggest automaker, dropped 3.2 percent to

7,460 yen. BHP Billiton, the biggest mining company, fell 2.9 percent

to A$26.34. Posco, the world's No. 3 steelmaker, slumped 8.5 percent

to 333,500 won.

 

U.S. consumer confidence declined as fuel prices rose, a day after the

government reported an increase in jobless claims. The

Reuters/University of Michigan's reading for consumer sentiment fell

to 91.3 last month from 96.9 in January. The figure compares with an

initial reading of 93.3 issued Feb. 16.

 

Recession?

 

Economists last week lowered forecasts for a U.S. jobs report due

March 9 after the government said the number of people on unemployment

rolls jumped to the highest in 14 months. James O'Sullivan at UBS

Securities LLC was among those who cut projections.

 

The U.S. economy created 100,000 jobs last month, the fewest in two

years, according to the median forecast in a Bloomberg News survey of

economists. The jobless rate is projected to hold at 4.6 percent for a

second month.

 

St. Louis Federal Reserve Bank President William Poole acknowledged

there ``could be'' a recession, although one isn't likely. The central

bank's consensus estimate is for growth above 2.5 percent in the

coming year.

 

``The memory of last week is still with us and it's a matter of when

investors say `enough is enough,''' said Hans Kunnen, who helps manage

the equivalent of $70 billion at Colonial First State Investment

Management Australia Ltd. in Sydney. ``That isn't happening today

because we've had more U.S. data to worry the market.''

 

Emerging Markets

 

The Morgan Stanley Capital International's Emerging Markets Index fell

2.5 percent to 856.59, adding to a four-day, 6.7 percent slump.

 

The Kuala Lumpur Composite Index plunged 4.6 percent while the

Philippine Stock Exchange index lost 4.5 percent. Gauges in Taiwan,

South Korea, India and Indonesia fell more than 2 percent.

 

Reliance Industries Ltd., India's largest non-state run company,

declined 3.3 percent to 1,274 rupees. Tenaga Nasional Bhd., Malaysia's

biggest power producer, dropped 5.2 percent to 11 ringgit.

 

``It's a panic situation among investors and they're selling at

ridiculous prices,'' said Scott Lim, who helps manage $400 million as

chief investment officer at CMS Dresdner Asset Management Sdn. in

Kuala Lumpur. ``It's just bad luck.''

 

2.

U.S. Notes Gain as Investors Seek Safety, Bet on Fed Rate Cut

 

By Wes Goodman and Kevin Lim

 

March 5 (Bloomberg) -- U.S. Treasuries rose as Asian stocks extended a

global decline, feeding demand for the relative safety of government

debt and prompting traders to increase bets the Federal Reserve will

cut interest rates.

 

Ten-year notes added to their biggest weekly gain in five months as

Japan's Nikkei 225 Stock Average dropped for a fifth day. Yields on

two-year notes, among the most sensitive to Fed rate expectations,

approached the lowest in more than a year.

 

``People want to go to safe havens,'' said Satoshi Okumoto, who helps

manage $25 billion in fixed-income assets at Fukoku Mutual Life

Insurance Co. in Tokyo. ``It's increasingly possible the Fed might cut

rates in this type of scenario.''

 

The yield on the benchmark 10-year Treasury fell 4 basis points, or

0.04 percentage point, to 4.46 percent as of 1:14 p.m. in Singapore,

according to bond broker Cantor Fitzgerald LP. The price of the 4 5/8

percent note due February 2017 rose 9/32, or $2.81 per $1,000 face

amount, to 101 9/32. Bond prices move inversely to yields.

 

Ten-year yields may drop to 4 percent in the next few weeks, Okumoto

said. A decline to that level by March 31 would bring a 4 percent gain

to an investor who bought today, according to data compiled by Bloomberg.

 

Interest-rate futures show traders are betting the Fed will reduce its

target for overnight loans by at least a quarter point to 5 percent at

its August meeting. The odds were 20 percent Feb. 22.

 

3.

Central Bankers Signal Markets' Turmoil Won't Bring Rate Cuts

 

By Rich Miller, John Fraher and Matthew Benjamin

 

March 5 (Bloomberg) -- The world's central bankers have a message for

investors stung by last week's roller-coaster ride in financial

markets: Don't count on us to bail you out with easier credit.

 

Federal Reserve Chairman Ben S. Bernanke, European Central Bank

council member Axel Weber and Bank of Japan policy maker Atsushi

Mizuno all play down the significance of the global shakeout on their

economies and are signaling that they still see inflation as a greater

risk.

 

``The global economy continues to perform very well, with solid growth

and relatively low inflation,'' John Lipsky, the International

Monetary Fund's second-ranking official, said in a March 2 interview.

Among global central banks, ``policies seem on track.''

 

That would keep the ECB and BOJ on a course to continue tightening

credit, while the Fed holds rates steady throughout 2007. Such an

outcome would disappoint investors who have bet the turmoil will

prompt policy shifts by the central banks. Dealers marked up the

chances of a Fed interest-rate cut by mid-year and lowered the odds on

future increases by the ECB and BOJ after a selloff in China sparked

the global rout.

 

The Dow Jones Industrial Average on Feb. 27 dropped as much at 546

points, the most since just after the Sept. 11, 2001, terrorist

attacks. The Morgan Stanley Capital International World Index lost

more than 4 percent in the week, its biggest slump in eight months.