CENTRAL BANKS
Central banks inject cash, markets are not impressed
Thursday, December 13, 2007
After five central banks announced Wednesday that they will inject cash into the global banking system to ease the credit squeeze, Wall Street ended a touch higher while Asian stock markets dropped.
Thursday, December 13, 2007
By Reuters
SYDNEY, Dec 13 (Reuters) - Scepticism about plans by major central banks to tackle tight credit conditions knocked Asian stocks to one-week lows on Thursday, while the yen gained against the euro and dollar as risk appetite waned.
Doubts over the central banks’ plan were also set to weigh on European stocks, where financial bookmakers expect falls of up to 0.7 percent for the three major stock indexes.
Oil and gold were off their best levels, taking a breather as initial optimism over the central banks’ action dimmed. U.S. crude slipped to $94 a barrel, while gold dipped below $810 at one stage from a two-week high of $817.
“The action of central banks overnight highlights that they are very concerned about the problem and they need to do something about it. But it’s still unclear if it will work,” said Shane Oliver, the head of investment strategy with AMP Capital Investors in Sydney.
Investors were initially cheered by news the U.S. Federal Reserve and counterparts in Europe, Canada and Britain had banded together to stem a mounting credit crisis, in their first coordinated action since terror attacks shut down U.S. financial markets on Sept. 11, 2001.
The Bank of Japan also joined in saying it would ensure stable money markets by conducting appropriate operations such as supplying year-end funds.
But doubts the plan would completely solve the credit problems chipped away gains on Wall Street, where both the blue-chip Dow and tech-laden Nasdaq Composite Index ended just a touch higher on Wednesday.
Tokyo’s Nikkei closed down 2.5 percent at a one-week closing low, while MSCI’s measure of other Asia Pacific stocks fell nearly 1 percent by 0619 GMT, after earlier plumbing levels last seen on Dec. 5.
Markets had already been disappointment over the Fed’s modest 25 basis point rate cut at Tuesday’s meeting.
The MSCI index has fallen 9.1 percent from a record high on
Nov. 1, but is still up 35.2 percent this year, three times the
gain on MSCI’s key world stock index
Major markets in the region all fell with Taiwan’s TAIEX ending 3.6 percent lower. India’s key BSE index set a fresh all-time high before succumbing to some selling pressure.
FINANCIALS SAG
Financial stocks were mostly lower, further pressured by
news of possible fourth-quarter write-downs and loan losses for
three of the major U.S. banks including Bank of America
Japan’s Mitsubishi UFJ fell nearly 8 percent and Citigroup’s Tokyo stocks dropped 6.3 percent. Australia’s Macquarie Group and HSBC both shed about half a percent.
MSCI’s index for financial stocks in Asia slid 2.2 percent, outpacing declines in the wider market.
Worries that slower growth will crimp demand also weighed on resource stocks with China’s top copper miner Jiangxi Copper and Japan’s Sumitomo Metal Mining both falling more than 3.5 percent.
But investors bought some of the region’s top gold producers on the back of the overnight surge in bullion prices, with Newcrest Mining gaining 3.8 percent.
But Lihir Gold slumped 4.6 percent after the Papua New Guinea gold miner cut its 2007 production forecasts due to unplanned maintenance shutdowns.
YEN EDGES UP
The yen clawed off one-month lows versus the dollar and euro as investors turned cautious after early euphoria on the central banks’ plan fizzled.
“The liquidity measures will help fund markets to a degree, especially now when liquidity conditions are tight ahead of the year-end,” said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
The dollar slipped below 112 yen from Wednesday’s high of about 112.50 yen, while the euro edged down to 164.47 yen from the overnight peak of around 165.30 yen.
Investors tend to sell the low-yielding Japanese currency to fund purchases of higher yielding but riskier assets and reverse those trades in times of heightened risk aversion.
Against the greenback, the single European currency was
slightly firmer from late New York levels at $1.4720
Demand for safe-haven government bonds waned slightly after a strong rally in the previous session. The yield on the benchmark 10-year Japanese government bond was flat at 1.51 percent, after falling 6.5 basis points on Wednesday.
Doubts over the central banks’ plan were also set to weigh on European stocks, where financial bookmakers expect falls of up to 0.7 percent for the three major stock indexes.
Oil and gold were off their best levels, taking a breather as initial optimism over the central banks’ action dimmed. U.S. crude slipped to $94 a barrel, while gold dipped below $810 at one stage from a two-week high of $817.
“The action of central banks overnight highlights that they are very concerned about the problem and they need to do something about it. But it’s still unclear if it will work,” said Shane Oliver, the head of investment strategy with AMP Capital Investors in Sydney.
Investors were initially cheered by news the U.S. Federal Reserve and counterparts in Europe, Canada and Britain had banded together to stem a mounting credit crisis, in their first coordinated action since terror attacks shut down U.S. financial markets on Sept. 11, 2001.
The Bank of Japan also joined in saying it would ensure stable money markets by conducting appropriate operations such as supplying year-end funds.
But doubts the plan would completely solve the credit problems chipped away gains on Wall Street, where both the blue-chip Dow and tech-laden Nasdaq Composite Index ended just a touch higher on Wednesday.
Tokyo’s Nikkei closed down 2.5 percent at a one-week closing low, while MSCI’s measure of other Asia Pacific stocks fell nearly 1 percent by 0619 GMT, after earlier plumbing levels last seen on Dec. 5.
Markets had already been disappointment over the Fed’s modest 25 basis point rate cut at Tuesday’s meeting.
The MSCI index has fallen 9.1 percent from a record high on
Nov. 1, but is still up 35.2 percent this year, three times the
gain on MSCI’s key world stock index
Major markets in the region all fell with Taiwan’s TAIEX ending 3.6 percent lower. India’s key BSE index set a fresh all-time high before succumbing to some selling pressure.
FINANCIALS SAG
Financial stocks were mostly lower, further pressured by
news of possible fourth-quarter write-downs and loan losses for
three of the major U.S. banks including Bank of America
Japan’s Mitsubishi UFJ fell nearly 8 percent and Citigroup’s Tokyo stocks dropped 6.3 percent. Australia’s Macquarie Group and HSBC both shed about half a percent.
MSCI’s index for financial stocks in Asia slid 2.2 percent, outpacing declines in the wider market.
Worries that slower growth will crimp demand also weighed on resource stocks with China’s top copper miner Jiangxi Copper and Japan’s Sumitomo Metal Mining both falling more than 3.5 percent.
But investors bought some of the region’s top gold producers on the back of the overnight surge in bullion prices, with Newcrest Mining gaining 3.8 percent.
But Lihir Gold slumped 4.6 percent after the Papua New Guinea gold miner cut its 2007 production forecasts due to unplanned maintenance shutdowns.
YEN EDGES UP
The yen clawed off one-month lows versus the dollar and euro as investors turned cautious after early euphoria on the central banks’ plan fizzled.
“The liquidity measures will help fund markets to a degree, especially now when liquidity conditions are tight ahead of the year-end,” said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
The dollar slipped below 112 yen from Wednesday’s high of about 112.50 yen, while the euro edged down to 164.47 yen from the overnight peak of around 165.30 yen.
Investors tend to sell the low-yielding Japanese currency to fund purchases of higher yielding but riskier assets and reverse those trades in times of heightened risk aversion.
Against the greenback, the single European currency was
slightly firmer from late New York levels at $1.4720
Demand for safe-haven government bonds waned slightly after a strong rally in the previous session. The yield on the benchmark 10-year Japanese government bond was flat at 1.51 percent, after falling 6.5 basis points on Wednesday.
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