Month: January 2012

In trading on Thursday, transportation services shares were relative laggards, down on the day by about 1.4%. Helping drag down the group were shares of Zipcar (ZIP), down about 4.2% and shares of Bristow Group (BRS) off about 1.2% on the day.

In trading on Thursday, precious metals shares were relative leaders, up on the day by about 1.2%. Leading the group were shares of Golden Minerals (AUMN), up about 6% and shares of Kimber Resources (KBX) up about 5.6% on the day.

Indonesia’s central bank, Bank Indonesia, kept the BI reference rate unchanged at 6.00%.  Bank Indonesia Governor, Darmin Nasution, said: “Board of Governors views that current BI rate is still consistent with inflation targets, financial system stability, and remains conducive to propel domestic economic expansion amidst global economic uncertainty. In 2011, Indonesian economy showed strong performance with low inflation, higher economic growth, stable exchange rate, and stable financial system. The achievement was supported by various policies implemented by Bank Indonesia and the government. Going forward, Bank Indonesia will monitor closely the worsening global economic condition. Regarding the policy, Bank Indonesia will continue to strengthen monetary and macro-prudential policy mix, as well as coordination with the government.”

Previously the Bank cut the interest rate by 50 basis points at its November meeting, and also cut the key monetary policy rate (the BI Rate) by 25 basis points to 6.50% at its October meeting.  Previously the Bank raised the BI rate by 25 basis points to the current 6.75% in February 2011.  Indonesia reported annual inflation of 4.1% in November, down slightly from 4.61% in September, compared o 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Bank Governor Nasution previously said the Bank expects “inflation next year [2012] will be below 5%”.  Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter last year.  

The Indonesian Rupiah (IDR) has weakened by about 1% against the US dollar over the past year, and the USDIDR exchange rate last traded around 9,157.

The Bank of England (BoE) held the Bank Rate at a record low stimulatory level of 0.50%, and continued with its Asset Purchase Program (Quantitative Easing) target of GBP 275 billion, after increasing it by 75 billion at its October meeting.  On its asset purchase program, the Bank said: “The Committee expects the announced programme of asset purchases to take until early February to complete. The scale of the programme will be kept under review.”  The Bank releases its minutes on the 25th of January.

The Bank also held the official Bank Rate unchanged at 0.50% at its December meeting last year; the rate has remained on hold since March 2009, when the Bank reduced the interest rate by 50 basis points to 0.50%.  The United Kingdom reported annual consumer price inflation of 5.2% in September, 4.5% in August, and 4.4% in July, and still above the Bank’s inflation target of 2.00%.

Tractor Supply (TSCO) issued revised guidance, raising its 2011 earnings forecast to a range of of $2.97 to $2.99 per share, up from $2.85 to $2.89 per share. The company said that sales for its fourth quarter were 20.1% higher to $1.24 billion, while same store sales increased 7.6% versus 13.1 percent in the same period last year.

The European Central Bank (ECB) held its Main refinancing operations rate unchanged at 1.00%.  ECB governor, Mario Draghi, said: “Inflation is likely to stay above 2% for several months to come, before declining to below 2%. At the same time, the underlying pace of monetary expansion remains moderate. As expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels. The economic outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy-relevant horizon. “

The ECB previously announced (making no changes to this time) a series of measures “to support bank lending and money market activity”. These measures included longer-term refinancing operations (LTROs), reduction in the reserve ratio to 1% from 2% presently, and increasing collateral availability through reducing the rating threshold for asset-backed securities (ABS), and allowing national central banks to accept bank loans as collateral. Essentially the moves are designed to prevent a freezing up of credit markets and liquidity akin to that seen during the global financial crisis. 

Previously the ECB also cut the interest rate by 25 basis points at its November and December meetings.  The ECB last increased the interest rates by 25 basis points at its July meeting; pausing in May and June, after raising the rate by 25 basis points to 1.25% in April last year.  The Euro Area reported annual HICP inflation of 3% in November and October and September, 2.5% in August and July, 2.7% in June (same as May) and above the Bank’s inflation target of maintaining inflation below, but close to, 2% over the medium term. 

The Euro Area reported quarterly GDP growth in the September quarter of 0.2% (1.4% y/y); the same as the June quarter of 0.2%, following a 0.8% increase in the March quarter, and a 0.3% increase in the December quarter of 2010.  The Euro (EUR) has weakened by about 5% against the US dollar over the past year, while the EURUSD exchange rate last traded around 1.28

www.CentralBankNews.info

Source: ForexYard

The EUR/USD turned bullish on Thursday, as the combination of a successful Spanish bond auction and the European Central Bank’s decision not to lower euro-zone interest rates helped turn investors onto the common currency. Analysts were quick to warn that the overall trend for the pair is still strongly bearish and the gains can be partly attributed to traders correcting the huge euro sell-off in the last few weeks.

Thursday also saw the release of several important US indicators that came in below expectations. Both the Retail Sales and Core Retail Sales figures proved to be disappointing , while a higher than forecasted number of Americans filed for unemployment benefits last week. The news cast doubts on the strength of the US economic recovery. How traders will react to the poor economic data will likely depend on US indicators set to be released today.

On Friday, traders will want to pay attention to the US Trade Balance and Prelim UoM Consumer Sentiment figures. While the Trade Balance figure is forecasted to come in slightly worse than last month, the Consumer Sentiment figure is expected to increase slightly. Positive news is likely to help the USD against its main safe-haven currency rivals, especially the yen and Swiss franc, to close out the week.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

How the Yen-Yuan Agreement Benefits the United States

by Jason Jenkins, Investment U Research
Thursday, January 12, 2012

What you may have missed during the last week of 2011 was the announcement of a currency pact between Tokyo and Beijing. Here’s your briefing of what went down…

During a visit to China by Japanese Prime Minister Yoshihiko Noda, China and Japan announced a series of deals that promote the use of the yuan in trade and investment between the world’s second- and third-largest economies.

On December 26, 2011, it was officially announced that Japan and China will promote direct trading of the yen and yuan without at first using dollars and will encourage the development of a market for companies involved in the exchanges.

What this means is that the two countries agreed to promote direct yuan-yen trade, rather than converting their currencies first to dollars, and also for Japan to hold yuan in its foreign-exchange reserves, which are now largely denominated in dollars.

This will limit some of the power of the dollar in Asia.

Not Just Japan

China also announced an $11-billion currency swap agreement with Thailand earlier in December as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations (ASEAN) and establish free trade zones.

ASEAN is a geo-political and economic organization of ten countries located in Southeast Asia which aims include the acceleration of economic growth, social progress, cultural development among its members, the protection of regional peace and stability.

Their top six economies are: Indonesia, Thailand, Malaysia, Singapore, Philippines and Vietnam.

Central banks from Thailand to Africa have expressed interest in buying yuan assets as slowing global growth have knocked down interest rates in the more developed economies.

What it Means…

• From the Japanese point of view:

A Japanese government official said that in the future, Asian currencies “may become more important than they currently are.” However, Japan did not make this move to buy Chinese government debt based on a perception that the yuan is likely to become more popular and dominant than the yen. “The yen’s role will rather become more important to other countries if we deepen our relationships with them,” the official said. This is strategic positioning.

• From the Chinese point of view:

The Chinese have always been wary of the almighty dollar’s role in international trade, and has suggested other ways to run the international monetary system – this includes giving a bigger role to the International Monetary Fund (IMF) and a wider role for the yuan.

• The U.S. stance:

Harvard University economist Jeffrey Frankel said that “this hastens a multicurrency world, but this is just one of 100 steps along the way.” We know the yuan is far away from becoming an international safe haven currency like the dollar.

Yet, the U.S. government loves this agreement because it forces the yuan to be stronger on the international stage. For the yuan to play a larger role, China would need to restructure its monetary policy. Morris Goldstein, an economist at the Peterson Institute of International Economics in Washington D.C., said those policies would include sharply reducing its exchange-rate intervention, liberalizing interest rates, reducing restrictions on capital flows and putting its banking system “on a more market-oriented basis,” so the yuan can trade freely.

Good Investing,

Jason Jenkins

Article by Investment U

This is what’s in the news for Thursday January 12, 2012. The Wall Street Journal reports U.S. energy firms are pumping so much natural gas out of the ground that prices are dropping–down 5.7% yesterday–and the cheap gas isn’t likely to end anytime soon. The Wall Street Journal also reports Google (NASDAQ:GOOG), which took its Web-search engine out of mainland China two years ago after a censorship fight with Chinese authorities, renewed its drive to expand there. The Wall Street Journal also reports Sears Holdings (NASDAQ:SHLD) suffered a new setback when CIT Group (NYSE:CIT) said it would no longer finance loans to suppliers waiting for payment from the company. Reuters reports GM (NYSE:GM) could move more vehicle production to its European factories in a cost-cutting deal with its German union that could avoid a standoff and keep its Opel unit out of bankruptcy, Reuters reports. Finally, Bloomberg reports generic drug maker Teva Pharmaceutical Industries (NASDAQ:TEVA) is seeking acquisitions in Asia to help its sales in the region and expand its product lines, company executives say.

U.S. Manufacturing Vitality Offers Opportunities

by Carl Delfeld, Investment U Senior Analyst
Thursday, January 12, 2011: Issue #1685

I hail from Milwaukee – the heart of America’s industrial backbone.

My father and his two brothers all graduated from Marquette University with degrees in engineering. My Dad was an industrial and manufacturing engineer working for giants like Allis-Chalmers and smaller companies like Pressed Steel Tank.

Sadly, my only contribution to American industry was pitching industrial stocks to institutional investors in Tokyo, Hong Kong and Sydney during the mid-1980s. Given the growing perception that American manufacturing was on a path to oblivion – it was like pounding your head against a wall.

The perception of a manufacturing base in decline is largely tied to manufacturing jobs that have dropped sharply from 19.6 million in 1979 to 11.8 million today.

The truth is far more positive and encouraging.

• U.S. manufacturing workers are standout performers with productivity rates five times that of Chinese workers.
• American manufacturing output is roughly equal to that produced by China and equal to the entire economy of India! The value of American manufactured exports over the latest 12-month period is $1.074 trillion (not adjusted for inflation) according to The New York Times.
• America is the largest exporter of advanced manufactured products in the world. The United States is particularly strong in machinery, chemicals and transportation equipment, which together make up nearly half of the exports.

And lately, manufacturing has been a bright spot in a rather sluggish U.S. economy.

The U.S. Labor Department reported that manufacturing companies have added jobs in two consecutive years. Until last year, there had not been a single year when manufacturing employment rose since 1997.

Another favorable trend is that companies are beginning to move some offshore manufacturing back home. This is driven by higher labor costs in countries like China, plus the desire to protect intellectual property and bring production closer to end markets.

No wonder that a recent PricewaterhouseCoopers quarterly survey of manufacturing executives found almost 63% were optimistic about growth prospects in the next 12 months.

A More Vibrant Manufacturing Base

One manufacturing play that highlights the trend of a more vibrant manufacturing base is Honeywell (NYSE: HON).

Honeywell is a well-diversified multinational in the aerospace, climate control, special materials and auto parts business. The company is best known for its heating, cooling, ventilation, and home security products and services.

Roughly 50% of its products are linked to energy efficiency – a nice place to be right now.

CEO Dave Cody has outlined some ambitious performance targets to be achieved by 2014. The company plans to increase annual revenue growth to 9%, reduce cycle times by 30%, reduce product costs by 50%, increase revenue from emerging markets from 23% to 30%, and more than double its product sales from $4.1 billion to $9 billion by 2014.

Plus, investing in America’s manufacturing micro boom is great for your portfolio and for the country.

Good Investing,

Carl Delfeld

Article by Investment U