Global shares down ahead of earnings

Updated 09 January 2013
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Global shares down ahead of earnings

NEW YORK: Global shares fell, with US investors cautious ahead of an earnings season
expected to show sluggish growth in corporate profits.
European shares were flat as data showed the euro zone economy may be stabilizing, though at a weak level. The euro held steady while commodity markets were largely subdued as
investors sat on recent gains.
Profits in the US fourth quarter are seen above the previous quarter’s lackluster results, but analyst estimates are down sharply from where they were in October. Quarterly earnings are expected to grow by 2.8 percent, according to Thomson Reuters data.
Alcoa Inc. reports results after the market closes yesterday, and as the first Dow component to report, the aluminum company’s results are seen as setting the tone for the season.
If earnings growth appears to be “less bad” than expected, that would fuel a near-term uptick in the market, according to Eric Wiegand, senior portfolio manager at US Bank Wealth Management in New York. “There’s still ample areas for concern,” he added, citing policy worries in Washington and uneven economic activity.
In Europe, the data was mixed. Euro zone business confidence improved again in December, but unemployment reached a record and households held back from spending in the run-up to
Christmas, suggesting a recovery from recession will be slow.
German industrial orders also fell more than forecast due to a sharp drop in demand from abroad.
“Things are bad. It is still consistent with recession, but at least they have stopped deteriorating,” said Deutsche Bank economist Gilles Moec.
European shares edged down 0.08 percent. The euro held steady at just over $1.3120. Global shares measured by MSCI’s ACWI price index fell 0.5 percent.
The Dow Jones Industrial Average was down 66.04 points, or 0.49 percent, at 13,318.25. The Standard & Poor’s 500 Index was down 8.86 points, or 0.61 percent, at 1,453.03.
The Nasdaq Composite Index was down 16.10 points, or 0.52 percent, at 3,082.71.
In the currency market, the dollar paused a sharp rally against the yen that has boosted it almost 12 percent in less than two months. The rise has come as expectations grow that Japan’s new government will push the central bank to ease policy aggressively in the next few months.
The dollar was last down 0.4 percent at 87.40 yen, some way off the 2-1/2-year high of 88.48 hit last Friday.
“We will perhaps see a marginal retracement (in dollar/yen) over the next couple days and I’d be slightly more bearish dollar over the next few days ... on profit-taking,” said Geoff Kendrick, FX strategist at Nomura.
Bond markets smoothly digested the first debt sales of the year by the Netherlands and Austria, as well as Spain’s announcement that it plans to borrow 121.3 billion euros this year, 7.6 percent more than in 2012.
Madrid is expected to turn to official lenders for a bailout in 2013, although a European Central Bank promise to preserve the euro has significantly reduced the pressure.
German government bond prices also edged higher as investors dipped a toe back into the market for low-yielding but secure assets as a steep selloff last week made valuations more attractive.
The German bund future was up 42 ticks at 143.48, climbing for a second day after a small rise on Monday and moving in line with US Treasuries. The rebound follows a three-point sell-off last week when an easing of US fiscal concerns caused investors to pile into riskier assets.
The benchmark 10-year US Treasury note was up 8/32, the yield at 1.8709 percent.
In commodity and metals markets, Brent crude oil rose 0.2 percent, steadying above $111 a barrel, while US light crude was down 0.4 percent at $ 92.82. Copper was down 0.2 percent and gold edged back above $ 1,655 an ounce before data on Thursday from China and the ECB’s monthly
meeting.
“The market is underpinned by expectations that a cyclical rebounding out of China will be positive for industrial metals, and there is more positive sentiment now in the market,” said Robin Bhar, analyst at Societe Generale.


Turkish lira hits record low, down 20 pct against dollar this year

Updated 56 min 56 sec ago
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Turkish lira hits record low, down 20 pct against dollar this year

ISTANBUL: The Turkish lira tumbled more than 5 percent on Wednesday before recovering some ground, the latest drop in a sell-off that reflects growing investor alarm over the direction of monetary policy under President Tayyip Erdogan.
The decline, exacerbated by stop-loss selling by Japanese retail investors overnight, brings the lira’s losses to more than 20 percent so far this year and puts it on track for its worst monthly performance since the 2008 financial crisis.
The sell-off has also increased expectations that the central bank may be forced to call an extraordinary meeting to raise interest rates before its next scheduled policy-setting meeting on June 7, as it has done in previous years.
“We expect the MPC to hold an interim meeting over the coming days to raise interest rates by at least 200bp,” Jason Tuvey of Capital Economics said in a note to clients.
“If policymakers refrain from tightening monetary policy, the risk of a disorderly adjustment and a sharp economic downturn (possibly recession) will mount.”
The lira was at 4.8500 at 0855 GMT from its close of 4.6746 on Tuesday. It earlier touched a record low of 4.9290. It also fell against the Japanese yen, amid talk Japanese retail investors were selling the lira as it hit stop-loss levels.
“We are bearish on the lira and always have been given its very weak external balances and with macroeconomic policy moving in the wrong direction as well,” said Kiran Kowshik, emerging markets forex strategist at UniCredit.
A self-described “enemy of interest rates,” Erdogan wants borrowing costs lowered to spur credit growth and construction, and he said last week he would seek greater control over monetary policy after elections set for June 24.
Economy officials told Reuters the government’s economic management team met at the start of this week to discuss potential measures, including possible steps by the central bank. Deputy Prime Minister Mehmet Simsek and Central Bank Governor Murat Cetinkaya attended the meeting.
Ratings agencies sounded alarm about monetary policy. S&P Global senior sovereign analyst Frank Gill told Reuters government finances could deteriorate rapidly if authorities failed to stem pressure on the currency and government borrowing costs .
Investors want to see decisive rate increases to rein in double-digit inflation, and Erdogan’s comments have reinforced long-standing worries about the central bank’s ability to do that.
Borsa Istanbul Group, the Istanbul stock exchange company, said in a statement on Wednesday it had converted its foreign currency assets into lira, aside from its short-term needs, in a step to support the Turkish currency.
The lira’s weakness was exacerbated by dollar gains against a basket of currencies, with investors awaiting the minutes of the Federal Reserve’s last policy meeting for hints on the pace of monetary tightening.
The yield on the benchmark 10-year bond rose to 15.30 percent at the opening from a last trade of 14.92 percent on Tuesday.
The main BIST 100 share index fell 0.22 percent to 103,105 points on Tuesday.