New Zealand Dollar Sinks, China PMI Lifts Aussie

The New Zealand dollar skidded to a low of six weeks on July 24 after central bank of the country decided to follow a wait-and-see stance following its fourth straight rate hike. On the other hand, the Australian dollar rose after a survey showed the factory sector of China expanded at its fastest pace in 18 months.

New Zealand dollar

The kiwi dollar dropped nearly a full U.S. cent to touch levels not seen since June 12. The Australian dollar, which is often used as a proxy for the economic performance of China, touched a high of three weeks of $0.9480 and last traded at $0.9463.

In July, the HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index rose to 52.0 that is its highest since January 2013.

“Long positions in the pound and antipodean currencies were unwound at the height of concerns towards tensions in the Ukraine, but such moves are winding down with the market now more immune to geopolitical risk,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

“Under such conditions participants are opting again for the pound, Aussie and dollar, which could benefit from the next round of economic indicators. This leaves the euro as the sole bear currency,” he said.

The Reserve Bank of New Zealand (RBNZ) raised its cash rate by 25 basis points to 3.5 percent early and remarked the economy appeared to be responding to higher rates as intended.

“Perhaps the main surprise was the language regarding the high NZD exchange rate. ‘There is potential for a significant fall’ opens to interpretation as a veiled intervention threat,” said Imre Speizer, senior strategist at Westpac in Auckland.

Dow And S&P At Record Levels

On last Thursday, the holiday-shortened session of Wall Street ended with multiple records with the Dow Jones Industrial Average topping 17,000 for the first time after the June jobs report came in much stronger than expected. The Dow and S&P 500 ended at their third consecutive record highs.

Since 2000, the Nasdaq closed at its highest and rose for a third straight week. Regular trading ended at 1 p.m. on the day before the Independence Day holiday, when the U.S. stock market will be closed.

Dow And S&P At Record Levels

The U.S. economy added 288,000 jobs in June, racing past the 212,000 that economists had expected.

“The report was very good and a real sign the economy is starting to take off,” said David Kelly, chief global strategist at J.P. Morgan Funds in New York, which has about $450 billion in assets under management. “That said, it isn’t an unmixed positive for the market because it suggests the Fed will consider raising rates in the first quarter.”

The Dow Jones industrial average .DJI rose 92.02 points or 0.54 percent, to 17,068.26. The S&P 500 .SPX gained 10.82 points or 0.55 percent, to 1,985.44. The Nasdaq Composite .IXIC added 28.19 points or 0.63 percent, to 4,485.93.

The Dow Jones Transportation Average .DJT closed at a record 8,294.74, after hitting an intraday all-time high at 8,298.17.

Google Executives Visit Cuba For Promoting Open Internet

A team of top Google executives visited Cuba to promote open Internet access. This team led by Executive Chairman Eric Schmidt had a meeting with Cuban officials as well as independent people in the technology and digital field.

Executive Chairman Eric Schmidt

According to a report on the independent news website 14ymedio.com, Google is on an official two-day visit “to promote the virtues of a free and open Internet.” The website was started last month by blogger Yoani Sanchez. Sanchez said Schmidt was accompanied by Jared Cohen, director of Google Ideas, as well as two other staff. Sanchez started Cuba’s first independent online newspaper in May but the site has been repeatedly blocked in Cuba.

Google’s Executive Chairman appeared to confirm the report when he retweeted a message on Twitter posted by Sanchez. However, no official statement about presence of the executives in Cuba was made by Google or the Cuban government.

Cuba does not allow open Internet access and only 2.6 million out of a population of 11.2 million have Internet access, almost entirely limited to government-run centers, foreign companies, and tourist hotels.

According to its website, Google Ideas describes itself as “a think/do tank that explores how technology can enable people to confront threats in the face of conflict, instability or repression.”

Dollar Underpinned By Data On Inflation

On Wednesday, the U.S. dollar held onto modest gains following its broad strengthening. This was after U.S. consumer prices had their largest increase in more than a year in May to spark speculations that the Federal Reserve may inch closer to rate hikes.

dollar share market

The greenback reached a one-week high of 102.245, while the euro retreated from a one-week peak hit on Tuesday to $1.3547. The U.S. consumer price index rose 0.4 percent, double what economists had expected that increased the risk that a separate inflation gauge watched by the Federal Reserve also pushed higher in May.

“Almost all measures of U.S. price pressure are rising, and the CPI shows the clear upswing,” said Emma Lawson, senior currency strategist at National Australia Bank in Sydney.

“With the U.S. labor market improving, and the Fed’s other mandate being stable prices, these type of inflation pick-ups will make it difficult for the Fed to ignore,” she said.

“Our economics team expects the Fed will, in fact, deliver a more hawkish message,” analysts at BNP Paribas wrote in a note to clients.

“The statement is likely to upgrade views on inflation and the labor market and the projections of future Fed funds rates are likely to show a creep higher relative to those presented in March,” they said.

The pound stood flat at $1.6962, off a five-year high of $1.7011 hit on Monday.

Hundred M&S Stores In India By 2016

Marks & Spencer (MKS.L), the largest clothing retailer of Britain, has announced that it will open a hundred stores in India by 2016 instead of 86 as planned last year.

Marks & Spencer

M&S, which runs 40 stores in the country, said the same-store-sales in India grew 13 percent in the fiscal year ended March 2014.

Same-stores-sales is a key performance metric for retailers and is used for measuring the growth of sales at stores open for more than a year. M&S, three years ago, identified India as a priority market. It was remarked by Chief Executive Marc Bolland that the clothing retailer is planning to offer more stylish and fashionable clothes to Indians after years of struggling with brand positioning in the country.

The company is expected to face stiff competition in India from the world’s biggest fashion retailer Inditex SA (ITX.MC) and its Zara brand. M&S operates in India in a joint venture with Reliance Retail, a unit of billionaire Mukesh Ambani’s Reliance Industries (RELI.NS).

“Together with our partner Reliance Retail, we are continuing to invest into accelerating our growth in India as we build a leadership position in the market,” said Venu Nair, Managing Director of Marks & Spencer Reliance India.

Dollar And Shares Slide On Ukraine Concerns

On Friday, world stock indexes fell on concerns that economic activity in Europe may get depressed due to the tensions between Ukraine and Russia while the 30-year U.S. Treasury bond yield reached the lowest in nearly a year as investors sought safety in U.S. debt.

russia sanctions

Other safe havens such as gold and the yen received a boost while selling in US shares increased. Disappointing earnings from Amazon and Ford on Thursday offset gains fueled by strong reports from Apple, Caterpillar, and Travelers. The three main U.S. stock indexes all fell for the week while the 30-year U.S. Treasury bond’s yield fell to 3.42 percent, lowest since last June.

“(The market’s) a little bit tired, but then you throw in all this stuff – it’s Friday, you have the weekend coming, you have the whole Russia and Ukraine thing, Putin is pounding the table, so naturally you get this risk-off mentality,” said Ken Polcari, a director at O’Neil Securities in New York.

The Dow Jones industrial average .DJI fell 140.19 points, or 0.85 percent, to end at 16,361.46. The S&P 500 .SPX lost 15.21 points, or 0.81 percent, to 1,863.40. The Nasdaq Composite .IXIC dropped 72.777 points, or 1.75 percent, to 4,075.561.

U.S. oil settled down 1.3 percent at $100.60 a barrel, after plumbing a near three-week low at $102.05. Brent crude oil finished down 0.7 percent at $109.58 a barrel but stayed near seven-week highs. The benchmark 10-year U.S. Treasury note was up 7/32 to yield 2.6677 percent.

SEC Lawsuit Against Bank Of America Should Proceed, Says Judge

On Monday, a federal judge recommended that U.S. Securities and Exchange Commission (SEC) should pursue a lawsuit against Bank of America Corp over $855 million of mortgage securities that soured during the global financial crisis.

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Four days after urging dismissal of a related Department of Justice civil lawsuit, U.S. Magistrate Judge David Cayer in Charlotte, made the recommendation. This ruling is seen by many as a possible setback for government efforts for fighting fraud by Wall Street in the sale of mortgage securities.

“We are reviewing the magistrate judge’s recommendation carefully,” bank spokesman Lawrence Grayson said.

Both recommendations are subject to review by U.S. District Judge Max Cogburn in Charlotte. District judges are not bound by the recommendations of magistrate judges but often follow them.

Bank of America was accused by authorities of misleading Wachovia Corp, now part of Wells Fargo & Co, and the Federal Home Loan Bank of San Francisco about risks in the $855 million offering that dates from early 2008 and backed by 1,191 “jumbo” adjustable rate mortgages that proved less safe than expected.

The case is SEC v. Bank of America Corp et al, U.S. District Court, Western District of North Carolina, No. 13-00447.

Asian Stocks Tumble As Ukraine Crisis Worsens

On Friday, Asian shares dropped to a low of one months and the Japanese Yen pushed higher as growing tension in Ukraine drove investors out of riskier assets.

Asian Stocks Tumble As Ukraine Crisis Worsens

Thursday’s disappointing Chinese economic data added to the gloom while solid U.S. retail sales and employment data reinforced expectations that the U.S. Federal Reserve will continue with its plan of gradually withdrawing its asset-buying stimulus. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.1 percent to touch its lowest level since mid-February and on track for a weekly loss of more than 2 percent. As the Yen soared, Japan’s Nikkei stock average .N225 skidded 2.7 percent to a one-month low, on track for a weekly loss of more than 5 percent.

“Investors are unwinding their long positions in the Nikkei and short positions in the yen,” said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas.

“Short-term sellers like commodity trading advisors are also big players today and they are also reacting to the falling copper price,” he added.

The Euro slipped about 0.2 percent on the day to 140.97 yen, after a precipitous fall on Thursday from a session high of 143.38 yen to a low of 140.70 yen. The greenback was down about 0.2 percent on Friday at 101.70 yen.

“Incoming data in the U.S. suggest the economy is emerging from weather-related distortions to activity,” strategists at Barclays wrote in a note to clients.

“We continue to expect the Fed to taper its monthly pace of asset purchases by another $10 billion at its meeting next week,” they said.

U.S. Small Businesses Borrowings Increased

In November 2013, U.S. small businesses increased their borrowing from a year ago, according to the Thomson Reuters/PayNet Small Business Lending Index.

U.S. Small Businesses Borrowings Increased

This suggested continued economic growth ahead even as the Federal Reserve starts to reduce its massive monetary stimulus. The index that measures the volume of financing to small companies, rose 1 percent in November from a year earlier, to 111.4, PayNet said. The data also revealed that November had the highest per-day borrowing rate of 2013 despite just 20 working days.

“It’s another sign of continued expansion,” PayNet founder Bill Phelan said. Small businesses “are seeing more demand for goods and services, and that’s all good for GDP.”

Loans are usually taken by small companies to purchase new tools, equipment, and factories that indicate more borrowing can be an early signal of increased hiring ahead.

According to the Thomson Reuters/PayNet Small Business Delinquency Index, delinquencies of 31 to 180 days in November rose to 1.45 percent of all loans made, from 1.44 percent in October.

Real-time loan information such as originations and delinquencies from more than 250 leading U.S. lenders is collected by PayNet. The lending index of PayNet has historically correlated to overall economic growth one or two quarters in the future.

Dollar And Asian Stocks Subdued

In early trading on January 17, the dollar struggled to rise as Asian stocks creaked lower after being unable to shrug off the impact of downbeat results on Wall Street.

Dollar And Asian Stocks Subdued

The dollar index that tracks the greenback against a basket of six major currencies held its ground on the day at 80.943 .DXY. But the US dollar slipped 0.1 percent against the yen at 104.34 yen and edged down to euro at $1.3612.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slumped 0.2 percent, while Australian shares .AXJO skidded 0.4 percent and Japan’s Nikkei index .N225 dropped 0.8 percent.

“U.S. companies whose earnings have a big impact on the global economy disappointed the market, so it is triggering selling,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“The market has not made much of the news with regard to global growth, though, as oil prices remained broadly unchanged and non-financial stocks broadly outperformed,” strategists at Barclays said in a note to clients.

In early trade on Friday, Gold was steady at $1,243.60 an ounce, after U.S. data showed more strength. U.S. crude futures rose about 0.1 percent to $94.07 a barrel. The Australian dollar slumped 0.2 percent to $0.8806 after news that economy of the country shed 22,600 jobs in December, when economists had expected a small increase.