AUCKLAND, Aug 5 — New Zealand’s dollar weakened after China and other nations suspended imports of milk powder from dairy exporter Fonterra Cooperative Group Ltd. Australian and Hong Kong stock futures rose as US payrolls data damped speculation the Federal Reserve will soon reduce stimulus.
The kiwi slipped 0.8 per cent to 77.78 US cents by 8:14am in Tokyo, headed for the lowest close in three weeks. Futures on Australia’s S&P/ASX 200 Index added 0.2 per cent, while contracts on the Hang Seng Index in Hong Kong gained 0.5 per cent in their most recent trading session. Japanese stock futures retreated. Futures on the Standard & Poor’s 500 Index dropped 0.1 per cent, after the measure gained 0.2 per cent to a record August 2. Crude oil fell a second day.
China imposed the ban after Fonterra said August 3 whey protein used in products from baby formula to sports drinks may contain bacteria that causes botulism. US data August 2 showed employers added 162,000 workers to payrolls in July, the least in four months and below a median economist estimate of 185,000. An index of China’s non-manufacturing sectors rose for the first time since March, a report August 3 showed, before HSBC Holdings Plc and Markit Economics’ China services gauge due today.
“Markets’ shoot first and ask questions later response looks entirely appropriate as investors factor in the risk of New Zealand’s milk powder exports taking a decent hit,” Mike Jones, a currency strategist in Wellington at Bank of New Zealand Ltd., wrote in a note to clients. “We still believe a tapering of Fed quantitative easing at the September meeting is more likely than not, however, it is certainly not a done deal and Friday’s labor market data have probably reduced the odds.”
Toyota outlook
Futures on the Nikkei 225 Stock Average were bid at 14,330 in the Osaka pre-market by 8:05am, after closing at 14,320 in Chicago August 2 and 14,480 in Japan.
Toyota Motor Corp., which has the biggest weighting on Japan’s Topix Index, raised its full-year net income target by 8 per cent August 2. The Topix, up 2.5 per cent last week, has rallied an average 30 per cent in the 12 months before increases to the target rate for loans between American banks in 1986, 1994, 1999 and 2004, data compiled by Bloomberg show.
The MSCI Asia Pacific Index of regional stocks added 0.1 per cent last week, capping a sixth weekly gain. Companies on the gauge trade at 12.5 times estimated earnings, after falling to a three-week low of 12.2 times July 31.
Asics Corp., China Overseas Land & Investment Ltd., Hang Seng Bank Ltd. and Sumitomo Chemical Co. are among 18 index members scheduled to report earnings today. Of the 395 companies that have posted results this season, 50 per cent have beaten analysts’ estimates on profits and 49 per cent exceeded projections for sales, data compiled by Bloomberg show. The gauge has climbed 4.8 per cent in 2013, compared with an 11 per cent advance in MSCI’s All-Country World Index.
Aussie rates
The New Zealand dollar slipped 0.8 per cent to 87.29 Australian cents, retreating for a third day and set for the steepest one-day slide since November 2011. Russia suspended imports of all Auckland-based Fonterra’s products after news of the possible contamination, which the company said may affect three batches of whey protein made at a New Zealand plant. Dairy products make up about 25 per cent of the nation’s total overseas sales, according to government data.
Shares of Fonterra Shareholders’ Fund, backed by the dividends and earnings of the cooperative, dropped 5.9 per cent in Wellington.
Australia’s dollar was little changed at 89.09 US cents, after slumping 3.8 per cent last week, the most among 16 major currencies tracked by Bloomberg. Retail sales probably expanded 0.4 per cent in June, according to a Bloomberg survey of economists before data due today. The Reserve Bank of Australia reviews its cash rate tomorrow, with the median of 27 analysts’ estimates for borrowing costs to be cut by 25 basis points, or 0.25 percentage point, to 2.5 per cent.
Dollar index
The yen was little changed at 98.96 per dollar today, after gaining 0.6 per cent August 2. The Bloomberg Dollar Index, which tracks the US currency against 10 major peers, was steady at 1,029.17, after sinking 0.6 per cent at the end of last week, trimming its five-day gain to 0.6 per cent. The greenback weakened against 12 of the 16 major world currencies August 2, including the euro, South African rand and British pound.
Three rounds of bond purchases by the Fed, coupled with improving earnings and economic growth, have helped propel the S&P 500 up more than 150 per cent from its bear-market low in 2009. Speculation about the Fed’s monthly asset buying has whipsawed stocks since May, when Chairman Ben S. Bernanke first indicated policy makers could begin reducing the stimulus this year should the job market continue to improve.
PBOC statement
The US unemployment rate dropped to 7.4 per cent, compared with a median economist projection of 7.5 per cent, data August 2 showed. The ISM non-manufacturing composite gauge, scheduled for release today, is forecast to rise to 53.1 for July, from 52.2 in June. Malaysian trade data and the HSBC/ Markit services purchasing managers’ index for India are also due today.
Futures on the Hang Seng China Enterprises Index of mainland Chinese companies traded in Hong Kong climbed 0.6 per cent. The People’s Bank of China will appropriately fine-tune policies and strike a balance between stable growth, structural adjustment, reform and risk prevention, according to a statement after a meeting of chiefs of central bank branches posted on the PBOC’s website August 4.
The S&P 500 advanced 1.1 per cent last week, its biggest gain in three weeks. Ten-year Treasury yields lost 11 basis points, the most since February, to 2.6 per cent in New York August 2, while 30-year yields dropped seven basis points to 3.68 per cent.
Chevron, Dell
Chevron Corp. slipped 1.2 per cent August 2 as the energy producer said net income fell for a second straight quarter. American International Group Inc. rallied 2.7 per cent after saying that it will pay its first dividend since 2008 and authorizing a share buyback of as much as US$1 billion. LinkedIn Corp. surged 11 per cent after increasing its full-year sales forecast. Dell Inc. advanced 5.6 per cent as Michael Dell agreed to sweeten his proposal to buy the computer maker with a special dividend.
The S&P 500 briefly extended declines earlier on August 2 after the US State Department issued a worldwide alert to citizens warning of potential terrorist attacks, particularly in the Middle East and North Africa.
About 83 per cent of stocks in the index traded above their average prices from the past 50 days as of August 2, according to data compiled by Bloomberg. While that’s below a 19-month high of 93 per cent reached in May, it’s up from its 2013 bottom of 12.8 per cent in June.
Emerging markets
Some 115 S&P 500 stocks had their 14-day relative-strength index exceed 70 August 2, the most since May 21, data compiled by Bloomberg show. RSI measures the degree to which gains and losses outpace each other and some analysts who watch charts to predict market moves consider a reading over 70 an indication stock has risen too far, too fast.
Europe’s Stoxx 600 Index increased 0.3 per cent August 2, capping a weekly gain of 1.8 per cent. Trading volumes were 4.5 per cent below the 30-day average today for the European benchmark and 7.5 per cent less than average for the S&P 500.
The MSCI Emerging Markets Index added 0.1 per cent August 2, reducing its weekly drop to 0.6 per cent. Egypt’s EGX 30 Index jumped to the highest level in five months yesterday, on bets the first cut to interest rates in four years will help boost the nation’s economy.
Gold rose in early trading today, adding 0.1 per cent to US$1,313.43 an ounce after the precious metal slumped 1.6 per cent last week. West Texas Intermediate crude dropped 0.2 to US$106.74 a barrel, after gaining 2.1 per cent last week.
The S&P GSCI gauge of 24 commodities slid 0.6 per cent August 2, cutting its weekly gain to 0.9 per cent. — Bloomberg
