Asia shares struggle as data shows going tough

(STOCK, AFTER, EXPECTED, INDEX, QUARTER, PERCENT)

By Charlotte Cooper
TOKYO (Reuters) - Asian stock markets struggled to gain ground on Wednesday as economic data showed the process of turnaround to recovery was likely to be a slow grind, and the dollar capitalized on that more cautious sentiment.
Oil held above $70 a barrel after industry inventory data showed a bigger-than-expected fall in crude stocks, which helped pare some of the previous day`s losses after data unsettled investors about a potential U.S. economic rebound.
In Japan, business confidence pulled back from a record low hit three months ago, but the improvement was smaller than market players had expected and still a negative reading.
That followed an unexpectedly steep slide in U.S. consumer confidence in June, which dented optimism on Wall Street about prospects for recovery and weighed on shares in Asia.
Australia`s benchmark index .AXJO got the new quarter off to a weak start, falling 2 percent as growth-sensitive stocks such as shopping mall owner Westfield Group (WDC.AX) lost ground.
The broader MSCI index of Asia-Pacific shares excluding Japan .MIAPJ0000PUS eased 0.4 percent, holding below June`s 2009 peak, while Tokyo`s Nikkei share average .N225 was flat, with Orix Corp (8591.T) and All Nippon Airways (9202.T) sliding on news of possible public share offerings. .T
Japanese construction machinery makers such as Komatsu (6301.T) edged higher on news that China`s official purchasing manager index (PMI) gained.
But analysts noted big Japanese firms in the Bank of Japan`s tankan survey planned to cut capital spending, a key driver of the economy, by 9.4 percent in the year to next March, more than the market expected.
"Basically, the tankan showed that things aren`t all that good in the near term but seemed encouraging for the longer term, making its overall impact neutral," said Kenichi Hirano, operating officer at Tachibana Securities.
"I`d have liked to see slightly better capital spending, but given the current situation it`s only natural that it should fall -- after all, with production down, the last thing manufacturers can do right now is spend."
In Seoul, shares rose 0.8 percent helped by a slower than expected fall in South Korean exports, while component-maker LG Innotek (011070.KS) rallied on the first day of trading after it completed a merger with LG Micron Ltd.
The U.S. Conference Board`s index of consumer attitudes fell in June to 49.3 from a downwardly revised 54.8 in May, deflating stocks on the last day of the quarter.
The Dow Jones industrial average .DJI slipped 0.97 percent, the Standard & Poor`s 500 Index .SPX dropped 0.85 percent and the Nasdaq .IXIC eased 0.49 percent.
Nevertheless, Wall Street still closed out its best quarter in a decade, with the S&P 500 jumping 15.2 percent in the three months to end-June, the blue-chip Dow advancing 11 percent and the Nasdaq climbing by more than a fifth. .N
JOBS DATA IN FOCUS  Continued...
Original article

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Fed`s Yellen: slow recovery to start in late 2009

(YELLEN, INFLATION, SEVERAL, YEARS, ECONOMY, MARKET)

By Ros Krasny
SAN FRANCISCO (Reuters) - The recession is likely to end later in 2009, ushering in a "frustratingly slow" recovery marked by continued high unemployment, a top Federal Reserve official said on Tuesday.
Janet Yellen, president of the San Francisco Fed, looked for inflation to stay low for several years, and hinted that the central bank should be in no hurry to raise interest rates even once growth turns positive.
"I am not optimistic that the economy will spring back to normal anytime soon," Yellen told the Commonwealth Club of California in San Francisco.
The U.S. jobless rate is likely to rise from its current level, and it could take several years to return to full employment, Yellen said -- a period that could intensify downward pressure on wages and prices.
In her first extended remarks on the economy since early May, Yellen said that undesirably low inflation was the biggest issue on the medium-term horizon.
"I`ll put my cards on the table right away. I think the predominant risk is that inflation will be too low, not too high, over the next several years," she said.
"I expect core inflation will dip to about 1 percent over the next year and remain below 2 percent for several years."
Further, "if the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation." Still, Yellen said the risk of a "devastating spiral" of deflation was unlikely.
Yellen is a voting member of the Federal Open Market Committee in 2009.
The FOMC lowered its benchmark lending rate to a range of zero to 0.25 percent in December in an attempt to shore up the economy.
Financial markets assess a reasonable chance the Fed will start to raise rates by late 2009 or early 2010, but seem to be at odds with Yellen`s focus on deflation.
The Fed "certainly has the means to unwind the stimulus when the time is right," she said, adding that many of the bank`s special credit programs are tapering off as market conditions improve.
Even so, "I`m more concerned that we will be tempted to tighten policy too soon, thereby aborting recovery," Yellen said, citing the notorious blunders of the Fed committed in the 1930s.
"I do not believe that there is a real threat of high inflation in the current situation."
She said financial markets continued to show more confidence after a time when the Fed`s programs succeeded "in averting a full-blown meltdown."  Continued...
Original article

Crisis far from over: World Bank chief

(WORLD, ZOELLICK, MARKETS, DEVELOPING, COUNTRIES, THERE)

By Lesley Wroughton
WASHINGTON (Reuters) - World Bank President Robert Zoellick said on Tuesday that financial markets are showing signs of stabilization, but warned that the global crisis was far from over in developing countries.
Speaking to reporters ahead of a meeting of finance ministers from Latin America, Zoellick said developing countries were only now feeling the full force of the global economic and financial crisis, which could quickly return to advanced economies where it began.
He said demand for World Bank financing was high and growing as credit markets remained shut to many developing market clients.
"There seems some opportunities for improvement on the financial market side, but there is still great uncertainty about the scope and timing of recovery," Zoellick told reporters on a conference call
"There are risks that could threaten the turnaround and I have emphasized the world needs to recognize that dangers will come in waves," he said. Zoellick was speaking ahead of a meeting of finance ministers from Latin America in Chile on July 2.
"A number of developing countries remain under significant stress," he added.
Zoellick said the strength of the recovery and the potential for setbacks depends a lot on how policy-makers cope with risks, including in banking systems, protectionism and financing of rollover debt of private-sector companies.
The World Bank estimated in March that well over $1 trillion in emerging market corporate debt and $2-3 trillion in total emerging market debt will mature in 2009, the majority of which reflects claims of major global banks extended across borders or through affiliates in emerging markets.
Zoellick said developing countries faced a total financing shortfall in the range of $350 billion to $635 billion, of which $178 is in Latin America.
He said demand for financing from the World Bank was increasing in part because developed countries have guaranteed so much debt that it is crowding out "good developing country" debt.
"Even if they can go to the markets and go sometimes to their domestic markets, it will crowd out their private sector," Zoellick said, "So, I remain quite cautious about the overall state of the recovery. I don`t think we`re remotely through this.
"We remain in a situation where we have to be very alert to dangers because there are significant risks out there, and we are finding that the demand for our resources from all of our different instruments ... remains high and growing," he added.
Zoellick said he would discuss with Latin American finance ministers ways to bolster the World Bank`s capital base. This could include possible early replenishment of money for the Bank`s facility that provides low-cost loans and grants to 78 of the world`s poorest countries, 39 of which are in Africa.
(Reporting by Lesley Wroughton; Editing by Dan Grebler)
Original article

Soros predicts "stop-go" economy and higher rates

(SOROS, RATES, MARKETS, BUBBLE, REGULATORS, GOVERNMENT)

By Joseph A. Giannone and Jennifer Ablan
NEW YORK (Reuters) - Billionaire investor George Soros on Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.
Soros, one of the world`s most successful hedge fund managers who was speaking at a breakfast hosted by the Wall Street Journal, said borrowing costs are the major headwinds for the economy.
"As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said.
Rising U.S. Treasury yields have driven mortgage rates back up, threatening a recovery in the housing market and a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them.
The rise in bond yields and mortgage rates may also act to check the huge recent rally in global stock markets of the past three months, with the Federal Reserve trying to end an 18-month recession and yet not spur inflation.
Soros went back into retirement earlier this year after leading his self-named firm through the 2008 crisis. He made about $1.1 billion last year, according to Institutional Investor`s Alpha Magazine.
SOROS ON `SUPER BUBBLE`
Soros, who made his fortune targeting currencies in tightly controlled markets, said international financial markets need global regulation, even while being critical of regulators and calling for minimal government intervention.
"The idea of self-correcting markets is a misconception," he said. What governments need to do, he said, is recognize they cannot prevent bubbles but instead try to control them from getting bigger.
"You cannot prevent bubbles from forming but prevent them from self-reinforcement," Soros said.
Soros, who has retired from active fund management, acknowledged that getting regulation right is not easy as he argued both for and against stricter supervision.
"The regulators will always be wrong," he said. "They should interfere as little as possible."
Regulators, he said, typically try to control money supply and then let free markets take care of everything else, but that is a fallacy.
By the same token, Soros said that efforts by regulators and governments to stop bubbles bursting for more than 25 years gave rise to the most recent "super bubble."
Soros cautioned that the U.S. government may be making some serious missteps in dealing with the current credit crunch and recession. Massive stimulus spending and bank bailouts have pumped up the U.S. government`s own balance sheet.  Continued...
Original article

Gloomy U.S. consumers clip housing recovery hopes

(CONFIDENCE, SHOWED, MONTH, REPORT, PRICES, INDEX)

By Emily Kaiser
WASHINGTON (Reuters) - U.S. consumer confidence took an unexpectedly steep slide in June, figures released on Tuesday showed, suggesting the 18-month-long recession had yet to loosen its grip on the economy.
A separate report on April house prices in major cities offered some encouraging signs that the worst of the housing slump may be over, but that was not enough to lift investors` spirits, while another crop of economic data showed business activity in New York City and the Midwest remained weak and retail chains slogged through a rough June.
Billionaire investor George Soros added to the cautionary tone, saying fears of inflation would drive up borrowing costs and choke off growth once financial markets recover.
Major stock market indexes turned lower after the Conference Board`s consumer confidence index showed households felt gloomier about their current situation, and less optimistic about the eventual economic recovery.
Kevin Kruszenski, head of listed trading at Keybanc Capital Markets in Cleveland, said the confidence data "kind of took the wind out of things a little bit."
The confidence index fell to 49.3 in June from 54.8 in May. Economists polled by Reuters had expected a healthier reading of 55.0 for this month.
Standard & Poor`s/Case Shiller home price indexes showed prices of single-family homes declined in April from the prior month, but the pace of the slide moderated.
There were a few glimmers of hope as 13 of the 20 metropolitan areas tracked showed some improvement. The laggards included Las Vegas, Phoenix and Miami, which were among the cities that saw the biggest run-up in house prices in the middle part of this decade.
"While one month`s data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in some of the regions," said David Blitzer, chairman of the index committee at S&P. "We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here."
Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said less-bad news was certainly a relief to investors, but their patience may soon start to wear thin.
"To get the markets moving to the next level you`re going to have to see prices stop falling and begin to rise here at some point in the not-so-distant future," he said.
In New York, the National Association of Purchasing Management-New York`s monthly measure of business activity showed conditions worsened in June, although the purchasing and supply managers surveyed felt a bit better about the six-month outlook.
The index of current business conditions tumbled to 44.8 in June from 61.3 in May, while the six-month outlook index rose to 58.3 this month from 56.1 a month earlier.
A similar report on activity in the U.S. Midwest in June showed some improvement from a month earlier, but still pointed to a weak economy.
Readings on the health of retailers were mixed. A report from the International Council of Shopping Centers and Goldman Sachs showed that chain store sales rose modestly last week from a year earlier, but a separate report from Redbook Research showed a sharp decline.  Continued...
Original article

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Airlines lost $3 billion in first quarter

(GENEVA, AIRLINES, BILLION, CARRIERS, DETERIORATION, PRICES)

GENEVA (Reuters) - The world`s airlines lost more than $3 billion in the first quarter of 2009, the International Air Transport Association (IATA) said on Tuesday, maintaining its estimate for full-year losses of $9 billion.
In its latest snapshot on the industry, the Geneva-based lobby said weak travel demand and lower freight volumes in the global recession had bled revenues for major carriers, in "a significant deterioration from last year."
"This deterioration was before the recent rise in fuel prices," IATA said, warning the 30 percent increase in oil and jet fuel prices since early May would squeeze airline cash flows further in coming months.
Both oil and jet fuel prices have risen almost $20 a barrel in the past two months, and are now 75 percent higher than their low point at the end of 2008, the Financial Monitor report said.
"Airlines have not yet felt the full impact of this oil price rise," it said.
But it said it was not changing its previous 2009 loss forecast of $9 billion, which follows revised 2008 losses of $10.4 billion.
On Tuesday, U.S. crude traded around $72 per barrel.
IATA, which represents more than 200 airlines, also said carriers trying to fly fewer flights to save costs during the downturn have not managed to cut capacity in line with shrinking air transport demand.
Leading airlines have been seeking mergers and acquisitions to help build scale and shield themselves against continued market weakness until the global economy recovers.
Delta Air Lines (DAL.N) swallowed rival Northwest Airlines last year to create the world`s largest airline, and European carriers have also consolidated with Deutsche Lufthansa (LHAG.DE) agreeing to buy Austrian Airlines and Air France-KLM (AIRF.PA) scooping up Alitalia.
British Airways (BAY.L) is also in merger talks with Iberia (IBLA.MC), and Singapore Airlines (SIAL.SI) has said it is eyeing acquisitions in China and India.
(Reporting by Laura MacInnis; Editing by Stephanie Nebehay and Dan Lalor)
Original article

Asia stocks gain as risk taking persists

(QUARTER, PERCENT, PRICES, MARKETS, INDEX, HIGHER)

By Kevin Plumberg
HONG KONG (Reuters) - Asian stocks and the Australian dollar rose on the last day of the second quarter, as investors kept adding to bets global economic activity is rebounding, having driven Chinese shares to the highest in a year.
The U.S. dollar slipped as momentum kept dealers rolling out of trades based on safety after a 7 percent drop on the quarter, keeping commodity prices supported. Oil prices rose above $73 a barrel, to new highs for the year.
Emerging markets have been the big winner so far this year, with the MSCI emerging markets equities index .MSCIEF up 32 percent so far in 2009 compared to a 6 percent rise on the all-country world index.
A tremendous shift by investors out of cash and low-yielding money market instruments into riskier assets, particularly in Asia, has been driving equity valuations and currencies in the region higher.
However, the third quarter could be a time of reckoning if higher raw materials prices snuff out a nascent recovery.
"Just how higher oil prices are a boon to the global economy when consumers are struggling to keep jobs and make payment on negative equity housing loans is a mystery. We are confident that threats to risk appetite and risk assets point clearly toward potential reversal, not extension of gains," said Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale said in a note.
So far this year, Chinese and Indian stock markets have been the hottest in the region.
The Shanghai composite .SSEC was up 0.3 percent on the day to the highest since June 2008, and has risen 63 percent so far this year.
India`s BSE index .BSESN has gained 52 percent in the first half, with most of it won after a decisive election victory by a Congress-led coalition in May.
Japan`s Nikkei share average .N225 rose 1.9 percent, with firms in the technology sector giving a boost to the index. Valuation of the Nikkei on a price-to-book basis has jumped to around 1.3 times, having spent the first quarter below a multiple of one.
That is still well below the average of the last decade of 1.9 times.
Hong Kong`s Hang Seng index .HSI climbed 1.5 percent, helped by a 5.8 percent jump in shares of refiner Sinopec (0386.HK) after China unexpectedly lifted domestic gasoline and diesel prices to their highest ever.
Oil rose sharply to 8-month highs, though a lack of news suggested dealers were focused on quarter-end activity.
U.S. crude for August delivery rose to an eight-month high of $73.38 a barrel, but later cooled to trade at $72.09, up $1.60 on the day.
London Brent, where trading volume in the front month contract surged much higher than normal, led the rally, gaining $1.93 a barrel to $72.92.  Continued...
Original article

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Putin says Russia will continue cheap energy supplies to Belarus

(PRICE, BELARUS, PUTIN, 1000, RUSSIAN, AVERAGE, CUBIC)

NOVO-OGARYOVO, June 28 (RIA Novosti) - Russia will continue for the near future to sell oil and gas to Belarus at subsidized rates to support the country`s economy, Prime Minister Vladimir Putin said on Sunday.
"For the near future we intend to continue this, while bearing in mind the tendency toward switching to world price levels for hydrocarbons," Putin told leaders of factions in the State Duma, the lower house of parliament.
Putin`s pledge comes amid a dispute with Belarus over payments for Russian natural gas, which was massively discounted until 2007.
Gazprom announced on Friday it had sent Belarus a letter demanding it pay $244 million in gas debts, and warning that supplies could be cut if the sum is not cleared.
The debt has arisen due to differences between contract and average prices. In the first quarter Belarus paid $210 per 1,000 cubic meters, but by the end of the year this figure should have dropped to under $100. In line with verbal agreements the price should average out at $150 per 1,000 cubic meters.
Belarusian First Deputy Prime Minister Vladimir Semashko said on Friday that the government expects Russian gas prices to reach $166 per 1,000 cubic meters on January 1, 2010 if oil prices remain around the $70 per barrel mark this year. The rate is still well below the average rate Russia charges European Union countries for its gas.
The countries have in the past also clashed over Russian oil sales to Belarus, which had also been heavily discounted until the end of 2006. After Russia raised the oil price for Minsk, while keeping it below international prices, Belarus imposed a tariff on oil pipeline transit via its territory, triggering a temporary cut-off in early 2007.
 
Original article

Recovery frail but stimulus exit must be timely

(CENTRAL, BIS, BANKS, RECOVERY, ANNUAL, STILL, AFTER)

By Krista Hughes and Natsuko Waki
BASEL, Switzerland (Reuters) - Unprecedented attempts to stimulate economic growth may fail to bring a sustained recovery, yet withdrawing them too late could be even more risky, leading central bankers said on Monday.
Regional currencies would gain in importance, they also said after two days of talks. But the U.S. dollar still had no serious rival in playing a lead role in foreign reserves and trade settlement, according to the monetary policy chiefs from the world`s major industrial and emerging economies.
The Bank for International Settlements warned that although authorities had tried to arrest sharp declines in economic output, it was still an open question whether the stimulus would lead to a sustained recovery.
Still, waiting too long to withdraw support could fuel inflation and create new imbalances, the BIS, which acts as a forum for the world`s central banks, said in its annual report.
"It may be too early to take exit strategies now; we don`t think it`s too early to talk about them," BIS general manager Jaime Caruana told Reuters Television after the bank`s annual meeting.
Although it was risky to wait too long, "experience suggests that the bigger risk is exiting too late and too slowly or, in the case of fiscal policy, not exiting at all," he said after the meeting at the BIS headquarters in the Swiss city of Basel.
As the financial crisis has deepened, central banks around the world have slashed interest rates and poured extra liquidity into markets, some by buying assets directly.
Governments have rushed to help banks and promised extra public spending this year worth about 2 percent of economic output of the Group of 20 nations, according to the International Monetary Fund.
Central bank chiefs attending the meeting, including European Central Bank President Jean-Claude Trichet, U.S. Federal Reserve Chairman Ben Bernanke and Bank of Japan Governor Masaahi Shirakawa, believe that eventually ending the very expansionary policies will be a major challenge.
Mexico`s Guillermo Ortiz told Reuters that it may be premature to detail exit strategies as yet. Amando Tetangco of the Philippines said central banks could refrain from raising interest rates, warning that exit strategies should avoid disorderly adjustment.
ONLY TEMPORARY HELP
The BIS said governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks, instead focusing on guarantees and capital -- also exposing taxpayers to potentially large losses.
Past experience showed that the key to recovery was to force the banking system to take losses, dispose of non-performing assets, eliminate excess capacity and build their capital base.
"These conditions are not being met. A significant risk is therefore that the current stimulus will lead only to a temporary pickup in growth, followed by protracted stagnation," the BIS said in the annual report.
"The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy."  Continued...
Original article

Central banks seek rankings for financial products

(OF, BIS, FINANCIAL, THEIR, BANKS, GOVERNMENT, PRODUCTS)

By Huw Jones and Krista Hughes
BASEL (Reuters) - Financial products should be treated like medicines and sold to consumers only when they are certified safe to prevent a repeat of last year`s financial meltdown, the world`s central bankers said on Monday.
The Bank for International Settlements (BIS), which acts as a forum for central banks, said government efforts to revive the global economy might have only a temporary impact because banks are not being pushed hard enough to fix their underlying problems.
Banks` lending and other practices, including the approval of risky mortgages in the United States, led the global economy into the worst recession in decades. Governments have poured trillions of dollars into rescuing the financial system and easing a recession that has cut through company workforces.
A rise in Japanese industrial output and a pick-up in euro zone economic confidence showed the unprecedented government spending is having an effect.
But policymakers said it was too early to conclude a recovery was taking root and officials in the United States, Europe and China said the need for further stimulus measures should not be ruled out.
"I think that we are not out of the woods yet," said Guillermo Ortiz, Mexico`s central bank governor and the BIS board chairman. "One important question is whether these green shoots actually take root.
Global recovery hopes have pushed world stocks more than 20 percent higher in the second quarter. But the rally has stalled recently on worries that markets may have been too aggressive in their bets on the strength and timing of the nascent upturn.
U.S. stocks are expected to open flat to higher following mixed signals from Asia and Europe. Tokyo shares fell 1 percent, but European stocks were up 0.9 percent by 1200 GMT. <MKTS/GLOB>
RISK OF "PROTRACTED STAGNATION"
The BIS was alarmed by how a collapse in the value of opaque and complex securitized products propelled the world`s financial system into crisis. It said in its annual report all financial products should be registered like medicines.
The safest instruments would be available to everyone, a second tier only to people with authorization, like prescription drugs, and a third tier to a limited number of pre-screened individuals and institutions, like experimental drugs are.
A final tier would be securities deemed illegal.
"Such a registration and certification system creates transparency and enhances safety ... This will mean that issuers bear increased responsibility for the risk assessment of their products," the BIS said.
The BIS also said that while governments have moved quickly to support their economies, they have not done enough to remove problem assets from banks` balance sheets.
"A significant risk is therefore that the current stimulus will lead only to a temporary pickup in growth, followed by protracted stagnation," it said.  Continued...
Original article

Oil rises over $69 after Nigerian attack report

(CRUDE, US, PERCENT, MONDAY, BARREL, PRESIDENT, DEMAND)

LONDON (Reuters) - Oil rose above $69 a barrel on Monday after Nigeria`s main militant group said it attacked an oil platform belonging to Royal Dutch Shell (RDSa.L) despite an amnesty offer from President Umaru Yar`Adua.
The Movement for the Emancipation of the Niger Delta (MEND) said in an emailed statement it had struck the Shell Forcados platform in the Delta state. There was no immediate independent confirmation.
The report followed an announcement on Friday by four Nigeria militant factions to accept in principle an amnesty offer from the country`s president, raising hopes Africa`s top oil producer would halt a battle with rebels.
U.S. crude for August delivery was up 10 cents at $69.26 a barrel by 0750 GMT (3:50 a.m. EDT). The contract fell $1.07 to settle at $69.16 a barrel on Friday.
London Brent crude was up 12 cents at $69.04.
Pipeline bombings, attacks on oil and gas installations and kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two-thirds of its installed oil output capacity of 3 million barrels per day.
DEMAND WEAK, STOCKS HIGH
Algerian Energy and Mines Minister Chakib Khelil said on Monday oil demand was still weak due to the weakness of the U.S. and European economies and world oil stocks remained high.
Khelil told reporters ahead of a meeting of gas producers an increase in OPEC oil production was hard to envisage, despite rising crude prices.
Asian stock markets slipped on Monday with Japan`s Nikkei average down 1 percent but European equities inched higher in early trade after slipping in the previous two sessions, with firmer pharmaceutical and mining stocks outpacing weaker financial shares. .T .EU
U.S. consumer confidence data on Tuesday leads a heavy calendar of economic data this week, including China`s Purchasing Managers Index on Wednesday and a U.S. jobs report and manufacturing data on Thursday.
The U.S. data will help determine whether an oil market rally, which has lifted prices more than 50 percent this year on hopes of economic recovery, has any legs.
In the first big number for the week, industrial output from the world`s No. 3 energy consumer Japan jumped 5.9 percent in May, the third straight month of increase after a big slump, although doubts remained whether it can sustain the momentum without a clear rebound in the United States and other key export markets.
Japanese oil demand has been hit by the economic slump over the last year. On Monday, Idemitsu Kosan Co (5019.T), Japan`s third-largest refiner, said it planned to refine 2.1 million kilolitres of crude oil in July, down 26 percent from a year earlier.
A top White House adviser said on Sunday President Barack Obama could discuss a second stimulus package to boost the economy if needed, but at the moment no more new money looked necessary.
Crude oil speculators on the New York Mercantile Exchange hiked their net long positions in the week to June 23, according to data from the Commodity Futures Trading Commission released on Friday.
(Reporting by Christopher Johnson in London and Fayen Wong in Perth; editing by Keiron Henderson)
Original article

Asia stocks mixed, dollar regains footing

(PERCENT, DOLLAR, AFTER, SHARES, CURRENCY, CENTRAL, JAPAN)

By Eric Burroughs
HONG KONG (Reuters) - Asian stock markets were mixed on Monday as many investors stuck to the sidelines as the second quarter winds down, while the dollar recovered from a slide on worries about the push by major emerging countries for a reserve currency alternative.
A drop in oil prices pulled down energy-related shares, with Japan`s Nippon Oil (5001.T) losing nearly 2 percent. Crude oil lost 51 cents a barrel to $68.65 on easing tensions in major exporter Nigeria.
Asian shares outside Japan have surged 32 percent in the second quarter, which would be the best quarterly gain in 16 years, as investors embraced the region on hopes it would emerge more quickly from the deepest global recession in decades.
World stocks have mostly shuffled sideways in the past few weeks as investors have questioned how quickly the global economy will return to growth, giving a boost to battered government bonds.
Asian manufacturers had cranked up production to increase inventories after having slashed them too sharply at the end of last year, but doubts remain about whether consumer and business demand will improve enough to make growth sustainable.
Japanese economic figures highlighted this trend. Industrial output jumped a hefty 5.9 percent in May for a third straight month of growth, but forecasts showed that factories expected the recovery to taper off in coming months.
"It is a sign of the unusual nature of the current cycle that the strongest rise in output on record can still be viewed as a moderate disappointment," said Richard Jerram, chief Japan economist at Macquarie Securities in Tokyo.
The MSCI index of Asia-Pacific shares outside Japan slipped 0.3 percent in light trade after having posted a 2.3 percent rise last week. The drop tracked a 0.2 percent dip in the U.S. S&P 500 .SPX on Friday.
The MSCI benchmark for Asia is up about 31 percent so far this year, outpacing the 7.4 percent increase in world stocks and the 1.7 percent rise in the S&P 500.
Japan`s Nikkei average .N225 edged up 0.4 percent, with shares of Nippon Electric Glass (5214.T) climbing 1 percent after the maker of LCD glass lifted its estimated earnings for the April-June quarter to double the top of its previous forecast range.
The dollar inched higher after being hit on Friday when China`s central bank renewed calls for a super-sovereign currency to reduce the U.S. dollar`s global domination, saying it was a serious defect in the international system for one currency to tower over all others.
On the sidelines of a meeting of central bankers over the weekend, China and Brazil said they were discussing a currency arrangement to allow exports and importers to settle deals in local currencies, thereby avoiding the dollar.
The dollar index, a gauge of its performance against six major currencies, rose 0.3 percent to 80.151 .DXY, near a two-week low struck on Friday. The euro retreated 0.3 percent to $1.4025, while the dollar was up 0.2 percent at 95.50 yen.
Government bonds pushed higher, helped in part by the rally in U.S. Treasuries last week after a record $104 billion of debt was sold without causing trouble for dealers.
Foreign central banks were believed to have been hefty buyers at each of the three auctions via indirect bids.  Continued...
Original article

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Stocks eye job data in July 4th week

By Ellis Mnyandu
NEW YORK (Reuters) - For investors, June`s job data could determine in this short July 4th holiday week if the stock market`s recent rally is reignited or sputters out like a wet firecracker.
The monthly nonfarm payrolls report will come out on Thursday, instead of the usual Friday. U.S. markets will be closed on Friday, July 3, for the long Fourth of July, or Independence Day, holiday weekend.
Investors will pick apart the job figures and reams of other economic data released during the four-day week to see if recent signs of stabilization point to a sustainable economic recovery. Consumer confidence, the Institute for Supply Management`s June index on U.S. manufacturing activity, and domestic car sales are among the major indicators on tap.
Although the U.S. economy has been mired in a recession since December 2007, investors` optimism has increased since early March amid growing signs that the extent of the economic slump is moderating.
That optimism has provided a crucial underpinning to stocks since the Standard & Poor`s 500 Index .SPX hit a 12-year closing low on March 9. This spring, the S&P 500 climbed as much as 40 percent from that low; at Friday`s close, it was still up 35.8 percent.
While unpleasant surprises may trigger a long-awaited correction, analysts said evidence of further economic stabilization would make the bulls grow bolder and help stocks break out of their recent consolidation range.
"It is going to depend a lot on where the surprise is," Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois, said, referring to the nonfarm payrolls data.
"In the last report, people looked at the fact that the decline in payrolls was not nearly as large as expected, but the unemployment rate jumped tremendously. At the end of the day, that jump trumped things."
JOBLESS RATE NEAR 10 PERCENT
U.S. nonfarm payrolls are forecast to lose 355,000 jobs in June versus May`s slide of 345,000, according to economists polled by Reuters.
The U.S. unemployment rate is projected to rise to 9.6 percent in June from 9.4 percent in May.
"We think that a spike in the rate of unemployment could actually be a positive, as it may signal that discouraged workers are coming in from the sidelines and starting to look for work again," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
"There may be something else that plays out next week, a sort of portfolio window dressing effect. There`s still a ton of cash sitting on the sidelines right now."
For the past week, the three major U.S. stock indexes were mixed. The blue-chip Dow Jones industrial average .DJI slipped 1.2 percent, while the S&P 500 dipped 0.3 percent, and the Nasdaq .IXIC gained 0.6 percent.
Holiday-shortened weeks tend to be volatile.  Continued...
Original article

Stocks eye jobs, other data in July 4th week

By Ellis Mnyandu
NEW YORK (Reuters) - For stock investors, June`s job report could be a make-or-break factor next week in determining whether the recent rally has legs or not.
The monthly non-farm payrolls data will come out on Thursday, instead of the usual Friday. U.S. markets will be closed on Friday, July 3rd, for the long Fourth of July, or Independence Day, holiday weekend.
Investors will pick apart the job figures and reams of other economic data released during this four-day week to assess if recent signs of stabilization point to a sustainable economic recovery. Consumer confidence, the Institute for Supply Management`s June index on U.S. manufacturing activity, and domestic car sales are among the major indicators on tap.
Although the U.S. economy has been mired in a recession since December 2007, investors` optimism has increased since early March amid growing signs that the extent of the economic slump is moderating.
That optimism has provided a crucial underpinning to stocks since the Standard & Poor`s 500 Index .SPX hit a 12-year closing low on March 9. This spring, the S&P 500 climbed as much as 40 percent from that low; at Friday`s close, it was still up 35.8 percent.
While unpleasant surprises may trigger a long-awaited correction, analysts said evidence of further economic stabilization would make the bulls grow bolder and help stocks break out of their recent consolidation range.
"It is going to depend a lot on where the surprise is," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois, referring to the non-farm payrolls data.
"In the last report, people looked at the fact that the decline in payrolls was not nearly as large as expected, but the unemployment rate jumped tremendously. At the end of the day, that jump trumped things."
JOBLESS RATE NEAR 10 PERCENT
U.S. non-farm payrolls are forecast to lose 355,000 jobs in June versus May`s slide of 345,000, according to economists polled by Reuters.
The U.S. unemployment rate is projected to jump to 9.6 percent in June from 9.4 percent in May.
"We think that a spike in the rate of unemployment could actually be a positive, as it may signal that discouraged workers are coming in from the sidelines and starting to look for work again," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
"There may be something else that plays out next week, a sort of portfolio window dressing effect. There`s still a ton of cash sitting on the sidelines right now."
At Friday`s close, the three major U.S. stock indexes finished the week mixed. The blue-chip Dow Jones industrial average .DJI slipped 1.2 percent, while the S&P 500 dipped 0.3 percent, and the Nasdaq .IXIC gained 0.6 percent.
Holiday-shortened weeks tend to be volatile.  Continued...
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U.S. spending and income rise, mood improves

By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - U.S. consumer spending in May rose for the first time since February and savings hit a record high as federal stimulus measures boosted incomes, while consumer sentiment edged higher in June, bolstering the view that the economy was close to emerging from recession.
Consumer spending, which accounts for more than 70 percent of U.S. economic activity, rose 0.3 percent in May, the Commerce Department said on Friday. The department also revised up April`s figure to unchanged from a small decline previously.
Personal income jumped 1.4 percent last month, propped by social benefit payments from the government`s massive economic stimulus.
U.S. stocks fell as the jump in savings to the highest level since records began in 1959 boosted worries the economic recovery will not make much headway if consumers save rather than spend. The U.S. dollar extended losses versus the euro as the data reduced safe-haven demand for the greenback.
"Though consumption is positive, it`s kind of a tepid rebound versus the huge bounce-back everyone was expecting. So we have to see if this is stabilization," said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.
"The government programs are new. We really have no history on it, and the rules tend to be changing as well. Right now we`re on new ground with a lot of this, at least in the short-term."
The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income, and other benefits.
Personal savings jumped to a record annual rate of $768.8 billion. The saving rate climbed to 6.9 percent, the highest since December 1993, the department said.
CONSUMER SENTIMENT RISES
A separate report showed U.S. consumer confidence improved in June to the highest since February 2008.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for June stood at 70.8, up from 68.7 in May, equaling February 2008`s reading. This was above economists` median expectation for a reading of 69.0, according to a Reuters poll.
The index of consumer expectations edged lower, however.
"Over the past four months, sentiment has improved moderately, suggesting that consumers` attitudes about the economy are improving," said Steven Wood, chief economist at Insight Economics in a research note.
"However, they remain very cautious. Nevertheless, these data do suggest consumers are no longer shell shocked."
Since the November 2008 low of 55.3, the sentiment index has gained 15.5 points, recouping about one-third of the loss posted since the peak in January 2007.  Continued...
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GE`s Immelt says U.S. economy needs industrial renewal

By David Bailey and Soyoung Kim
DETROIT (Reuters) - General Electric Co Chief Executive Jeff Immelt said on Friday the United States needs to refocus its economy on manufacturing and exporting if it wishes to recover from a brutal recession.
The world`s largest economy can no longer count on consumer spending to drive demand, nor can it rely on Wall Street financial wizardry if it wants its population to continue to enjoy a high standard of living, the head of the largest U.S. conglomerate said.
"We should clear away any arrogance, false assumptions, or a sense that things will be `OK` just because we are America," Immelt told the Detroit Economic Club. "Our competitive edge has slipped away and this has hit the middle class hard."
The U.S. should work to have manufacturing represent about 20 percent of employment, more than double its current level, he said.
The world`s biggest maker of jet engines and electricity- producing turbines said on Friday it would be building a new manufacturing research center outside Detroit that will employ 1,100 people.
The move reflects Immelt`s belief that, like many U.S. companies GE has turned too many core technological procedures over to outside contractors and foreign operations.
"In some areas, we have outsourced too much," Immelt said, according to a copy of his prepared remarks. "We plan to `insource` capabilities like aviation component manufacturing and software development."
The United States need to reduce its reliance on financial services to drive economic growth, Immelt warned.
"While some of America`s competitors were throttling up on manufacturing and R&D, we de-emphasized technology," he said. "Our economy tilted instead toward the quicker profits of financial services."
That is a lesson GE has learned -- its shares have lost some 58 percent of their value over the past year, largely the result of falling profit at its GE Capital finance unit. Immelt is restructuring GE so it will count on finance for just 30 percent of its profit, down from half before the downturn.
"While our financial services business has performed well, I can`t tell you that we were entirely free of these errors," Immelt said. "We weren`t."
(Reporting by David Bailey and Soyoung Kim; writing by Scott Malone; editing by Andre Grenon)
Original article

Oil rises above $70 on Nigeria attacks, econ hopes

By Jennifer Tan
SINGAPORE (Reuters) - Oil surged above $70 a barrel on Friday, extending a 2 percent gain the day before, after rebel attacks on Nigerian oil facilities disrupted supply and equity markets rallied on optimism the global recession was ebbing.
The release of the June consumer sentiment index by the Reuters/University of Michigan Surveys of Consumers later is expected to reflect a mildly improving outlook for the U.S. economy, auguring well for ailing world energy demand.
U.S. crude futures for August gained 36 cents to $70.59 a barrel by 11:33 p.m. EDT, off a morning high of $70.77 and after settling at $70.23 in the previous session. London Brent crude rose 28 cents to $70.06
Oil is on course for a 1.5 percent gain this week, buoyed by optimism over a potential economic recovery that has lifted prices from below $40 over the past three months.
"Worry over the geopolitical situation is a big factor right now, and that`s what`s giving the market traction," said Peter McGuire, managing director of Commodity Warrants Australia, referring to the situation in Iran.
"We had a correction earlier in the week, and the technicals still look a little bearish, but you can`t rule out the fundamentals, and you can`t rule out the geopolitical."
About 20 people have been killed in protests after Iran`s June 12 presidential election, the worst unrest since the 1979 Islamic revolution.
Investors are also keeping their eyes peeled on Nigeria, where President Umaru Yar`Adua on Thursday offered amnesty to gunmen in the Niger Delta who lay down their weapons by October 4, a bid to end unrest which has cost Africa`s top oil exporter billions of dollars in lost revenue.
The main militant group, the Movement for the Emancipation of the Niger Delta (MEND), sabotaged a Royal Dutch Shell (RDSa.L) oil pipeline on Thursday, the latest act in a month-old campaign which has shut in at least 133,000 barrels per day. The attack helped push oil to near $71 a barrel.
Fuelling oil`s rise, Exxon Mobil (XOM.N) said its huge Baytown refinery suffered an operational glitch that triggered flaring, sparking worries the largest U.S. oil refinery could tighten gasoline stockpiles during this summer`s peak demand driving season.
Firmer Asian stocks on the back of Wall Street`s rally also lent support to oil, with shares outside Japan .MIAPJ0000PUS climbing 1 percent and Japan`s Nikkei .N225 up 0.2 percent.
A further boost came from a fall in the dollar against most major currencies on Friday, extending losses the previous day, as investors shifted funds back into risky assets after the Federal Reserve this week appeared to confirm it would keep interest rates low for a while. <USD/>
The Reuters/University of Michigan final June consumer sentiment index, due at 1355 GMT, is expected to show a reading of 69.0 compared with 68.7 in the May report, a Reuters poll of economists showed.
(Editing by Ben Tan)
Original article

Nominees emerge for U.S. panel on Wall Street meltdown

By Karey Wutkowski
WASHINGTON (Reuters) - A bipartisan panel armed with subpoena power to investigate causes of the Wall Street meltdown is on the brink of being launched, as Congress embarks on an ambitious effort to reform policing of the financial sector.
A short list of names has emerged for the Financial Crisis Inquiry Commission that includes former Republican presidential candidate Fred Thompson; former Democratic head of the Commodities Futures Trading Commission Brooksley Born; and Alex Pollock, a fellow at the conservative think tank American Enterprise Institute, according to a source familiar with the matter.
Congress last month created the 10-member commission to study how fraud, regulatory lapses, monetary policy, accounting, lending practices and executive pay contributed to the worst U.S. financial crisis since the Great Depression.
House of Representatives Speaker Nancy Pelosi has said the panel is modeled after the Pecora Commission, a Depression-era U.S. Senate panel that investigated the causes of the 1929 Wall Street crash.
"I think the announcement should be coming in the near future," Pelosi spokesman Nadeam Elshami said about the naming of the appointees.
The source, speaking anonymously because discussions were still ongoing, said other possible appointees include Bill Thomas, former Republican chairman of the House Ways and Means Committee; Jake Garn, former Republican senator; and Bob Graham, the former Democratic senator and Florida governor.
Born, Pollock and Thomas declined to comment. Thompson, Garn, and Graham did not immediately respond to messages.
The crisis commission must report its findings to Congress in December 2010. Its work will run parallel to Congressional efforts to draft the most dramatic overhaul of the financial regulatory system since the 1930s.
President Barack Obama has said he hopes reform legislation can be finalized by the end of this year. Obama`s proposal, unveiled earlier this month, calls for the Federal Reserve to police systemic risks to the economy and proposes consolidating primary bank supervision into a new regulator.
The plan also calls for creating a new consumer financial product watchdog and for giving the federal government the power to unwind troubled firms whose stability impact the broader financial system.
The Financial Crisis Inquiry Commission will study what led to the failure of several large Wall Street firms, which prompted Congress last year to pass a $700 billion financial bailout that has been unpopular among voters.
The U.S. economy has shed six million jobs since December 2007 in the midst of a recession that has seen the jobless rate hit 9.4 percent.
The crisis commission was given the power to hold hearings and to subpoena witnesses` testimony as well as correspondence and documents.
(Reporting by Karey Wutkowski, additional reporting by Jeremy Pelofsky; editing by Carol Bishopric)
Original article

U.S. jobless claims rose 15,000 in latest week

By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft.
Gross domestic product, which measures total output within U.S. borders, dropped at a 5.5 percent annual rate in the first quarter after shrinking 6.3 percent in the fourth quarter of last year and 0.5 percent in the third quarter.
Separately, the Labor Department said the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 -- a measure of the strain still faced by hard-pressed consumers.
"This will send a message that the labor market remains difficult and that it`ll be a while until we get some recovery," said Peter Boockvar, equity strategist with Miller Tabak & Co in New York.
Bond prices rose after the jobless claims data was issued as investors grew more cautious, while Wall Street appeared set for a weak stock-market opening.
The GDP reading was the final one for the first quarter. The Commerce Department initially said it shrank 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall. GDP is expected to slip again in the second quarter ending June 30 though less severely than in the first quarter.
"The economic data we`ve seen so far for the second quarter suggest the preliminary number for the second quarter will show a modest decline, maybe half the rate we saw in the first quarter," said Gary Thayer, senior economist with Wells Fargo Advisors in St. Louis, Missouri.
The GDP report reflected an economy still deep in recession as the year began, though the Paris-based Organization for Economic Cooperation and Development predicted this week the U.S. downturn will bottom out this year and be followed by a soft recovery in 2010.
Consumer spending, which fuels two-thirds of U.S. economic activity, increased at a downwardly revised 1.4 percent rate instead of the 1.5 percent previously estimated. Weak job markets and falling home prices are expected to dampen spending for some time.
Partly accounting for the revised GDP figure, the department said companies cut inventories at a slightly less vigorous rate in the first quarter than thought previously. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, meaning they subtracted less from growth.
Reflecting the weak pace of global economic activity, exports plunged at a 30.6 percent rate in the first quarter instead of the 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947.
The department said the drop in exports cut 4.16 percentage points from GDP.
Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980.
Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.
(Additional reporting by Alister Bull; Editing by James Dalgleish)
Original article

U.S. GDP contracts less in Q1, demand still soft

By Glenn Somerville
WASHINGTON (Reuters) - The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft.
Gross domestic product, which measures total output within U.S. borders, dropped at a 5.5 percent annual rate in the first quarter after shrinking 6.3 percent in the fourth quarter of last year and 0.5 percent in the third quarter.
The GDP reading was the final one for the first quarter. The Commerce Department initially said it contracted 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall. GDP is expected to decline again in the current quarter ending June 30 though less severely than in the first quarter.
The GDP report reflected an economy still deep in recession as the year began, though the Paris-based Organization for Economic Cooperation and Development predicted this week the U.S. downturn will bottom out this year and be followed by a soft recovery in 2010.
Consumer spending, which fuels two-thirds of U.S. economic activity, increased at a downwardly revised 1.4 percent rate instead of the 1.5 percent previously estimated. Weak job markets and falling home prices are expected to dampen spending for some time.
Partly accounting for the revised GDP figure, the department said companies cut inventories at a slightly less vigorous rate in the first quarter than thought previously. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, which meant they subtracted less from growth.
Reflecting the weak pace of global activity, exports plunged at a 30.6 percent rate in the first quarter instead of 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947.
The department said the drop in exports cut 4.16 percentage points from GDP.
Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980.
Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.
(Editing by James Dalgleish)
Original article