European Financials Drop To 7-Month Lows

European bank stocks are officially in bear market territory, now down over 22% from their highs with today’s drop closing the index at seven month lows. Financial stocks have played catch down to credit’s early warning weakness but still have more room to run. The correlation between financials and sovereigns has been notably broken down in the last few weeks – as it seems an external funding source has saved European sovereign debt (perhaps one that just wants to get away from its vicious cycle-like devaluation and diversify into anything non-JPY-denominated). On the day, Portugal blew wider at the open (+22bps) only to be magnificently bid back to unchanged by the invisible hand. Spain and Italy drifted slightly tighter on the day. Stocks were similarly low range today. Swiss 2Y closed at 3-month lows as EURUSD retraced back from its highs to close practically unchanged from Friday at 1.3000.

 

Bank stocks are -22% from their highs in Late January. Notice the stability in European sovereign risk (the blue line is a GDP-weighted average of nation spreads)… and its ignorance of the collapse in recent weeks…

it seems the ‘promise’ still holds… and the equity-credit arb has almost converged…

 

Portugal was sold and bid right back out of the gate; European stocks surged at the open but leaked lower all day…

 

Charts: Bloomberg

Zero Hedge

European Financials Drop To 7-Month Lows

Yen firmer but near lows, Asian shares capped

1 of 7. Electronic information boards display market information at the London Stock Exchange in the City of London January 2, 2013.

Credit: Reuters/Paul Hackett

By Chikako Mogi

TOKYO | Mon Feb 18, 2013 7:46pm EST

TOKYO (Reuters) – The yen remained near recent lows on Tuesday, as attention turned to the appointment of a new Bank of Japan governor.

Regional share markets held to tight ranges as the absence of catalysts and a holiday in the U.S. overnight capped demand.

The yen, which has dropped 20 percent against the dollar since mid-November, fell further at the start of the week after financial leaders from the G20 promised not to devalue their currencies to boost exports and avoided singling out Japan for any direct criticism.

The choice of the next BOJ governor and two deputies has drawn market attention as a gauge to how strongly Prime Minister Shinzo Abe is committed to reflating the economy. The G20′s message was that as long as Japan pursues aggressive monetary easing to achieve that goal, a weaker yen as a result of such domestic monetary policy will be tolerated, analysts say.

“But that means that some other economy’s monetary conditions have been tightened,” said Barclays Capital in a note.

“Japan hasn’t even changed its policy stance thus far, and the effect of expectations of a looser setting have led to limited moves in domestic interest rates, but the sell-off of the JPY has been marked and has clearly caused unease in other economies.”

Market reaction was muted to the release of the minutes of the BOJ’s January 21-22 meeting, when the bank set a 2 percent inflation target and pledged to an open-ended quantitative easing from 2014, but the yen was bought when Finance Minister Taro Aso told reporters Japan has no plans to buy foreign currency bonds as part of monetary easing, a trader said.

The dollar was down 0.2 percent to 93.75 yen, but remained near its highest since May 2010 of 94.465 hit on February 11. The euro also eased 0.3 percent to 125.05 yen, below its peak since April 2010 of 127.71 yen touched on February 6.

The MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was nearly flat.

The Nikkei stock average .N225 opened down 0.6 percent, after closing up 2.1 percent on Monday to approach its highest level since September 2008 of 11,498.42 tapped on February 6. .T

Australian shares .AXJO inched down 0.1 percent on the back of weakness in metals prices, with investors focusing on local corporate earnings for direction after a three-month rally that has taken the market to 4-1/2 year highs.

Seoul shares .KS11 opened little changed, and were expected to struggle to find momentum on worries about the weak yen.

“The market has been taking a breather recently after staging a recovery earlier this month,” said Lee Jae-man, an analyst at Tong Yang Securities in Seoul. “The weaker yen has been priced in to some extent, and the pace of its fall is expected to slow down.”

Disappointing earnings pushed European shares lower on Monday for a third straight session of losses while U.S. markets were closed for the President’s Day holiday.

The euro was steady around $ 1.3348. The currency eased slightly on Monday after European Central Bank President Mario Draghi said in a speech at the European Parliament that “the exchange rate is not a policy target but is important for growth and price stability” and that its rise is “a risk.”

The risk of an inconclusive outcome in Italy’s election this weekend added to investor concerns.

Sterling hovered near a seven-month low against the dollar touched on Monday after a key policymaker made comments about the need for further weakness, while recent poor data has spurred worries of another British recession.

U.S. crude fell 0.4 percent to $ 95.47 a barrel. <O/R>

(Additional reporting by Hyunjoo Jin and Miyoung Kim in Seoul; Editing by Shri Navaratnam)

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Reuters: Business News

Yen firmer but near lows, Asian shares capped

GLOBAL MARKETS-Yen near lows vs dlr, Asian shares ease in subdued trade

Mon Feb 11, 2013 7:42pm EST

* MSCI Asia ex-Japan steady, Nikkei opens up 1.7 pct

* Many Asian markets remain shut for holiday

* Yen hovers near lowest since May 2010 vs dollar

By Chikako Mogi

TOKYO, Feb 12 (Reuters) – The yen hovered near fresh lows against the dollar and Japanese stocks jumped on Tuesday after a U.S. official voiced support for Japan’s drive to beat deflation, assuaging fears that criticism of its aggressive stance on monetary policy would mount.

Asian shares were steady, with many regional bourses shut for holidays. Encouraging data from China late last week was lending support but markets lacked momentum as investors await key events such as the U.S. president’s State of the Union address.

Rhetoric about a so-called currency war was dialled back ahead of a Group of 20 meeting. In addition to U.S. Treasury Undersecretary Lael Brainard saying the United States supports Japanese efforts to end deflation, European Central Bank council member Jens Weidmann said the euro was not overvalued at current levels.

On Monday, the yen sank to its lowest since May 2010 of 94.465 and also plunged over 2 percent against the euro as traders saw Brainard’s remarks as an encouraging sign to sell the yen further.

In early Tuesday trade, the dollar was trading at 94.22 yen and the euro was at 126.35 yen. The euro scaled its highest since April 2010 of 127.71 yen last week.

Japan’s Nikkei stock average opened 1.7 percent higher, after snapping a 12-week winning streak to close down 1.8 percent on Friday.

“While currency moves have been sensitive to officials’ comments in general, people thought any comment from the G20 would trigger yen buying,” said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities.

“But such worries are receding as she (Brainard) said she supports Japan’s efforts to end deflation.”

The MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed, with Australian shares inching up 0.2 percent and South Korean shares opening up 0.4 percent.

Trading resumed in Japan and South Korea but markets remained closed in Singapore, Hong Kong, mainland China, Malaysia and Taiwan.

G20 finance ministers and central bankers meet in Moscow on Friday and Saturday, and G20 officials said on Monday the Group of Seven nations are considering a statement this week reaffirming their commitment to “market-determined” exchange rates.

Currency and equities markets were also looking ahead to President Barack Obama’s State of the Union address later on Tuesday, for any signs of a deal to avert automatic spending cuts due to take effect on March 1.

“We believe that the G20′s take on currency wars, Mr. Obama’s upcoming state of the union address, and data on the current condition of the US economy should help markets assess where the global recovery stands and where we are heading,” Barclays Capital said in a research.

The yen is expected to stay under pressure on expectations that Prime Minister Shinzo Abe will endorse a far more dovish Bank of Japan regime when the current leadership’s term ends next month. The BOJ is expected to refrain from taking fresh easing steps when it meets this week.

Wall Street and world equity markets were little changed in light volume on Monday as a lack of major economic news gave investors little incentive to push prices higher for now, after a robust performance last week.

Encouraging U.S. and Chinese data last week lifted the tech-focused Nasdaq Composite Index to a 12-year closing high and the Standard & Poor’s 500 Index to a five-year peak on Friday.

U.S. crude futures edged down 0.1 percent to $ 96.91 a barrel.

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Reuters: Financial Services and Real Estate

GLOBAL MARKETS-Yen near lows vs dlr, Asian shares ease in subdued trade

Yen near fresh lows versus dollar, Asian shares steady

1 of 9. Visitors cast their shadows on the logo of the Tokyo Stock Exchange, prior to a ceremony marking the end of trading in 2012 at the Tokyo Stock Exchange in Tokyo December 28, 2012.

Credit: Reuters/Kim Kyung-Hoon

By Chikako Mogi

TOKYO | Mon Feb 11, 2013 10:27pm EST

TOKYO (Reuters) – The yen hovered near fresh lows against the dollar and Tokyo stocks jumped back near a 33-month high on Tuesday after markets took comments from a U.S. official as giving Japan the green light to pursue policies that weaken the yen as long as they help beat deflation.

Asian shares were steady, with many regional bourses shut for holidays. Encouraging trade data from China late last week was lending support but non-Japan markets lacked momentum as investors awaited key events such as the U.S. president’s State of the Union address for trading cues.

While Japan has faced some criticism from German and other European officials that it is intentionally trying to weaken the yen with monetary easing, rhetoric about a so-called currency war was dialled back ahead of a Group of 20 meeting in Moscow on Friday and Saturday.

U.S. Treasury Undersecretary Lael Brainard said on Monday the United States supports Japanese efforts to end deflation. But she also mentioned that the G7 has long committed to exchange rates determined by market forces, “except in rare circumstances where excess volatility or disorderly movements might warrant cooperation.

European Central Bank council member Jens Weidmann also said the euro was not overvalued at current levels.

The dollar was trading at 94.22 yen after marking on Monday its highest level since May 2010 of 94.465. The euro was trading at 126.28 yen after the yen fell 2 percent against the euro on Monday, pushing it back towards 127.71 yen hit last week, its highest level since April 2010.

“I think the yen’s weakening is a function of (playing)catch-up,” and not Japan resorting to deliberate devaluation of its currency, said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York.

“It’s the market’s way of saying: we’re convinced there is a movement afoot to reinflate Japan.”

The weaker yen in turn helped bolster sentiment for Japanese stocks, sending the Nikkei average .N225 2.6 percent higher. .T

“While currency moves have been sensitive to officials’ comments in general, people thought any comment from the G20 would trigger yen buying,” said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities.

“But such worries are receding as she (Brainard) said she supports Japan’s efforts to end deflation.”

The yen is expected to stay under pressure on expectations that Prime Minister Shinzo Abe will endorse a far more dovish Bank of Japan regime when the current leadership’s term ends next month. The BOJ is expected to refrain from taking fresh easing steps when it meets this week.

The MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed. Australian shares AXJO. inched up 0.1 percent led by financials, as investors waited for corporate earnings results.

Trading resumed in Japan and South Korea but markets remained closed in Singapore, Hong Kong, mainland China, Malaysia and Taiwan.

G20 officials said on Monday the Group of Seven nations are considering a statement this week reaffirming their commitment to “market-determined” exchange rates.

Currency and equities markets were also looking ahead to President Barack Obama’s State of the Union address later on Tuesday, for any signs of a deal to avert automatic spending cuts due to take effect on March 1.

“We believe that the G20′s take on currency wars, Mr. Obama’s upcoming state of the union address, and data on the current condition of the US economy should help markets assess where the global recovery stands and where we are heading,” Barclays Capital said in a research report.

Wall Street and world equity markets were little changed in light volume on Monday as a lack of major economic news gave investors little incentive to push prices higher after a robust performance last week.

U.S. and Chinese data last week lifted the tech-focused Nasdaq Composite Index .IXIC to a 12-year closing high and the Standard & Poor’s 500 Index .SPX to a five-year peak on Friday.

U.S. crude futures edged down 0.2 percent to $ 96.88 a barrel while Brent steadied around $ 118.12.

Spot gold stayed near a one-month low.

(Additional reporting by Ayai Tomisawa and Lisa Twaronite in Tokyo; Editing by Edwina Gibbs)

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Reuters: Business News

Yen near fresh lows versus dollar, Asian shares steady