- Investors Rebel as EM Rate Hikes Fail to Buoy Curencies. Investors beating a retreat from emerging markets tested the resolve of central banks fighting to protect their economies from sliding exchange rates. The Turkish lira resumed a decline and South Africa’s rand touched its lowest level in more than five years against the dollar after policy makers raised interest rates higher than predicted by economists. Russia’s ruble tumbled to a record, Brazil’s real slid to the weakest since August and Hungary’s forint tumbled the most in more than 18 months.
- Ruble Weakens to Record Low Against Basket as Currencies Slide. The ruble dropped to a record low against the basket as steps by central banks in Turkey and South Africa failed to shore up emerging-market currencies. The ruble weakened 1.2 percent to 40.9632 against Bank Rossii’s target dollar-euro basket, the lowest level on a closing basis, as of 6:01 p.m. in Moscow. The currency was at 40.9332 by 6 p.m., when the central bank stops its market operations. The yield on ruble-denominated OFZ bonds due February 2027 rose 14 basis points to 8.39 percent.
- Yen Advances as South Africa Stokes Rout in Emerging Markets. The yen gained against all except one of 24 emerging-market currencies as South Africa’s central bank joined Turkey in raising its benchmark interest-rate in moves that failed to reassure investors. The dollar rose for a fourth day against the euro as the Federal Reserve ends a policy meeting and after a European Central Bank official said euro appreciation runs counter to the bank’s price-stability aim. The rand fell the most since April as policy makers said their actions weren’t aimed at the currency. Russia’s ruble extended its slump to 13 days and Hungary’s forint weakened. “It’s a broad-based theme of bold-but-futile attempts by central banks in the most beleaguered countries to fight the avalanche and ferocity of the attack on their currencies -- which is obviously failing,” Robbert Van Batenburg, director of market strategy at Newedge Group in New York, said by phone. “It’s denting if not completely diminishing the faith the currency market has in the ability of central banks to fight against the attacks on currencies.”
- Abe Crunch Year Sees Risk rise Most After Iceland: Japan Credit. Japan's default risk jumped the most among developed nations after Iceland this year as the world's third-largest economy faces mounting challenges from energy import costs and a budget overhaul. Credit-default swaps that insure Japanese government bonds against nonpayment for five years touched 56 basis points on Jan. 27, the highest since Nov. 5, according to CMA. It has risen 12.8 basis points this month, the most among the 22 sovereigns tracked by Bloomberg after Iceland's 13 point increase. A global rout in emerging markets in 2014 has shifted investor attention on Japan's more than 1 quadrillion yen ($9.7 trillion) debt load, the world's heaviest as a proportion of gross domestic product. "There are concerns about Japan's growing fiscal and trade deficits," said Takayuki Atake, the Tokyo-based head of credit research at SMBC Nikko Securities Inc. a unit of Japan's second-largest banking group by market value. "The risk scenario we need to be on a lookout for is for the fiscal situation to deteriorate while the economy lags behind, leading to questions about Japan's credibility."
- Canon Forecast Misses Analyst Estimates Amid Camera Slump. Canon Inc. (7751)’s forecast for annual net income missed analyst estimates as the world’s largest camera maker stumbles amid slowing demand. Net income will probably total 240 billion yen ($2.3 billion) in 2014, the Tokyo-based company said in a statement today. That’s less than the 267 billion yen average of 22analyst estimates compiled by Bloomberg.
- Merkel Warns of ‘Deceptive Calm’ as Euro Crisis Risk Remains. German Chancellor Angela Merkel called for a fresh push to create “real economic union” through changes to European treaties, saying that the euro-area debt crisis isn’t yet defeated. Addressing lawmakers in Berlin today in her first policy speech of the year, Merkel said that Europe risks falling behind unless the 18-nation euro region expands binding commitments and improves its current “unsatisfactory” coordination on economic policy. “Without decisive progress on this front, without a quantum leap, we won’t overcome the European sovereign-debt crisis,” Merkel said.
- Europe Stocks Decline as Bank Shares, Automakers Retreat. European stocks fell, as automakers and retailers declined, and the Turkish central bank’s interest rate increases failed to support emerging-market currencies. Fiat (F) SpA slid 4.1 percent after posting earnings that missed analysts’ forecasts. Nordea Bank AB (NDA) lost 2.3 percent after its chief executive said it will need to cut more jobs to adjust to slow growth. Mulberry Group Plc tumbled 27 percent after saying full-year pre-tax profit will miss market estimates. Anglo American Plc gained 5.7 percent after saying fourth-quarter platinum production rose 25 percent. The Stoxx Europe 600 Index dropped 0.6 percent to 322.38 at the close of trading, paring earlier losses of as much as 1.5 percent.
- Gold Climbs on Speculation of Emerging Markets Safe-Haven Demand. Gold advanced in London and New York on speculation a global rout of emerging markets will spur demand for precious metals as a safe haven. Turkey’s financial markets have plunged since news of a corruption scandal broke last month. That coincided with a flow of money out of emerging economies that weakened currencies from Brazil to South Africa. Gold fell earlier today amid expectations the Federal Reserve will cut stimulus more today. “Gold should be in demand as long as the turmoil persists,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said by e-mail today. “That’s why gold has recovered its early losses.” Gold for immediate delivery rose 0.2 percent to $1,259.81 an ounce by 12:37 p.m. in London, after falling as much as 0.6 percent. April futures climbed 0.7 percent to $1,259.40 an ounce on the Comex in New York. Trading on Comex was 62 percent higher than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.
- Natural Gas Soars to Four-Year High on Outlook for Supply Drop. Natural gas surged to a four-year high on the last day of February futures trading on speculation that a government report tomorrow will show a bigger-than-normal inventory drop as frigid weather eroded supplies. Gas jumped as much as 13 percent as the Energy Information Administration may say stockpiles slid by 232 billion cubic feet last week, compared with a five-year average decrease of 162 billion, according to the median of 12 analyst estimates compiled by Bloomberg. WSI Corp. in Andover, Massachusetts, said the weather may be colder than usual in most of the contiguous U.S. from Feb. 3 through Feb. 7.
- Copper Heads for Longest Slump in 15 Months on Economy. Copper futures headed for the longest slump in 15 months on speculation that rising borrowing costs in emerging markets will damp economic growth, eroding demand for industrial metals. The South Africa Reserve Bank unexpectedly increased its benchmark interest rates, following central banks from Turkey to Brazil. Countries tightened monetary policy to bolster their currencies. A gauge of global equities approached the lowest in six weeks, while aluminum, nickel, zinc and lead dropped. Copper has dropped 12 percent in the past 12 months, partly as economic growth eased in China, the world’s largest user. Global production will outstrip consumption by 167,000 metric tons this year, following a deficit of 137,000 tons in 2013, Barclays Plc has said. “More problems in emerging markets are going to limit the demand for copper,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said in a telephone interview. “Some people think anytime a country has to raise interest rates just to keep money there, that means there’s something wrong.”
- Fed Tapers QE to $65 Billion. The Federal Reserve will trim its monthly bond buying by $10 billion to $65 billion, sticking to its plan for a gradual withdrawal from departing Chairman Ben S. Bernanke’s unprecedented easing policy. “Labor market indicators were mixed but on balance showed further improvement,” the Federal Open Market Committee (FDTR) said today in a statement following a two-day meeting in Washington that was the last for Bernanke, who will be succeeded by Vice Chairman Janet Yellen on Feb. 1. “The unemployment rate declined but remains elevated.”
- Hilsenrath Takeaways: Fed Sets Bar on Tapering. Here are five takes on what it means:
- Turkey rate hike stirs Black Wednesday memories. Parallels lie mostly on the surface, but illustrate central bankers’ lament. Don’t take it too far, but the failure of Turkey’s stunning rate hike to provide lasting support for the Turkish lira is stirring memories of the currency crisis that made billionaire George Soros a household name more than two decades ago.
- Obama's education focus overlooks next financial contagion. With the $1.2 trillion student loan crisis accelerating, President Barack Obama gave a nod in his State of the Union speech to the millions of young Americans starting their adult lives in crushing debt but offered no new proposals for relief.
Business Insider:
The Blaze:
Reuters:
Finanz und Wirtschaft:
- Capital Controls Part of Solution, Stiglitz says. Controls part of solution to capital flight, Joesph Stiglitz said in an interview.
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