U.S. Stocks Sink With Emerging Currencies After Fed Taper

U.S. stocks fell, pushing the Standard & Poor’s 500 Index to a two-month low, while Treasuries and the yen gained as the Federal Reserve said it would make further cuts to economic stimulus and as emerging-market currencies weakened. Gold and natural gas climbed.

The S&P 500 slumped 1 percent to 1,774.20 by 4:34 p.m. in New York, the lowest close since Nov. 12 after European stocks retreated. Facebook Inc. (FB) rose after market on better-than-estimated earnings. Ten-year Treasury yields dropped seven basis points and the yen gained 0.7 percent. Russia’s ruble slipped to a record versus its dollar-euro basket, while South Africa’s rand sank 2.1 percent. Gold futures rose the most in a week while natural gas contracts jumped to a four-year high.

The Fed said it will trim its monthly bond buying by another $10 billion to $65 billion, sticking to its plan for a gradual withdrawal from outgoing Chairman Ben S. Bernanke’s unprecedented easing policy. Turkey doubling its key interest rate and South Africa unexpectedly increasing borrowing costs failed to assuage concern over emerging markets and a slowdown in China, where a private report tomorrow may firm signs that manufacturing is contracting in Asia’s largest economy.

(Source: Bloomberg)

BOJ Silence on Exit Plan Stokes Concern as Prices Rise: Economy

Japan’s success in rekindling inflation is raising the stakes for policy makers to map out the endgame for monetary stimulus, given the risk of a surge in yields when the Bank of Japan winds down bond purchases.

With the BOJ’s benchmark inflation gauge past halfway to Governor Haruhiko Kuroda’s 2 percent target, yields on 10-year government securities are still the world’s lowest at 0.67 percent -- held down by central bank purchases of unprecedented scale. Even so, Kuroda, who meets with fellow board members next week, says it’s “too early” to discuss an exit strategy.

In the absence of the BOJ, investor demand for compensation from inflation could send the government’s borrowing costs surging, fueling the danger of a collapse in confidence in the fiscal sustainability of the world’s third-largest economy. Kuroda should start thinking about “disengaging” now, according to economist Richard Koo.

“It may be too late to prevent long-term rates doing something crazy” should the BOJ hold off on tapering before inflation reaches the target, said Koo, a former Federal Reserve economist who wrote “The Holy Grail of Macroeconomics -- Lessons from Japan’s Great Recession.”

The BOJ’s board will maintain its pledge to expand the monetary base by an annual 60 trillion to 70 trillion yen ($668 billion) in a two-day meeting starting Jan. 21, according to all 36 economists in a Bloomberg News survey.

(Source: Bloomberg)

Asia Stocks Rise as Dollar Falls; Metals Rally on Ore Ban

Asian stocks rose and the dollar weakened as investors weighed prospects for U.S. stimulus. Nickel led gains by metals and the rupiah climbed after Indonesia banned mineral ore exports.

The MSCI Asia Pacific excluding Japan Index increased 0.4 percent at 10:45 a.m. in Hong Kong. Standard & Poor’s 500 Index futures slid 0.2 percent. The Bloomberg Dollar Spot Index fell for a third day as the greenback dropped 0.8 percent against the yen and 0.9 percent versus the rupiah. Nickel rose 0.9 percent and aluminum increased 0.4 percent. Gold traded at its highest level in a month. Japanese markets are closed for a holiday.

U.S. payrolls rose the least since January 2011 last month, trailing economists’ estimates. Atlanta Federal Reserve President Dennis Lockhart speaks today, while Charles Plosser from the Philadelphia Fed and Richard Fisher from Dallas speak tomorrow. Indonesia, which Goldman Sachs Group Inc. estimates provides as much as 20 percent of global nickel supply, imposed a ban on raw ore exports effective from yesterday.

(Source: Bloomberg)                         

Aussie Set for Weekly Loss Versus Dollar Before U.S. Jobs Data

Australia’s dollar headed for a weekly decline versus the greenback amid speculation U.S. payrolls data today will encourage the Federal Reserve to continue tapering stimulus that has boosted asset prices.

The Australian and New Zealand dollars held declines against most major peers before data forecast to show import growth slowed in China, the major trading partner of both nations. The Australian 10-year government bond yield was set for a five-day drop.

Australia’s currency fell to 88.96 U.S. cents as of 10:51 a.m. in Sydney from 89 yesterday. It rose 0.1 percent to NZ$1.0790. New Zealand’s dollar declined 0.1 percent to 82.45 U.S. cents. For the week, the Aussie has fallen 0.6 percent against the greenback, while the kiwi has weakened 0.3 percent.

The yield on Australia’s benchmark 10-year bond declined four basis points from yesterday to 4.28 percent, and has dropped six basis points since Jan. 3. A basis point is 0.01 percentage point.

Data today may show U.S. employers added 197,000 jobs last month after boosting positions by 203,000 in November, according to the median estimate in a Bloomberg News poll of economists. In China, imports probably rose 5 percent in December from a year ago, compared with a 5.3 percent pace in the previous period, according to a separate economist survey. ~Jalatama~

(Source: Bloomberg)        

Oil Tumble Sends U.S. Trade Gap to Four-Year Low: Economy

A plunge in oil imports pushed the trade deficit in November to the lowest level in four years, showing the U.S. economy is becoming more energy independent.

The gap narrowed 12.9 percent to $34.3 billion, smaller than projected by any economist surveyed by Bloomberg and the least since October 2009, figures from the Commerce Department showed today in Washington. Petroleum imports were the weakest in three years as advances in domestic extraction put the U.S. on track to become the world’s largest oil producer by 2015.

The fuel-driven drop in purchases from abroad overshadowed record demand for foreign autos, parts and capital goods that indicate spending by American consumers and businesses is strengthening. Exports also were the strongest ever as improving economies in Europe and Asia benefit companies like Boeing Co. (BA), contributing to a pickup in manufacturing.

(Source: Bloomberg)