Japanese Stocks Decline on Concern Greek Debt Crisis Is Worsening

Japanese stocks fell, dragging the broader Topix Index to a second day of decline, after former Federal Reserve chairman Alan Greenspansaid a default by Greece is “almost certain.”

Canon Inc. (7751), a camera maker that counts Europe as its biggest source of revenue, slid 0.4 percent. Tokyo Electric Power Co., the utility at the center of the worst nuclear crisis in 25 years, slumped 9.1 percent after the head of Japan’s banking lobby said lenders won’t consider forgiving loans made to the company. Sekisui House Ltd. (1928), a home builder, plunged 5.5 percent after announcing a plan to sell convertible bonds.

The Topix index dropped 0.4 percent to 809 at the 11:00 a.m. trading break in Tokyo, erasing gains of as much as 0.3 percent. The Nikkei 225 Stock Average was little changed at 9,410.68, after swinging between gains and losses at least nine times.

“As long as the Greece’s debt crisis isn’t taken care of investors are going to be very cautious,”Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co. “People are worried Greece’s problems will spread to neighboring countries. If that happens, it will weigh heavily on stocks.”

The Nikkei is heading for a 1.2 percent decline this week, the biggest weekly drop since May 13, amid concern faltering U.S. economic growth and Greece’s worsening sovereign debt crisis will derail the global economic recovery. The Topix index is set for a 1 percent fall.

Greenspan said in an interview yesterday with Charlie Rose in New York that a default by Greece is “almost certain” and that could help drive the U.S. economy into recession. www.bloomberg.com

Gold May Rise as Slowing U.S. Economy, Weaker Dollar Fuel Investor Demand

Gold may gain for a third day in New York as concern about Europe’s debt crisis, signs that the U.S. economy is slowing and a weakening dollar spurs demand for the metal as an alternative investment. Palladium climbed.

U.S. payrolls grew at the slowest pace in eight months in May and manufacturing expanded at its slowest pace in more than a year, reports showed last week. The European Union needs to reach an accord on Greece’s debts before finance ministers meet on June 20, EU Economic and Monetary Affairs Commissioner Olli Rehn said yesterday. The dollar slid to a one-month low against six currencies. Gold typically moves counter to the greenback.

“Speculation U.S. economic growth is losing pace and the Greek debt crisis is worsening” is supporting gold, John Meyer, an analyst at Fairfax IS in London, wrote in a report today. “The dollar is off this morning, helping support prices as they push toward the record.”

Gold for August delivery fell 40 cents to $1,546.80 an ounce by 7:59 a.m. on the Comex in New York. It yesterday reached $1,555, the highest price since May 2. Immediate- delivery gold was 0.1 percent higher at $1,546.05 in London.

Concern about faster inflation, Europe’s debt crisis, a weakening dollar and fighting in Libya boosted gold to a record $1,577.40 on May 2. Prices are up 8.8 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades in London. Federal Reserve Chairman Ben S. Bernanke is scheduled to speak today at the International Monetary Conference in Atlanta as the bank’s second round of bond buying, called quantitative easing or QE2, ends this month.

Debt Crisis

European Central Bank President Jean-Claude Trichet signaled for the first time he may support encouraging investors to buy new Greek bonds to replace maturing securities as officials seek to stem the nation’s debt crisis. ECB policy makers have opposed any measure that could be classed as a default to avoid what Rehn described yesterday as a “Lehman Brothers catastrophe.”

“The market’s still very sensitive to what’s happening in Greece and Europe, and at the same time sensitive to U.S. data,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd., said by phone. “There doesn’t seem to be many reasons to be selling gold at this present moment.”

Gold Fund

China Universal Asset Management Co. received approval from the nation’s financial-market regulator to start a fund that will invest holdings in overseas exchange-traded products backed by precious metals. Liu Ming, a spokesperson for China Universal, didn’t give details of when the fund would start raising money, nor how the extent of the holdings in each metal will be set.

“All the market participants we met with in China last week expect a slowdown in physical demand before buying picks up again in September,” Edel Tully, a London-based analyst at UBS AG said today in a report. While there may be “summer headwinds” for gold, “this would be viewed by most as a short- term correction within a bullish market. It’s very difficult to leaveAsia, and in particular China, without feeling bullish about gold.”

Silver for July delivery rose 1.4 percent to $37.285 an ounce in New York. Palladium for September delivery climbed as much as 1.6 percent to a three-month high of $811.80 an ounce and was last at $806. Platinum for July delivery was 0.1 percent higher at $1,823.40 an ounce. www.bloomberg.com

Asian Stocks Drop on Global Economic Concern Over U.S., Greece

Asian stocks dropped on concern Greece’s debt crisis may worsen and after President Barack Obama said failure to raise the U.S. debt ceiling by early August might disrupt the global financial system.

BHP Billiton Ltd. (BHP), the world’s largest mining company, fell 1.9 percent in Sydney after gold and metal prices dropped. Rio Tinto Group, the second-biggest by sales, sank 1.5 percent.Toyota Motor Corp. (7203), the world’s No. 1 carmaker, slid 1.5 percent in Tokyo, whileMitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded bank, lost 0.3 percent.

“Investors are getting more sensitive about taking risks on concern about the future of Greek debt issues,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc. “They may continue putting money in safe bonds or cash, rather than stocks.”

The MSCI Asia Pacific Index declined 0.7 percent to 135.17 as of 9:35 a.m. in Tokyo. About five stocks fell for each that rose on the gauge, which recorded its second straight weekly decline last week amid concern China’s anti-inflation policies may crimp global growth.

Japan’s Nikkei 225 (NKY) Stock Average sank 0.6 percent, while South Korea’s Kospi Index lost 0.4 percent. Australia’s S&P/ASX 200 Index slid 1.4 percent. www.bloomberg.com

Coffee Rises to 14-Year High on Rainfall in Colombia; Cocoa Prices Slide

Coffee climbed to the highest price in New York in almost 14 years as rains may hurt crops inColombia, the world’s second-largest producer of arabica beans. Sugar advanced.

Colombia’s Agriculture Ministry said a lack of sunshine will hurt the nation’s coffee crops over the next few months. Coffee plantations are being damaged by landslides and rains, Hamburg-based broker Eugen Atte GmbH said on April 28. “What is scarier is that, according to weather experts, the worse rains are yet to come,” the broker said in a report.

Strong demand, record-low inventories and production disruptions in several major producer nations are supporting the market, Bjarne Schieldrop, chief commodity analyst at SEB AB,Sweden’s third-biggest bank by market value, wrote in a report today. “The situation originated with three consecutive disappointing Colombian crop years.”

Arabica coffee for July delivery rose 3.55 cents a pound, or 1.2 percent, to $3.0865 a pound by 8:31 a.m. on ICE Futures U.S. in New York. Earlier the price touched $3.089, the highest since May 1997. Robusta coffee for July delivery rose $58, or 2.3 percent, to $2,613 a metric ton in London.

Roadways across Colombia have been damaged by rainfall, according to a statement from the Agriculture Ministry. Floods, landslides and damaged bridges have isolated entire towns, according to Atte. The extent of the coffee losses is still unknown, German researcher F.O. Licht said in a report.

Production in the Andean nation will be 9.2 million bags in the current crop, the International Coffee Organization said on April 6. The figure is still below the 2007-08 level of 12.5 million bags, ICO figures show.

Guatemala Exports

Coffee exports from Guatemala, the largest producer in Central America, rose 8.7 percent to 447,265 bags in April, according to the country’s National Coffee Association, known as Anacafe. Exports for the marketing season started Oct. 1 came to 1.881 million bags, down 0.7 percent from 1.895 million bags in the previous season, data from the association showed.

Raw sugar for July delivery rose 0.40 cent, or 1.8 percent, to 22.27 cents a pound on ICE. White, or refined, sugar for August delivery fell $7.30, or 1.2 percent, to $607.80 a ton on NYSE Liffe, after reaching $597.50, the lowest since Oct. 4.

Egypt’s state-run Sugar and Integrated Industries Co. is seeking to buy 50,000 tons of raw sugar at a tender yesterday for May and June arrival, Hussein Ahmed, purchasing manager at the company, said by phone in Cairo.

Cocoa for July delivery dropped $65, or 2 percent, to $3,226 a ton in New York. Cocoa for July delivery fell 13 pounds, or 0.7 percent, to 1,968 pounds ($3,243) a ton in London. www.bloomber.com

New Zealand Dollar Falls as Bollard Holds Rates; Aussie Hits Record High

New Zealand’s dollar fell from near a three-year high as Reserve Bank Governor Alan Bollard left interest rates at a record low, citing an “uncertain” outlook after a February earthquake devastated Christchurch.

The so-called kiwi snapped a two-day gain as Bollard said monetary policy won’t change for some time and called the currency’s recent advance “unwelcome.” Australia’s dollar climbed to a record versus the greenback on speculation the nation’s Reserve Bank will raise interest rates to contain inflation earlier than its U.S. counterpart. Federal Reserve Chairman Ben S. Bernanke yesterday signaled he’ll maintain record monetary stimulus.

“Bollard’s tone in the statement seems to be a bit more dovish than the market expected, much more focused on damage from the quake than on positives from the trade boom,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Bollard’s lambasting of the high New Zealand dollar was a bit of a surprise after he said earlier this month that soaring commodity exports helped explain the currency’s strength.”

The New Zealand dollar dropped to 80.53 U.S. cents as of 11:01 a.m. in Sydney from 80.80 cents in New York yesterday, when it had climbed to 81.08 cents, the strongest since March 19, 2008. It slid 0.5 percent to 66.05 yen and weakened 0.7 percent to NZ$1.3553 per Australian dollar.

Outlook ‘Very Uncertain’

“The outlook for the New Zealand economy remains very uncertain,” Bollard said in statement today in Wellington after leaving the official cash rate at 2.5 percent. “Higher oil prices and the elevated level of the New Zealand dollar are both unwelcome. They will have some dampening effect on economic activity.”

The so-called Aussie advanced to $1.0917, the strongest level since exchange controls were scrapped in 1983, before trading at $1.0915, from $1.0872 yesterday. The currency rose 0.3 percent to 89.53 yen, the highest since April 11.

Bernanke said at his first press conference yesterday that the Fed is likely to continue reinvesting its securities holdings, including mortgage-backed debt, when they mature even after its $600 billion bond-buying program ends in June.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell to 73.091 today, the lowest level since July 2008.

Last to Raise

“What we’re looking at right now is the Fed most likely being the last major central bank to hike” interest rates, except the Bank of Japan, said Khoon Goh, Wellington-based head of market economics and strategy at ANZ National Bank Ltd. “That’s why we’re seeing ongoing U.S. dollar weakness because the currency market is very much trading on interest-rate differentials at the moment.”

Swaps traders are betting the Reserve Bank of Australia will raise its target rate by 26 basis points over the next 12 months, up from bets on an increase of 19 basis points last week, a Credit Suisse Group AG index shows.

Consumer prices in the country gained 1.6 percent last quarter from the previous three months, the biggest jump since 2006, the Bureau of Statistics said yesterday. www.bloomber.com

Gold Climbs to Record, Silver Rallies as Investors Flee Weakening Dollar

Gold advanced to a record, set for the best run since November 2006 after rising for nine days, as investors sought to protect their wealth against a weaker dollar, faster inflation and geopolitical tension in the Middle East. Silver climbed to a 31-year high.

Bullion for immediate delivery rose as much as 0.5 percent to $1,514.72 per ounce and traded at $1,511.65 at 10:39 a.m. in Singapore. The June-delivery contract in New York advanced as much as 0.7 percent to $1,514.50 per ounce, also a record.

“We do look at quite quick appreciation of gold in the coming months and it’s really driven by dollar weakness,” Dominic Schnider, director for wealth management research at UBS AG, said in a Bloomberg Television interview today.

Gold has climbed 5.6 percent this month as the dollar fell 2.2 percent against a six-currency basket. The dollar dropped near a 16-month low against the euro on speculation that the Federal Reserve will keep borrowing costs near zero while European Central Bank officials signal further rate increases.

Consumer prices are accelerating from China to India as oil surged to a two-and-a-half year high after violence in the Middle East and Africa threatened to disrupt supplies. Assets in gold-backed exchange-traded products expanded 2.1 percent this month, reaching 2,069.87 metric tons on April 22, according to data compiled by Bloomberg from 10 providers.

Silver Climbs

Silver gained as much as 1.4 percent to $47.8925 an ounce, the highest price since March 1980. It’s also up for a ninth day, the longest winning run since an 11-day increase in March 2008.

The ratio of gold to silver dropped to the lowest level since October 1980 as investors sought a store of value in the metal that may also benefit from economic growth. One ounce of gold bought as few as 31.5777 ounces of silver today.

“Silver in the long run really will end up in a bloodbath, but in the short term the market loves it,” said Schnider. “As long as the economy is doing well, you’re going to see higher prices and dollar weakness.”

Platinum gained for a fourth day, by as much as 0.5 percent to $1,831.50 per ounce, the highest price since March 7, and palladium rose as much as 0.9 percent to $774.50 an ounce.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

http://www.bloomberg.com/news/2011-04-25/gold-climbs-to-record-silver-rallies-as-investors-flee-weakening-dollar.html

Aussie Rides Commodity Boom as Credit Suisse Joins RBS in Seeing 4% Gains

From coal to iron ore, soaring commodity prices are paving the way for the Australian dollar to rebound from its worst first quarter in five years.

Royal Bank of Scotland Group Plc says the currency may jump about 4 percent against the dollar by the end of September after the Standard & Poor’s GSCI Index of 24 commodities climbed three-straight quarters. Credit Suisse Group AG predicts it will rise that amount over a year. Futures traders boosted bets this month on a stronger currency to the highest since at least 1993.

The so-called Aussie may strengthen because the central bank will increase interest rates, already the highest in the developed world, while the Federal Reserve keeps borrowing costs at record lows, according to surveys of economists by Bloomberg. Demand from China for Australian raw materials, which account for about 60 percent of exports, may be augmented by Japan rebuilding from last month’s earthquake and tsunami that caused an estimated $300 billion in damage.

“The commodity story that is driving Australia, not just now but over the last few years, will continue,” said Ray Farris, chief strategist for Asia-Pacific fixed income and global head of foreign-exchange strategy at Credit Suisse in Singapore. “The fundamental picture for the Aussie over the next 12 months is very, very good.”

Analyst Estimates

Australia’s dollar will probably strengthen compared with the U.S. currency, reaching $1.10 in a year, from $1.0568 last week, Farris said. It fell 1.8 percent in the three months through March, according to Bloomberg Correlation-Weighted Indexes. That was the worst start to a year since 2006, when it declined 2.3 percent.

Analysts are boosting estimates for the Aussie even as a measure of the Paris-based Organization for Economic Cooperation and Development signals the currency is 38 percent too strong versus the dollar. It has climbed 50 percent since 2008, reaching $1.0584 on April 8, the highest level since it was allowed to trade freely in 1983.

Strategists surveyed by Bloomberg News have lifted fourth- quarter forecasts against the U.S. dollar 9.9 percent since September to the most on record. The Aussie surged 14 percent last year to $1.0233. It was at $1.0539 as of 11:17 a.m. in London today.

Aussie Vulnerable

Money is flooding into Australia because the nation produces about 20 percent of the world’s iron ore, 7 percent of its liquefied natural gas and 6 percent of its gold. Ore climbed 4.3 percent in the past year, while coal-export prices from Newcastle, Australia, a benchmark for Asia, jumped 25 percent in the period, according to Petersfield, England-based IHS McCloskey. Gold advanced to a record for a third day today, trading at $1,488.68 an ounce.

That makes the Australian dollar vulnerable to a drop in raw-material prices.

Goldman Sachs Group Inc. ended a recommendation that investors buy a basket of commodities including crude oil, copper, cotton and platinum, saying on April 11 that the risk of a price decline outweighed the potential for more gains. The basket rose 25 percent since the trade was started on Dec. 1, the New York-based bank said.

“The momentum is in favor of the Aussie but I think we should also recognize that the air is getting pretty thin up here,” said Daragh Maher, deputy head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in London. “You’ve got a market that’s pretty much positioned one way, so people will get increasingly nervous about the risks that you get a substantial retracement.”

‘Crowded Trade’

Wagers by futures traders on additional gains have boosted the chances of a decline, according to Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto.

The difference in the number of wagers by hedge funds and other large speculators on an advance compared with those on a drop was 90,651 on April 12, compared with 90,938 on April 5, the most since Bloomberg began tracking the data.

“When the market becomes too heavily positioned one way things can unwind very quickly,” said Osborne, who forecasts the currency will end the year at 96 U.S. cents.

While Treasurer Wayne Swan said on April 12 the Aussie’s strength was a burden for parts of the economy, the currency is becoming a favorite for investors because of the nation’s relatively high interest rates and prospects for economic growth.

Commodity Prices

Gross domestic product will increase by 2.6 percent this year and 3.95 percent in 2012, according to the median of eight economist forecasts compiled by Bloomberg. That compares with 3 percent and 3.1 percent in the U.S., and 1.7 percent this year and next in the euro region, separate surveys show.

The S&P GSCI jumped 18 percent this year, adding to an 81 percent surge in the past two years. Australia’s benchmark stock index, the S&P/ASX 200 Index, increased 2.3 percent this year, compared with a 0.7 percent gain in the Stoxx Europe 600 Index.

“We are seeing commodity prices rise once again, so that should also support the Aussie dollar,” said Bilal Hafeez, London-based head of foreign-exchange strategy at Deutsche Bank AG, who forecast it may rise to $1.08.

Australia’s key rate of 4.75 percent compares with a range of zero to 0.1 percent in Japan and zero to 0.25 percent in the U.S. The Reserve Bank of Australia raised borrowing costs seven times since October 2009. Benchmark rates exceed those in the euro area by 3.5 percentage points and 4.25 percentage points for Britain.

Relative Rates

The premium investors get from holding Australian two-year government debt instead of Treasuries was 4.33 percentage points on April 15, almost double the average since 2000.

While the European Central Bank raised its key rate this month by a quarter-percentage-point to 1.25 percent, the difference with Australia will remain unchanged this year, surveys shows. The Fed won’t raise borrowing costs until the first quarter, according to the median of 67 economist forecasts compiled by Bloomberg.

Aussie gains may also be fueled by commodity customers boosting orders. China accounts for 25 percent of Australia’s exports, with Asia taking more than 70 percent, RBA Governor Glenn Stevens said in a speech in New York on April 13. Asia bought about 50 percent of Australian exports as recently as 2003, he said.

Japan Reconstruction

China increased banks’ reserve requirements yesterday for the fourth time this year after inflation accelerated to 5.4 percent in March, more than the 2011 target of 4 percent set by Premier Wen Jiabao. Central bank Governor Zhou Xiaochuan said two days ago that monetary tightening will continue for “some time” and he sees no “absolute” limit on how high reserve requirements can go.

Japan, the second-biggest buyer of the South Pacific nation’s exports, increased purchases 14 percent last year to A$43.6 billion ($46 billion). The country accounted for about 19 percent of Australia’s overseas sales in 2010, according to Australian Bureau of Statistics data.

Copper, iron ore and beef are likely to benefit from rising demand in Japan as the country recovers from its biggest earthquake on record, analysts at National Australia Bank Ltd. and Rabobank Australia Ltd. said this month. The 9-magnitude earthquake and deadly tsunami on March 11 left more than 28,000 dead or missing and caused radiation leaks at a nuclear plant.

Greg Gibbs, a strategist at Royal Bank of Scotland in Sydney, expects the currency to peak at $1.10 by the end of the third quarter. As a result, the Aussie will be buoyed by “enormous investment plans for the next several years related to ongoing confidence in the commodities market.” www.bloomberg.com