U.K. Recovery Seen at Risk as Rebalancing Eludes Economy

Britain’s consumer and housing-driven recovery, the fastest among Group-of-Seven nations, risks losing steam unless export growth picks up, economists said.

While the economy grew the fastest in more than two years in the three months through September, the expansion was led by consumer spending, construction and stock building. Net trade knocked 0.9 percentage point off GDP, the most since the second quarter of 2011.

Bank of England Governor Mark Carney this week extolled the strength of the economy’s revival, while acknowledging that weak growth in the euro area may weigh on the export outlook and limit rebalancing of the economy. Part of the domestic demand is linked to a revival in the housing market, which has fueled concerns of a brewing bubble. Carney will address those risks at a press conference in London today.

“The consumer is a big part of the economy, so it’s always going to be an important component of growth but it shouldn’t be the sole component,” said Carl Astorri, senior economic adviser to the EY ITEM Club. “To get the stronger recovery that we’re forecasting for next year does rely on it broadening out.”

The U.K. economy grew 0.8 percent in the last quarter, the Office for National Statistics said yesterday. Investment in private-sector dwellings climbed 5.9 percent, the most in two years. Consumer spending increased for an eighth consecutive quarter. Exports, which account for about one third of the economy, fell 2.4 percent, the most in more than two years.

(Source: Bloomberg)

Most Asian Stocks Fall as U.S. Consumer Confidence Drops

Most Asian stocks fell, dragging the regional benchmark index lower for a second day, after U.S. consumer confidence unexpectedly dropped this month.

Industrial Bank of Korea sank 4.2 percent as the South Korea government sells 13.2 million of shares in the lender. BHP Billiton Ltd. lost 1.2 percent in Sydney after copper prices fell for the first time in more than a week. Rakuten Inc. surged 9.6 percent after the website operator said it will increase its dividend following a plan to move its listing to the First Section of the Tokyo Stock Exchange.

The MSCI Asia Pacific Index declined 0.1 percent to 141.53 as of 9:39 a.m. in Hong Kong as five shares fell for every four that rose. The gauge gained 9.5 percent this year through yesterday as central banks around the world pledged to leave interest rates near record lows for a prolonged period.

The MSCI Asia Pacific Index yesterday traded at 13.9 times estimated earnings, close to the multiple of 14 reached on Nov. 18, which was the highest since May, according to data compiled by Bloomberg. That compares to a current multiple of 16.3 on the S&P 500 and 15.1 for the Stoxx Europe 600 Index.

(Source: bloomberg)

China’s Stock-Index Futures Decline as Sinopec May Retreat

 China’s stock-index futures fell after the benchmark index retreated for a third day.

Futures on the CSI 300 Index  expiring in December lost 0.2 percent to 2,390.20 as of 9:18 a.m. local time. China Petroleum & Chemical Corp. , known as Sinopec, may decline after seven people from the refiner were detained after a pipeline explosion. Guangxi-based stocks including Guangxi Wuzhou Zhongheng Group Co.  and Guangxi Fenglin Wood Industry Group Co. may move after the China Securities Journal said the province’s Dongxing city may be allowed to set up a free-trade zone.

The Shanghai Composite Index  dropped 0.5 percent to 2,186.12 yesterday. The CSI 300 Index slid 0.4 percent to 2,388.63. The Hang Seng China Enterprises Index  retreated 0.5 percent. The Bloomberg China-US Equity Index fell 1.4 percent.

The Shanghai Composite is down 3.7 percent this year and trades at 8.6 times projected profit for the next 12 months, compared with the seven-year average of 15.3, according to data compiled by Bloomberg.

Sinopec, Asia’s biggest oil refiner, may be active. Seven people from the company and two local officials were detained by police after the Nov. 22 explosion in Qingdao, the city’s Huangdao district government said in a posting on its official microblog yesterday. The explosion at the pipeline operated by Sinopec killed 55 people.

Sinopec won’t see any major negative earnings per-share impact from the incident, according to Daiwa Securities Group Inc. While the utilisation rate of Sinopec’s refinery may decline in the near to medium term, the company should have enough refined products stored in its various tank farms to ensure that sales will not be disrupted, Daiwa Securities analysts Adrian Loh and Benjamin Lim wrote in a note dated yesterday. They have a hold rating on the company’s Hong Kong-traded shares.

(Source: Bloomberg)

Euro Rises as German Confidence Increases; Aussie Dollar Weakens

The euro rose to the highest in more than four years versus the yen after a German report showed Europe’s economic recovery may be gaining momentum, easing speculation the central bank will cut interest rates further.

Australia’s dollar fell against all of its 16 most-traded peers amid speculation the nation’s central bank will take steps to curb the currency’s strength. The yen reached a four-month low versus the dollar after Bank of Japan Governor Haruhiko Kuroda said he will do his utmost to restrict an increase in long-term yields. Futures traders increased their bets that the yen will decline against the dollar to the most in six years.

The euro gained 0.7 percent to 137.28 yen at 5 p.m. New York time after touching 137.25, the highest level since October 2009. The shared currency rose 0.6 percent to $1.3558 and advanced for a second week. The dollar added 0.1 percent to 101.27 yen after reaching 101.35 yen, the strongest since July 8.

The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major counterparts, fell 0.2 percent to 1,018.56 to pare its weekly gain to 0.2 percent.

(Source: Bloomberg)

Indonesia Pain Threshold Looms on Rate Increases: Southeast Asia

Indonesia’s most aggressive rate-tightening in eight years has barely dented a current-account deficit, prompting calls for more increases and other measures before the Federal Reserve cuts stimulus.

Bank Indonesia has raised borrowing costs by 1.75 percentage points to 7.5 percent since mid-June, the quickest since 2005. Following data last week showing the country recorded its second-highest current-account shortfall on record in the three months through September, JPMorgan Chase & Co. and Standard Chartered Plc now see a further 50 basis points of increases in the first half of next year.

Foreign funds pulled $3.8 billion from Indonesian stocks and local-currency bonds in June after the Fed said it could cut stimulus, and a lack of progress on improving the current account before the U.S. does eventually taper leaves the country vulnerable to another sudden outflow. The government said this week it will raise import taxes for consumer goods, showing policy makers are looking for other bullets to slay the deficit.

The rate rise on Nov. 12 came after a pause in October and was forecast by just one of 25 analysts surveyed by Bloomberg. A day later, the government reported a current-account deficit of $8.4 billion in the third quarter, compared with a record $9.9 billion in the previous three months.

(Source: Bloomberg)