(Diskusi) Kemanakah arah suku bunga The Fed?

Japan Stocks Fall on U.S. Inflation Concern; Sony, Canon Drop April 12 (Bloomberg) – Japanese stocks fell after a jump in commodity prices increased concern that the U.S. Federal Reserve will keep raising borrowing costs in the world''s biggest economy. Sony Corp. and Canon Inc. paced declines. Crude oil rose to a seven-month high yesterday on concern a confrontation over Iran''s nuclear program may disrupt shipments. ``There''s greater concern now about further U.S. interest rate increases and that will damp the overall Japanese market,'''' said Yutaka Miura, an equities manager at Shinko Securities Co. in Tokyo. ``Hi-tech and autos may fall on concern about reduced overseas demand.'''' The Nikkei 225 Stock Average fell 174.7, or 1 percent, to 17,243.43 at 10:01 a.m. in Tokyo. The broader Topix index dropped 15.54, or 0.9 percent, to 1754.64. Exporters declined on concern higher borrowing and fuel costs will leave U.S. consumers with less to spend and curb corporate investment. Canon, the world''s biggest maker of digital cameras, fell 80 yen, or 1 percent, to 8230. Sony, the world''s second-biggest consumer electronics maker, fell 110 yen, or 2 percent, to 5460. Advantest Corp., the world''s-biggest maker of memory-chip testing equipment, fell for a third day, declining 350 yen, or 2.4 percent, to 14,230 yen. Interest-rate futures show traders are certain the U.S. Federal Reserve will raise the overnight lending rate to 5 percent at its May 10 meeting. The odds of an increase to 5.25 percent at the following meeting in June have climbed to 52 percent yesterday, from no chance about two weeks ago. Investors More Optimistic Declines were limited after a Merrill Lynch & Co. survey yesterday said global investors became more optimistic about stocks in Japan this month amid prospects for profit growth in the world''s second- biggest economy. ``Investors are more confident about Japan,'''' David Bowers, chief global strategist at Merrill, said in London yesterday. Japanese consumer prices are likely to keep rising as more than seven years of deflation eases, Bank of Japan Governor Toshihiko Fukui said yesterday. Japan''s core consumer prices, which exclude fresh food, rose 0.5 percent in January and February following back-to-back increases in November and December. Japan''s central bank hasn''t set a timetable for when interest rates will increase, Fukui added. The Cabinet Office is expected to maintain its view the Japanese economy is recovering in its monthly economic report for April due for release on April 14, the Nihon Keizai newspaper said. Exports are expected to be revised up for the first time in three months on the strength of shipments to the U.S., the paper said. The government report will indicate prices are improving though they remain in a deflationary condition, the same assessment as in March''s report, the Nihon Keizai said. Japan''s bank lending rose for the second month in March, gaining 0.3 percent in March from the same month a year earlier, a central bank report in Tokyo today showed. Lending adjusted for factors including currency fluctuations, securitizations and bad loan write-offs advanced 1.5 percent. Total lending by banks and credit institutions climbed 0.4 percent. Last Updated: April 11, 2006 21:05 EDT
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Jubak''s Journal 5/23/2006 12:00 AM ET How Japan sank the U.S. market Trying to make sense of the global stock market sell-off that began on May 13? Remember that old Wall Street saying, “Don''t fight the Bank of Japan.” If you want to know what has rattled stock markets around the world and when you can expect it to end, study the Bank of Japan. What''s that? You thought the saying went “Don''t fight the Fed”? How yesterday. Right now the Bank of Japan, not the U.S. Federal Reserve, is the most important central bank in the world. It''s the Bank of Japan that''s calling the tune for the world''s equity markets. Slip sliding away For the last week, you''ve heard all the talking heads focus on the U.S. Federal Reserve in their efforts to explain the sell-off that began on May 13. The market decline, which reached a temporary crescendo with May 17''s 214-point tumble on the Dow Jones Industrial Average ($INDU), is a result of worries that U.S. inflation is in danger of spinning out of control and that the Federal Reserve will have to raise interest rates at its June meeting and beyond. Core inflation – that is inflation without volatile food and energy prices – hit an annual 2.3% in the April Consumer Price Index numbers reported on May 17. That''s perilously close to the 2.5% inflation rate that many think is the top of the range that the Federal Reserve will tolerate. After those numbers came out, the odds of a June 29 interest-rate hike, as indicated by prices in the Fed funds futures market, climbed to 50% from 35%. That''s not a huge shift – to 50/50 from a 35% chance. And you''d think while the stock market wouldn''t welcome another interest rate increase – higher interest rates, which increase the attraction of alternative investments such as bonds, are never great for stocks – it would have gotten used to them by now. A rate increase in June would be the 17th quarter-point hike since the Federal Reserve began raising short-term interest rates in June 2004. The stock market has proven itself perfectly capable of rallying while the Federal Reserve raises interest rates. Before this recent sell-off, the Dow was up 12% since the Fed began raising interest rates from 1% on June 30, 2004. It certainly wasn''t enough to send the U.S. bond market into a swoon. Bonds actually rallied on some days when stocks were sinking. On May 18, for example, when the Dow Jones industrials fell 77 points and the Nasdaq Composite ($COMPX) fell to its lowest level since November 2005, the 10-year Treasury note actually climbed in price by 0.75%. The yield on the 10-year note, which moves in the opposite direction to prices, at 5.07% on May 18 was very little changed from where it stood at 5.12% on May 10, the day the Fed announced its latest hike in interest rates. Gold also behaved oddly. The metal is the classic inflation hedge, and yet gold sold off on these inflation worries – if that''s what they were. The metal, which had been selling at $700 an ounce on May 10, closed at $657.50 an ounce on May 19. That''s a drop of 6% when gold should have been climbing – if the financial markets were focused on the U.S. Federal Reserve and heightened fears of inflation. And finally there was the strange behavior of the U.S. dollar. If worries centered on the U.S. Federal Reserve and concern that the Fed and its new Chairman Ben Bernanke had lost control of U.S. inflation, you''d expect the dollar to sink against other global trading currencies as investors sold dollars to find safer havens in euros and yen. But instead, the U.S. dollar has actually stayed steady against these currencies. The U.S. dollar sold for 110.6 yen on May 10 and for 110.7 yen on May 18. Not the Fed but the bank This is where the Bank of Japan comes in. You can''t understand why some asset prices have tumbled and others have stayed rock solid if you don''t know what the Bank of Japan has been doing over the last few months. As good as its word, the Bank of Japan has been taking huge amounts of liquidity out of the global capital markets. In an effort to re-inflate the Japanese economy and end the years of deflation that had kept the country mired in a no-growth swamp, the Bank of Japan had pumped billions into the country''s banking system. Now that the economy is finally growing again and now that prices aren''t sinking any longer, the Bank of Japan has given two cheers to the return of inflation and has started to remove some of that cash from the financial markets. In the last two months, the bank has taken almost 16 trillion yen, or about $140 billion, in cash deposits out of the country''s banks. The country''s money supply has fallen by almost 10%. The Bank of Japan isn''t finished pumping out the liquidity that it had pumped in. That should take a few more months. And when it is finished, the Bank of Japan is expected to start raising short-term interest rates. No more cheap This sign of the return of economic and financial health to Japan is, however, bad news to the speculators who have used cheap Japanese cash to make big profits by buying everything from Icelandic bonds to Indian stocks. The momentum in many of the world''s riskier markets was a result of ever increasing floods of cash – borrowed at 1% in Japan and multiplied by leverage as speculators turned $1 of capital into $3 or more of borrowed money. For example, India''s Mumbai stock market, up 21% in 2006 and 70% over the last 12 months, has seen an inflow of $10 billion in overseas money. That wouldn''t be enough to move a market like the $14 trillion (market cap) New York Stock Exchange, but it''s a bigger deal on the $742 billion Mumbai market. Although $10 billion isn''t enough to move a market by itself – that took improving fundamentals in the Indian economy – it is enough to increase upside momentum once the ball is rolling. (The Indian market''s benchmark BSE index plunged 10% Monday before trading was halted for an hour. It ended the day down 4.2%.) New inflows of cash are needed to keep the momentum going, hot money investors know, and it looks like the supply of money flowing into these markets might diminish. The moves to date by the Bank of Japan aren''t enough to radically diminish global liquidity, but they are enough so that the investors who have fed some of the world''s riskier markets understand that the trend has turned. It''s one thing to invest in five-year Indonesia government bonds paying 12.13% when cash is flowing into the Jakarta financial markets, keeping the rupiah strong against the dollar and pushing Indonesian stocks ever higher. It''s something else entirely when it looks like investment flows might be drying up. Speculators aren''t about to wait until they actually see signs that cash flows are dwindling. They take profits at the first sign that the trend may be changing. That''s why the Jakarta market can drop 5.3% in a day, as it did on May 18. What we''ve witnessed since May 13 is a global flight out of more leveraged and more speculative investments. Speculators attracted by the momentum of the gold, copper, and silver markets have sold – and are still selling – rushing to get out before other speculators could liquidate their positions. Emerging equity markets have sold off for the same reason: India''s Bombay Sensex index dropped 6.8% on the same day as the Jakarta market fell. High-yielding bond markets have collapsed as prices dropped, sending yields soaring and currencies skidding. The central bank of Iceland has raised interest rates to 12.25% in an effort to prevent the further fall of the krona as hot money flees the country. Risky investments look riskier What the Bank of Japan has done is to set off a global re-setting of investors'' risk tolerance. With Japanese interest rates so low and Japanese cash so abundant, speculators, traders, and investors have been more and more willing in the last few years to take on risk at increasingly low premiums. It isn''t amazing that anyone would buy Indonesian bonds. It''s amazing that they would buy them when the yield was only 12%. And given what we know about the direction of U.S. interest rates, the likely course of U.S. inflation and the size of the U.S. trade deficit, it was amazing that so many investors flocked to buy 10-year U.S. Treasury notes that they drove the yield in July 2005 to less 4%. On July 10, the 10-year Treasury yielded 3.97%. By locking up your money for eight fewer years in a 2-year note, you could get 3.62%. That''s 0.35 percentage points in yield for taking on eight more years of risk. Risk tolerance doesn''t get reset in a day. The Bank of Japan is only halfway through removing liquidity from its domestic and global markets. Interest-rate hikes are likely to follow that with the first increases coming in the second half of 2006. At the same time, the European Central Bank is raising interest rates. All excess liquidity has by no means been removed from the global financial markets. But the speculators know that money is gradually getting more expensive. Rallies can count on less hot money to fuel their last stages. Getting out earlier in rallies starts to seem wiser. Some risks are just not worth taking. The correction that began on May 13 is part of the process of resetting risk tolerance and recalibrating risk premiums. It''s not likely to last terribly long. Frankly I think the turn in this correction isn''t that far off, and it''s probably time to look for a buy or two. And it''s likely to be followed at some distance by another bout of speculative momentum, which will be followed by another correction. Markets move from one equilibrium point to another by a messy process of over-shooting on each extreme of the swing until they find a new center. That''s where I think we are now, and that''s what you can expect to see for the rest of 2006 as the Bank of Japan continues to force a recalibration of the risk tolerance of global investors. The volatility that results can be scary, but it doesn''t mark the end of the world. It''s rather just the way that, in the short term, the financial markets adjust to new fundamental conditions, such as a change in global liquidity.
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Fed funds sees a pause in rate hikes as more likely By Tomi Kilgore Last Update: 8:53 AM ET Jun 2, 2006 NEW YORK (MarketWatch) – The fed funds futures market now sees it as more likely that the Federal Reserve will not raise interest rates in June following the release weaker-than-expected jobs growth in May. The June contract was last up 0.06 at 94.88, which implies a fed funds rate of 5.12%. That implies a 48% chance that the Fed will raise its target for overnight rates to 5.25% following the end of its policy setting meeting on June 30, vs. a 72% chance late Thursday. The U.S. Labor Department said nonfarm payrolls expanded by a seasonally adjusted 75,000 in May, well below the 174,000 expected by economists surveyed by MarketWatch. Meanwhile, the unemployment rate fell to 4.6% from 4.7%, while economists expected it to remain unchanged. http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B53B99238%2DBCAF%2D452B%2DB811%2D7F9A229C2750%7D&dist=newsfinder&siteid=google
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Apa bener? Don''t believe the ‘'tough guy’' Fed The Federal Reserve is making lots of noise about getting tough on inflation. Fact is, the governors desperately want to stop raising rates. I have long maintained that the Fed does not care about inflation, because it believes in its own infallibility. I also believe that the Fed will have no trouble explaining away rising prices. The Fed has done so throughout its entire existence (excluding Paul Volcker, of course). And, since Easy Al Greenspan''s tenure began in 1987, the rationalizing has been operating in overdrive. Hawk-talk and manliness Last week, however, the Fed appeared to switch into vigilante mode. New chief Ben Bernanke''s hawkish-sounding comments on June 5 received credit for all the selling around the globe. The next day, St. Louis Fed Chief William Poole reinforced that tone when he suggested that a slowing economy alone might not bring inflation down. Which brings me to this question: Given that attitude, why is it only now that the Fed has suddenly awoken to the reality of inflation – considering that inflation has been raging for the better part of a year and has been too high for a couple of years? My answer: The Fed''s “manliness” (or credibility) has been challenged, and too many people have been laughing at it. Fed members don''t like that, but they desperately want to stop hiking rates. Thus, in an attempt to win back confidence, the Fed has to talk a tough game … to be able to do what it really wants to do, which is pause. If you want to back off, talk is cheap – but necessary. So, I''m not at all surprised to hear the rhetoric ratchet up. Of red stocks and red herrings Be that as it may, the markets tend to take these guys more seriously than I do. Thus, Bennie is getting blamed for the selling in the stock market. A week ago Friday, however, those same folks didn''t seem to be pointing a finger at him when the anemic May employment number failed to inspire a Fed-won''t-be-tough rally. Stocks were also down hard before he flapped his jaws the following Monday. The implication being: Stocks are just plain weak right now, with Bernanke''s chatter only being the excuse for the selling. By the time we get to the Federal Open Market Committee meeting at month''s end, I expect that the data will be weaker still, allowing the Fed to rationalize whatever level of inflation exists, especially if Bernanke talks a good game in front of it (which he has been doing). And, if perchance he sneaks in one more rate hike, he''ll make it clear that the Fed is done for a while. So, either way, I don''t think it''s much of a big deal. Piecing together a pathway As for how and when the stock market capitalizes on the Fed-is-done idea, the upside that it tried to muster (until last Monday) was pretty unimpressive. What happens when the Fed actually is done will be a function of how low stocks have traded beforehand. Maybe the bulls will be able to put together a better (albeit seriously failing) bounce. But except for the near-term squiggles, I firmly believe that the resumption of the bear market is under way. The path of least resistance now, in my opinion, is going to be down, and future surprises are all likely to be negative as the bear market picks up speed. Biotech update Finally, it''s not my intention to make this column the Nastech Chronicles, but news occurs as it occurs. Thus, as a follow-up to last week''s discussion on Nastech Pharmaceutical (NSTK, news, msgs), I would just offer a brief update on what has occurred since then. (More information can be found directly at the Nastech Web site.) On Tuesday, Nastech announced a supply agreement with Procter & Gamble (PG, news, msgs). Though expected, nothing in this industry can be taken for granted. (I purchased more Nastech stock on Tuesday and now have a rather meaningful position.) The following day, Nastech filed for a Phase I trial for PYY, a potential treatment for obesity. This trial, which should not last long, will be to determine the dosing regimen to be used in Phase II trials, which I would expect to begin sometime later this summer. Not that this announcement is good news per se, but at least now the process has begun to move forward. And, as this trial will now be conducted by Nastech, not Merck (MRK, news, msgs), the process will be fairly transparent in terms of information flow. So, folks will be able to keep themselves abreast of developments on that subject. Most importantly, on Thursday, Nastech received a $7 million milestone payment from P&G, and it will be receiving two more payments of roughly the same size over the balance of 2006. Phase III trials should be under way in the not-too-distant future. Also on the subject of PYY and Merck, there was a lengthy page-one article in Wednesday''s Wall Street Journal titled “Research Chief Stirs Up Merck by Seeking Aid from Outsiders.” Based on this article and how events have played out, I can construct a case that in the matter of PYY and Merck, Merck''s agenda should have been questioned rather than Nastech''s credibility. Although no one is likely to raise those doubts (because, after all, Merck is Merck and hardly anyone''s ever heard of Nastech), if PYY is a success, then it will clearly have been an error on Merck''s part – which will have provided a wonderful opportunity for folks to buy Nastech at an attractive price. Bill Fleckenstein is president of Fleckenstein Capital, which manages a hedge fund based in Seattle. He also writes a daily “Market Rap” column on his Fleckenstein Capital Web site. His investment positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Bill Fleckenstein''s columns are his own and not necessarily those of CNBC or MSN Money. At the time of publication, Fleckenstein was long Nastech. http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/DontBelievetheToughGuyFed.aspx
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