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Yen Weakens, Metals Advance on Japan Stimulus, Production Data

Published: November 30, 2012 | 8:37 am
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The yen weakened against all of its major peers, metals rose and bond risk in Asia declined as Japan approved additional stimulus and the nation’s factory production unexpectedly gained. European stocks were little changed.
The yen fell 0.9 percent to 107.50 per euro at 8:02 a.m. in London after dropping to a seven-month low of 107.63. Copper advanced 0.6 percent and gold increased 0.2 percent. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan is set to close at its lowest since July 4, 2011. The Stoxx Europe 600 Index was little changed after rallying to the highest level in 17 months yesterday. Futures on the Standard & Poor’s 500 Index dropped 0.1 percent.

Japan’s cabinet approved 880 billion yen ($10.7 billion) of stimulus ahead of next month’s elections and data showed output rose the most since December. In the U.S., Treasury Secretary Timothy Geithner offered Republican House Speaker John Boehner a proposal to avert the so-called fiscal cliff. Confidence in China’s economy is at the highest in more than a year, while Germany is seen sliding into recession, according to Bloomberg investor polls.
“Japan’s economy will probably return to growth in the first quarter of 2013,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “The U.S. economy is looking solid and China’s economy may have a clear rebound this quarter, boding well for Japanese exports.”
The Stoxx Europe 600 Index is headed for its sixth monthly advance. Even as European leaders laud their latest fix for Greece’s debt woes, 53 percent of 862 respondents in the latest Bloomberg Global Poll said they think Germany, the region’s largest economy, will enter a recession for the first time in more than three years.

Equity Funds

The Shanghai Composite Index gained 0.9 percent, trimming its biggest monthly loss since July. A quarterly global poll of investors, analysts and traders who are Bloomberg subscribers showed 72 percent of respondents see the Chinese economy improving or remaining stable, up from September’s 38 percent, amid optimism that the new leadership headed by Xi Jinping will be better for the financial climate.
Equity funds took in $14.9 billion in the week to Nov. 28, compared with $5.1 billion lured into all bond funds, Citigroup Inc. analysts Markus Rosgen and Yue Hin Pong wrote in a report today. This is the first time in 10 weeks equity inflows beat bonds, the report said.
Japan’s Nikkei (NKY) 225 Stock Average gained 0.5 percent ahead of next month’s elections, capping the biggest monthly increase since February. Shinzo Abe, leader of Japan’s opposition Liberal Democratic Party, yesterday reiterated his call for the Bank of Japan (8301) to pump unlimited cash into the financial system until inflation reaches 2 percent.

Yen Weakens

The yen declined 0.6 percent to 82.60 per dollar. Japan’s consumer prices excluding fresh food were unchanged in October from a year earlier after a 0.1 percent decline in September, the statistics bureau said. The BOJ has an annual inflation target of 1 percent. Industrial production in October increased 1.8 percent from the previous month, when it dropped 4.1 percent.
The dollar slumped to a more than one-month low against the euro as Democrats and Republicans wrangled over the budget. Geithner’s plan would trade $1.6 trillion in tax increases for $400 billion in unspecified entitlement program cuts, a Republican aide said. The greenback lost 0.3 percent to $1.3012 per euro after touching $1.3028, the lowest since Oct. 23.
“Abe’s remarks are pulling down the yen,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Markets are completely driven by what Republicans and Democrats say over the fiscal cliff.”

Indian Rupee

The Indian rupee gained 0.6 percent to 54.50 per dollar and government bonds rallied as the central bank said it will buy more of the nation’s bonds to support growth. The 10-year yield fell four basis points to 8.17 percent after the Reserve Bank of India said in statement yesterday that it will offer to buy as much as 120 billion rupees ($2.2 billion) of securities at an auction on Dec. 4.
India’s economy expanded 5.3 percent in the three months through September, the Central Statistical Office said today, matching the median in a Bloomberg survey. That also matched the pace in the first quarter of 2012, which was the slowest since the three months through March 2009.
The cost of insuring Asia-Pacific corporate and sovereign bonds from non-payment fell, according to traders of credit- default swaps and data provider CMA. The Markit iTraxx Asia index decreased one basis point to 110 basis points, Royal Bank of Scotland Group Plc prices show.
Gold for immediate delivery climbed to $1,729.05 an ounce, rising for a second day. Palladium increased 0.4 percent to $687.50 an ounce. Copper in London rose to $7,950 a metric ton, and nickel added 1.4 percent to $17,240 a ton.
Commodities as measured by the S&P GSCI Index slipped 0.2 percent, led by declines in grains. Wheat fell 1 percent in Chicago to $8.77 a bushel as U.S. export sales in the week through Nov. 22 slumped 56 percent from a week earlier, the U.S. Department of Agriculture said. The U.S. is the world’s biggest wheat exporter. Corn slid 0.4 percent to $7.5575 a bushel as USDA data showed demand by producers of grain-based fuel, animal feed and food ebbed.

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