Group of Seven agrees joint intervention in currency markets
By V. Phani Kumar, MarketWatch , Shri Navaratnam and Leslie Shaffer
HONG KONG (MarketWatch) — Stocks in Tokyo led most Asian markets higher Friday after some of the world’s largest economies agreed to put their weight behind Japan to keep the yen from rising as the country struggled to cope with the aftermath of last week’s earthquake.
Indian stocks declined on worries about further interest rate increases and political concerns after a leaked U.S. diplomatic cable suggested the ruling coalition’s Congress Party offered bribes to win a crucial vote in Parliament.
The Nikkei Stock Average (JP:NI225 9,207, +244.08, +2.72%) jumped 2.7% to 9,206.75 in Tokyo, but still ended the week with losses of more than 10%.
The day’s rally came after the Group of Seven industrialized nations — of which Japan is a member — said they will make concerted efforts to intervene in the foreign-exchange markets to prevent “excess volatility and disorderly movements.” The agreement is the first time the G-7 has decided to interfere in the currency markets in more than a decade.
“What G-7 is telling us is that they will simply not tolerate a rapid strengthening in the yen,” said Sean Callow, strategist at Westpac bank.
“This is a powerful statement from the G-7… Whether this is viable looking ahead will partially depend on the size of intervention operations and the commitment of international partners to sustain them,” analysts at Nomura Securities wrote in a note.
The G-7 news and reported intervention by Japanese authorities bolstered the U.S. dollar — which hit an all-time low of 76.25 yen Thursday — to ¥81.42 from ¥78.93 late in New York trade. The euro jumped to ¥114.38 from ¥110.58.
Among the big stock movers, Taiheiyo Cement Corp. (THYCY 15.85, +1.35, +9.31%) (JP:5233 136.00, +18.00, +15.25%) climbed 15.3%, JFE Holdings Inc. (JFEEF 24.00, -4.85, -16.81%) (JP:5411 2,248, +78.00, +3.59%) added 3.6%, Toshiba Corp. (JP:6502 360.00, +25.00, +7.46%) (TOSYY 26.65, +1.75, +7.03%) rose 7.5% and Fast Retailing Co. (JP:9983 10,240, +620.00, +6.44%) (FRCOY 12.06, +0.18, +1.52%) jumped 6.4%.
Sony Corp. (SNE 31.40, +1.52, +5.09%) (JP:6758 2,519, +4.00, +0.16%) rose 0.2%, underperforming the market after saying six of its Japanese manufacturing plants remain closed and that it is investigating whether a disruption in component supply will impact its production.
Still, some traders were circumspect about the Tokyo market’s rise, noting the G-7 action had been anticipated and Japanese officials still have a massive recovery and rebuilding task on hand.
“The problems at the nuclear plant are far from over, and we have a three-day weekend ahead, so it’s hard to keep buying on the weaker yen alone,” said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets. Japanese markets are closed for a public holiday Monday.
Japanese authorities continued to make efforts to control the earthquake damaged Fukushima Daiichi nuclear-power plant amid global fears of a full-blown nuclear disaster. Radiation levels at the plant dropped on Friday, further buoying the Nikkei. Tokyo Electric Power Co. (TKECY 9.31, 0.00, 0.00%) , (JP:9501 948.00, +150.00, +18.80%) which operates the plant, soared 18.8%, paring its weekly loss to 55.3%.
Lead June Japanese government bond futures were up 0.04 at 139.74 points. The yield on the 10-year cash JGB was up one basis point at 1.210%.
Among the region’s other major stocks markets, China’s Shanghai Composite (CN:SHCOMP 2,907, +9.59, +0.33%) added 0.3% to 2,906.89, Hong Kong’s Hang Seng Index (HK:HANGSENG 22,300, +15.80, +0.07%) rose 0.1% to 22,300.23, Australia’s S&P/ASX 200 (AU:XJO 4,626, +71.12, +1.56%) advanced 1.6% to 4,626.40, South Korea’s Kospi gained 1.1% to 1,981.13 and Taiwan’s Taiex climbed 1.4% to 8,394.75. Going the other way, India’s Sensex (XX:SENSEX 17,921, -228.95, -1.26%) fell 0.9% to 17,981.82.
Dow Jones Industrial Average (DJIA 11,775, +161.29, +1.39%) futures were up 84 points in screen trade.
Many energy stocks soared across the region, including in Tokyo, as crude-oil futures climbed after the United Nations Security Council approved a no-fly zone over Libya and authorized “all necessary measures” to protect civilians in the nation.
Inpex Corp. (JP:1605 580,000, +37,000, +6.81%) (IPXHF 5,750, +524.06, +10.03%) and Japan Petroleum Exploration Co. (JP:1662 3,825, +265.00, +7.44%) (JPTXF 0.00, 0.00, 0.00%) climbed 6.8% and 7.4%, respectively in Tokyo. Elsewhere in the region, Woodside Petroleum Ltd. (AU:WPL 44.41, +1.56, +3.64%) (WOPEY 42.42, +1.86, +4.59%) rose 3.6% in Sydney, and Cairn India (IN:532792 345.10, +0.05, +0.01%) edged up 0.3% in Mumbai trading.
Sydney-listed Origin Energy (AU:ORG 15.40, +0.18, +1.20%) dropped 1.7% after resuming trading following its plan to raise A$2.3 billion ($2.28 billion) via a share issue to reduce debt associated with its A$3.26 billion purchase of electricity assets privatized by the New South Wales state government.
Shares of PetroChina Co. (PTR 135.65, +2.35, +1.76%) (HK:857 10.32, -0.14, -1.34%) (CN:601857 11.62, -0.07, -0.60%) reversed early gains to end 1.3% lower in Hong Kong and 0.6% in Shanghai, on profit-taking a day after it reported higher-than-expected profit growth for 2010.
In Seoul, Posco (PKX 108.66, +3.55, +3.38%) climbed 3.2% on expectations the steelmaker would benefit from quake-induced supply shortages.
Shares in Mumbai declined on political concerns after a leaked U.S. diplomatic cable Thursday suggested India’s ruling Congress party offered bribes to win a crucial vote in Parliament on the U.S.-India nuclear deal in 2008. Expectation that the Reserve Bank of India might raise interest rates further, on top of eight 0.25 percentage-point hikes since the beginning of 2010, to cool inflationary pressures, also weighed the market.
Shares of heavyweight Reliance Industries Ltd. (IN:500325 995.35, -36.10, -3.50%) dropped 3.3%, while Housing Development Finance Corp. (IN:500010 622.65, -14.70, -2.31%) fell 1.9%.
Among other markets, New Zealand’s NZX 50 rose 0.3% and Philippine shares gained 0.6%. In afternoon trading, Singapore’s Straits Times Index slipped 0.1%, Indonesian shares rose 0.3% and Thailand’s SET gained 0.7%.
Spot gold was at $1,414.10 per troy ounce, up $10.10 from its New York settlement Thursday. April Nymex crude-oil futures added $1.85 to $103.27 a barrel.
