March 23, 2010: 11:37 AM ET
NEW YORK (CNNMoney.com) -- Sales of existing homes fell slightly in February, according to an industry report released Tuesday, a sign that the housing market's recovery remains fragile.
The National Association of Realtors reported that home resales fell 0.6% last month to a seasonally adjusted annual rate of 5.02 million units. That's down from a rate of 5.05 million in January. Still, sales are 7% higher than in February 2009, when homes were going into contract at an annual rate of 4.69 million units.
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Last month's figures came in slightly above analyst expectations. Consensus estimates had forecast an annual rate of 5 million units, according to Briefing.com.
"Some closings were simply postponed by winter storms, says Lawrence Yun, NAR's chief economist, "but buyers couldn't get out to look at homes in some areas and that should negatively impact near term contract activity."
Yun added that sales have been higher on a year-over-year basis for eight straight months.
Analysts are hoping sales will pick up as the April 30 deadline for the new homebuyer tax credit closes in.
In November, Congress extended and expanded an $8,000 tax credit for first-time homebuyers, which also allows some repeat buyers to qualify for a $6,500 credit.
"We saw [an increase] in home buying figures in November" when consumers thought the credit was going away, said Carl Riccadonna, senior U.S. economist for Deutsche Bank.
But this time around, Riccadonna doesn't necessarily expect a "rush to the realtors."
0:00 /3:10Homeowners walking away
A separate NAR survey found that first-time homebuyers purchased 42% of homes in February, compared to 40% in January. Investors made up 19% of transactions, compared to 17% in January. Overall buyer traffic improved by 12% in February, NAR said.
Sales of distressed properties, including foreclosures and short sales, made up 35% of sales last month, compared to 38% in January.
Prices and inventory: NAR's report showed that the median price of homes sold in February was $165,100, down 1.8% from February 2009.
Total existing homes on the market jumped 9.5% in February to 3.59 million units, representing an 8.6-month supply of homes unsold, up from a 7.8 month supply in January. NAR's Yun attributed some of the increase in inventory to the number of distressed homes coming to market.
Sales by property type: Sales of single-family homes dipped 1.4% to a seasonally-adjusted annual rate of 4.37 million units in February, compared to 4.43 million units in January.
Existing condos and co-op sales fared better, rising 4.8% to a seasonally adjusted annual rate of 650,000 in February, from 620,000 in January. Sales for existing condos and co-ops are up 30.3% from February 2009.
Sales by region: The Midwest fared the best of all, according to NAR. The region saw existing home sales jump 2.8% in February to an annual rate of 1.11 million units, which was 8.8% higher than last year.
The Northeast also saw slight improvement in existing homes sales, which rose 2.4% to an annual pace of 840,000 for the month. Sales are up 12% from last year.
The Western region of the country fared the worst, with existing home sales falling 4.7% to an annual rate of 1.22 million units in February. Still, sales are up 3.4% from last year.
Existing home sales in the South dipped 1.1% to an annual rate of 1.85 million units in February, but were up 6.9% from a year ago.
Outlook: The housing market this year will struggle to balance a gradual recovery of demand with glut of inventory, according to Deutsche Bank's Carl Riccadonna.
While February's declines are worrisome, he stressed that this time of year is a trickle for homebuying, since the true judge of the health of the market will come during peak homebuying season this spring.
But even then, all eyes will be on jobs, the most definitive sign of economic recovery. "The best housing recovery plan is a strong labor market," said Riccadonna. "That's the rising tide that lifts all boats."
Tuesday, March 23, 2010
Monday, March 22, 2010
Obama Pays More Than Buffett as U.S. Risks AAA Rating
March 22 (Bloomberg) -- The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.
“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”
Moody’s Warning
While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.
“Those economies have been caught in a crisis while they are highly leveraged,” said Pierre Cailleteau, the managing director of sovereign risk at Moody’s in London. “They have to make the required adjustment to stabilize markets without choking off growth.”
Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels, said John Lipsky, first deputy managing director of the International Monetary Fund.
Unprecedented Spending
All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech yesterday at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said.
Obama’s unprecedented spending and the Federal Reserve’s emergency measures to fix the financial system are boosting the economy and cutting the risk of corporate failures. Standard & Poor’s said the default rate will drop to 5 percent by year-end from 10.4 percent in February.
Bonds sold by companies have returned 3.24 percent this year, including reinvested interest, compared with a 1.55 percent gain for Treasuries, Bank of America Merrill Lynch index data show. Returns exceeded government debt by a record 23 percentage points in 2009.
Berkshire Hathaway
Berkshire Hathaway’s 1.4 percent notes due February 2012 yielded 0.89 percent on March 18, 3.5 basis points, or 0.035 percentage point, less than Treasuries, composite prices compiled by Bloomberg show. The Omaha, Nebraska-based company, which is rated Aa2 by Moody’s and AA+ by S&P, has about $157 billion of cash and equivalents and about $52 billion of debt.
P&G, the world’s largest consumer-products maker, saw the yield on its 1.375 percent notes due August 2012 fall to 1.12 percent on March 18, 6 basis points below government debt. The Cincinnati-based company, rated Aa3 by Moody’s and AA- by S&P, makes everything from Tide detergent to Swiffer dusters.
New Brunswick, New Jersey-based Johnson & Johnson’s 5.15 percent securities due August 2012 yielded 1.11 percent on Feb. 17, 3 basis points less than Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The world’s largest health products company is rated AAA by S&P and Moody’s.
Yields on bonds of home-improvement retailer Lowe’s in Mooresville, North Carolina, drugmaker Abbott Laboratories of Abbott Park, Illinois, and Toronto-based Royal Bank of Canada have also been below Treasuries, Trace data show.
‘Avalanche’
“It’s a manifestation of this avalanche, this growth in U.S. Treasury supply which is under way and continues for the foreseeable future, and the comparative scarcity of high-quality credit,” particularly in shorter-maturity debt, said Malvey, whose Lehman team was ranked No. 1 in fixed-income strategy by Institutional Investor magazine from 1998 through 2007.
Last year’s $2.1 trillion in borrowing by the government exceeded the $1.08 trillion issued by investment-grade companies, the biggest gap ever, Bloomberg data show. Malvey said the last time he can recall that a corporate bond yield traded below Treasuries was when he was head of company debt research at Kidder Peabody & Co. in the mid-1980s.
While Treasuries are poised to make money for investors this quarter, they are losing momentum. The securities are down 0.43 percent in March after gaining 0.4 percent last month and 1.58 percent in January, Bank of America Merrill Lynch indexes show.
Benchmark 10-year Treasury yields will reach 4.20 percent by year-end, up from 3.69 percent last week, according to the median forecast of 48 economists in a Bloomberg News survey. Two-year yields will rise to 1.77 percent, from 0.99 percent.
Relative Yields
Investors demand 0.59 percentage point more in yield to own 10-year Treasuries than German bunds of similar maturity, Bloomberg data show. A year ago, debt of Germany, whose deficit is 4.2 percent of its economy, yielded about half a percentage point more than Treasuries.
President Obama’s budget proposal would create bigger deficits every year of the next decade, with the gaps totaling $1.2 trillion more than his administration projects, the nonpartisan Congressional Budget Office said this month. Publicly held debt will zoom to $20.3 trillion, or 90 percent of gross domestic product, by 2020, the CBO forecast.
There’s “a lack of a long-term plan to deal with the federal budget deficit,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “At some point in time the market may lose its patience.”
Balance Sheets
Deutsche Bank and Barclays Plc, two of the 18 primary dealers of U.S. government securities that are obligated to bid at the Treasury’s auctions, say balance sheets of high-rated companies make them more attractive than Treasuries.
Corporate borrowers are reducing debt at a record pace. Companies in the S&P 500 cut their liabilities by $282 billion to $7.1 trillion in the fourth quarter from the prior three months, Bloomberg data show. That represents 28 percent of assets, the least in at least a decade.
Investors are accepting smaller premiums to lend to companies, with yields on bonds rated at least AA falling to within 107 basis points of Treasuries on average, Bank of America Merrill Lynch indexes show. That’s down from the peak of 515 basis points in November 2008, and approaching the record low of 36 in 1997.
Adding to Corporates
New York Life Investment Management is adding to bets the difference in yields will continue to shrink.
“As the balance sheet of corporate America continues to improve and the balance sheet of the government deteriorates, that spread should narrow,” said Thomas Girard, a senior money manager who helps invest $115 billion at the New York-based insurer. “There is some sort of breaking point. The federal government can’t keep expanding its borrowing without having to incur some costs.”
For all the concern about U.S. finances, Treasuries are unlikely to lose their role as the world’s borrowing benchmark, said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. The U.S. has the biggest, most liquid securities markets, said Cheah.
Speculating that Treasuries may lose their privileged position is “not a bet I want to put on,” said Cheah, who worked at Singapore’s central bank. Yields on 10-year notes are about half their average since 1980.
Losing its Status
The last time there was talk of the U.S. losing its status as the world’s benchmark for bonds was in the late 1990s, when the government began amassing budget surpluses in 1998 for the first time in almost three decades. The amount of Treasuries outstanding dropped 8 percent to $3.4 trillion in 2000, the biggest annual decline since 1946.
Treasury supply resumed growing in 2001 after two rounds of tax cuts proposed by President George W. Bush led to deficits. Outstanding Treasury supply rose 53 percent to $4.5 trillion in 2007 from 2000 as the U.S. borrowed to finance tax cuts intended to revive a slumping economy. The amount has since risen 64 percent to $7.4 trillion.
More is on the way. The U.S. will sell a record $2.43 trillion of debt in 2010, according to the average forecast of 10 of the 18 primary dealers in a Bloomberg survey.
At the same time Treasury sales are rising, the cash position of the largest corporations is swelling. Companies in the S&P 500 held a record $2.3 trillion as of the fourth quarter, Bloomberg data show.
Growing Supply
High-rated corporate bonds due in three to five years are most likely to yield less than Treasuries, according to Deutsche Bank’s Pollack. The growing supply of Treasuries with those maturities will make government debt a bigger proportion of indexes that fund managers measure their performance against, he said. Managers betting Treasury yields will rise may diversify into corporate debt, Pollack said.
“There’s no natural law that says a Treasury has to yield less than a corporate,” said Daniel Shackelford, who is part of a group that manages $18 billion in bonds at T. Rowe Price Group Inc. in Baltimore. “It wouldn’t be the first time that I would scratch my head and say ‘this doesn’t make sense, the market’s behaving irrationally.’ And it can go on for much longer than you may think.”
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.
“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”
Moody’s Warning
While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.
“Those economies have been caught in a crisis while they are highly leveraged,” said Pierre Cailleteau, the managing director of sovereign risk at Moody’s in London. “They have to make the required adjustment to stabilize markets without choking off growth.”
Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels, said John Lipsky, first deputy managing director of the International Monetary Fund.
Unprecedented Spending
All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech yesterday at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said.
Obama’s unprecedented spending and the Federal Reserve’s emergency measures to fix the financial system are boosting the economy and cutting the risk of corporate failures. Standard & Poor’s said the default rate will drop to 5 percent by year-end from 10.4 percent in February.
Bonds sold by companies have returned 3.24 percent this year, including reinvested interest, compared with a 1.55 percent gain for Treasuries, Bank of America Merrill Lynch index data show. Returns exceeded government debt by a record 23 percentage points in 2009.
Berkshire Hathaway
Berkshire Hathaway’s 1.4 percent notes due February 2012 yielded 0.89 percent on March 18, 3.5 basis points, or 0.035 percentage point, less than Treasuries, composite prices compiled by Bloomberg show. The Omaha, Nebraska-based company, which is rated Aa2 by Moody’s and AA+ by S&P, has about $157 billion of cash and equivalents and about $52 billion of debt.
P&G, the world’s largest consumer-products maker, saw the yield on its 1.375 percent notes due August 2012 fall to 1.12 percent on March 18, 6 basis points below government debt. The Cincinnati-based company, rated Aa3 by Moody’s and AA- by S&P, makes everything from Tide detergent to Swiffer dusters.
New Brunswick, New Jersey-based Johnson & Johnson’s 5.15 percent securities due August 2012 yielded 1.11 percent on Feb. 17, 3 basis points less than Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The world’s largest health products company is rated AAA by S&P and Moody’s.
Yields on bonds of home-improvement retailer Lowe’s in Mooresville, North Carolina, drugmaker Abbott Laboratories of Abbott Park, Illinois, and Toronto-based Royal Bank of Canada have also been below Treasuries, Trace data show.
‘Avalanche’
“It’s a manifestation of this avalanche, this growth in U.S. Treasury supply which is under way and continues for the foreseeable future, and the comparative scarcity of high-quality credit,” particularly in shorter-maturity debt, said Malvey, whose Lehman team was ranked No. 1 in fixed-income strategy by Institutional Investor magazine from 1998 through 2007.
Last year’s $2.1 trillion in borrowing by the government exceeded the $1.08 trillion issued by investment-grade companies, the biggest gap ever, Bloomberg data show. Malvey said the last time he can recall that a corporate bond yield traded below Treasuries was when he was head of company debt research at Kidder Peabody & Co. in the mid-1980s.
While Treasuries are poised to make money for investors this quarter, they are losing momentum. The securities are down 0.43 percent in March after gaining 0.4 percent last month and 1.58 percent in January, Bank of America Merrill Lynch indexes show.
Benchmark 10-year Treasury yields will reach 4.20 percent by year-end, up from 3.69 percent last week, according to the median forecast of 48 economists in a Bloomberg News survey. Two-year yields will rise to 1.77 percent, from 0.99 percent.
Relative Yields
Investors demand 0.59 percentage point more in yield to own 10-year Treasuries than German bunds of similar maturity, Bloomberg data show. A year ago, debt of Germany, whose deficit is 4.2 percent of its economy, yielded about half a percentage point more than Treasuries.
President Obama’s budget proposal would create bigger deficits every year of the next decade, with the gaps totaling $1.2 trillion more than his administration projects, the nonpartisan Congressional Budget Office said this month. Publicly held debt will zoom to $20.3 trillion, or 90 percent of gross domestic product, by 2020, the CBO forecast.
There’s “a lack of a long-term plan to deal with the federal budget deficit,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “At some point in time the market may lose its patience.”
Balance Sheets
Deutsche Bank and Barclays Plc, two of the 18 primary dealers of U.S. government securities that are obligated to bid at the Treasury’s auctions, say balance sheets of high-rated companies make them more attractive than Treasuries.
Corporate borrowers are reducing debt at a record pace. Companies in the S&P 500 cut their liabilities by $282 billion to $7.1 trillion in the fourth quarter from the prior three months, Bloomberg data show. That represents 28 percent of assets, the least in at least a decade.
Investors are accepting smaller premiums to lend to companies, with yields on bonds rated at least AA falling to within 107 basis points of Treasuries on average, Bank of America Merrill Lynch indexes show. That’s down from the peak of 515 basis points in November 2008, and approaching the record low of 36 in 1997.
Adding to Corporates
New York Life Investment Management is adding to bets the difference in yields will continue to shrink.
“As the balance sheet of corporate America continues to improve and the balance sheet of the government deteriorates, that spread should narrow,” said Thomas Girard, a senior money manager who helps invest $115 billion at the New York-based insurer. “There is some sort of breaking point. The federal government can’t keep expanding its borrowing without having to incur some costs.”
For all the concern about U.S. finances, Treasuries are unlikely to lose their role as the world’s borrowing benchmark, said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. The U.S. has the biggest, most liquid securities markets, said Cheah.
Speculating that Treasuries may lose their privileged position is “not a bet I want to put on,” said Cheah, who worked at Singapore’s central bank. Yields on 10-year notes are about half their average since 1980.
Losing its Status
The last time there was talk of the U.S. losing its status as the world’s benchmark for bonds was in the late 1990s, when the government began amassing budget surpluses in 1998 for the first time in almost three decades. The amount of Treasuries outstanding dropped 8 percent to $3.4 trillion in 2000, the biggest annual decline since 1946.
Treasury supply resumed growing in 2001 after two rounds of tax cuts proposed by President George W. Bush led to deficits. Outstanding Treasury supply rose 53 percent to $4.5 trillion in 2007 from 2000 as the U.S. borrowed to finance tax cuts intended to revive a slumping economy. The amount has since risen 64 percent to $7.4 trillion.
More is on the way. The U.S. will sell a record $2.43 trillion of debt in 2010, according to the average forecast of 10 of the 18 primary dealers in a Bloomberg survey.
At the same time Treasury sales are rising, the cash position of the largest corporations is swelling. Companies in the S&P 500 held a record $2.3 trillion as of the fourth quarter, Bloomberg data show.
Growing Supply
High-rated corporate bonds due in three to five years are most likely to yield less than Treasuries, according to Deutsche Bank’s Pollack. The growing supply of Treasuries with those maturities will make government debt a bigger proportion of indexes that fund managers measure their performance against, he said. Managers betting Treasury yields will rise may diversify into corporate debt, Pollack said.
“There’s no natural law that says a Treasury has to yield less than a corporate,” said Daniel Shackelford, who is part of a group that manages $18 billion in bonds at T. Rowe Price Group Inc. in Baltimore. “It wouldn’t be the first time that I would scratch my head and say ‘this doesn’t make sense, the market’s behaving irrationally.’ And it can go on for much longer than you may think.”
House Approves Landmark U.S. Health-Care Legislation
March 22 (Bloomberg) -- The U.S. House passed the most sweeping health-care legislation in four decades, rewriting the rules governing medical industries and ensuring that tens of millions of uninsured Americans will get medical coverage.
President Barack Obama will sign the health-care package into law at the White House tomorrow, said an administration official who spoke on condition of anonymity because it hasn’t been publicly announced.
Yesterday’s 219-212 vote marks a victory for Obama. Only Democrats voted for the legislation, underscoring a partisan divide that promises to make health care the defining issue in November’s congressional elections.
Lawmakers hailed the action as a historic follow-up to the 1965 creation of the Medicare program for the elderly and a way to mitigate soaring health costs that make up a sixth of the U.S. economy. It came after a last-minute deal with anti- abortion Democrats and a lobbying trip by Obama to the Capitol.
“It’s a victory for the American people,” Obama told reporters at the White House just before midnight. “This legislation will not fix everything that ails our health-care system but it moves us decisively in the right direction. This is what change looks like.”
House Speaker Nancy Pelosi described the passage as “history for our country and progress for the American people.”
Two Bills
To finish their work on health care, House Democrats approved a Senate bill passed in December and then voted 220-211 to pass a measure that would amend the Senate legislation to fix provisions they don’t like. The Senate must also pass this second bill under a budget process called reconciliation that requires a simple majority vote.
While Senate Democrats plan to act this week on the second bill, they face a host of challenges from Republicans that may hold up their work or force a new vote in the House.
The two bills together will cost $940 billion over 10 years and cover 32 million uninsured Americans, the Congressional Budget Office estimated. That’s more than made up for with a new tax on the highest earners, fees on health-care companies and hundreds of billions of dollars in Medicare savings, which will reduce the federal deficit, the CBO said.
Companies such as health insurer WellPoint Inc. of Indianapolis, medical-device maker Medtronic Inc. of Minneapolis and drugmaker Pfizer Inc. of New York will get millions of new customers with the extension of coverage. Their industries will also face billions of dollars in new fees.
WellPoint Reacts
As part of the overhaul, drugmakers agreed to help the elderly more easily afford medicines. Insurers, which opposed the legislation, will have to take all customers, regardless of pre-existing conditions, and face limits on how much revenue can be spent beyond covering medical expenses.
“WellPoint is disappointed that after more than a year of debate, Congress has approved health-care legislation that does little to reduce cost and improve quality,” company spokeswoman Kristin Binns said in an e-mail to reporters.
Under the bill, Americans will have to buy insurance or pay a penalty, with the possibility of tapping new purchasing exchanges and government aid for lower-income Americans.
Republicans said the costs will balloon, criticized the increases in government programs and held out the possibility that private insurance and medical care would be hurt.
“We are looking at a health-care bill that nobody in this body believes is satisfactory,” House Minority Leader John Boehner said prior to the vote. “We have failed to reflect the will of our constituents.”
Business Groups
Business groups, including the U.S. Chamber of Commerce, also lobbied against the legislation, and Peoria, Illinois-based Caterpillar Inc. sent a letter to leaders saying the bills would raise its costs by $100 million in the first year alone.
The House’s two-step process became necessary after Democrats lost the 60th vote in the Senate generally needed to push through major legislation.
Just weeks after the Senate’s party-line 60-39 vote, Democrats were almost finished drafting a House-Senate compromise bill when Massachusetts Republican Scott Brown won a Jan. 19 special election to fill the seat left vacant by the death of Democrat Edward M. Kennedy.
The use of the budget-reconciliation tool opens the door for the Senate to pass the second bill with 51 votes, as long as it can withstand Republican challenges and the rulings of a parliamentarian, who will take out any provision he decides have only an incidental impact on the federal budget.
‘Massive’ Amendments
New Hampshire Senator Judd Gregg, who will help coordinate the Republicans’ efforts, said his party can put forth “massive amounts” of amendments on unrelated issues from gun control to immigration. They can also challenge provisions such as the scaling back of a tax on high-end, or so-called Cadillac, insurance plans because it would affect money flowing into Social Security, he said.
Any changes in the Senate would force a new House vote on the reconciliation bill, further complicating the effort. House Democrats particularly wanted to change the Cadillac tax because they say it would affect too many workers.
“If those people think they’re only going to vote on this once, they’re nuts,” Senator Orrin Hatch, a Utah Republican, said in a Bloomberg Television interview last week.
Illinois Senator Richard Durbin, a member of the Democratic leadership, said yesterday his party is prepared for challenges and any amendments Republicans might file.
‘Ready to Tackle’
“We’re ready to tackle that if that’s what they want to do,” Durbin said on CBS’s “Face the Nation” program. “We’re ready to deal with honest amendments. There will come a time when the American people say enough, this is about politics.”
Obama, who faced criticism for largely leaving the drafting of the legislation to Congress, swung into high gear in recent weeks. He hosted a Feb. 25 bipartisan summit at the White House, proposed detailed final compromises and lobbied dozens of undecided Democrats. He postponed a trip to Asia to remain in Washington for yesterday’s vote.
Obama benefited in part from the votes of Democrats who are leaving Congress and who were willing to switch sides after voting “no” on a House version in November.
He also won support from Democrats, including Representative Dennis Kucinich of Ohio, who had threatened to oppose the final measure because it didn’t include a new government program, or public option, to compete against private insurers.
Expanding Medicaid
The legislation will expand the Medicaid government program for the poor to cover those making up to 133 percent of the federal poverty level, and offer subsidies for millions of other Americans to buy insurance through an online exchange offering policies at more-affordable group rates.
Many employers with more than 50 workers that don’t offer coverage will be subject to a penalty. The reconciliation bill will change the penalty to $2,000 per worker, from $750 in the Senate bill, and subtract out the first 30 employees.
The overhaul is financed in large part through new taxes. The reconciliation bill would add a 3.8 percent Medicare tax on investment income imposed on individuals who earn more than $200,000 a year and joint tax filers who have more than $250,000 in earnings. That adds to a higher Medicare payroll tax already in the Senate bill.
President Barack Obama will sign the health-care package into law at the White House tomorrow, said an administration official who spoke on condition of anonymity because it hasn’t been publicly announced.
Yesterday’s 219-212 vote marks a victory for Obama. Only Democrats voted for the legislation, underscoring a partisan divide that promises to make health care the defining issue in November’s congressional elections.
Lawmakers hailed the action as a historic follow-up to the 1965 creation of the Medicare program for the elderly and a way to mitigate soaring health costs that make up a sixth of the U.S. economy. It came after a last-minute deal with anti- abortion Democrats and a lobbying trip by Obama to the Capitol.
“It’s a victory for the American people,” Obama told reporters at the White House just before midnight. “This legislation will not fix everything that ails our health-care system but it moves us decisively in the right direction. This is what change looks like.”
House Speaker Nancy Pelosi described the passage as “history for our country and progress for the American people.”
Two Bills
To finish their work on health care, House Democrats approved a Senate bill passed in December and then voted 220-211 to pass a measure that would amend the Senate legislation to fix provisions they don’t like. The Senate must also pass this second bill under a budget process called reconciliation that requires a simple majority vote.
While Senate Democrats plan to act this week on the second bill, they face a host of challenges from Republicans that may hold up their work or force a new vote in the House.
The two bills together will cost $940 billion over 10 years and cover 32 million uninsured Americans, the Congressional Budget Office estimated. That’s more than made up for with a new tax on the highest earners, fees on health-care companies and hundreds of billions of dollars in Medicare savings, which will reduce the federal deficit, the CBO said.
Companies such as health insurer WellPoint Inc. of Indianapolis, medical-device maker Medtronic Inc. of Minneapolis and drugmaker Pfizer Inc. of New York will get millions of new customers with the extension of coverage. Their industries will also face billions of dollars in new fees.
WellPoint Reacts
As part of the overhaul, drugmakers agreed to help the elderly more easily afford medicines. Insurers, which opposed the legislation, will have to take all customers, regardless of pre-existing conditions, and face limits on how much revenue can be spent beyond covering medical expenses.
“WellPoint is disappointed that after more than a year of debate, Congress has approved health-care legislation that does little to reduce cost and improve quality,” company spokeswoman Kristin Binns said in an e-mail to reporters.
Under the bill, Americans will have to buy insurance or pay a penalty, with the possibility of tapping new purchasing exchanges and government aid for lower-income Americans.
Republicans said the costs will balloon, criticized the increases in government programs and held out the possibility that private insurance and medical care would be hurt.
“We are looking at a health-care bill that nobody in this body believes is satisfactory,” House Minority Leader John Boehner said prior to the vote. “We have failed to reflect the will of our constituents.”
Business Groups
Business groups, including the U.S. Chamber of Commerce, also lobbied against the legislation, and Peoria, Illinois-based Caterpillar Inc. sent a letter to leaders saying the bills would raise its costs by $100 million in the first year alone.
The House’s two-step process became necessary after Democrats lost the 60th vote in the Senate generally needed to push through major legislation.
Just weeks after the Senate’s party-line 60-39 vote, Democrats were almost finished drafting a House-Senate compromise bill when Massachusetts Republican Scott Brown won a Jan. 19 special election to fill the seat left vacant by the death of Democrat Edward M. Kennedy.
The use of the budget-reconciliation tool opens the door for the Senate to pass the second bill with 51 votes, as long as it can withstand Republican challenges and the rulings of a parliamentarian, who will take out any provision he decides have only an incidental impact on the federal budget.
‘Massive’ Amendments
New Hampshire Senator Judd Gregg, who will help coordinate the Republicans’ efforts, said his party can put forth “massive amounts” of amendments on unrelated issues from gun control to immigration. They can also challenge provisions such as the scaling back of a tax on high-end, or so-called Cadillac, insurance plans because it would affect money flowing into Social Security, he said.
Any changes in the Senate would force a new House vote on the reconciliation bill, further complicating the effort. House Democrats particularly wanted to change the Cadillac tax because they say it would affect too many workers.
“If those people think they’re only going to vote on this once, they’re nuts,” Senator Orrin Hatch, a Utah Republican, said in a Bloomberg Television interview last week.
Illinois Senator Richard Durbin, a member of the Democratic leadership, said yesterday his party is prepared for challenges and any amendments Republicans might file.
‘Ready to Tackle’
“We’re ready to tackle that if that’s what they want to do,” Durbin said on CBS’s “Face the Nation” program. “We’re ready to deal with honest amendments. There will come a time when the American people say enough, this is about politics.”
Obama, who faced criticism for largely leaving the drafting of the legislation to Congress, swung into high gear in recent weeks. He hosted a Feb. 25 bipartisan summit at the White House, proposed detailed final compromises and lobbied dozens of undecided Democrats. He postponed a trip to Asia to remain in Washington for yesterday’s vote.
Obama benefited in part from the votes of Democrats who are leaving Congress and who were willing to switch sides after voting “no” on a House version in November.
He also won support from Democrats, including Representative Dennis Kucinich of Ohio, who had threatened to oppose the final measure because it didn’t include a new government program, or public option, to compete against private insurers.
Expanding Medicaid
The legislation will expand the Medicaid government program for the poor to cover those making up to 133 percent of the federal poverty level, and offer subsidies for millions of other Americans to buy insurance through an online exchange offering policies at more-affordable group rates.
Many employers with more than 50 workers that don’t offer coverage will be subject to a penalty. The reconciliation bill will change the penalty to $2,000 per worker, from $750 in the Senate bill, and subtract out the first 30 employees.
The overhaul is financed in large part through new taxes. The reconciliation bill would add a 3.8 percent Medicare tax on investment income imposed on individuals who earn more than $200,000 a year and joint tax filers who have more than $250,000 in earnings. That adds to a higher Medicare payroll tax already in the Senate bill.
Stocks Show Economy Revving as Cyclical Shares Win
March 22 (Bloomberg) -- Retailers erased their stock market losses since the collapse of Lehman Brothers Holdings Inc. and transportation companies doubled in a year, signs the advance in U.S. equities is just getting started.
Amazon.com Inc. and Gap Inc. have wiped out declines of as much as 63 percent since the bear market began in October 2007 amid forecasts retailers’ profits will increase 63 percent through 2012. The Dow Jones Transportation Average, where earnings are projected to almost triple in two years, is beating the Standard & Poor’s 500 Index by 32 percentage points since March 2009, the widest gap for a rally since 1990.
Investors seeking signals equities will keep rising are finding them in industries most tied to the economy, the basis for a century-old forecasting technique known as Dow Theory. While bears say the gains aren’t justified by earnings and that shares are climbing too fast, Stephen Lieber of Alpine Woods Capital Investors LLC and David Darst of Morgan Stanley are buying on speculation the expansion will revive profit growth.
“This is not a junk stock rally,” said Lieber, who helps manage more than $7 billion in Purchase, New York. “This is a restoration-of-confidence rally. This is a business confidence rally.”
Lieber owns Intel Corp., the Santa Clara, California-based semiconductor maker that climbed to an 18-month high of $22.24 last week amid optimism sales to business customers are growing.
Winning Streak
The S&P 500 increased 0.9 percent and the MSCI World Index of stocks in 23 developed nations climbed 0.3 percent as both measures advanced for a third week. Government reports showing higher consumer spending and lower-than-expected inflation have pushed the Dow Jones Industrial Average up 3 percent in 2010, according to data compiled by Bloomberg. The S&P 500 slipped 0.1 percent to 1,158.79 at 9:55 a.m. in New York today.
An exchange-traded fund that matches the performance of the U.S. benchmark index, the SPDR S&P 500 ETF Trust, rose 14 straight days through March 17, the longest streak in its 17- year history. The 11-day winning streak by the Dow transports that ended last week was the best since 1992, data compiled by Bloomberg show.
Companies whose profits are most tied to changes in U.S. gross domestic product are beating those with the smallest connection to the economy by the widest margin on record.
The Morgan Stanley Cyclical Index, a measure of 30 stocks from Dearborn, Michigan-based Ford Motor Co. to U.S. Steel Corp. in Pittsburgh, has surged 209 percent since March 6, 2009. It topped the Morgan Stanley Consumer Index, a gauge of companies such as Pfizer Inc. and ConAgra Foods Inc. that do relatively well during a contraction, by 147 percentage points.
Twice the Gain
The cyclical index has also provided almost double the return since Feb. 8, when the S&P 500 began rebounding from a three-week drop that erased 8.1 percent, according to data compiled by Bloomberg.
Manufacturing and industrial stocks in the S&P 500 are up 11 percent in 2010, beating nine other groups in the index by at least 2 percentage points, data compiled by Bloomberg show. This is the first time since 1985 that the measure, which includes Chicago-based Boeing Co., the world’s second-largest commercial plane-maker, and General Electric Co. in Fairfield, Connecticut, the biggest supplier of power turbines, has led this far into a year, according to Birinyi Associates Inc., the Westport, Connecticut-based research firm founded by Laszlo Birinyi.
“We are still bullish on risk assets,” said Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, which oversees $1.6 trillion. “We see a multiyear cyclical bull market.”
High Velocity
The speed of the rebound in stocks since Feb. 8 is reason to doubt its sustainability, says Andrew Lapthorne, global head of quantitative strategy at Paris-based Societe Generale. The relative strength index using 14 days of data for the SPDR S&P 500 ETF rose to 76.76 on March 17, the highest level since October 2006. Surges in the RSI mean a security may have climbed too far, too fast.
Rallying stocks have pushed the S&P 500’s price relative to earnings in the last 12 months to 18.6 times. The average multiple over the last 56 years is 16.6, according to data compiled by Bloomberg.
“The long-term valuation expectations are way, way too high,” said Lapthorne. “I don’t think there is much value in the markets. It has the potential to drive violently downwards.”
Amazon, Old Navy
Investors should bet that companies with the best earnings prospects will outperform, Robert Buckland, an equity strategist at Citigroup Inc. in London, wrote in a March 17 report. Stocks that fell the most in the 2007 to 2009 bear market helped propel the S&P 500 during the past 12 months and cyclical stocks will help lead the market in the next two years, Buckland said.
Amazon, the Seattle-based owner of the world’s biggest Internet retailer, has doubled since the stock market bottomed in 2009 and gained 12 percent over the last six weeks. San Francisco-based Gap, which runs namesake clothing stores and Old Navy, is up 22 percent in the past six weeks.
Both stocks helped send the S&P 500 Consumer Discretionary Index, a measure of companies reliant on Americans’ spending, past its level on Sept. 12, 2008, just before Lehman’s bankruptcy froze credit markets and $1.7 trillion in bank losses spurred the worst recession in seven decades.
Buffett’s Indicator
The average analyst estimate for Amazon’s 2011 earnings has increased 14 percent to $4.78 a share this year. Gap’s has risen 4.8 percent to $1.73. Profit for companies in the consumer discretionary index are forecast to surge an average of 57 percent to $21.66 a share through the end of 2012, according to data compiled by Bloomberg.
Warren Buffett said on Nov. 3 that he made an “all-in wager” on the strength of the U.S. economy when he bought Fort Worth, Texas-based railroad Burlington Northern Santa Fe Corp. for $27 billion, the biggest purchase of his career.
Buffett, 79, the billionaire chairman of Berkshire Hathaway Inc. in Omaha, Nebraska, told ABC News last year that U.S. rail- freight traffic is among the most important measures of economic health. Trains hauled 287,837 carloads for the week ended March 13, near the highest level in a year, data from the Washington- based Association of American Railroads show.
‘Coming Back’
The rebound in shipping has helped push the Dow Jones Transportation Average up 104 percent since the market low, compared with the S&P 500’s 71 percent jump. Companies in the gauge are projected to report a 173 percent increase in profits in the next two years, led by a sixfold gain at Honolulu-based Alexander & Baldwin Inc., which operates barges, data on operating profits compiled by Bloomberg show. By comparison, earnings among S&P 500 companies may grow 52 percent during that time, the data show.
“The cyclical stocks are coming back because the economy is coming back,” said Jeffrey Saut, the chief investment strategist at Raymond James & Associates, which manages $230 billion in St. Petersburg, Florida. “I’m still bullish into the summer.”
Dow Theory, developed by Wall Street Journal co-founder Charles Dow in the 1800s, suggests the rally in U.S. equities may continue. Dow’s transportation and industrial averages both reached the highest levels since October 2008 last week.
Stocks that fell the most during the bear market plunge have been the biggest winners in the rebound, according to data compiled by Bloomberg. Financial shares in the S&P 500 have risen 152 percent in the past year. Investors from Paulson & Co. to Fairholme Capital Management are loading up on the group. Regulatory filings show banks, brokerages and insurers make up 19 percent of hedge fund equity holdings, the biggest allocation compared with other industries.
“I’m bullish,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees more than $220 billion. “The economy is improving, corporate earnings look good and there’s still great value in the market.”
Amazon.com Inc. and Gap Inc. have wiped out declines of as much as 63 percent since the bear market began in October 2007 amid forecasts retailers’ profits will increase 63 percent through 2012. The Dow Jones Transportation Average, where earnings are projected to almost triple in two years, is beating the Standard & Poor’s 500 Index by 32 percentage points since March 2009, the widest gap for a rally since 1990.
Investors seeking signals equities will keep rising are finding them in industries most tied to the economy, the basis for a century-old forecasting technique known as Dow Theory. While bears say the gains aren’t justified by earnings and that shares are climbing too fast, Stephen Lieber of Alpine Woods Capital Investors LLC and David Darst of Morgan Stanley are buying on speculation the expansion will revive profit growth.
“This is not a junk stock rally,” said Lieber, who helps manage more than $7 billion in Purchase, New York. “This is a restoration-of-confidence rally. This is a business confidence rally.”
Lieber owns Intel Corp., the Santa Clara, California-based semiconductor maker that climbed to an 18-month high of $22.24 last week amid optimism sales to business customers are growing.
Winning Streak
The S&P 500 increased 0.9 percent and the MSCI World Index of stocks in 23 developed nations climbed 0.3 percent as both measures advanced for a third week. Government reports showing higher consumer spending and lower-than-expected inflation have pushed the Dow Jones Industrial Average up 3 percent in 2010, according to data compiled by Bloomberg. The S&P 500 slipped 0.1 percent to 1,158.79 at 9:55 a.m. in New York today.
An exchange-traded fund that matches the performance of the U.S. benchmark index, the SPDR S&P 500 ETF Trust, rose 14 straight days through March 17, the longest streak in its 17- year history. The 11-day winning streak by the Dow transports that ended last week was the best since 1992, data compiled by Bloomberg show.
Companies whose profits are most tied to changes in U.S. gross domestic product are beating those with the smallest connection to the economy by the widest margin on record.
The Morgan Stanley Cyclical Index, a measure of 30 stocks from Dearborn, Michigan-based Ford Motor Co. to U.S. Steel Corp. in Pittsburgh, has surged 209 percent since March 6, 2009. It topped the Morgan Stanley Consumer Index, a gauge of companies such as Pfizer Inc. and ConAgra Foods Inc. that do relatively well during a contraction, by 147 percentage points.
Twice the Gain
The cyclical index has also provided almost double the return since Feb. 8, when the S&P 500 began rebounding from a three-week drop that erased 8.1 percent, according to data compiled by Bloomberg.
Manufacturing and industrial stocks in the S&P 500 are up 11 percent in 2010, beating nine other groups in the index by at least 2 percentage points, data compiled by Bloomberg show. This is the first time since 1985 that the measure, which includes Chicago-based Boeing Co., the world’s second-largest commercial plane-maker, and General Electric Co. in Fairfield, Connecticut, the biggest supplier of power turbines, has led this far into a year, according to Birinyi Associates Inc., the Westport, Connecticut-based research firm founded by Laszlo Birinyi.
“We are still bullish on risk assets,” said Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, which oversees $1.6 trillion. “We see a multiyear cyclical bull market.”
High Velocity
The speed of the rebound in stocks since Feb. 8 is reason to doubt its sustainability, says Andrew Lapthorne, global head of quantitative strategy at Paris-based Societe Generale. The relative strength index using 14 days of data for the SPDR S&P 500 ETF rose to 76.76 on March 17, the highest level since October 2006. Surges in the RSI mean a security may have climbed too far, too fast.
Rallying stocks have pushed the S&P 500’s price relative to earnings in the last 12 months to 18.6 times. The average multiple over the last 56 years is 16.6, according to data compiled by Bloomberg.
“The long-term valuation expectations are way, way too high,” said Lapthorne. “I don’t think there is much value in the markets. It has the potential to drive violently downwards.”
Amazon, Old Navy
Investors should bet that companies with the best earnings prospects will outperform, Robert Buckland, an equity strategist at Citigroup Inc. in London, wrote in a March 17 report. Stocks that fell the most in the 2007 to 2009 bear market helped propel the S&P 500 during the past 12 months and cyclical stocks will help lead the market in the next two years, Buckland said.
Amazon, the Seattle-based owner of the world’s biggest Internet retailer, has doubled since the stock market bottomed in 2009 and gained 12 percent over the last six weeks. San Francisco-based Gap, which runs namesake clothing stores and Old Navy, is up 22 percent in the past six weeks.
Both stocks helped send the S&P 500 Consumer Discretionary Index, a measure of companies reliant on Americans’ spending, past its level on Sept. 12, 2008, just before Lehman’s bankruptcy froze credit markets and $1.7 trillion in bank losses spurred the worst recession in seven decades.
Buffett’s Indicator
The average analyst estimate for Amazon’s 2011 earnings has increased 14 percent to $4.78 a share this year. Gap’s has risen 4.8 percent to $1.73. Profit for companies in the consumer discretionary index are forecast to surge an average of 57 percent to $21.66 a share through the end of 2012, according to data compiled by Bloomberg.
Warren Buffett said on Nov. 3 that he made an “all-in wager” on the strength of the U.S. economy when he bought Fort Worth, Texas-based railroad Burlington Northern Santa Fe Corp. for $27 billion, the biggest purchase of his career.
Buffett, 79, the billionaire chairman of Berkshire Hathaway Inc. in Omaha, Nebraska, told ABC News last year that U.S. rail- freight traffic is among the most important measures of economic health. Trains hauled 287,837 carloads for the week ended March 13, near the highest level in a year, data from the Washington- based Association of American Railroads show.
‘Coming Back’
The rebound in shipping has helped push the Dow Jones Transportation Average up 104 percent since the market low, compared with the S&P 500’s 71 percent jump. Companies in the gauge are projected to report a 173 percent increase in profits in the next two years, led by a sixfold gain at Honolulu-based Alexander & Baldwin Inc., which operates barges, data on operating profits compiled by Bloomberg show. By comparison, earnings among S&P 500 companies may grow 52 percent during that time, the data show.
“The cyclical stocks are coming back because the economy is coming back,” said Jeffrey Saut, the chief investment strategist at Raymond James & Associates, which manages $230 billion in St. Petersburg, Florida. “I’m still bullish into the summer.”
Dow Theory, developed by Wall Street Journal co-founder Charles Dow in the 1800s, suggests the rally in U.S. equities may continue. Dow’s transportation and industrial averages both reached the highest levels since October 2008 last week.
Stocks that fell the most during the bear market plunge have been the biggest winners in the rebound, according to data compiled by Bloomberg. Financial shares in the S&P 500 have risen 152 percent in the past year. Investors from Paulson & Co. to Fairholme Capital Management are loading up on the group. Regulatory filings show banks, brokerages and insurers make up 19 percent of hedge fund equity holdings, the biggest allocation compared with other industries.
“I’m bullish,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees more than $220 billion. “The economy is improving, corporate earnings look good and there’s still great value in the market.”
U.S. Stocks Rise as Drug Shares Rally After House OKs Overhaul
March 22 (Bloomberg) -- U.S. stocks gained, erasing an early decline, as health-care shares rallied after the House of Representatives passed an overhaul of the industry.
Merck & Co. and Pfizer Inc. climbed more than 1.5 percent to help lead health-care companies to the biggest gain among 10 groups in the Standard & Poor’s 500 Index after the House approved legislation that will ensure tens of millions of uninsured Americans will get medical coverage.
“The health-care legislation approval removes the uncertainty,” said Richard Sichel, chief investment officer at the Philadelphia Trust Co., which manages $1.4 billion. “On top of that, the shares had been beaten down, so you can find reasonably valued companies.”
The S&P 500 increased 0.3 percent to 1,162.8 at 10:37 a.m. in New York. The Dow Jones Industrial Average climbed 35 points, or 0.3 percent, to 10,776.98.
U.S. stocks retreated at the start of trading amid concern growing government debt and rising interest rates will derail the global economy.
Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures won’t come close to bringing deficits back to prudent levels, John Lipsky, first deputy managing director of the International Monetary Fund, said in a speech yesterday at the China Development Forum in Beijing.
The Reserve Bank of India raised its benchmark rates after local financial markets closed on March 19, a month earlier than the next scheduled review, to tame the fastest inflation in more than a year.
Policy makers in Australia and Malaysia have also increased rates since the end of February, while China has ordered lenders to set aside more funds as reserves twice this year.
“There’s a lot of structural headwinds around at the moment,” said Markus Steinbeis, head of equity portfolio management at the German unit of Pioneer Investments, which oversees about $221 billion globally. “Sentiment is neutral to negative and we could see a couple of days of consolidation before trading higher.”
Merck & Co. and Pfizer Inc. climbed more than 1.5 percent to help lead health-care companies to the biggest gain among 10 groups in the Standard & Poor’s 500 Index after the House approved legislation that will ensure tens of millions of uninsured Americans will get medical coverage.
“The health-care legislation approval removes the uncertainty,” said Richard Sichel, chief investment officer at the Philadelphia Trust Co., which manages $1.4 billion. “On top of that, the shares had been beaten down, so you can find reasonably valued companies.”
The S&P 500 increased 0.3 percent to 1,162.8 at 10:37 a.m. in New York. The Dow Jones Industrial Average climbed 35 points, or 0.3 percent, to 10,776.98.
U.S. stocks retreated at the start of trading amid concern growing government debt and rising interest rates will derail the global economy.
Advanced economies face “acute” challenges in tackling high public debt, and unwinding existing stimulus measures won’t come close to bringing deficits back to prudent levels, John Lipsky, first deputy managing director of the International Monetary Fund, said in a speech yesterday at the China Development Forum in Beijing.
The Reserve Bank of India raised its benchmark rates after local financial markets closed on March 19, a month earlier than the next scheduled review, to tame the fastest inflation in more than a year.
Policy makers in Australia and Malaysia have also increased rates since the end of February, while China has ordered lenders to set aside more funds as reserves twice this year.
“There’s a lot of structural headwinds around at the moment,” said Markus Steinbeis, head of equity portfolio management at the German unit of Pioneer Investments, which oversees about $221 billion globally. “Sentiment is neutral to negative and we could see a couple of days of consolidation before trading higher.”
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