Friday, September 9, 2011

Treasuries, Dollar Fall on Obama's Job Plan; Asian Stocks Drop

Sept. 9 (Bloomberg) -- Treasuries declined, while the dollar slid against most of its major peers after President Barack Obama detailed his $447 billion plan to boost hiring in the U.S. Asian stocks fell for the first time in three days.

Ten-year yields climbed two basis points to 2 percent as of 2:32 p.m. in Tokyo. The dollar weakened 0.4 percent against New Zealand's currency and fell 0.3 percent against Australia's. Standard & Poor's 500 futures added 0.1 percent, following a drop of as much as 0.6 percent. The MSCI Asia Pacific Index sank 0.5 percent even after data today showed China's inflation eased. Zinc and nickel paced a retreat among metals.

Obama called on Congress to pass his package after jobs growth stalled last month, fueling concern the U.S. recovery is faltering. Federal Reserve Chairman Ben S. Bernanke yesterday stopped short of detailing new plans to boost growth, while European Central Bank President Jean-Claude Trichet said "downside risks" for the region's economies have risen. Ministers from the Group of Seven nations will meet amid mounting bets on a Greek default.

"The headline number was better than expected but it comes down to how he's going to fund it and how soon the plan will be implemented," Khiem Do, head of multi-asset strategy at Baring Asset Management, said in a Bloomberg Television interview from Hong Kong. "We need some action right now as far as the U.S. economy is concerned."

Obama's Job Plan

Longer-maturity bonds led losses after Obama detailed his jobs package, which includes infrastructure spending, subsidies to local governments to stem teacher layoffs and cutting in half the payroll taxes paid by workers and small-business owners. Tax cuts account for more than half the dollar value of the stimulus. The Treasury Department will sell $66 billion in three-, 10- and 30-year debt next week.

The dollar declined against 11 of its 16 most-actively traded counterparts. It fell 0.4 percent against the New Zealand dollar to 83.40 U.S. cents and weakened 0.2 percent to $1.0601 versus Australia's currency. The Dollar Index slid less than 0.1 percent, paring its gain this week to 1.9 percent. That's still the largest increase since the period ended May 6.

"Overall, it's a net positive for equity markets," said Brian Jacobsen, the chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. Still, the proposal will be "will be subject to amendments. As there's so much uncertainty as to what the final product will be, it's difficult to game this from an investment perspective," he said in a Bloomberg Television interview.

Bernanke's Tools

The S&P 500 retreated 1.1 percent yesterday after Bernanke said risks to the economic outlook have increased and policy makers will discuss tools they could use to boost growth at their meeting this month. As in a speech on Aug. 26, the Fed chief stopped short of signaling what he thinks is the central bank's best option to aid the economy.

Gains in futures were capped after the U.S. Department of Homeland Security said it has "specific, credible but unconfirmed threat information" as the 10th anniversary of the Sept. 11 terrorist attacks nears.

About five shares declined for every four that advanced on MSCI's Asia Pacific Index, which is headed for a 2.2 percent weekly loss. Japan's Nikkei 225 Stock Average lost 0.6 percent after data today showed the nation's economy contracted more than the government initially estimated in the second quarter. Australia's S&P/ASX 200 Index rose 0.2 percent and South Korea's Kospi Index dropped 1.3 percent.

Inflation Eases

China's Shanghai Composite Index erased an early jump of as much as 1.2 percent to trade 0.3 percent lower. Inflation eased to 6.2 percent in August from the three-year high of 6.5 percent in July, data today showed.

Hynix Semiconductor Inc. led technology stocks higher on speculation the company will benefit from production cuts by smaller rivals. Unimicron Technology Corp. jumped 6.9 percent in Taipei after saying sales rose last month. Fanuc Corp. fell 8 percent after a report yesterday showed growth in Japan's machine tool orders slowed.

The cost of insuring Asia-Pacific corporate and sovereign bonds from default pared an earlier increase, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan was little changed at 158 basis points, Royal Bank of Scotland Group Plc prices show. That's down from the earlier 3 basis-points advance today, according to Credit Agricole SA prices.

Gold for immediate delivery fell 0.1 percent to $1,868.52 an ounce. Bullion has declined 0.6 percent this week, after reaching an all-time high of $1,921.15 on Sept. 6. Three-month zinc retreated 1 percent to $2,228.25 a metric ton on the London Metal Exchange, while nickel lost 2.1 percent to $21,610 a ton.

Oil climbed as much as 0.5 percent to $89.50 on the New York Mercantile Exchange before trading at $89.12. The contract for October delivery earlier fell as much as 0.8 percent. Futures have gained 3.1 percent this week and 20 percent the past year.

--With assistance from Susan Li in Hong Kong, Candice Zachariahs in Sydney, Jarrett Banks in Tokyo and Masaki Kondo and Kristine Aquino in Singapore. Editors: Patrick Chu, Shiyin Chen

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