Archives for April 2010

April 2010 - Page 7 of 10 - Money Morning - Only the News You Can Profit From

Obama Gains Ground on China Trade Policies as Hu Refuses to Rule Out Floating Yuan

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President Barack Obama pushed against potentially unfair trade policies on two fronts in Monday's meeting with Chinese President Hu Jintao and appeared to win a small victory when Hu didn't completely rule out letting the yuan appreciate.

After Obama urged China to move toward a "more market-oriented exchange rate," Hu told him that his country wouldn't yield to "external pressure" in deciding when to adjust the yuan, Bloomberg News reported.

Obama also expressed "his concern" about some "market- access barriers in China," Jeff Bader, senior director for Asia at the National Security Council, told reporters after the meeting, which was held in conjunction with a gathering of world leaders in Washington to discuss nuclear security.

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New $61 Billion Aid Package Is No Cure For Greece's Long Term Ills

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After an extraordinary teleconference on Sunday, Eurozone members offered Greece a rescue package worth as much as $61 billion (45 billion euros) at below-market interest rates. But even though the aid package sparked a rally in Greek stocks and bonds, it probably won't be enough to cure the debt-plagued nation's long-term ills.

A surge in Greek borrowing costs last week sent yields to an 11-year high, forcing European finance ministers to take action. The result was an offer of as much as $40.7 billion (30 billion euros) in three-year loans over the next year. Another $20 billion (15 billion euros) in aid could come from the International Monetary Fund (IMF).

The interest rates charged to Athens would be around 5% for a three-year fixed loan – above the IMF's standard lending rate but below the 7.45% jittery investors were getting for purchasing Greek bonds last week.

"This is a huge amount," Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist, told Bloomberg News. "This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run, the market is short Greek assets so we'll get a rally in those."

News of the rescue package sent prices higher for short-term Greek debt vehicles, reflecting a lighter mood among investors who sensed a much lower risk of a debt default.

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Washington - Not China - Is the Real Manipulator Here

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SHANGHAI, People's Republic of China – China just posted its first monthly trade deficit in nearly six years, a $7.24 billion shortfall for March that essentially torpedoes Washington's argument that the Asian giant is a "currency manipulator" of the worst kind.

The Obama administration's assertion that China is artificially keeping the yuan undervalued to gain a global competitive advantage isn't just misguided: It actually demonstrates that Washington lacks even a basic understanding of global economics. Given that the same U.S. leaders who have been pushing to hang this manipulator label on China and impose sanctions are the same ones who tried to end the financial crisis by creating a river of debt that will haunt us for years, I can't say that I'm surprised.

As the U.S. argument goes, pegging its currency to the dollar gives China a distinct advantage when it comes to less-expensive manufacturing and a strong export market. The implication is that somehow this is negatively impacting our economy, or – in a variation of the same logic – holding back our recovery. Washington points to the massive trade deficits we regularly run with that country as evidence of China's currency-market wrongdoing.

In reality, China's pegged currency has done two things. First, it's allowed the United States to keep its inflation rate at a much lower (and more-manageable) level than it should have been in view of the $14 trillion in debt that this country has taken on.

And, second, it's allowed China to fuel its own stimulus package while at the same time assuming a meaningful role in the ongoing global recovery.

Let's take a minute to talk about why this is true.

The U.S. Employment Outlook: Bad For Paychecks, Good For U.S. Stocks

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You undoubtedly know by now that the U.S. economy added 164,000 jobs in March. While that was the best number in ages, anyone who looked closely at the payrolls report issued by the U.S. Labor Department would discover that it was actually riddled with problems.

Indeed, the report sends a very clear message: While the March report is consistent with a gradually improving labor market, the numbers hardly convey a sense of an economy that's zooming its way back to health.

Still, as we'll see, this employment scenario could be a good one for U.S. stocks.

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China Auto Sales Off to a Strong Start

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China topped the United States in auto sales for the first time ever last year, and it looks poised to keep its crown as the world's largest auto market this year as car sales in China got off to a strong start in the first quarter – soaring 76% from 2009.

Some 3.52 million cars were sold in China in the January-March period, according to the China Association of Automobile Manufacturers. The strong showing was partly the result of weak 2009 sales but it was enough to convince carmakers to raise their regional sales forecasts.

General Motors Corp., which leans heavily on its joint venture Shanghai General Motors Co. Ltd., said it would hit its target of 2 million sales in China this year, putting the company four years ahead of schedule.

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Buy, Sell or Hold: The Boeing Co. Is Flying High and Ready to Soar Even Higher

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Last Dec.14 I gave you my global outlook for 2010.  I recommended three key stocks that would be flying this year:  The Boeing Co. (NYSE: BA), Corning Inc. (NYSE: GLW), and Cypress Semiconductor Corp. (NYSE: CY).

So far, they have all enjoyed rallies.

Boeing rose 29% in about three months, Corning has appreciated about 7%, and Cypress Semiconductors is up 11%.  So all three beat the Standard & Poor's 500 Index, which is up 6% over the same time period.

I remain very bullish on all three companies, but today we will focus exclusively on Boeing.

Boeing continues to ride very powerful trends, and the company is executing well. 

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Foreign Markets Outshine U.S. on Investors' Increasing Appetite for Risk

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U.S. stocks carved out one of their patented half-percent advances last week — a little sloppy, to be sure, yet not bad at all considering their very overbought condition.

The stars of the global capital show this month, though, have been markets in China and Europe, as they shook off their multi-month torpor to score big wins. With a scorching 6% advance in the past two weeks, ishares FTSE Xinhua China 25 Index (NYSE: FXI) nosed up to log a +5.5% gain for the year after being negative for three months. And the ishares S&P Europe 350 Index (NYSE: IEV) rose 1%, putting it at flat for the year after malingering below zero.

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China May Let Yuan Appreciate Despite First Trade Deficit in Six Years

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China's imports pushed higher in March, which may cause the Asian economic powerhouse to post its first trade deficit in six years.  But even though the deficit bolsters its argument for keeping the yuan pegged to the dollar, it appears Beijing will let its currency appreciate in the near future.

Rising commodity prices probably led imports to outpace exports by $390 million in March after a $7.6 billion trade surplus the previous month, according to the median estimate in a Bloomberg News survey of 26 economists.

Nevertheless, a change in China's currency policy is "imminent", and may occur in the next few weeks, Ben Simpfendorfer, a Hong Kong- based economist at Royal Bank of Scotland Group Plc (NYSE ADR: RBS), said Friday on Bloomberg Television.

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