Irandaily | No. 4384 | International Economy

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France Downgraded

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“French debt still remains among the most liquid and safest of the eurozone,” said Moscovici, a member of the ruling Socialist government. “The French economy is large and diversified, and the government has shown proof of its serious plan to implement structural reforms and restore public finances.”
The yield on the French 10-year government bond fell 1 basis point, or 0.01 percentage point, to 1.96 percent on Monday. That’s 60 basis points more than equivalent German government bonds, suggesting that investors see them as riskier.
Asian stocks rose for a third day and the won strengthened after US housing data boosted optimism in world’s largest economy. The euro fell after France lost its top credit rating with Moody’s Investors Service.
The MSCI Asia Pacific Index of shares advanced 0.3 percent as of 3:06 p.m. in Tokyo. Standard & Poor’s 500 Index futures slid 0.1 percent after the gauge surged 2 percent. The won increased to the highest in 14 months against the greenback, while the euro weakened against 14 of its 16 major peers. Copper declined 0.7 percent in London, Bloomberg wrote.
Euro-area finance ministers were expected to meet to try to plug a hole in Greece’s finances and win over the International Monetary Fund.
“While France’s downgrade is not good news, investors are getting more immune to issues in Europe than before,” Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $31 billion, said by telephone. “Improving data in the US housing market is a very positive signal.”
The Hang Seng Index rose 0.8 percent, while South Korea’s Kospi added 0.6 percent. A gauge tracking technology companies advanced 0.8 percent on MSCI’s Asian equities index, after Apple Inc. rallied 7.2 percent in New York. China Oilfield Services Ltd. paced an advance by energy producers.

Muddy Waters
Olam International Ltd., the commodities trader part owned by Singapore’s state-owned investment company, halted its shares from trading in the city-state after short-seller Carson Block questioned the company’s accounting methods. The shares fell 21 percent in over-the-counter trading in New York.
The euro fell 0.3 percent to 104 yen and declined 0.2 percent to $1.2789. The won climbed 0.4 percent to 1,082.23 per dollar, heading for its strongest close since September 2011.
“France’s fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand” and “structural rigidities” in the longer term, Moody’s said.

Bond Rally
When France was to AA+ from AAA on Jan. 13 by Standard & Poor’s, French government bonds gained 9.4 percent, compared with 3.4 percent for Germany debt, and 2.5 percent for that of the US, according to Bank of America Merrill Lynch index data.
Recycling European Central Bank profits on Greek bonds, charging the country lower interest rates and extending repayment deadlines are among the options under consideration for filling the new gap in Greece’s public accounts.
Officials said the Brussels meeting won’t make a final decision to release the next tranche of aid to Greece, partly because parliaments in Germany, the Netherlands and Finland have yet to weigh in.
The yen held daily gains after the Bank of Japan kept policy unchanged at the end of a two-day meeting. Japan’s currency added 0.1 percent to 81.32 per dollar after sliding to 81.59, the weakest since April 25.
Copper for delivery in three months dropped 0.7 percent to $7,752.25 a ton in London Metal Exchange trading. Tin slid 0.5 percent.
Crude for January delivery dropped 0.2 percent to $89.10 a barrel. Futures climbed 2.7 percent as Israeli ground forces honed preparations to enter the Gaza Strip for the first time in almost four years.

China Foreign Investment Falls

Foreign direct investment in China fell for the 11th time in 12 months as labor costs rose, an economic slowdown threatened to drag growth to a 13-year low and a territorial dispute with Japan weighed on trade.
Investment dropped 0.2 percent in October from a year earlier to $8.31 billion, the Ministry of Commerce said in Beijing.
FDI inflows in the first 10 months of the year declined by 3.5 percent to $91.7 billion, while non-financial outbound investment rose by 25.8 percent to $58.2 billion, Bloomberg wrote.

New Challenges for China
The decline in inflows highlights challenges for new Chinese leadership headed by Xi Jinping, who took the reins of the ruling Communist Party last week in a once-a-decade power handover, as officials seek to reverse a growth slowdown.
The world’s second-largest economy may expand by 7.7 percent this year, the weakest pace since 1999, based on the median estimate of analysts surveyed by Bloomberg News.
“Inward FDI will decelerate much faster next year,” given the economic slowdown and rising labor costs, said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “Outward FDI will continue the current trend of strong growth” and may surpass inbound investment within one year.”
The Shanghai Composite Index, China’s benchmark stock gauge, fell 0.3 percent as of the 11:30 a.m. local-time break. The gauge had declined 16.5 percent in the year.

Yuan Flexibility
Separately, People’s Bank of China Governor Zhou Xiaochuan reiterated that the nation will promote the convertibility of the yuan, increase its exchange-rate flexibility and push forward looser controls on interest rates.
Inbound investment in the first 10 months of 2011 rose 15.9 percent; last month’s drop was the smallest since May.
Other data are pointing to a growth recovery, with exports rising at the fastest pace in five months and industrial output and retail sales exceeding forecasts.
Economists have scrapped projections for any easing of monetary policy in the rest of 2012. Analysts surveyed by Bloomberg News Nov. 14-19 see China holding its reserve- requirement ratio at 20 percent through the end of the year, based on the median estimate. That compares with the median forecast for a 0.5 percentage-point cut in last month’s survey.

Airline Capacity
All Nippon Airways Co., Japan’s biggest carrier, said on Nov. 16 that it will extend capacity cuts on China routes into next month.
Chinese visitors to the country slumped 33 percent in October, according to data from the Japan National Tourism Organization, while Japanese trips to China may drop by as much as 70 percent until the end of March, said JTB Corp., Japan’s biggest travel agency.
Toyota Motor Corp., Honda Motor Co. and Panasonic Corp. reported damage to their operations in China in September as thousands marched in demonstrations over the disputed islands known as Diaoyu in China and Senkaku in Japan.

UK Home Rental Costs Still Rising

The cost of renting a home in England and Wales hit another new high in October although the pace of rent rises slowed, a survey has suggested.
LSL Property Services said that the ‘heat’ had come out of the rental market, as the quieter season for new tenants approached.
It said typical rent stood at £744 a month in October, up 0.4 percent on September, BBC reported.
Charity Shelter said the increasing cost “piles on the pressure” for hard-pressed families.
“This news is yet more proof that life is becoming more difficult for renters. In a week when inflation figures revealed a tighter squeeze on family budgets, every rent rise piles on the pressure,” said Campbell Robb, chief executive of Shelter.
“With the property ladder remaining out of reach for many, these figures are bad news for our growing population of reluctant renters.”
The typical cost of renting a home in October was 3.4 percent higher than in the same month a year earlier, the survey said.
October’s increase marked the seventh consecutive month of rent rises, although the picture differed in various areas of England and Wales.
The biggest increases were in London (up 0.9 percent) and the south-east of England (up 0.7 percent) compared with September. However, five areas saw rental costs fall, with the biggest drop in the East Midlands (down 1.8 percent).
“A combination of improved buyer activity and a seasonal slowdown has taken some of the heat out of the rental market, as it enters the traditionally quieter final months of the year,” said David Newnes, director of LSL.
“However, despite the deceleration, the fact that monthly rents rose by twice the rate seen a year ago points to the underlying strength of tenant demand.”
The level of late or unpaid rent fell to the lowest level since January, equating to 8.1 percent of all rent across England and Wales in October.