#MARKETS ‘ Wall St. joins global stocks slide; euro, bonds rise

#AceMarketsNews – Sept.24: Stocks around the world fell for a fifth day on Thursday, sliding towards two-year lows, as worries lingered over global economic growth and the scandal over Volkswagen’s emissions test-cheating rattled Europe’s carmakers.

Government bond prices rose on safety bids, while the dollar fell against the euro but jumped to a 13-year high against the Norwegian crown after a surprising cut in the oil producer’s interest rates.

Wall Street equity indexes fell in trading clouded by concerns about global growth and ahead of a speech later Thursday by Federal Reserve Chair Janet Yellen that comes a week after the U.S. central bank shook markets by keeping in place near-zero interest rates.

The Dow Jones industrial average fell 104.46 points, or 0.64 percent, to 16,175.43, the S&P 500 lost 10.54 points, or 0.54 percent, to 1,928.22 and the Nasdaq Composite dropped 34.36 points, or 0.72 percent, to 4,718.38.

Shares of Caterpillar fell as much as 8 percent to a five-year low of $64.65. The company slashed its revenue forecast for 2015 by $1 billion and said it could cut up to 10,000 jobs through 2018 amid a downturn in mining and energy industries.

Tokyo’s Nikkei closed down 2.8 percent as Japan returned from an extended break, setting a gloomy tone in Asia and Europe’s bourses.

EMISSIONS TEST SCANDAL

Shares of Volkswagen, which had been battered on news it cheated on diesel-emissions tests, clawed back 0.6 percent after some reassuring German and French sentiment data.[.EU]

However, the scandal threatened to widen to VW’s rivals, and share prices of BMW, Renault, Fiat and Daimler all ended lower. [.EU]

Those declines dragged London’s FTSE down 1.2 percent and Frankfurt’s DAX and the Paris CAC 40 indices by nearly 2 percent, to leave MSCI’s 45-country All World index off 0.9 percent and with a fifth day of losses.

Prices for U.S. Treasuries and German Bunds were driven up by investor concerns over possibly slowing global economic growth and the stocks selloff.

Benchmark 10-year Treasuries notes rose 14/32 in price for a yield of 2.098 percent, down nearly 5 basis points from late on Wednesday. The 10-year yield touched its lowest level in four weeks at 2.081 percent. [GVD/EUR] [US/]

Norway’s crown slumped 2 percent after its central bank unexpectedly cut interest rates.

The euro added to gains it had made on Wednesday, when European Central Bank chief Mario Draghi appeared to suggest a fresh round of money printing wasn’t as close as many analysts had thought.

The euro was last up 0.50 percent at $1.124.

Oil prices were under pressure from the equities slump but seesawed were last up slightly.

Platinum which has been hammered by the VW scandal because it used in catalytic converters to clean exhaust emissions, also rebounded having hit its lowest level in more than 6-1/2 years.

Emerging market currencies remained under heavy fire too.

The Brazilian real at one point sank to a new all-time low of 4.2482 per dollar, clobbered by a recession, fiscal deficit and political instability following corruption allegations against leading politicians in the world’s seventh-largest economy. [EMRG/FRX]

(Editing by Bernadette Baum and Nick Zieminski)

Wall St. joins global stocks slide; euro, bonds rise

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FEATURED: ‘ Govt and Bank Indonesia need to synchronize policies to resolve currency volatility: Economist ‘

In limbo: Traders work in a booth on the floor of the New York Stock Exchange, Thursday, Sept. 17, 2015. The Federal Reserve is keeping U.S. interest rates at record lows in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. (AP/Richard Drew)In limbo: #AceFinanceNews – Sept.24: Traders work in a booth on the floor of the New York Stock Exchange, Thursday, Sept. 17, 2015. The Federal Reserve is keeping U.S. interest rates at record lows in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. (AP/Richard Drew)

The government and the central bank need to synchronize interrelated policies to reduce the volatility of the rupiah amid uncertain economic situations, following the US Federal Reserve’s (Fed) delayed interest rate increase, scholars said.

“The rupiah will continue slumping because of weak synchronization between the government and Bank Indonesia [BI],” Latif Adam, economist at Indonesian Institute of Sciences (LIPI), told thejakartapost.com.

For example, Latif said, when the central bank decided to raise minimum down payments for housing credit, or loan to value (LTV) and financing to value (FTV), then at the same time the government should have increased value added taxes for luxury goods (PPN BM).

“Even though the government has immediately reviewed its policy on PPN BM, such an unsynchronized approach to policy has created a negative perception among the market that has hampered monetary and capital market sectors,” Latif said.

The rupiah depreciated further on Wednesday afternoon by 0.65 percent to Rp 14,646 per US dollar. The Jakarta Composite Index (JCI) dropped 2.29 percent to 4,244.43 at the close on Wednesday. The Indonesian market closed on Thursday due to a Muslim holiday.

According to Latif, the Fed’s delayed decision built market perceptions that the US central bank was still planning to increase its interest rates, adding that the situation could trigger massive purchases of US dollars in anticipation of the Fed’s next policy.

“Retaining big numbers of US dollars by the Indonesian market could keep weakening the rupiah and pushing down the JCI,” he asserted.

Associate Professor in Finance at Univesity of Indonesia Budi Frensidy said that the government and BI were in a dilemma between stabilizing the rupiah and boosting the real sector, adding that it was caused by the recent Fed policy not to increase its interest rate as the market expected.

“I think the rupiah will still face difficulties with strengthening due to the uncertainty of the US interest rate. The rupiah would start strengthening when there is assurance from the Fed about increasing interest rates to moderate levels,” Budi said.

According to Budi, the market expects the US central bank to increase its benchmark rates moderately in order to make sure investors keep investing in emerging markets.

Budi said what the government needs to do is to boost the purchasing power of the people by reducing fuel prices, limiting additional foreign debts by private corporations and reducing projects that are financed in US dollars.

“The government needs to give incentives for industries in order to reduce cutting jobs due to the weakening rupiah,” he said.

Bank Indonesia decided last week to keep its benchmark interest rates at 7.5 percent on the same day with the gathering of the Fed’s Federal Open Market Committee (FOMC) that also decided to maintain its interest rates near zero.

Budi said the government should issue further economic policy packages in response to the current global economic conditions that affect the Indonesian economy, adding that the policy has to be in line with monetary policies.

President Joko “Jokowi” Widodo has previously issued three policy packages that have pushed national industrial competitiveness through deregulation, de-bureaucratization, law enforcement and economic certainty.

Original Article: http://www.thejakartapost.com/breaking/news/2015/09/24/govt-and-bank-indonesia-need-synchronize-policies-resolve-currency-volatility-econom

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