Interview: Asia Pacific markets
>> 912 9:12 a.m. in sydney, a dry wednesday, sunny breaks increasing throughout the day with the high temperature of 23 degrees celsius. trials for those accused of war crimes in iraq tops world news. ron madison joins us from tokyo.
>> iraq’s interim prime minister says the war crimes trials will begin next week. in a televised address, iyad allawi says the trials will begin so justice can be done in iraq. he didn’t specify if saddam hussein would be among the baath party officials to be tried. despite allawi’s comments, government leaders have recently said the special tribunal is not ready to begin trials yet. elsewhere in iraq, a car bomb snrods explodes near a checkback that led to the green zone, leaving several dead, including a member of iraq’s national guard. the attack follows a blast yesterday at the same location. that blast killed 10 people. the green zone is a frequent target of militants. militants hoping to show that no part of iraq is safe, even the heavily fortified green zone. interim palestinian leader mucked mucked―mahmoud abbas calls for an end to the intifada, the uprising against israel. his most recent comments are his strongest since the death of long-time leader yasser arafat last month. abbas is the front runner to win january leadership elections. in turkey, a fire breaks out in a movie theater. rescuers fear some were trapped inside. it happened in istanbul. the associated press reports the theater was hosting an opening gala of a new film. rescuers say an unspecified number of people may have been trapped inside. that is the latest look at world news. back to you in hong kong.
>> thanks, ron. economists are already looking ahead to the fed’s next meeting in february. bloomberg’s latest poll of economists show most expect another quarter-point increase. su keenan has more from new york.
>> economists say they’re taking their cue from the fed’s latest statement that it’s keeping its plan to carry out future increases at a measured pace. alan blinder says the markets have come to define this as 25 basis points per meeting. the fed said in the latest statement “with underlying inflation expected to be relatively low, the committee believes policy accommodation can be removed at a pace that is likely to be measured.” william ford offers translation.
>> they’re saying stand by for more small increases as long as the economy continues to do well.
>> our latest bloomberg poll of economists in the u.s. shows agreement. the consensus is for another quarter-point increase at the fed’s february meeting. goldman sachs ed mckelvey says it’s too soon for the fed to stop tightening.
>> inflation is getting towards the spot where they would like to keep it. so at some point they’ll probably have to send the signal that says no more. as the growth rate slows, we think the fed will continue to tighten for that reason.
>> kirk cart with swiss re says the fed is less concerned about inflation and believes the fed will continue on its current path.
>> it’s not a big factor but i have it at a little bit higher than they do, 2% next year instead of 1.7. nevertheless, that just means the fed doesn’t have to go quickly to a neutral rate. and a measured pace is 25 basis points per meeting and that’s what i expect them to continue to do.
>> michael rosenburg, marvard management’s currency strategist, says the effects will be offset by the weakening dollar.
>> the weaker dollar helped the fed out and helped them nudge short-term rates higher today and going ahead into 2005. higher short-term rates, obviously, acts as a constraining force on the u.s. economy. but if you have a weaker dollar offsetting, the overall level of monetary conditions in the united states won’t be as tight.
>> another specialist disagrees and predicts the federal reserve will do nothing at the next meeting so it can see how the past five increases are affecting the economy. i’m su keenan, back to you.
>> thank you. general electric expects profit growth as much as 17% next year as new businesses spur sales. chief executive jeffrey immelt says the world’s biggest company by market value will return to 10% annual profit growth for the foreseeable future. immelt expanded g.e.’s business into healthcare and consumer finance while selling lower return units like insurance. immelt expects earnings of as much as $1.83 a share next year, up 17%. we’ll have more on currencies and how the dollar has performed after the break.
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Listen Interview: The Tankay Survey
welcome to “ live” from hong kong. i’m catherine yang. the fed in washington and the b.o.j. in japan top our coverage today. full fed coverage is coming your way, including a live report from new york, what it means for asian markets and live discussions with a currency strategist and u.s. investment strategist. we’re gearing up for the bank of japan’s influential tankan report and preview the quarterly survey of business confidence in a moment and bring you the numbers when they break in just under two hours, including reaction from two guests in tokyo. the federal reserve indicates more rate increases to come after raising its benchmark interest rate by a quarter point for the fifth straight time to 2.25%. alan greenspan and the rest of the fed governors kept the same wording in their statement that more increases will be at a measured pace and signaled inflation is under control. several fed members pointed out earlier this month higher oil prices, improving labor market and weaker u.s. dollar were inflationary concerns. we’ll have more details from new york in 10 minutes. the dollar’s rally against the euro stalled, reversing course after the fed signaled inflation is contained, an indication it won’t get aggressive on interest rates. the dollar held on to gains against the yen. a report indicating the u.s. trade deficit widened to a record $55 billion in october failed to weaken the dollar, even though it came in bigger than expected. the 10-month total topped half a trillion dollars, also a record. on wall street, stocks extend gains after the fed rate increase. technology shares lifted the market. the dow and s&p 500 closed .4% higher, the nasdaq rose .5%. investors were encouraged by m&a news. shares of veritas rallied on reports that symantec may purchase veritas. the 10-year note rises after the fed says inflation remains tame. asia stocks rising in u.s. trading, the bank of new york indexes tracking asian stocks rose, nikkei futures pointing to a higher start when the tokyo stock exchange opens in two hours. the bank of japan tankan survey may add to concerns that the economy is faltering. economists expect the tankan survey to show japan’s largest manufacturers are becoming less optimistic. gene otani is standing by with a preview.
>> the tankan means short term economic outlook and is the most closely watched index of business confidence in japan and asks companies like toyota, sony and canon about outlooks for sales and profits and spending. economists we surveyed say japanese businesses may be less confident partly because of the stronger yen. companies like mitsubishi gas chemical may say further yen -- gains in the yen against the dollar may hurt earnings. bank of japan governor toshihiko fukui adds that oil prices are also a risk. fukui predicts growth to be sustainable. some economists agree, saying business investment may pick up as companies improve finances.
>> companies are minimizing debt. that process is ending. it’s not over yet but and companies came out april last year and now the balance sheet problems are over, that stimulates all the other companies to follow suit because you cannot just pay down debt when other companies are already out of the tunnel, grabbing for new market. so that part of the recovery will continue.
>> investors will also watch out for a report on confidence from banks, retailers and non-manufacturers to gauge where the domestic economy is heading. some economists say a record number of typhoons may hurt retail sales. wages have declined four of the past 44 months as companies replace full-time workers with part-time workers.
>> while the economic environment got better, when you look at the customers in stores and how they’re spending money, there isn’t a sense that conditions have improved.
>> we’ve been speaking to investors ahead of the tankan and money managers saying the economy is at an important crossroad. the ad said today’s tankan survey may provide evidence pointing to a rebound in domestic spending and consumer confidence. i’ll be speaking with the president of one retail outlet company. i’ll ask him about his assessment of japanese consumer spending.
>> thailand’s central bank will probably leave interest rates unchanged. economists we surveyed expect the bank to keep the interest rate at 1.75%. thailand raised rates in october. the bank’s decision is expected this afternoon in bangkok. also today, australia’s westpac banking corporation releases its index of leading economic indicators. singapore reports october retails. malaysia reveals inflation figures and the philippines report jobless figures. air china starts trading today, debuting on the hong kong stock exchange this morning and opened on the london stock exchange later today. air china will use the money to buy planes and cut debt. the airline sold more than 2.8 billion shares at $2.98 hong kong each. we’ll go to david tweed, our stock market editor in sydney. how are japanese stocks likely to react to the tankan survey.
>> we’ll have to wait to see what the number is. we expect a decline. but what’s important is whether the survey comes out better or worse than expected. the number we expect is 22. i think it’s useful to go back and see how the markets reacted last time. last time, october 1, we saw that the tankan survey number came in better than expected by about three points. and you could see that the topix and nikkei increased with a 3% increase in the banking index. today, depending on whether we’re better or worse, watch out for mitsubishi tokyo, mizuho financial. real estate companies did well last time because it’s about a reading for the domestic economy. another to watch is mitsubishi estate company, companies to watch depending on whether we’re better or worse when the market opens in japan.
>> what about the u.s. interest rate decision? what effect might that have on stock trading in the rest of asia?
>> we’re seeing an indication that the―if it wasn’t the tankan survey coming out today, that the nikkei would probably rise. the australian market is indicating higher. the key thing here is the comments about inflation remaining relatively low and the economist with prudential retirement saying he’s willing to bet inflation will remain low and thinks there’s a high probability there may be a pause. also in australia, glenn stevens from the reserve bank of australia, gave indications that maybe in australia there won’t be interest rate rises to come for the time being, that most of the work has been done in australia in terms of interest rates and the australian dollar has fallen on the back of that one, cathy.
>> thank you. after the break, more on the fed’s latest interest rate decision and a preview of what’s in store next year. our reporter is standing by in new york.
