Finance Blog number 1

European inflation accelerated to the fastest pace in two and a half years and confidence in the economic outlook declined as surging energy prices threatened to undermine growth.

Inflation in the 17-nation euro region quickened to 2.8 percent in April from 2.7 percent, the European Union’s statistics office in Luxembourg said today in an initial estimate. Economists had expected inflation to remain unchanged, according to the median of 34 forecasts in a Bloomberg News survey. An index of executive and consumer sentiment slipped to 106.2 from 107.3 in March, the sharpest drop since May 2010, and unemployment held at 9.9 percent, separate reports showed.

Crude-oil prices have soared 38 percent in the past six months, pushing inflation above the European Central Bank’s 2 percent limit and prompting policy makers to raise interest rates this month for the first time in almost three years. At the same time, higher raw-material costs are weighing on consumption and company profits, just as governments across the region cut spending to narrow budget deficits.

“The inflation numbers support the view that the ECB will deliver another interest rate hike before long,” said Aline Schuiling, senior economist at ABN Amro Bank NV in Amsterdam. “Growth was exceptionally strong in the first quarter, but will slow from here. The labor market is still very sluggish and paired with inflation that’s not good for purchasing power.”

German Output

The euro was little changed after the data were released, trading at $1.4867 at 11:31 a.m. in Brussels, up 0.2%.

European services and manufacturing growth unexpectedly accelerated in April, driven by higher output in Germany and France, the region’s largest economies. Still, European investor confidence declined as faster inflation and higher interest rates may hurt the recovery. Euro-region growth will slow to 1.6 percent this year from 1.8 percent in 2010, the European Commission forecast last month.

A gauge of sentiment among euro-region manufacturers slipped to 5.8 in April from 6.7 in the previous month, the European Commission said today. Services confidence dropped to 10.4 from 10.8 and an index of consumer confidence eased to minus 11.6 from minus 10.6. Sentiment among builders rose to minus 24.2 from minus 25.4.

Debt Crisis

Capacity utilization rose to 81.3 percent in the second quarter from 80.3 percent in the previous three months, the commission said.

As governments from Ireland to Spain cut spending to contain a sovereign debt crisis, eroding consumer and investment spending, European companies have relied on faster-growing markets to bolster sales. Volkswagen AG (VOW), Europe’s biggest automaker, this week reported record operating profit in the first quarter on stronger demand from China.

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New Zealand’s central bank kept its benchmark interest rate at a record low as the nation recovers from the most devastating earthquake in 80 years, sending the country’s currency lower.

“The outlook for the New Zealand economy remains very uncertain,” Governor Alan Bollard said in a statement today in Wellington after leaving the official cash rate at 2.5 percent. “Given the outlook for core inflation and continued economic disruption from the earthquakes, the current level of the cash rate is likely to remain appropriate for some time.”

Bollard has scope to leave borrowing costs unchanged until late this year because economic growth is forecast to be as slow as 0.8 percent and price increases have been slower than forecast. He cut the key rate by half a percentage point in March after earthquakes in the southern city of Christchurch hurt consumer confidence and spending.

“Growth is coming from an extremely weak starting point,” Dominick Stephens, chief economist at Westpac Banking Corp. in Auckland, said before the release easy payday loans. “The pace of recovery from the recession has been tepid so far. There is still a lot of slack in the economy relative to its potential.”

The New Zealand dollar declined after Bollard’s decision and his statement that the economic outlook “remains very uncertain.” The currency slid to 80.45 U.S. cents as of 9:03 a.m. in Wellington from 80.80 cents just before the announcement.

“Higher oil prices and the elevated level of the New Zealand dollar are both unwelcome,” Bollard said. “They will have some dampening effect on economic activity.”

The currency is being buoyed by demand from carry traders who borrow in countries with low interest costs to fund purchases in markets with higher yields. They are seeing returns rebound from two-year lows as the U.S. Federal Reserve and Bank of Japan show no urgency to tighten monetary policy.

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Purchases of new houses in the U.S. rose in March from a record low as the weakest industry in the economy strained to recover.

New-home sales, tabulated when contracts are signed, climbed 11.1 percent to a 300,000 annual pace, faster than forecast, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey called for a rise to 280,000. Housing prices fell from a year ago.

The market for new homes faces competition from a glut of foreclosed properties that may keep prices depressed this year, discouraging new construction. Unemployment above 8 percent and housing’s struggles help explain why the Federal Reserve may announce at the end of this week’s policy meeting that it plans to complete the purchase of $600 billion of Treasuries by June.

“It’s a nice rebound from February but the bottom line is housing is continuing to trend sideways,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut, who correctly forecast March sales. “Builders have been doing their bit in paring inventory but the problem is they’re facing competition from distressed properties, high unemployment and prices that are still falling.”

Estimates in the Bloomberg survey of 68 economists ranged from 247,000 to 300,000. Sales in February were revised to a 270,000 annual rate from a 250,000 previously reported.

Stocks held earlier losses after the report and Treasuries were little changed. The Standard & Poor’s 500 Index fell 0.4 percent to 1,332.53 at 10:55 a.m. in New York. The yield on the benchmark 10-year note dropped to 3.38 percent from 3.39 percent.

Median Price

The median sales price decreased 4.9 percent from the same month last year, to $213,800, today’s report showed.

Purchases rose in three of four U.S. regions last month, led by a 67 percent surge in Northeast after a 54 percent slump a month earlier. Sales in the South were little changed at a 162,000 pace after February’s 163,000.

The supply of homes at the current sales rate fell to 7.3 month’s worth in March from 8.2 months. There were 183,000 new houses on the market at the end of March, the fewest since August 1967, indicating builders are reducing construction.

Previously-owned home purchases climbed 3.7 percent to a 5.1 million annual rate in March as a mounting supply of properties in or near foreclosure lured investors, a National Association of Realtors report showed April 20. All-cash deals accounted for 35 percent of the transactions, the most on record, while distressed properties including foreclosures and short sales made up 40 percent of all deals, the group said.

Existing-Home Sales

New-home sales are considered a more timely barometer than purchases of previously owned homes, which are calculated when a contract closes. Resales account for about 95 percent of the housing market so far this year.

Housing demand gyrated in 2010, reflecting a boost from a homebuyer tax incentive of as much as $8,000 that gave way to a plunge in sales by mid-2010 after the credit ended.

While sales have steadied, they have yet to strengthen, keeping builders pessimistic. The National Association of Home Builders’ confidence index fell to 16 this month from 17 in March. A reading under 50 means a majority of builders view conditions as poor.

KB Home (KBH)

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Vietnam’s inflation accelerated to the fastest pace since 2008, putting pressure on the government to tighten policy further after almost doubling a key interest rate in less than six months.

Consumer prices climbed 17.51 percent in April from a year earlier, according to figures released by the General Statistics Office in Hanoi today. The rate is the highest since December 2008 and compares with the 13.89 percent pace last month. Prices rose 3.32 percent in April from March.

Policy makers have boosted the repurchase rate to 13 percent from 7 percent in November and cut the target for 2011 credit growth to tame inflation and regain investor confidence in the government’s ability to prevent the economy from overheating. Still, food and commodities make up a large share of household spending and increases in gasoline and power costs will fuel inflation, Standard & Poor’s said this month.

“Inflation shows little signs of responding to monetary and fiscal austerity just yet,” said Bill Stoops, chief investment officer at Ho Chi Minh City-based fund manager Dragon Capital. “Government policies to slow inflation operate with a lag effect.”

The inflation rate may peak at almost 20 percent before easing to about 13 percent by year-end, according to U.K.-listed Vietnam Property Fund Ltd. (VPF), which is managed by Dragon Capital.

The repurchase rate at which the central bank performs open market operations is Vietnam’s key policy rate, according to Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG (CSGN), which expects an increase to 14 percent by the end of the year.

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Japan’s top automakers helped lead the Nikkei 225 index out of negative territory Friday after a key auto parts supplier announced the early resumption of some operations that had been halted after last month’s devastating earthquake.

Renesas Electronics Corp., a key provider of microprocessors that control brakes, engines and transmissions, said operations would resume early at its Naka factory in Ibaraki prefecture, where production was temporarily halted after the March 11 quake and tsunami that wreaked havoc along Japan’s northeastern coast.

Renesas had earlier said it intended to restart partial manufacturing at the Naka factory in July. The company said it is working “with more than 2,000 additional support workers dispatched from outside Renesas Electronics companies to help speed up the resumption of production as much as possible.”

Japan’s Nikkei 225 index rose 0.3 percent to 9,713.94, with automakers posting major gains. Toyota Motor Corp. rose 3 percent, Honda Motor Corp. bumped up by 2.3 percent and Nissan Motor Corp. jumped 3.6 percent.

However, some major Japanese exporters slipped as the yen gained against the U.S. dollar. Canon Inc. dropped 1.3 percent and Sony Corp no fax pay day loan. was down 0.6 percent.

The Nikkei was one of a handful of exchanges open in Asia on the Good Friday holiday.

South Korea’s Kospi index was flat at 2,198.30, and mainland China’s Shanghai Composite Index was down 0.6 percent to 3,007.63 as investors booked profits following a week of gains. The smaller Shenzhen Composite Index was down 0.7 percent to 1,273.01. Taiwan’s TAIEX rose 0.1 percent to 8,969.43.

Markets in Hong Kong, India, the Philippines, Australia, New Zealand and Singapore were closed.

On Wall Street, strong earnings from large companies like Apple Inc. and UnitedHealth lifted stocks broadly higher Thursday. Gains were spread across the market, with all 10 company groups that make up the S&P 500 index closing the day with gains.

The Dow rose 52 points to close at 12,506. The S&P 500 rose 7 points to 1,337. The Nasdaq rose 18 points to 2,820.

The euro rose $1.4577 from $1.4544 late Thursday in New York. The dollar dropped to 81.85 yen from 81.90 yen.

Oil was untraded in Asia due to the holiday.

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Schlumberger says earnings increased 40 percent in the first quarter on stronger demand for its services in North America.

The Houston company on Thursday reported first-quarter income of $944 million, or 69 cents per share. That compares with $672 million, or 56 cents per share, in the same part of last year. Revenue increased 56 percent to $8.72 billion.

Excluding special charges, Schlumberger says it earned $972 million, or 71 cents per share.

Analysts expected the company to earn 76 cents per share on sales of $8.83 billion, according to FactSet.

Demand from the oil industry for testing and other services provided by Schlumberger has soared this year as oil prices rose to two-year highs. Rival Halliburton Co. said its first-quarter earnings more than doubled to $511 million.

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Renren, China’s largest social-networking service, filed for a U.S. initial public offering late Friday in a bid to fund expansion.

The so-called Facebook of China plans to sell shares for $9 to $11 each, according to Renren’s filing with the Securities and Exchange Commission.

Renren said in its filing that it is the leading social networking site as measured by total page views, total number of visits and total user time spent on its websites as of February. Renren cited data from iResearch.

The company’s platform — which also features an online games site, a social commerce site and a professional networking service — had about 117 million activated users as of March 31, 2011.

Renren said it plans to use proceeds from the IPO to expand its technology, development and marketing. It will trade on the New York Stock Exchange under the symbol "RENN."

China Internet stocks have been hot on the U.S. market in recent months. Back in December, shares of Dangdang (DANG) and Youku (YOKU) — China’s Amazon and YouTube respectively — soared after making their U.S. debuts.

Experts have said Renren competitor Kaixin001 could also go public in the U payday loans.S. this year.

Meanwhile Baidu (BIDU), China’s top online search company in China, has reported stellar earnings — as has Internet media company Sohu.com (SOHU).

Stateside, the tech IPO market is showing signs of thaw. LinkedIn filed in January, while Demand Media went public the same month. Pandora filed for an IPO in February. And online real estate company Zillow filed to go public Monday.

But everyone’s waiting for Facebook — and the golden child hasn’t shown much interest in going public soon.

Still, the social network said earlier this year that it will begin filing public financial statements by April 2012. That’s a move likely to coincide with an IPO, as regulatory rules are forcing Facebook’s hand.

When companies have more than 499 shareholders, they’re required to publicly disclose their financial results and file quarterly reports to the SEC. Facebook has said it expects to pass the 500 shareholder mark sometime this year. 

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China’s new home price growth slowed in Beijing and Shanghai in March as the government intensified property curbs, sending the property stock index to its highest in a year.

New home prices in the capital of Beijing rose 4.9 percent in March from a year earlier, easing from a 6.8 percent gain in February, the statistics bureau said on its website today. In Shanghai, the country’s financial hub, prices climbed 1.7 percent last month, down from 2.3 percent growth in February. Of the 70 cities monitored by the government, 67 cities posted gains, down from 68 in the first two months, the data showed.

The government said last week that its measures are working. About 40 cities said last month they will cap new home prices below annual economic and disposable per-capita income growth or keep them steady following the central government’s measures to rein in housing values. China also said yesterday it will raise banks’ reserve requirements starting April 21 to cool inflation, and central bank Governor Zhou Xiaochuan said monetary tightening will continue for “some time.”

“The turning point for home prices is getting closer and closer,” Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said in a phone interview. “The government is sending a strong signal to further tighten the liquidity and continue to control home prices.”

Challenges

Premier Wen Jiabao said last week in a cabinet meeting that the country faces challenges including rising property prices in many cities even as real estate transactions shrink. The government also raised the minimum down payment for second-home purchases this year and levied taxes on residences in Shanghai and Chongqing. Beijing and Guangzhou imposed restrictions on housing purchases in February, while the central bank raised interest rates twice this year.

The measure tracking property stocks on the Shanghai Composite Index rose 0.9 percent to the highest since April 16, 2010, at the 11:30 a.m. midday break. It also posted the biggest gain among the five industry groups on the benchmark gauge.

Home prices in Sanya on southern Hainan island fell the most by 0.6 percent last month from a year earlier. Nanchong in the western Sichuan province posted a 0.5 percent decline, while prices in Quanzhou in the country’s southeast were unchanged, the statistics bureau said.

‘Clear Sign’

New home prices in Beijing were unchanged in March from February, when they recorded a 0.4 percent month-on-month gain. In Shanghai, they added 0.2 percent in March, down from a 0.9 percent increase in February from the previous month. Of the 70 cities, 12 posted price declines in March from February, when only eight cities reported a drop in housing values, according to the data.

It’s a “clear sign that the market is cooling,” said Sun Mingchun, chief economist at Daiwa Securities Capital Markets in Hong Kong, adding that month-on-month data is more reflective of market trends. “Once we get higher bases and further price declines in the coming months, we should see year-on-year price changes turning negative in more and more cities.”

Existing home prices in Beijing fell 0.1 percent from February, while those in Shanghai jumped 0 low fee cash advance.4 percent.

China’s home sales value rose 26 percent in the first quarter to 860.7 billion yuan ($132 billion) from last year, driving all property transactions 27 percent higher to 1.02 trillion yuan, the statistics bureau reported last week.

Hot Money

Hot money inflows into the Chinese property market is creating bubbles in some cities, Jiang Jianqing, chairman of Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, said on April 15.

Moody’s Investors Service lowered its outlook for China’s property sector on April 14 to “negative” from “stable” on concern residential sales could decline by as much has 30 percent as local government enforce housing restrictions.

The effects of the government’s controls on the property market were evident in the first quarter, Sheng Laiyun, spokesman for the statistics bureau, said in Beijing on April 15. China’s investment in real estate rose 34 percent to 885 billion yuan in the first quarter, the government said last week.

“Property investment is still robust and we are seeing a mixed picture,” said Shen Minggao, Citigroup Inc.’s China research head. “It’s too early to draw a conclusion on whether the government curbs took effect. It might also be because these are lagging indexes.”

Mounting Concerns

The International Monetary Authority said April 11 that rapid credit growth has created “mounting concerns about the potential for steep corrections in property prices” in China.

Today’s figures came after private data showed the country’s housing market remained robust. China’s home prices rose 0.6 percent in March, expending gains, SouFun Holdings Ltd., operator of China’s biggest real estate website, reported on April 1.

There will be more government measures in the next month, Du Jinsong, a Hong Kong-based analyst for Credit Suisse Group AG, said in an interview with Bloomberg Television today.

“This is a wakeup call for some of those who are very bullish,” said Du, who predicted in November the government will introduce more property curbs. “That means the government will definitely come up with more measures.”

China Vanke Co., the country’s biggest publicly traded developer, said March contracted sales value fell 37 percent from a year earlier in 14 major cities including Shanghai, Beijing and Guangzhou.

“Local government implementation will be critical, and all developers are quite cautious and are focusing on getting presales early,” Christie Ju, head of Hong Kong and China research at Jefferies Equity Research, said in an e-mailed response to queries.

China stopped releasing national average property prices and changed methodology of the survey starting this year, the statistics bureau announced on Feb. 17.

–Bonnie Cao. Editors: Linus Chua, Malcolm Scott

To contact Bloomberg News staff for this story: Bonnie Cao in Beijing at +86-21-6104-3035 or bcao4@bloomberg.net

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Japan’s economy will overcome some temporary setbacks and may recover once reconstruction from last month’s earthquake and tsunami damage begins, Finance Minister Yoshihiko Noda said.

“Japan’s economy will likely slump in the near-term, but it may start to recover once reconstruction activities start kicking in,” Noda said in Washington overnight, after a meeting of finance ministers and central bankers from Group of 20 nations. “We need to keep in mind three uncertainties — the nuclear problems, power supply shortages and global supply chain disruptions.”

The March 11 magnitude-9 earthquake and tsunami left more than 28,000 dead or missing, knocked out plants, and triggered a nuclear crisis. The government last month estimated damages from the disaster may swell to as much as 25 trillion yen ($300 billion).

While the recovery is “broadening and becoming more self- sustained,” unrest in the Middle East and North Africa, as well as Japan’s earthquake, raise “uncertainty” in the outlook, G- 20 finance ministers and central bankers said in a statement. The G-20 will provide “any needed cooperation” with Japan, it said.

Priority on Relief

Noda said the priority for the government is to undertake relief measures, such as building temporary homes for evacuees displaced by the disaster and clearing debris, and to submit an extra budget to parliament in April to finance that work. Following that, the government should immediately start compiling a second extra budget for reconstruction that could require more financing, he said.

“It’s necessary to address whether we are going to seek a path to restore fiscal health in the medium-term at the same time,” Noda said, indicating the government may flesh out a consolidation plan around the middle of the year when it reviews its fiscal goals.

Japanese Prime Minister Naoto Kan plans to unveil this month what he says may be the first of multiple supplementary budgets. Chief Cabinet Secretary Yukio Edano told reporters on April 7 that the first budget may be 4 trillion yen.

Chernobyl Level

The quake and ensuing tsunami crippled the Fukushima Dai- Ichi nuclear plant operated by Tokyo Electric Power Co., causing radiation leaks and power shortages in eastern Japan. Government officials this week raised the severity level of the accident to the same level as the 1986 Chernobyl disaster.

Bank of Japan Governor Masaaki Shirakawa, who held a joint press conference with Noda in Washington, said he told the G-20 members that Japan’s financial system and the financial markets remain “resilient” after the disaster.

“We will continue strong support of the economy and financial markets,” Shirakawa said.

After the disaster in northeastern Japan, the central bank doubled to 10 trillion yen a fund to provide cash to markets by buying assets such as corporate debt and exchange-traded funds. It also unveiled a 1 trillion yen, one-year loan program for banks, aimed at getting funds to companies hit by the quake and tsunami.

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The United States, Britain and France are pledging to keep up the military campaign in Libya until leader Moammar Gadhafi leaves.

In a joint declaration, U.S. President Barack Obama, British Prime Minister David Cameron and French President Nicolas Sarkozy say they will not stop the campaign and “remain united” _ despite European complaints about the low-profile U.S. role.

The leaders say that as long as Gadhafi remains in power, NATO and its partners “must keep up their operations” to protect civilians and increase pressure on Gadhafi.

They say Gadhafi must leave “definitively.” If he doesn’t, they warn, his opponents would face vicious reprisals and the country could become a haven for extremists.

Sarkozy’s office released the declaration to The Associated Press late Thursday.

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