Yen again fall after the G20, the earnings worries hit stocks

1 of 7. Traders are pictured at their desks in front of the DAX Board at the Frankfurt Stock Exchange 4 January, 2013.

Credit: Reuters/remote/Joachim Hermann

By Richard Hubbard

LONDON | Mon Feb 18, 2013 9: 6 am EST

London (Reuters)-the yen resumed falling on Monday after Japan signaled it will push ahead with expansionist monetary policies as escaped criticism from the 20 largest economies in the world at the end of the week.

European shares and industrial metals fell on lingering worries about the Economic Outlook, especially for the eurozone. The risk of inconclusive results in Italian elections at the weekend, also added to investor concerns.

Though activity was diminished by the closure of markets in the United States for the holiday Presidents ' day.

The yen, which has fallen 20 percent against the dollar since mid-November, fell further after the financial leaders of the g-20 promised not to devalue their currencies to boost exports and avoids singling out Japan for any direct criticism.

"Future Yen direction will continue to be driven by internal monetary policy by the Bank of Japan and the rising confidence of international investors, who are both driving the yen weaker," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.

Japan Prime Minister Shinzo Abe seized the opportunity to continue the pressure on the Central Bank to loosen policy, telling Parliament that Japanese buying of foreign bonds may be among options, the Bank of Japan to adopt.

The result is the dollar rising 0.5 percent to 93.98 yen, near a 33-month high of 94.47 Yen set a week ago. The euro rose 0.2 percent to 125.32 yen, roughly halfway between Friday two-week low of 122.90 and 34-month high of 127.71 Yen hit earlier this month.

Strategists said that while the yen is likely to remain weak, its decline could lose momentum as investors wait for more clarity on who will be having headed into the Bank of Japan when this Governor steps down on March 19.

"The big unknown is who will be appointed as the new BoJ Governor, so it's hard to put on a massive positions in advance," said Saeed Amen, currency strategist at Nomura.

Abe is poised to nominate the new Governor in the coming days. Sources said Thursday that the former financial bureaucrat Toshiro Muto, was likely to be less radical than the other candidates, is a leader in the field.

Elsewhere in the Forex market, Sterling hit a seven-month low against the dollar after a key policymaker makes comments about the need for further weakness and recent poor data that has kept alive worries of another British recession.

Sterling fell 0.15 percent to $ 1.5492, having earlier touched $ 1.5438, its lowest since July 13.

DATA LOOMS

A great week on the prospects for the global economy weighed on other risky assets markets after the recent dire fourth quarter growth numbers for the euro area and Japan, the United States on Friday producing soft shapes.

On European markets, the focus has been on euro zone purchasing managers indices for February and indexes, German sentiment later in the week. They could affect the hopes for recovery this year.

Analysts expect Thursday's euro zone Flash PMI indices, which offer pointers to economic activity about six months to show growth stabilizing in the whole region of hit, leaving intact expectations for recovery in the second half of 2013.

Concern about the elections inconclusive results of Italian on Sunday and Monday have been added to weak sentiment as a fragmented Parliament might prevent future Government efforts to reform the struggling economy.

Worries about the Outlook for Italy are encouraging investors back into safe-haven GOVERNMENT BONDS, German on Monday, with the 10-year Bund yields easing 3.6 basis points to be about 1.63 percent.

"Political uncertainty will keep bonds well bid this week," ING rates strategist Alessandro Giansanti said only better-than-expected economic data adding can create selling pressure on German debt in the near future.

Italian 10-year yields are 7 basis points higher on the day at 4.44%.

EARNINGS HIT

European equity markets were taking their lead from corporate earnings reports that have a reflective slow economic conditions in the region.

The Danish beer Carlsberg (CARLb. CO), which generates more than 60% of its sales in Western Europe, became the latest to report weaker-than-expected quarterly profit, sending its shares to its lowest level in nearly a month.

6.8 per cent drop for shares in the world's fourth largest brewery helped send the FTSEurofirst 300 index of top European FTEU3. shares down 0.3 percent at midday. In Germany the Dax.France SAS GDAXI, f-40.FCHI and UK FTSE-100.FTSE ranged between 0.1% and 0.3% lower.

Earlier, the effect of the G20 report, and the comments by Abe indicating renewed for stimulating the Japanese economy lifted the N225 Nikkei stock exchange index 2.1.%, up to the highest level since September 2008.

MSCI equity index in the world.MIWD00000PUS is flat as markets extended a two week period of consolidation, which has followed the big run-up in January when demand was spurred by the efforts of central banks to stimulate the global economy.

Data from EPFR global, a company based in the United States, which tracks the flow and distribution of resources worldwide, shows investors pulled 3.62 billion of United States stock funds in the latest week, 10 weeks after the neutral position a week ago.

But demand for emerging market equities remains strong, with investors putting up 1.81 billion in new money in stock funds, the Fund tracking firm said.

CHINA RETURN

In commodity markets, traders played catch-up after a week-long vacation last week in China, the second-largest user in the world of many raw materials, which has behaved, humble, with worries about economic prospects of sentiment.

Honey, for which China is the largest consumer in the world, dipped to near three-week low of 127.50, $8 metric tons (1.1023 tonnes) on the London Stock Exchange. Benchmark Tin and nickel also touched a three-week low.

Bargain hunters helped gold rise six months low to 0,2% of the $ 1, 611.87 per ounce with Jewelers in China return to the physical market after the Lunar New Year holiday.

Crude oil markets are mostly stable after some weak data on industrial production in the United States on Friday [ID: nL1N0BF44A] has seen slow demand, while the tension in the Middle East lent some support.

"We continue to see a mixed picture outside the United States. Industrial production was lower than expected but this should not affect the total upwards, "Olivier Jakob, an analyst at Geneva-based Petromatrix, said.

Brent was flat at $ 117.66 a barrel after posting their first weekly loss since the first half of January. United States crude slipped 19 cents to $ 95.67. U.S. crude.

(Additional reporting by Marius and Ron Bousso. editing by Philippa Fletcher)