Market News (Update for the last 7 days from 21-6-2006 to 27-6-2006):

24-6-2006 Tokyo -- BOJ Weighing Stricter Internal Rules For Investments, Assets

The Bank of Japan is eyeing the introduction of stricter rules governing its officials' investment activities, including possible restrictions on owning certain assets and mandatory asset disclosures, The Nihon Keizai Shimbun learned Friday.

This comes in response to the recent storm over BOJ Governor Toshihiko Fukui's personal shareholdings and his investment in a fund overseen by Yoshiaki Murakami, who was arrested earlier this month for suspected insider trading.

24-6-2006 Tokyo -- Yen Buffeted By Uncertainty Over BOJ's Fukui, Rate Hike

The ongoing controversy surrounding Bank of Japan Governor Toshihiko Fukui's stake in an investment fund suspected of insider trading is weighing down the yen.

24-6-2006 Tokyo -- TSE Eyes Strategic Tie-Ups With NYSE, Asian Bourses

In response to the ongoing consolidation of stock exchanges worldwide, the Tokyo Stock Exchange is considering partnerships with the New York Stock Exchange and Asian bourses.

24-6-2006 Beijing -- China cracks down on land sale corruption

The Chinese government has issued a flurry of headline-grabbing edicts over recent weeks to quell popular unrest about spiralling home prices, directing banks to rein in loans and developers to build more low-costhousing.


23-6-2006 Tokyo -- Fukui struggles to survive amid pressure

Yesterday, a poll in the Yomiuri newspaper found that 40 per cent of the public thought Mr Fukui should quit. Someone who knows the governor said: "Fukui is becoming a kind of scapegoat in this general backlash against what happened in five years of the Koizumi administration. The media are trying to portray him as a villain who was making lots of money while the public was suffering from zero interest rates."

The scandal broke last week, when Mr Fukui was questioned in parliament about his original investment. He tried to defuse the situation by apologising and promising to donate profits ??his investment had more than doubled in six years ??to charity. This week, he volunteered a 30 per cent salary cut for six months.

But pressure for him to quit is gathering momentum. A meeting yesterday with Junichiro Koizumi, prime minister, sparked rumours of his pending resignation, despite assurances that he was merely discussing economic and monetary policy. On the same day, the governor was again in parliament, expressing his "deep regret" for failing to act more prudently. He will be hauled back today to explain himself to the upper house. Next Tuesday, he appears yet again, this time to give full disclosure of his assets and BoJ salary.

BoJ officials say this could be a decisive moment. Mr Fukui's annual compensation runs to Y36m, plus fringe benefits including a chauffeur-driven car. He also owns shares in five companies worth a total of Y34m. The governor has added to public outrage by portraying such assets as modest. Much will depend on how this plays in parliament and whether there are further revelations about his personal wealth.

Yosuke Kondo, vice-chair of the opposition Democratic Party of Japan's Diet affairs committee, said: ??He has lost public trust. It will be a huge risk for Japan to have such a person as its central bank governor.??br />
If anything, Mr Fukui's tone on monetary policy has hardened in recent days, suggesting he is ready to preside over the bank's exit from zero interest rates as early as next month. Assuming, of course, he survives that long.

23-6-2006 Tokyo -- Japan to support sanctions against Iran

Japan has told the US it is ready to freeze bank accounts held by Iran and its leadership in support of an America-led coalition preparing sanctions in the event that Iran refuses to halt its nuclear fuel programme, officials have told the Financial Times.

Japan's decision to join the ??coalition of concerned countries??will be seen as a serious setback for Iran, which has tried to exploit divisions within the international community over how to respond to its alleged development of nuclear weapons. Iran provides more than 10 per cent of Japan's oil imports.

Tokyo's move reaffirms the close relationship between Junichiro Koizumi and President George W. Bush, who will host the Japanese prime minister at the White House next week.


23-6-2006 London -- Iran calls halt to petrol imports : Petrol is cheap for Iranian motorists

Iran is to stop importing petrol from September and instead start rationing the fuel, its oil minister has said.

23-6-2006 Tokyo -- Japan and US expand missile defence pact

Japan and the US would expand their cooperation on a joint ballistic missile defense shield, under an agreement signed on Friday that could be seen as a warning to North Korea.

The pact, announced by Japan's foreign ministry, commits the two countries to the joint production of missiles aimed at intercepting incoming missiles. Basic agreement on the principle of expansion was reached and announced by the two countries last year, but Friday's signing comes after several months of joint work on the details.


23-6-2006 Washington -- Financial Search Raises Privacy Fears

The Bush administration has been tracking clues about terrorists by searching a database that handles millions of financial transactions.

23-6-2006 New York  -- Treasuries Post Worst Slump Since 1984 on Fed Rate Concern

Treasuries posted their worst slump in more than two decades as traders pushed yields to where they expect the Federal Reserve to lift its benchmark lending rate at policy meetings next week and in August.

Yields on benchmark 10-year notes rose for an eighth consecutive day, the longest losing stretch since May 1984. They've climbed 26 basis points to 5.22 percent, the highest in four years, as speculation increases that the Fed may increase rates by as much as 50 basis points on June 28 and 29.

The yield on the 10-year note rose 2 basis points to 5.22 percent at 5 p.m. in New York, according to New York-based bond broker Cantor Fitzgerald LP. The price of the 5 1/8 percent note due May 2016 fell about 3/32, or 94 cents per $1,000 face amount, to 99 7/32. Bond yields move inversely to prices.

A report today showed orders for goods made to last several years dropped 0.3 percent, after falling 4.7 percent in April. Excluding bookings for transportation equipment such as aircraft, which are volatile, orders rose 0.7 percent, the eighth increase in 10 months, the Commerce Department said today in Washington.

Interest-rate futures contracts show traders are certain of a quarter-percentage point increase in the federal funds rate to 5.25 percent when policy makers meet next week, and are boosting the odds of a 50-basis-point move at the gathering.

The fed funds futures contract for July delivery yielded 5.28 percent on the Chicago Board of Trade, suggesting 12 percent odds for a half-point increase. The odds of a 5.5 percent rate at the August meeting are about 85 percent.

More Tightening

Fed policy makers have increased the overnight rate on loans between banks by a quarter of a percentage point at 16 consecutive policy meetings since June 2004.

The 10-day relative strength index, a gauge of momentum, for the 10-year note was 30 yesterday. A level below 30 or above 70 suggests the price may change direction.
Yield Curve

Two-year notes yielded about 3 basis points more than 10- year securities, the 12th consecutive day that shorter-maturity yields have exceeded those on longer-maturity debt.

The yield curve, a graph that charts yields on bonds with different maturities, has a negative slope when rates on shorter- term securities are above those of longer-dated bonds.

Curve steepening occurs when shorter-dated securities rise, longer-dated notes fall or when both occur at the same time.

The Treasury yesterday said it will sell $22 billion of two- year notes and $14 billion of five-year securities next week.

The new two-year notes yielded 5.25 percent in pre-auction trading, suggesting the securities will be sold at the highest yield since November 2000.

23-6-2006 New York -- Dollar Rises to Two-Month High Against Euro, Yen

The dollar climbed to an eight-week high against the euro on increasing speculation the Federal Reserve will raise interest rates at least twice more this year.

A slump in emerging-markets debt added to demand for dollars. The U.S. currency also gained versus the British pound, Canadian dollar, South African rand and Swiss franc.

The dollar advanced to $1.2507 per euro at 5:01 p.m. in New York, from $1.2580 yesterday, reaching its strongest since April 27. Its gains accelerated after it strengthened past the level of about $1.2530, where the euro bottomed out on three days in the past week. The dollar gained 1.1 percent this week.

The U.S. currency traded at 116.57 yen, for a 1.2 percent weekly advance. It reached 116.60, the highest since closing New York trading at about that level on April 21. That was the day the Group of Seven major industrialized countries met in Washington and called on China and other developing Asian nations to let their currencies gain to shrink the U.S. trade deficit. The dollar closed at $1.2341 per euro and 116.58 yen on April 21.

The Fed has raised rates 16 times since June 2004 to 5 percent. Interest-rate futures show traders see 100 percent odds of an increase to 5.25 percent on June 29. There's an 88 percent chance of another quarter-point rate boost in August, up from 67 percent a week ago, futures indicate.

Rate-Driven Market'

``It's primarily a rate-driven market,'' Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The talk in the market is the Fed may go 50,'' he said, referring to a potential half-point move next week.

UBS AG currency strategist Daniel Katzive said in a research note today that the bank's one-month forecasts of $1.27 per euro and 113 yen ``are clearly at risk in the current environment.''
Emerging-market bonds tumbled today, with the JPMorgan Chase & Co.'s benchmark EMBI+ index of dollar-denominated bonds dropping to its lowest this year. The rand fell to a 33-month low today on concern higher rates in developed economies will lure investors.

``People are really sinking their teeth into the Fed tightening cycle, and that's supporting the dollar,'' said Chris Turner, head of currency research in London at ING Groep NV, the largest Dutch financial-services company. ``The risk is the Fed signals more tightening.''

Half-Point Speculation

Some traders and investors are speculating the Fed will lift rates a half-point next week. The odds of a half-point increase at next week's Fed meeting are 14 percent, according to interest- rate futures.

A report showed orders for U.S. durable goods aside from transportation equipment rose in May, suggesting the economy can withstand higher rates. Orders for those items rose 0.7 percent last month, after dropping 1 percent in April, government figures showed.

Ten-year U.S. Treasuries yield about 5.22 percent, near the highest since May 2002, and a margin of 3.36 percentage points over similar-maturity Japanese government debt, the widest in two years.

``Interest-rate differentials between the U.S. and Europe and Japan will widen,'' said Thomas Benfer, a vice president of foreign exchange in New York at Bank of Montreal. ``The talk of a 50-basis-point move is pushing up the dollar.''

Investors are betting the Fed will signal rates will go higher when it meets next week after central bank officials including Chairman Ben S. Bernanke voiced concern about inflation.

Weber Talks

The euro trimmed losses today after European Central Bank council member Axel Weber said ``it's appropriate to continue withdrawing monetary stimulus.'' The remarks came in a speech in Mannheim, Germany.

The euro has gained 5.6 percent against the dollar this year on expectations the ECB will raise rates more than the Fed. The central bank of the 12-nation region has lifted its overnight rate three times since December to 2.75 percent.

The yen also cut its loss after Medley Global Advisors, a company that provides research to hedge funds, said in a report that the Bank of Japan is poised to raise rates as early as July. The BOJ has kept rates near zero percent for five years.

The yen also gained earlier as People's Bank of China monetary policy board member Yu Yongding said the country may allow its currency to appreciate faster to help curb excessive growth in money and investment in the economy.

China abandoned a decade-old peg against the dollar in July 2005 and has let its currency gain 1.4 percent since, to 8.0002 yuan per dollar today.

23-6-2006 New York -- Copper Rises in a Week on Signs Demand May Climb in U.S.

Copper rose in New York and London after a report showed a gain in orders of most U.S.-made durable goods, renewing speculation that demand will grow for metal used in wiring for cars, machinery and appliances.

Orders excluding transportation equipment rose 0.7 percent in May, including more demand for computers and communication equipment, the Commerce Department said today. Copper, after doubling in the past year, has tumbled 22 percent from a record last month on concern rising global interest rates would slow economic growth and metals demand.

``Manufacturing continues to be in decent shape, and that's a positive for copper,'' said Donald Selkin, director of equity research at Joseph Stevens & Co. in New York. Current copper prices are ``a good area to buy'' after falling from the record, he said.

Copper futures for September delivery rose 10.25 cents, or 3.4 percent, to $3.151 a pound on the Comex division of the New York Mercantile Exchange. The percentage gain was the most since June 15. Prices were still down 2.2 percent this week, the fourth straight decline after reaching a record $4.04 on May 11.

Copper for delivery in three months on the London Metal Exchange rose $71, or 1.1 percent, to $6,780 a metric ton. Prices reached a record $8,800 on May 11.

The metal had fallen in London on speculation rising U.S. rates will drive the dollar higher, curbing demand for copper. The dollar climbed to an eight-week high against the euro today. Traders are raising bets the Federal Reserve will increase its benchmark rate twice more to control inflation.

`Market Psychology'

``Market psychology at the moment is: As the dollar hardens, commodities come off,'' said Roy Carson, a London-based trader at Triland Metals Ltd., one of 11 companies that trade on the floor of the LME.

Prices may rebound next week on speculation supplies will be limited by labor disputes and declining stockpiles, a Bloomberg survey yesterday showed. Seven of 11 analysts, investors, traders and consumers said prices will rise next week. Three expected a drop and one expected little change.

Inventory in warehouses monitored by the LME plunged 9.3 percent this week, the most since the beginning of October.

``People are finding it difficult to lay their hands on enough stock,'' said John Kemp, an analyst at Sempra Metals in London. Sempra also trades on the LME.

23-6-2006 New York -- U.S. Durables Orders Fall 0.3 Percent on Lower Plane Demand

Orders for U.S.-made durable goods excluding aircraft rose in May, easing concern that the economy is cooling too quickly after two years of interest rate increases.

Bookings were buoyed by increased appetite for machinery, metals and communications gear, the Commerce Department said today in Washington. Slowing demand for aircraft pulled down overall orders for durable goods by 0.3 percent in May after a 4.7 percent drop in April. Not counting planes and other transportation equipment, orders rose 0.7 percent.

Companies, encouraged by rising profits, are purchasing new equipment to improve efficiency and help make up for fuel costs that remain near record highs. A boost from business investment will prevent the economy from faltering as consumer spending and the housing market slow.
``Things look reasonably solid,'' said Jay Feldman, a senior economist at Credit Suisse Holdings in New York. ``We are going to get a reasonably decent contribution from business spending this quarter. There is no real sign of a major slowdown here.''

Economists expected durable goods orders would rise 0.4 percent, based on the median of 67 forecasts in a Bloomberg News survey, after a previously reported 4.4 percent drop in April. Estimates ranged from a decrease of 4 percent to a 2.5 percent gain. Orders excluding transportation equipment were forecast to rise 0.6 percent.

``Things are slowing down a bit, but the trend of orders is still strong,'' said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh and a former Fed analyst. ``The industrial outlook looks pretty good.''


22-6-2006 New York -- Economists forecast further US rate rises

Barclays Capital economists on Thursday joined the small but growing "6 per cent" club of analysts predicting that further US monetary tightening still lies ahead.

The Federal Reserve's Open Markets Committee meets next week and is expected to raise its benchmark Fed funds rate by a quarter point to 5.25 per cent.

Most analysts believe the June move, or perhaps one further move, will mark the peak of the bank's rate-raising cycle. But an increasing number of economists are raising their forecasts.
On Thursday, Barclays became the first primary dealer bank to predict 6 per cent rates before the year end. "We have become less convinced that the FOMC will be comfortable keeping rates at 5.5 per cent in August as growth remains strong and core inflation continues to move higher," the bank's economists said.

Fed funds futures, a gauge of the market's interest rate expectations, have swung sharply this month. August contracts price in an 80 per cent probability of a quarter-point rate rise in that month, in addition to the quarter-point expected next week.

Interest rate-sensitive two-year yields yesterday reached their highest since December 2000 at 5.234 per cent ??just shy of next week's expected Fed funds target. Dealers cited jitters after speculation that the Fed could surprise the market with a half-point rate rise rather than a quarter-point rise next week.

"We think that there is a notable chance of a 50 basis point rate hike at an upcoming meeting," said Barclays economists yesterday, although they felt such a move was more likely in August. For two years the Fed has been raising rates in quarter-point increments and such a rise next week would be the 17th in a row.

Last week, economists at Lehman Brothers raised their Fed funds forecast to 5.75 per cent. Others with a 6 per cent peak include JPMorgan and Credit Suisse, although both expect that rate some time next year.

But others fear the Fed will be tightening policy in a slowing economy, potentially exacerbating the slowdown and forcing it to cut rates once more.

"If the Fed were to choose to chase the peak [in inflation], then the funds rate could be headed for 6 per cent ??which we think would be a big mistake," said David Rosenberg, chief US economist at Merrill Lynch.

22-6-2006 London  -- UK arms makers to join call for treaty

An unusual coalition of Britain??s government, arms manufacturers and campaigning groups will call on Tuesday for an international treaty to regulate arms sales.

Their public expression of support for a treaty will follow a meeting on Tuesday at the Foreign Office between Margaret Beckett, UK foreign secretary, and representatives of the Defence Manufacturers Association (DMA) and campaigning groups including Oxfam and Amnesty International.

The association has 625 members, including most large UK defence companies except for BAE Systems, the largest.

The association argues that an international treaty would be a good way to address big differences in export control regimes around the world. Its position also reflects frustration among its members, some of which have been refused export licences by the UK government only to see foreign competitors take their place.

Britain has been calling since last year for a broad treaty to regulate the sales of all arms and secured the support of all other European Union governments last October.

But a number of powerful countries are suspicious of the proposal. They include the US ??which says the solution is for other countries to adopt tough export controls such as its own ??and Russia, Ukraine and China, all with significant arms exporting industries.

According to campaigners, Barbara Stocking of Oxfam will point to the presence of the three groups on a common podium as ??a clear acknowledgement that controlling the arms trade is good for business, good for security and good for development and human rights??

Mrs Beckett said: ??Millions, especially in the world??s worst conflict regions, suffer untold misery because of the unregulated trading in arms. We in the British government recognise that we must address this scourge; the humanitarian and moral case for an international arms trade treaty is unassailable.??br />
Major General Alan Sharman, the DMA??s director-general, is expected to say that the diversity of national policies, systems and procedures creates a fertile environment for proliferators and illicit arms dealers.

However, the DMA says the treaty should not be viewed as a cure-all and argues that some campaigning groups may have oversold its benefits.

"We are concerned that everybody approaches this with realistic expectations," said Brinley Salzman, the DMA's director of exports. ??It will be beneficial in our view but don??t expect it to be the solution to everything.??br />
For example, a treaty would not influence the behaviour of exporters in countries that do not ratify the treaty, or those companies operating outside export control frameworks.
The meeting comes ahead of an international conference starting on Monday in New York to review a United Nations programme of action, adopted in 2001, aimed at curbing trade in small arms and light weapons.

Participants at Tuesday's meeting are expected to call for improved implementation of that programme.

22-6-2006 Tokyo -- Japan trade surplus up 35.2% in May

Japan's trade surplus in May rose year-on-year for the first time in 17 months, buoyed by strong demand for Japanese products abroad.

21-6-2006 London -- Beijing has 'dangerous approach' to arms exports

Chinese arms exports are worsening a number of conflicts around the world, belying Beijing's claims that its approach to weapons sales is 'cautious and responsible', according to a report published on Monday by Amnesty International.

The human rights group said most discussion of Chinese weapons exports focused on transfers of nuclear and missile technologies to countries such as Iran, North Korea and Pakistan. "Yet the routine export of conventional weapons and small arms has been contributing to human rights violations including in brutal armed conflicts."

China is one of the world's top 10 arms exporters and many of the companies involved in the trade were established by the People's Liberation Army and the police state agency, which benefit from the revenues. China's arms trade is estimated to be worth more than $1bn (?790m, ?540m) a year, Amnesty said.

The largest suppliers include companies such as China North Industries, known as Norinco, and two companies controlled by parts of the PLA: China Poly Group and Xinxing Corporation.
In 2005, a Chinese government report used the phrase 'cautious and responsible' to describe its approach to conventional arms export licensing. But Amnesty said: "Its record in supplying arms to countries such as Iran, Myanmar, Pakistan and Sudan suggests, by contrast, a dangerously permissive approach to licensing arms exports, both of conventional weapons and of small arms and light weapons."

Amnesty said some arms deals involved an exchange of weapons for raw materials, and cited since the 1990s barter deals with Iran, Liberia, Sudan and Zimbabwe.

China had also exported large quantities of small arms and light weapons to the Great Lakes Region of Africa, where they had been used in atrocities in the Democratic Republic of Congo. The report also cited Chinese weapons as worsening conflicts in Nepal, Chad and elsewhere.
In 2002, the China updated export control regulations covering arms transfers. "However, it is almost impossible to assess the effectiveness of the revised regulations, as China does not publish information about actual transfers abroad of military, security and police equipment," Amnesty said.