Business Blog Posts

Brent crude's dizzying 15 percent jump in less than two weeks has fanned worries about a stifling impact on the economic recovery, sending investors out of stocks into relatively safe assets such as gold and government bonds.

Though Asian stocks have reacted to swings in oil, markets have been largely resilient compared with January's selloff when investors dumped shares due to inflationary concerns.

While oil's jump has put monetary policy behind the curve in some countries, many central banks in Asia have already tightened considerably since the recovery began, so policy is not excessively loose in the region, IHS Global Insight said.

Shares in Tokyo .N225 and Hong Kong .HSI tumbled more than 1 percent following Wall Street's slide overnight and as the CBOE Volatility Index VIX .VIX, Wall Street's so-called fear gauge, jumped sharply.

Yahoo Japan (4689.T) was the notable outperformer with shares surging by 4.3 percent to 32,500 yen after sources said Yahoo Inc (YHOO.O) is in advanced talks to wind down its joint venture in Japan with Softbank Corp (9984.T).

"The market is volatile as oil's persisting gains and civil unrest in the Middle East is negatively affecting investor sentiment," said Lee Sun-yeb, a market analyst at Shinhan Investment Corp.

"But as long as we do not see the turmoil spreading to other countries within the region, current volatility will be contained and will eventually recover," Lee added.

The broader MSCI index of Asia ex-Japan stocks .MIAPJ0000PUS was down more than 1 percent, after a 2 percent fall in February.

Markets will keenly watch developments in the Middle East, especially Saudi Arabia, where stock markets tanked by nearly 7 percent on Tuesday and CDS spreads jumped.

GOLD, BONDS GAIN

U.S. Treasuries, a safe-haven asset, paused after recent hefty gains with ten-year yields stabilizing at 3.40 percent, well below a peak of 3.74 percent hit last month.

Japanese government bonds rose, with futures snapping a three-day losing streak..

Gold held just below a record high of $1,434 an ounce while spot silver hit a 31-year high..

In the currency markets, the euro dipped slightly after failing to break through a key resistance level, though further declines for the common currency may be limited a day before a European Central Bank meeting.

Plenty has changed over the course of the year. The iPad became a bona fide smash, essentially creating the tablet category and triggering a wave of me-too products that are just starting to hit the market.

Now, as rivals Motorola and Research in Motion race to catch up, Apple itself is going through a transformation.

There is as much speculation about whether iconic Chief Executive Jobs will take the stage at Wednesday's event in San Francisco as there is about the new device.

Jobs traditionally launches major products with a pizzazz and style that reflect his eye for detail and design. But he took indefinite medical leave last month and Apple has not given details of the cancer survivor's medical condition.

His absence is bound to spark a fresh round of speculation on his condition. And his presence will be scrutinized equally closely for any signals on his health.

Many in Silicon Valley and on Wall Street doubt he will return to the company he co-founded in 1976.

In his absence, it is a good bet that Tim Cook, the company's operations chief and Jobs' heir apparent, or marketing head Phil Schiller, will lead Wednesday's show.

If Cook does appear, investors will scrutinize his performance. While Wall Street has grown comfortable with Cook's leadership, Wednesday would provide the first major test of his showmanship skills -- a key asset for marketing maestro Apple.

Regardless, the company is in little danger of losing its massive lead in the tablet market in the near term. With a big first-mover advantage, the company is rolling out the second-generation iPad just as most its rivals are bringing their first offerings to consumers.

IPAD, PART DEUX

The new model will sport the same 10-inch screen but should be lighter, thinner and faster, according to a plethora of analyst and blog reports. Apple is expected to add a camera to enable video chat using the FaceTime application.

Shares of some Taiwanese component makers rose in Asian trade on Wednesday ahead of the launch.

Camera module maker Genius Electronic Optical Co Ltd and lens manufacturer Largan Precision Co Ltd were starting new supply deals with Apple, two sources said in December, but neither could confirm for which product the modules were intended.

Genius jumped as much as 5.1 percent, while lens manufacturer Largan edged up 0.2 percent in a broader market down 0.6 percent. Hon Hai Precision, whose parent Foxconn manufactures Apple products, eased 1.8 percent.

The February sales tally, which represents one of the first snapshots of U.S. consumer demand, was the strongest since August 2009 when the government's "cash for clunkers" credits spurred a short-lived boom at dealerships.

Auto executives attributed the unexpectedly large gains to both the lure of discounts -- including cheap lease deals -- along with improving consumer confidence and easier credit.

On an annualized basis, the sales rate for the month was 13.4 million vehicles, according to industry tracking firm Autodata. That was up from a sales rate near 12.6 million in December and January.

GM led with a 46 percent sales gain in February, stoked by incentives that also led the industry at an estimated $3,700 in spending per vehicle on average.

Toyota Motor Corp, which was bouncing back from depressed sales a year earlier, posted a 42 percent sales gain. Nissan Motor Co had a 32 percent increase after offering more aggressive discounts of its own.

Sales of trucks, SUVs and other light trucks were up almost 32 percent in February despite the sharpest spike in gasoline prices at the pump since Hurricane Katrina in 2005.

Still, investors remained on edge that a sustained spike in oil prices could push American consumers toward smaller cars or toward delaying purchases as they did in 2008.

That would crimp earnings at the Detroit automakers despite substantial gains over the past two years in rolling out more fuel-efficient small cars, analysts said.

"It's our No. 1 risk and we're not going to lose sight of it," said Paul Ballew, economist for insurer Nationwide. "The domestic automakers still depend heavily on trucks and SUVs for profits."

Shares of Ford Motor Co and GM fell by 2.6 percent ant 1.7 percent, respectively, extending a losing streak that began in early January.

Sales for Honda were up 22 percent. Ford and Chrysler Group lagged the industry, with sales gains of 14 and 13 percent, respectively.

INCENTIVE SPENDING KEY

The success of the aggressive discounts by both GM and Nissan in February raises the prospect that rivals will respond with stepped-up incentives of their own, cutting into projected profits across the industry.

But Ken Elias, a partner at consulting firm Maryann Keller & Associates, said GM had taken advantage of its lower cost base after its 2009 bankruptcy to put pressure on its rivals.

Williams, 48, will take up the post of president and chief executive effective Tuesday, the San Francisco Fed said in a statement.

Williams will join other regional Fed presidents and the Fed Board of Governors in Washington in shaping U.S. monetary policy, although he will not have a vote this year on the Fed's Open Market Committee under the usual rotation of Fed bank presidents. The Fed's next policy meeting is on March 15.

His appointment adds to the dovish composition of the U.S. central bank's policy-setting committee, which is also set to lose two vocal inflation hawks in coming months. Still, analysts said he may not be as dovish as his predecessor.

"I see him very much as a centrist, leaning somewhat in the dovish direction," Michael Hanson, an economist at Bank of America. "That's to be expected given how hard that area has been hit in the recession. I don't think he's quite as dovish as many people would characterize Yellen."

The Fed is at a critical point in its history, having cut interest rates to near zero to help pull the U.S. economy from its worst recession in decades and committing to buy more than $2 trillion in long-term government and mortgage bonds to shore up the recovery.

With recent data suggesting the U.S. economy is strengthening, some of the Fed's more hawkish officials have suggested it might be time to end the bond-buying program.

Fed Chairman Ben Bernanke on Tuesday signaled he disagrees, saying that while there is evidence the economic recovery is gaining momentum, job growth is too anemic.

As head of research at the San Francisco Fed, Williams is no stranger to monetary policy. Under Yellen, Williams attended regular policy-setting meetings and provided research used to inform policy-making.

Yellen, now the board's vice chairwoman, is known as an inflation dove more worried about the threat of unemployment than that of high inflation. Williams' recent research suggests he is cast in a similar mold.

"The economy still has enormous slack," Williams said in a speech on February 4. "Millions of people could be put back to work and many more goods and services could be produced without igniting unwelcome inflation."

Williams has credited the Fed's quantitative easing with restoring about 3 million jobs to the U.S. economy, with about 700,000 of those jobs stemming from the most recent round of bond-buying.

The appointment of a president with a dovish outlook comes as the Fed faces the exit of at least two hawks from its policy-setting committee.

The board has one vacancy already, and at the end of March Kevin Warsh, a hawk skeptical of recent monetary easing, steps down. Kansas City Fed President Thomas Hoenig, who used all of his votes on the Fed's policy-setting committee last year to dissent on Fed easing, faces mandatory retirement on October 1.

(Reporting by Ann Saphir and Mark Felsenthal; Editing by Kenneth Barry)