China New Yuan Loans CNY1.06 Trillion in March

By Richard Silk

BEIJING--Chinese financial institutions issued 1.06 trillion yuan ($171 billion) in new yuan loans in March compared with CNY620 billion in February, People's Bank of China data showed on Thursday.

A median forecast of 14 economists polled earlier by Dow Jones Newswires was for CNY940 billion in new yuan loans.

Total social financing--a broader measurement of credit--was CNY2.54 trillion in March compared with CNY1.07 trillion in February.

China's broadest measure of money supply, M2, was up 15.7% on year at the end of March. The March increase was more than February's 15.2%. The median forecast by the economists was 14.6%.

China's foreign-exchange reserves rose to $3.44 trillion at the end of the first quarter from $3.31 trillion at the end of the fourth quarter. The economists' forecast was $3.4 trillion.

Write to Richard Silk at richard.silk@dowjones.com

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New Zealand Fin Min: Budget 2013 Will Confirm A Surplus In FY15

By Rebecca Howard

WELLINGTON--Finance Minister Bill English Thursday confirmed the 2013 budget will show the New Zealand government is still on track to return to a surplus in the year to June 2015.

"That is a considerable achievement--and a significant turnaround in the space of just a few years. Just two years ago, we ran an 18.4 billion New Zealand dollar (US$15.8 billion) deficit, half of which was the cost of contributing to the rebuild of Canterbury," Mr. English told the Wellington Employers' Chamber of Commerce.

Mr. English didn't give a figure for the surplus but in December the Treasury forecast a surplus of NZ$66 million for the period. The budget is due to be presented May 16.

The budget has been in the red since the year to June 2009, largely as a result of a deep recession triggered by the global financial crisis and the series of earthquakes in the country's second largest city of Christchurch in Canterbury.

Write to Rebecca Howard at rebecca.howard@wsj.com

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Mexico's Central Banker Says Healthy Finances, Growth Bolstering Peso

By Juan Montes

MEXICO CITY--Bank of Mexico Gov. Agustin Carstens attributed the recent strengthening of the peso to the country's healthy public finances and solid economic growth.

"This process of appreciation is responding, in part, to a higher rate of growth in Mexico compared to that in the U.S.," Mr. Carstens said Wednesday on the sidelines of a hearing before the Senate Finance Committee.

Mr. Carstens stressed that the Mexican economy has chained together 15 consecutive quarters of growth. For this year, he said, Mexico will likely grow nearly 3.5%. The peso hit this week a 20-month high against the dollar, after having appreciated around 6% this year. Record-low interest rates in the U.S. and Europe, along with high expectations that Mexico will manage to approve sweeping structural reforms this year, have fueled investor interest in Mexico, analysts say. Mexico's federal government is also expecting a balanced budget for 2013, excluding financing for investments at the state-owned oil monopoly, while the U.S. and other developed countries are confronting large public deficits.

However, the currency's strong appreciation threatens to undermine Mexico's export engine, making Mexican products more expensive outside the country.

Asked if the Mexican currency was overvalued, Mr. Carstens said the exchange rate remains above MXN12 to the dollar, a level the currency last breached in the summer of 2011.

But the Bank of Mexico and the government have started to act. On Tuesday, the country's foreign exchange commission suspended a system of daily dollar auctions, which were put in place in November 2011 amid volatile markets due to the European crisis.

Also, the central bank's decision in March to cut the overnight interest rate--by 50 basis points to 4%--was a response in part to increased worries over the influx of capital due to loose monetary policies elsewhere. The move, however, hasn't helped to stem the peso's gains so far.

Write to Juan Montes at juan.montes@dowjones.com

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France Pitches Euronext Investment to Banks

The French government has asked some of the country's largest banks to invest in the planned spinoff of European stock markets operated by NYSE Euronext (NYX), said people with direct knowledge of the matter.

The efforts to keep control of the four bourses in European hands have so far met with resistance from banks already under pressure to meet tougher capital standards and handle a proposed financial transaction tax, said one of the people.

The trans-Atlantic exchange operator has proposed spinning off its Euronext division after completing its planned takeover by rival IntercontinentalExchange Inc. (ICE). The business includes the main securities exchanges in France, Belgium, Portugal and the Netherlands, and has been valued by analysts at around $1.4 billion.

The merger partners have touted the move as creating a European "champion" that could bolster capital-raising efforts on the continent. Spinning off the division could also allow ICE to sidestep nationalistic worries around the prospect of several leading European exchanges reduced to a lower profile under an enlarged, U.S.-based corporate parent.

ICE in December agreed to buy NYSE for about $8.2 billion in a deal seen creating the world's largest exchange company by valuation. Antitrust regulators are expected to decide early next week whether the deal will be vetted by European Union antitrust examiners, rather than individually by officials in the U.K., Spain and Portugal.

ICE and NYSE have discussed the proposed Euronext spinoff with European regulators, including the possibility of forming a stable shareholder base for the planned venture, according to a person close to the discussions.

A French government official confirmed the country's finance ministry had spoken with banks and others about investing in Euronext. The government is "carefully looking at the situation, the future of Euronext and its partners," the official said.

The discussions were earlier reported by French newspaper Les Echos.

The region's financial crisis has taken a toll on European financial institutions, and regulators are increasing the amount of capital banks must hold to help ensure stability. This has reduced the amount of banks' free capital while exchange valuations have come under pressure due to slower trading activity.

NYSE reported Friday that activity on its European stock markets last month fell 14% from the prior-year period.

Banks approached over a potential investment in Euronext have also raised concerns over the prospect of investing in Euronext because of the proposed tax on trades in stocks, bonds and derivatives that could soon be implemented in 11 countries in the European Union, including France, Germany, Spain, Italy and Portugal, the person said.

Many bankers argue the financial transaction tax, if implemented at a regional level, would hit the business of exchanges very hard.

France's three largest listed bank by assets--BNP Paribas SA (BNP.FR, BNPQY), Credit Agricole SA (CRARY, ACA.FR) and Societe Generale SA (SCGLY, GLE.FR)--declined to comment.

NYSE Euronext has estimated that its European stocks and derivatives businesses generated $560 million in revenue over the 12 months ended Sept. 30, 2012, and Sandler O'Neill + Partners estimated a pretax operating margin of 25% for the unit. That compares with ICE's overall profit margin of 60% for a business that is devoted nearly entirely to derivatives trading and clearing.

Equity Research Desk has estimated that an IPO of Euronext could value the company at $1.39 billion.

- William Horobin contributed to this article.

By Noemie Bisserbe

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White House Says 'Would Not Be Surprised' by N. Korea Launch

WASHINGTON -- The White House said Friday it "would not be surprised" by a North Korean missile test, after reports that Pyongyang had moved two mid-range missiles to its eastern coast.

When asked about the possibility of a new test, White House spokesman Jay Carney said "we would not be surprised" and noted Pyongyang had carried out such actions before. "We urge them to stop with the provocations," he added.

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CURRENCIES: U.S. Dollar Drops After Weak Jobs Report

By Saumya Vaishampayan and Carla Mozee, MarketWatch


NEW YORK (MarketWatch) -- The U.S. dollar dropped against the euro and most other major currencies on Friday after a surprisingly weak U.S. jobs report.


The Labor Department said Friday the U.S. economy created 88,000 jobs in March, well below expectations for a 190,000 gain, according to economists polled by MarketWatch. The unemployment rate fell to 7.6% from 7.7% as discouraged workers dropped out of the labor force.


The dollar dropped following the report, along with U.S. stocks. Gold futures and Treasurys rose.


"The weaker [payrolls] number is a dollar negative," said Richard Franulovich, chief currency strategist at Westpac Institutional Bank.


The ICE dollar index (DXY), which measures the greenback against a basket of six major rivals, slipped to 82.449 on Friday, compared to 82.622 before the jobs data and compared to late Thursday's 82.637.


The WSJ Dollar Index , which uses a slightly larger comparison basket, dropped to 73.46 compared to 73.72 earlier in the session but close to 73.53 on Thursday.


The euro (EURUSD) rallied against the dollar in the wake of the jobs report, rising as high as $1.3039, according to FactSet data. It last traded at $1.3023 compared to $1.2946 on Thursday.


The lower-than-expected headline jobs number means that U.S. rates are lower versus those in Europe, making the dollar less attractive, said Franulovich. "The [euro] bounce toward $1.30 makes sense," he said.

But a stronger euro isn't good news for peripheral euro-zone countries such as Italy and Cyprus, as it won't boost their exports, said Dean Popplewell, chief currency strategist at Oanda Corp. in Toronto.


"The biggest disappointment for the Europeans is that the weakened [payrolls] number certainly doesn't help their cause. A stronger euro will not help the periphery at the moment," said Popplewell.


The British pound (GBPUSD) rose to $1.5324 from $1.5244.


The Japanese yen fell further against the dollar Friday after plunging in the previous session when the Bank of Japan launched an aggressive monetary-easing program aimed at ending years of deflation.


The U.S. dollar (USDJPY) bought 97.33 Japanese yen Friday, compared to Yen96.16 in North American trade late Thursday and far above its Yen92.89 level just ahead of the Bank of Japan's policy announcement.


The yen dropped more than 3% against the greenback Thursday after Japan's central bank said it will pump some $1.4 trillion into the world's third-largest economy. The plan includes raising purchases of Japanese government bonds to an annual pace of about Yen50 trillion ($530 billion).


The two-year easing campaign was launched by newly appointed Bank of Japan Gov. Haruhiko Kuroda, who had pledged to do "whatever it takes" to meet a 2% consumer-inflation goal.


"The market is really buying into the aggressiveness of Governor Kuroda," said Popplewell.


The yen lost further ground against the euro (EURJPY) Friday, with the European currency rising 1.7% to Yen126.66. The euro leapt more than 4% against the yen Thursday.

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BOND REPORT: Treasurys Surge As Labor-market Recovery Slows

By Saumya Vaishampayan, MarketWatch


NEW YORK (MarketWatch) -- Treasurys surged on Friday, pushing yields to year-long lows, as the U.S. economy in March added the smallest number of jobs in nine months, suggesting a slowing in the labor-market recovery.


The economy created 88,000 jobs last month, sharply lower than economist expectations of a gain of 190,000, according to a poll by MarketWatch.


The unemployment rate edged lower to 7.6% from 7.7%, but that reflected fewer people looking for jobs rather than a stronger labor market.


The biggest reaction in yields was in 30-year bonds. Yields on the U.S. 30-year bond (30_YEAR) fell 14 basis points to 2.850%, the lowest level this year.


Yields on the benchmark 10-year Treasury note (10_YEAR) fell 8 basis points to 1.687%, also the lowest this year, and yields on the five-year note (5_YEAR) fell 3 basis points to 0.667%.


Yields move inversely to prices and one basis point is one-hundredth of a percentage point.

Treasury investors have been scrutinizing the jobs report each month for insight into the health of the labor market, which the Federal Reserve has linked to the duration of its bond-buying program. The Fed buys $85 billion in Treasury and mortgage debt per month in order to keep short-term interest rates low, and has said it will continue the program until the jobless rate falls to 6.5%. "The Fed isn't going to be moving toward higher rates any time soon," said Christopher Keith, senior vice president and fixed-income manager at Adviser Investments.


March's surprise payrolls miss is in stark contrast to February's positive jobs report. February gains were revised higher to 268,000 from 236,000, as were January's jobs gains to 148,000 from 119,000, the Labor Department said Friday. "This inconsistent pattern of jobs growth is pretty consistent with the slow growth economy that we're in," said Keith.


Treasury yields fell on Thursday as the Bank of Japan announced its aggressive monetary easing plan, which aims to eliminate deflation and achieve a 2% inflation target.


"In that sense, the drive back into Treasurys came on the heels of a strong reminder that central banks will continue to buy bonds," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York.


The combination of Japanese easing and Fed speakers alluding to exit strategies that include buying fewer bonds instead of selling them is "creating warmer waters surrounding Treasury prices," said Wilkinson. The jobs report, however, is still the main driver of movement on Friday, he added.


Not all data from the jobs report were negative; construction employment gains -- 18,000 in March -- was in line with recent results, Wilkinson said. And gains in professional services and healthcare were 51,000 and 23,000, respectively. Still, U.S. stocks posted sharp declines on Friday.


Ten-year yields are a long way from their levels around 2% earlier in 2013, which sparked talk about the end of the multi-year bond rally.


"Anyone who has been predicting the demise of the bond market is going to be in for a longer wait than they anticipated," said Keith of Adviser Investments.

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