Earnings, U.S. debt hopes lift stocks, euro flat
LONDON, July 20 (Reuters) - Strong company results and hopes for a settlement in the U.S. debt ceiling row boosted global equities while currency markets remained on edge over the euro zone debt crisis.
Gold retreated from a record high of $1,609.51, but was still well towards the top of recent trading levels. It has been boosted by both the U.S. and European debt fears.
Asia Bank Stocks Rise as France, Germany Agree; Technology Shares Decline (Source: Bloomberg)
Asian bank stocks rose after France and Germany agreed on a joint position to solve Greece’s debt crisis ahead of a summit today, reducing uncertainty over the earnings outlook for financial companies. Technology shares declined after Hynix Semiconductor Inc. reported a fall in profit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest public traded lender by market value, gained 0.8 percent in Tokyo. Hana Financial Group Inc., the South Korean lender that’s trying to buy Korea Exchange Bank, advanced 1.4 percent in Seoul after reporting second-quarter earnings more than doubled. Hynix fell 0.4 percent as slowing personal-computer demand drove down chip prices. The MSCI Asia Pacific Index gained 0.1 percent to 136.91 as of 10:14 a.m. in Tokyo, headed for its highest close since July 8. About seven stocks declined for every five that rose on the gauge.
The measure dropped for the first week in four last week after European finance ministers declined to rule out a temporary default for Greece and as Moody’s Investors Service put the U.S. under review for a possible credit-rating downgrade.
Obama Open to Short-Term Debt Increase (Source: Bloomberg)
The Obama administration signaled it may accept a short-term increase in the U.S. debt limit only if lawmakers need a few days to finish work on a broader agreement to cut the deficit. President Barack Obama “must have a firm commitment to something big” on cutting the deficit before he would sign a short-term rise in the debt ceiling, White House spokesman Jay Carney told reporters at a briefing. He released a written statement later saying Obama “does not support a short-term extension” unless “a few days” are needed “for a bill to work its way through the legislative process.” The president called congressional leaders to the White House today as the Aug. 2 deadline for raising the $14.3 trillion debt limit nears.
Existing-Home Sales in U.S. Unexpectedly Fall 0.8% to a 4.77 Million Rate (Source: Bloomberg)
Sales of previously owned U.S. homes unexpectedly declined in June to a seven-month low as the industry struggled to overcome rising unemployment and foreclosures. Purchases dropped 0.8 percent to a 4.77 million pace, data from the National Association of Realtors showed today in Washington. The median projection in a Bloomberg News survey called for a gain to 4.9 million. Inventories increased, more contracts were canceled and 30 percent of transactions last month were of distressed dwellings, the figures showed. Stricter lending rules, unemployment above 9 percent and delays in processing foreclosures mean it may take years to reduce the number of distressed properties on the market even as all-cash purchases have recently helped buoy demand. Federal Reserve Chairman Ben S. Bernanke last week said the decline in confidence and lack of job growth that are impeding consumer spending are also keeping real estate “depressed.”
U.S. Stocks Retreat as Debt-Limit Concern Offsets Apple’s Earnings Beat (Source: Bloomberg)
U.S. stocks fell, a day after the best rally since March for the Standard & Poor’s 500 Index, as concern the government will fail to increase the debt limit overshadowed higher-than-estimated earnings at Apple Inc. (AAPL) United Technologies Corp. (UTX) lost 1.8 percent as Boeing Co. (BA) picked a rival engine maker to upgrade its 737 jet. Yahoo! Inc., Altria Group Inc. and Johnson Controls Inc. (JCI) slid at least 2.4 percent as results disappointed investors. Apple jumped 2.7 percent after record sales of iPads and iPhones lifted profit, helping the company join 89 percent of S&P 500 members topping estimates so far in the earnings season. The S&P 500 slipped 0.1 percent to 1,325.84 at 4 p.m. in New York after yesterday surging 1.6 percent as President Barack Obama endorsed a bipartisan deficit-reduction plan from the so- called Gang of Six senators. The Dow Jones Industrial Average decreased 15.51 points, or 0.1 percent, to 12,571.91 after surging 202 points yesterday in its biggest gain of 2011.
US June housing starts at 6-month high, permits up
WASHINGTON, July 19 (Reuters) - Groundbreaking for U.S. homes scaled a six-month high in June, partly reflecting growing demand for rental apartments, a government report showed on Tuesday.
The Commerce Department said housing starts increased 14.6 percent to a seasonally adjusted annual rate of 629,000 units, the highest level since January, as ground breaking for multi-family units soared 30.4 percent.
Anything's possible if US debt downgraded to AA
NEW YORK, July 19 (Reuters) - For those who think a deeply indebted United States has begun its long, slow fade as the world's dominant financial power, the loss of the country's gold-plated AAA credit rating would seem poetic justice.
That's because characteristics blamed for volatile markets in countries like Italy -- high debt levels, slow economic growth, and government gridlock -- fairly describe the United States now.
China WTO row spotlights nations clamping down on resources
NEW DELHI, July 20 (Reuters) - Countries from India and Indonesia to Russia are tightening their grip on natural resources as they limit exports to build up domestic industry in a trend that will spawn many challenges to World Trade Organisation rules.
Export barriers are tightening on commodities ranging from food and coal to iron ore and coveted rare earths that have critical roles in high-tech devices as countries harden positions on what they see as a sovereign right to development.
China Signals More Yuan Moves Before Anniversary of Currency Policy Shift (Source: Bloomberg)
China said that it can allow more yuan moves without jeopardizing its foreign-exchange reserves after letting the currency rise today to a 17-year high against the dollar. “The changes in the yuan’s exchange rate against the U.S. dollar causes changes in the paper value of the reserves when valued in yuan,” the State Administration of Foreign Exchange said today. “This is not a real loss and will not affect the real overseas purchasing power of the foreign-exchange reserves.” Today’s jump in the yuan and the statement from the currency regulator came the day before the sixth anniversary of the government scrapping a peg to the dollar. Royal Bank of Canada said strength in exports and the need to tame inflation may encourage more gains.
China, Asean to Agree on ‘Incomplete’ S. China Sea Rules (Source: Bloomberg)
China and Southeast Asian nations are set to agree today on non-binding guidelines for keeping peace in the South China Sea, a diplomatic bargain that the Philippines said fails to address the root of recent tensions. Chinese Foreign Minister Yang Jiechi will meet with counterparts from the 10-member Association of South East Asian Nations after the countries settled yesterday on a framework to implement a 2002 agreement on behavior in the sea, a step toward a legally binding code of conduct. “The necessary elements to make the guidelines succeed are still incomplete,” Philippine Foreign Secretary Albert F. del Rosario told reporters late yesterday in Bali, where he is attending a regional security forum. The failure to deal with competing territorial claims in the waters means “the problem hasn’t gone away,” he said.
Japan Exports Decline Less Than Expected (Source: Bloomberg)
Japan’s exports fell less than economists expected as the decline in auto shipments slowed, underscoring the recovery of the world’s third-largest economy from the March 11 earthquake and tsunami. Exports decreased 1.6 percent in June from a year earlier, the slowest fall in four months and following a 10.3 percent drop in May, the Finance Ministry said today. The median estimate of 27 economists surveyed by Bloomberg News was for a 4.1 percent decline. Shipments are recovering as manufacturers such as Toyota Motor Corp. restore production damaged by a record temblor. Still, export growth may be threatened by the yen’s gain to a four-month high against the dollar, a U.S. economic deceleration and fallout from the European sovereign debt crisis.
Japanese Stocks Swing Between Gains, Losses Amid U.S. Debt-Deal Impasse (Source: Bloomberg)
Japanese stocks swung between gains and losses as lack of progress toward a U.S. debt deal eroded investor confidence in the world’s biggest economy and clouded the outlook for Asia’s exporters. Toyota Motor Corp. and Honda Motor Corp., which count North America as their largest market, declined at least 0.5 percent. Sumitomo Chemical Co. lost 1 percent after Moody’s Investors Service said it may cut the company’s credit rating. NOK Corp., a maker of oil seals and rubber products, surged 11 percent after it forecast profit will jump this year. The Nikkei 225 Stock Average rose 0.1 percent to 10,011.89 as of 9:50 a.m. in Tokyo, after earlier dropping as much as 0.1 percent. The broader Topix index was little changed at 860.48, with five stocks retreating for every three that advanced
Hong Kong Billionaire Fills Funding Gap in U.K.’s Low-Cost Housing Market (Source: Bloomberg)
Billionaire Cheng Yu-tung and two fellow Hong Kong investors, faced with soaring real-estate prices at home, are helping the U.K. plug a gap in funding for low-income housing after gaining control of a London-based property manager. Cheng’s Chow Tai Fook Enterprises Ltd., developer Sammy Lee and businessman Peter Fung last month paid 30 million pounds ($48 million) for 61 percent of Pinnacle Regeneration Group Ltd., manager of 22,000 homes in the U.K. Cuts in social housing are part of the British government’s plan to trim a record deficit with the biggest spending reductions since World War II.
S. Korea $3.7B Olympic Train to Spur Construction (Source: Bloomberg)
South Korea’s hosting of the 2018 Olympics is triggering an $8.4 billion building boom that will expand the nation’s high-speed rail network and create a winter- sports destination targeting millions of Chinese tourists. Organizers will spend $3.7 billion on a train running from the central city of Wonju to host cities Pyeongchang and Gangneung in the east. Another $1.4 billion is earmarked for six athletics venues, accommodations and media facilities, according to International Olympic Committee documents. Those plans may benefit the largest Korean construction companies, which are grappling with weak home sales and tightening credit. Hyundai Engineering & Construction Co., the largest builder; Samsung C&T Corp. (000830), the second-biggest; and Hyundai Rotem Co., the nation’s biggest maker of train cars, all expressed interest in bidding for Olympic contracts.
Euro Bonds May Be the Best Bet to Resolve the European Debt Crisis: View (Source: Bloomberg)
The bond markets are sending Europe’s leaders an unmistakable message: The opportunity to contain the euro area’s debt crisis is slipping away. If they want to save the union and its currency, the leaders will have to consider something far more ambitious than what’s been spelled out so far. Perhaps the unspecified agreement French President Nicolas Sarkozy and German Chancellor Angela Merkel reportedly reached last night on Greek debt marks the beginning of a wider -- and bolder -- effort.
Only three weeks after Greece averted disaster by passing the harsh austerity measures needed for a second bailout, investors have refocused their concern on the much larger economies of Spain and Italy. The yield on the 10-year Italian government bond, for example, has risen almost a percentage point to 5.6 percent as creditors demand bigger returns to compensate for the perceived risk of default.
Merkel, Sarkozy Find Joint Position on Greek Debt (Source: Bloomberg)
German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a joint position to solve Greece’s debt crisis on the eve of a summit convened to stamp out contagion in European bond markets. Details will be released today when euro region leaders meet in Brussels, the governments said in a statement after seven hours of talks in Merkel’s Chancellery in Berlin. The discussions also included European Central Bank President Jean- Claude Trichet and European Union President Herman van Rompuy, who participated by telephone. Merkel and Sarkozy “listened” to the views of Trichet, the statement said, without saying whether Trichet, who opposes any Greek default, shares their agreed stance. An ECB spokeswoman couldn’t immediately be reached for comment.
Euro Rises to Week High on German-French Agreement on Greece Before Summit (Source: Bloomberg)
The euro rose to a one-week high against the greenback after German Chancellor Angela Merkel and French President Nicolas Sarkozy reached a “joint position on Greece’s debt situation” before a summit today. The 17-nation currency also climbed to the highest level in a week versus the yen as Merkel’s spokesman Steffen Seibert said in a statement the joint Franco-German position will be presented at the meeting in Brussels. The dollar dropped to a one-week low against the Japanese currency on concern U.S. policy makers will struggle to agree on a plan to cut the nation’s deficit and increase the debt limit. “The report on the common position of Germany and France indicates their intention that they wanted some preparation for the summit,” said Yuki Sakasai, a currency strategist at Barclays Bank Plc in Tokyo. “It’s hard to sell the euro for the time being because of expectations for the region’s coordinated attitude.”
EU Said to Weigh Bailout Fund Use for Emergency Credit to Thwart Contagion (Source: Bloomberg)
European officials are considering steps previously rejected by Germany, including the use of precautionary credit lines, to prevent the spread of the region’s debt crisis, a person close to the talks said. Other options up for discussion at tomorrow’s Brussels summit include enabling the main 440 billion euro ($626 billion) rescue fund to lend to recapitalize banks, said the person, who declined to be named because negotiations are in progress. Nothing will be decided until leaders convene. Together with a second Greek aid package, the goal is to prove to markets that Europe has the will and the tools to prevent the 21-month sovereign debt crisis from engulfing Spain and Italy. The euro today rose against the dollar for a second day and Spanish and Italian bonds also gained as investors signaled optimism that policy makers are moving toward a deal. The cost of insuring against default on the sovereign debt of Greece, Portugal, Italy and Spain declined.
ECB’s Stark Heaps Pressure on European Governments to Find Greek Solution (Source: Bloomberg)
European Central Bank Executive Board member Juergen Stark heaped pressure on politicians to find a solution to the sovereign debt crisis at a summit tomorrow that doesn’t involve any form of Greek debt default. Stark told Germany’s Boersen-Zeitung newspaper that governments agreed last month to avoid a selective default and urged them to stick to that commitment. He also said the Frankfurt-based central bank won’t change its rules or take on any more risk if the private sector is involved in a Greek bailout. The ECB confirmed the remarks. “I expect state and government leaders this week to stop fiddling and give a clear signal to markets -- you can rely on Europe,” Stark said. “Europe is at a crossroads. What the leaders decide at their summit will have a medium to long-term impact on the functioning of the currency union.”
Arctic Passage to Rival to Suez May Boost Asian Carriers: Freight Markets (Source: Bloomberg)
Russia plans to revive a Soviet-era Arctic sea passage to service energy projects and provide a shorter supply route to Asia for carriers such as OAO Sovcomflot as the shipping line prepares for an initial share sale this year. Opening the northern sea route may allow state-owned Sovcomflot to speed natural-gas deliveries to China and win cargos between Europe and Asia by offering a quicker alternative to the Suez Canal. “If Russia gives the green light to develop this as a full commercial transit route, it would make Sovcomflot’s whole investment case completely different,” said Chris Weafer, chief strategist at ING Bank NV in Moscow. “It would make it more attractive to potential investors.”
Papandreou Sees Make-or-Break Time in Debt Crisis on Eve of Europe Summit (Source: Bloomberg)
Greek Prime Minister George Papandreou says Europe’s leaders need to show tomorrow that they can resolve the European Union debt crisis to avoid a contagion enveloping Italy and Spain. “It could be a make-or-break moment for where Europe is going,” Papandreou said during an interview in his Athens office at Parliament yesterday. “Markets are saying pretty much what I’m saying too: that Greece is doing what it can, but that Greece is not going to be able to carry the weight of all of Europe and the other problems that Europe has.” Papandreou plans to meet with EU leaders in Brussels tomorrow as officials struggle to agree on measures to restore confidence in the euro region’s creditworthiness after the last year’s financial rescue of Greece. Policy makers are divided on how to prod investors into financing a new bailout package and whether the 17-nation euro area should issue eurobonds to help debt-laden nations across the bloc tap markets.
BOE Voted 7-2 to Hold Rate as Majority Said Need for Increase Had Receded (Source: Bloomberg)
Bank of England officials voted 7-2 to keep the benchmark interest rate on hold this month as a majority of policy makers said recent developments meant there was less need for a near-term tightening. “It was likely that the current weakness in activity would persist for longer than previously thought,” the majority of the nine-member Monetary Policy Committee said, according to the minutes of the July 6-7 meeting published today in London. “That weakness, together with the continued subdued behavior of earnings, reinforced the case that inflation was likely to fall back once the temporary impact of the factors pushing up on it had waned.” At the meeting this month, there was a “range of views” among the majority of the MPC on the outlook for inflation. “Overall, however, recent developments had reduced the likelihood that a tightening in policy would be warranted in the near term,” the minutes said.
FOREX-Euro gains, but caution remains before euro summit
LONDON, July 20 (Reuters) - The euro rose against the dollar on Wednesday, with investors hopeful European leaders will reach some kind of deal to ease the debt problems in Greece at this week's summit but doubtful that this would ease fears of contagion.
The euro was up 0.3 percent versus the dollar at $1.4198 but any gains were seen limited, leaving it in a range below last week's high around $1.4283 and vulnerable to signs the debt crisis could still spread to larger countries like Italy and Spain.
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