Friday, July 29, 2011

20110729 1056 Global Market Related News.

Most Asian Stocks Fall on U.S. Debt Deal Impasse (Source: Bloomberg)
Most Asian stocks fell ahead of a planned briefing by the U.S. government on the stalemate in raising the nation’s debt limit that’s needed to avert a default. Nintendo Co., maker of the Wii computer-games console, plunged the most in 20 years after slashing it profit forecast. Sony Corp., a Japanese exporter of consumer electronics, dropped 2.5 percent after cutting profit forecasts. Nintendo Co. fell 20 percent after announcing its forecast cut and discounting devices. Taiwan Semiconductor Manufacturing Co., the chipmaker, dropped 1.6 percent in Taipei after posting its first profit decline in almost two years. East Japan Railway Co., the nation’s largest train operator by sales, advanced 1.9 percent after raising its net income guidance. The MSCI Asia Pacific Index dropped 0.3 percent to 137.21 as of 10:51 a.m. in Tokyo. About five shares fell for every three that rose on the gauge.
The measure is headed for a decline this week as forecasts for higher earnings at companies from Canon Inc. to Baidu Inc. were overshadowed by concern the U.S. may default on its debt if lawmakers can’t reach an agreement on raising the government’s borrowing limit by Aug. 2.

U.S. Contingency Plan Gives Bondholders Priority (Source: Bloomberg)
The U.S. Treasury will give priority to making interest payments to holders of government bonds when due if lawmakers fail to reach an agreement to raise the debt ceiling, according to an administration official. The official requested anonymity because no announcement has been made. The Treasury has said about $90 billion in debt matures on Aug. 4 and more than $30 billion in interest comes due Aug. 15. Overall, more than $500 billion matures in August. The $90 billion in six-month Treasury bills maturing Aug. 4 pared losses after the comments. Obama administration officials will brief the public no earlier than after financial markets close tomorrow on priorities for paying the nation’s bills if the $14.3 trillion limit isn’t raised, a Democratic Party official said earlier.

U.S. Debt-Agreement Delay Risks Lehman-Like Moment, Gieve Says (Source: Bloomberg)
Former Bank of England Deputy Governor John Gieve said U.S. officials’ delay in agreeing on a deal to raise the debt limit runs the risk of a disaster that would echo the collapse of Lehman Brothers Holdings Inc. (LEHMQ) “The problem with this kind of brinkmanship is, as we saw around Lehman -- after all the Treasury wanted to save Lehman -- if you leave it to the last minute that something can go wrong, something practical goes wrong, and you run out of time,” he said in an interview with Francine Lacqua on Bloomberg Television’s “The Last Word” yesterday. “I’m sure both sides fully expect to do a deal, but they’re running it very fine.” Gieve was deputy governor for financial stability at the U.K. central bank when Lehman Brothers filed for bankruptcy in September 2008. U.S. Republicans and Democrats have been unable to agree on an increase in the nation’s $14.3 trillion debt cap or budget-deficit cuts even as the government’s authority to borrow is set to run out on Aug. 2.

Fed’s Williams Sees No ‘Magic Wand’ in Event of Default on Sovereign Debt (Source: Bloomberg)
Federal Reserve Bank of San Francisco President John C. Williams said the central bank doesn’t have a “magic wand” to help the economy if the U.S. government defaults on its debts. “Make no mistake -- the Federal Reserve doesn’t have a magic wand that will allow the economy to get through a crisis of this magnitude unscathed,” the regional bank chief said during a speech in Salt Lake City. “A federal default must be avoided,” he said. Williams’ comments on the federal budget amplify similar warnings made this month by Chairman Ben S. Bernanke when he delivered the Fed’s twice-a-year economic report to Congress. Williams said there’s “no question” the nation is on an unsustainable long-run path of fiscal deficits, which must be reined in over the next decade.

Jobless Claims in U.S. Fall More Than Forecast to Lowest Level Since April (Source: Bloomberg)
Applications for unemployment benefits fell more than forecast last week to the lowest level since April, a sign the weakness in the labor market is fading. Jobless claims dropped by 24,000 to 398,000 in the week ended July 23, Labor Department figures showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a drop to 415,000. Another report showed the number of contracts to buy previously owned homes unexpectedly rose in June. Fewer firings are a first step toward gains in hiring that will help stem a slowdown in consumer spending, which accounts for about 70 percent of the economy. A report tomorrow may show household purchases last quarter grew at the slowest pace since the end of the recession in 2009 as the jobless rate climbed above 9 percent and payroll gains decelerated.

Democrats Can Lose on Debt, Win on Bush Tax Cuts: Ezra Klein (Source: Bloomberg)
Democrats are going to lose this one. Whatever deal emerges to raise the debt ceiling, we can be pretty sure it won’t include revenue, it won’t include stimulus, and it will let Republicans pocket a trillion dollars or more in cuts without offering anything to Democrats in return. It’s difficult to see how it could end otherwise. Virtually no Democrats are willing to go past Aug. 2 without raising the debt ceiling. Plenty of Republicans are prepared to blow through the deadline. That’s not a dynamic that lends itself to a deal. That’s a dynamic that lends itself to a ransom.
Yet Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is -- nothing.

Lacker Says More Fed Stimulus Would Increase Inflation Rather Than Growth (Source: Bloomberg)
Federal Reserve Bank of Richmond President Jeffrey Lacker said additional monetary stimulus would likely raise inflation further while not providing a substantial lift to economic growth. “Given current inflation trends, additional monetary stimulus at this juncture seems likely to raise inflation to undesirably high levels and do little to spur real growth,” Lacker said in a speech before the Dulles Regional Chamber of Commerce in Chantilly, Virginia. Federal Reserve policy makers meet Aug. 9 to assess the economy and monetary policy. U.S. central bankers have kept their benchmark lending rate in a range of zero to 0.25 percent since December 2008 and expanded the central bank’s balance sheet to $2.8 trillion in total assets in an effort to support growth.

Container-Ship Plunge Signals U.S. Slowdown (Source: Bloomberg)
Plunging rates for chartering container vessels that carry sneakers, furniture and flat-screen TVs may signal a U.S. consumer slowdown and losses for shipping lines in what is traditionally their busiest time of the year. Fees for hiring vessels have fallen 9.3 percent since the end of April, according to the Howe Robinson Container Index, which tracks charter rates for a range of vessels. Last year, the index surged 56 percent in the period, as lines added ships on demand from U.S. and European retailers restocking for the back-to-school and holiday shopping periods. “The troubling part is that charter rates are falling in the peak season,” said Johnson Leung, head of regional transport at Jefferies Group Inc. in Hong Kong. “Sentiment among consumers and retailers isn’t very strong.”

U.S. Sovereign Credit Rating Cut Would Threaten Trade in Asia, ADB Says (Source: Bloomberg)
A cut in the U.S.’s sovereign ratings may weaken the dollar and make Asian goods more expensive, hurting the region’s trade outlook, the Asian Development Bank said today. A depreciating dollar would also lead to financial losses for Asian nations who hold U.S. Treasuries, Iwan J. Azis, head of the ADB’s Office of Regional Economic Integration, told reporters in Beijing today. Standard & Poor’s, Moody’s Investors Service and Fitch Ratings have said they may cut the U.S.’s top-level sovereign ranking if officials fail to resolve a stalemate over raising the $14.3 trillion debt ceiling and reducing spending. Asia still relies on U.S. and European demand for its goods, even as Group of 20 members push to rebalance the world economy so that Asia depends more on domestic consumption.
“If the U.S. sovereign rating is cut to AA, it will increase the borrowing costs and put pressure on the dollar and it is likely to depreciate further, which will definitely cause financial losses for emerging Asian nations including China for their holdings of Treasury bills,” Azis said.

U.S. Stocks Retreat as Optimism Over Debt Compromise Fades (Source: Bloomberg)
U.S. stocks fell, dragging the Standard & Poor’s 500 Index lower for a fourth day, as lawmakers indicated they were no closer to reaching an agreement to increase the debt ceiling and avoid default. The Dow Jones Industrial Average erased an advance of as much as 82 points after optimism faded that Democrats and Republicans would be able to compromise over cutting the federal deficit. Exxon Mobil Corp. (XOM) slipped 2.2 percent as its earnings trailed analysts’ estimates. Technology stocks led gains in the S&P 500, with Cisco Systems Inc. (CSCO) climbing 2 percent after Goldman Sachs Group Inc. advised buying the stock. The S&P 500 dropped 0.3 percent to 1,300.67, its lowest level for the month, at 4 p.m. in New York. The Dow slipped 62.44 points, or 0.5 percent, to 12,240.11.
“There is no positive news on the debt discussions out of Washington,” Brad Pleimann, head of equity trading at Piper Jaffray & Co. in Minneapolis, wrote in an e-mail before the market closed. “Everyone believes, or at least hopes, that a deal will get done, but as we approach the close with no new news traders begin to unwind risk.” The S&P 500 retreated 3 percent over the previous three days amid concern lawmakers will fail to agree on an increase in the U.S. debt ceiling by an Aug. 2 deadline in order to avoid a default. A House vote on Republican John Boehner’s debt-ceiling measure scheduled for 6 p.m. tonight in Washington was delayed, though a spokeswoman for Majority Leader Eric Cantor said the vote would take place “this evening.”

Dollar on front line in U.S. debt ceiling battle
NEW YORK, July 27 (Reuters) - Fear the United States will lose its AAA credit rating or even default on its debt is driving foreigners away from U.S. assets, and the dollar is taking the biggest hit.
While stateside investors predicted lawmakers would avoid default with a last-minute deal to raise the government's $14.3 trillion borrowing limit, foreigners were hedging their bets.

Demand for US factory goods slips; Fed sees slowing
WASHINGTON, July 27 (Reuters) - Demand for long-lasting U.S. manufactured goods fell in June and economic activity across much of the nation slowed through mid-July, casting doubt over how quickly the economy might escape its soft patch.
The Federal Reserve said on Wednesday the recovery lost steam in eight of 12 regions it tracks in recent weeks, with hiring modest, wages soft and price pressures subdued.

Fears of 2nd-half slowdown spook corporate America
BOSTON, July 27 (Reuters) - Corporate America's hopes for a second-half pickup in the U.S. economy dimmed on Wednesday, as companies from Emerson Electric Co  to Corning Inc  warned of weakening demand for everything from industrial equipment to televisions.
Their cautious words, coupled with weak earnings reports from Delta Air Lines Inc  and health insurer WellPoint Inc  spooked investors who are already on edge over the U.S. debt-ceiling standoff, sending the broad Standard & Poor's 500 index down more than 1 percent.

China Should Buy U.S. Stocks, Not Treasuries: Xie (Source: Bloomberg)
China should buy U.S. stocks instead of Treasuries as they may be safer investments amid concerns about a U.S. debt default or credit-rating downgrades, according to Andy Xie, an independent economist. “The U.S. stock market can be a credible alternative,” Xie, 50, formerly Morgan Stanley’s chief Asia economist in Hong Kong, said in an interview in Bloomberg’s Shanghai office yesterday. “U.S. companies are reporting strong earnings and they are selling a lot to emerging markets. Even though U.S. stocks aren’t cheap by historical standards, they are a better investment relative to Treasuries.” Standard & Poor’s 500 Index companies are beating analysts’ earnings estimates for a 10th straight quarter, and the group surpassed its annual per-share profit record of $84.66 from 2007 last year. Analysts see 17 percent income growth in 2011, according to the average estimate in a Bloomberg survey.

Japan Industrial Output Rose Less Than Expected (Source: Bloomberg)
Japan’s industrial production rose less than expected in June, signaling a recovery in the world’s third-largest economy from the March 11 earthquake and tsunami may lose momentum. Factory output increased 3.9 percent in June from May when it rose 6.2 percent, the biggest gain since 1953, the Trade Ministry said in Tokyo today. The median estimate of 31 economists surveyed by Bloomberg News was for a 4.5 percent gain. Japan’s recovery is at risk from a slowdown in overseas demand and the yen’s appreciation, which can erode the value of profits earned by exporters such as Nissan Motor Co. At the same time, today’s report showed companies plan to boost output in July and August, an indication they are confident about demand.

Japanese Stocks Slip for Third Day as Sony, Nintendo Cut Profit Forecasts (Source: Bloomberg)
Japanese stocks slipped for a third day after Sony Corp. and Nintendo slashed profit forecasts, shaking investor confidence in the outlook for the country’s exporters. Sony sank 2.9 percent after slumping demand for televisions forced Japan’s biggest exporter of consumer electronics to cut its profit forecast. Game-maker Nintendo plunged 20 percent. Japan Tobacco Inc. gained 3 percent after saying profit will rise this year. The Topix lost 0.1 percent to 847.41 as of 10:13 in Tokyo, with about twice as many shares falling as rising. The gauge is on course for a 2.5 percent drop this week as U.S. lawmakers fail to make progress on a deal to raise the nation’s debt ceiling and avoid a default that could roil credit markets and threaten the global economic recovery. The Nikkei 225 (NKY) Stock Average was little changed today at 9,905.28.

South Korean Current-Account Surplus Widens as Exports Withstand Won Gains (Source: Bloomberg)
South Korea’s current-account surplus rose to an eight-month high in June as global demand for cars and steel bolstered exports, putting pressure on the won to strengthen further. The surplus was $2.99 billion, compared with a revised $2.18 billion in May, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income. The Bank of Korea raised its forecast for this year’s current-account surplus to $15.5 billion from $11 billion on July 15, citing strong export growth and stabilizing raw material costs. Goldman Sachs Group Inc. said July 19 that the won may keep appreciating as the government seeks to damp inflation and exports benefit from a recovery in Japan and a “moderate” acceleration in U.S. growth.

Most European Stocks Slide as Credit Suisse, Volkswagen Decline (Source: Bloomberg)
Most European stocks declined as companies from Volkswagen AG (VOW) to Credit Suisse Group AG (CSGN) reported earnings that missed analysts’ estimates and as U.S. lawmakers moved no closer to a deal to avert a default. Volkswagen sank 4.3 percent, its largest slide in six months. Credit Suisse, Switzerland’s second-biggest bank, dropped 2 percent. Alcatel-Lucent SA plunged 15 percent on concern spending by U.S. mobile phone companies will slow. BASF SE (BAS), the world’s largest chemical maker, retreated 4.6 percent after posting profit that missed estimates. The Stoxx Europe 600 Index rose less than 0.1 percent to 267.15 at the 4:30 p.m. close in London as three stocks dropped for every two that gained. The index has fallen 8.3 percent from this year’s high on Feb. 17 as investors speculated that Europe’s sovereign-debt crisis will derail the economic recovery and as concern mounted that U.S. lawmakers will fail to agree on the federal government’s debt ceiling by next week’s deadline.

FOREX-Euro falls as yields jump at Italian auction
LONDON, July 28 (Reuters) - The euro fell on Thursday after yields at an auction of benchmark Italian bonds rose to their highest level in 11 years, although deadlocked deficit reduction talks in the United States are limiting losses versus the dollar.
The Swiss franc hit a new record high against the dollar of 0.7990 franc  as investors unnerved by debt crises on both side of the Atlantic scrambled for safe haven assets.

Stocks fall, Australia dlr up on US debt deadlock
SINGAPORE, July 28 (Reuters) - Asian stocks slid more than 1 percent in thin volume  as investors trimmed positions with just three trading days to go before a deadline to lift the U.S. debt ceiling, while the Australian dollar showed resilience in the face of global sovereign risks.
"Buying on dips in companies with good earnings may continue, but exporters may not fare well for the time being as long as there are concerns about the U.S. economy," said Hideyuki Okoshi, general manager at Chibagin Securities in Tokyo.

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