GLOBAL MARKETS - Stocks, euro slide on economy, debt fears
LONDON, Sept 5 (Reuters) - Stocks fell on Monday and the euro hit a three-week low versus the dollar as worries about Greek and Italian fiscal deficits and a regional election rout for Germany's ruling party cast more doubt on the euro zone's ability to solve its debt crisis.
"Not a great start to the week. There is a lot going on for banks, especially in the light of a low-growth environment and the backdrop in the euro zone not improving," said Mike Lenhoff, chief strategist at Brewin Dolphin.
Stocks, euro slide on recession worries
LONDON, Sept 5 (Reuters) - World stocks fell to a one-week low and the euro hit a three-week trough against the dollar as investors worried the U.S. jobs market may be beyond easy repair and Europe faced a series of risks that would reignite its debt crisis.
"Jobs have been front and centre of this whole recovery debate. The problem is that there simply hasn't been any meaningful jobs growth, which is precisely why markets are so worried about slipping back into recession. The authorities have thrown a lot of stimulus at the problem and to date, it's basically done nothing," said Ben Potter, strategist at IG Markets.
Economies in Peril Proving Voters Aren’t Careful About What Is Wished For (Source: Bloomberg)
The world economy is paying a price for democracy. As recoveries from the U.S. to Europe lose momentum, policy makers are running into gridlock formed by the politicking and ideological preferences of governments that voters have chosen. Republicans and Democrats in the U.S. squabble about how to restrain the budget deficit and spur job growth, while officials throughout the euro zone differ over how best to safeguard the future of the single currency. The result is what JPMorgan Chase & Co. economist Bruce Kasman brands a “crisis of competency” as investors question the ability of authorities to act fast enough to avoid repeat recessions. JPMorgan, Citicorp Inc., UBS AG and Societe Generale SA all recently cited policy paralysis in downgrading estimates for global recovery.
“There is a gap between market horizons and political horizons, and the markets don’t like that,” said Michala Marcussen, London-based head of economics at Societe Generale, who last month cut her forecast for growth worldwide in 2012 to 3.9 percent from 4.6 percent. “Political uncertainty is at one of its highest points in 20 years.”
Asian Stocks Slide on Europe Debt Concern (Source: Bloomberg)
Asian stocks fell, with the regional benchmark index set for its biggest three-day decline in two weeks, amid concern that Europe will be unable to control its sovereign-debt crisis, denting the outlook for the global economy. Canon Inc., the world’s biggest camera maker which counts Europe as its biggest market for sales, slid 0.9 percent in Tokyo. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, declined 2.1 percent after the cost of insuring against default on European sovereign and financial debt surged to records. Commonwealth Bank of Australia, the nation’s largest lender, fell 1 percent in Sydney. The MSCI Asia Pacific Index dropped 0.8 percent to 119.82 as of 9:18 a.m. in Tokyo, headed for its third straight day of declines. Almost four stocks fell for each that rose on the gauge.
The measure slumped 8.6 percent last month, the most since May 2010, amid concern global economic growth is slowing as Europe’s sovereign debt crisis spreads and after Standard & Poor’s cut the U.S. credit rating.
Treasuries Rise, Send U.S. 10-Year Yields to Record Low, as Shares Decline (Source: Bloomberg)
Treasuries surged, pushing 10-year yields to a record low, as a rout in stocks around the world increased demand for the relative safety of government debt. Demand for longer maturities narrowed the extra yield that investors get for buying 10-year notes instead of two-year debt to 1.71 percentage points, the least since March 2009. Asian stocks fell for a third day on concerns that support for bailing out Europe’s indebted nations may fade and after data last week showed the U.S. jobs market stalled in August. “Treasury yields and equities can go down more,” said Yoshiyuki Suzuki, the Tokyo-based head of fixed income at Fukoku Mutual Life Insurance Co., which has the equivalent of $71.5 billion in assets. “People have a fear” of declines in financial markets that is increasing appetite for the most secure investments.
Stagnant August Hiring in U.S. May Signal Renewed Recession (Source: Bloomberg)
The U.S. may be on the cusp of a recession for the first time in more than two years. Stagnant payrolls in August reported last week added to data over the past month showing the economy is faltering, including slowing manufacturing, plunging consumer confidence, falling home values and lower bond yields and stock prices. “At this stage of the typical expansion we expect above- average growth and instead we are barely seeing any growth at all,” said James Hamilton, an economics professor at the University of California, San Diego, who has advised Federal Reserve banks and studied what tips the U.S. into downturns. “We have to be more worried. Overall, the economy is in a delicate position and another shock could send us down.”
Richest Americans Can Help Fix Social Security: Perry Golkin (Source: Bloomberg)
The debate on Social Security reform has reached an ideological stalemate, pitting collective responsibility to provide for the less fortunate against an individual’s right to one’s earnings and entitlements. There is a way of dealing, at least partially, with the funding shortfall for Social Security that draws on the country’s best traditions. That would be to encourage a voluntary waiver of benefits by affluent Americans. To avoid the cynicism of those expecting government to waste the funds, all waived benefits would be deposited into a trust fund and passed on to future generations of retirees. The mechanism for making this contribution would be simple and inexpensive, a single line on Internal Revenue Service Form 1040, annually indicating a waiver of next year’s benefits.
China HSBC August Services PMI Drops to Record Low as New Business Slows (Source: Bloomberg)
A Chinese services index fell to a record low in August as new business growth moderated, adding to evidence the economy is slowing after the government raised interest rates, curbed lending and limited property purchases. A purchasing managers’ index dropped to 50.6 from 53.5 in July, according to a statement issued by HSBC Holdings Plc and Markit Economics. The reading, near the borderline of 50 that marks expansion or contraction, was the lowest since the series began in November 2005, HSBC said. The data “reflects the effect of property and credit tightening measures,” Qu Hongbin, chief China economist at HSBC in Hong Kong, said in the statement. Tightening is probably approaching an end and consumer spending is resilient, “suggesting China’s service sector is likely to see a moderation in growth and not a meltdown.”
Japanese Stocks Fall for Third Day on Concern Europe Debt Crisis Worsening (Source: Bloomberg)
Japanese stocks for a third day fell as concern that Europe’s debt crisis is worsening saps demand for riskier assets. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, fell 1.8 percent after the cost of insuring against default on European sovereign and financial debt surged to records. Inpex Corp. (1605), the country’s No. 1 energy explorer, dropped 2 percent after the price of crude oil slid. Toyota Motor Corp. (7203) declined 0.4 percent as Kyodo News reported the carmaker will cease Japanese exports of its Camry sedan to North America after announcing a redesign of the model. The Nikkei 225 (NKY) Stock Average fell 1.1 percent to 8,685.16 as of 9:05 a.m. in Tokyo. The broader Topix index dropped 0.8 percent to 749.95.
South Korea’s Economy Grows More Than Initially Estimated on Construction (Source: Bloomberg)
South Korea’s economy expanded more than initially estimated in the second quarter as spending on public construction projects was higher than expected. Gross domestic product grew 0.9 percent over the three months through June from the first quarter, compared with a July estimate of 0.8 percent, the Bank of Korea said in Seoul today. The economy expanded 3.4 percent from a year earlier, matching the July estimate. The Bank of Korea will decide on Sept. 8 whether to raise interest rates for the fourth time this year as it grapples with risks from accelerating inflation and a global economic slowdown. Consumer prices climbed 5.3 percent in August, the fastest pace in three years and above the central bank’s 4 percent ceiling.
Services Expand at Slowest Pace in Two Years in August as Costs Increase (Source: Bloomberg)
India’s services industry grew at the slowest pace in more than two years in August after the central bank’s record interest-rate increases and a weakening global economy restrained consumer demand. The Purchasing Managers’ Index fell to 53.8 last month from 58.2 in July, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. That’s the lowest level since June 2009. A reading above 50 indicates an expansion. Asia’s growth has slowed as a faltering recovery in the U.S. and Europe’s debt crisis hurt the region’s exports, complicating monetary policy for central banks still grappling with price pressures. India’s manufacturing grew at the slowest pace in 29 months in August, a report showed last week, while inflation has exceeded 9 percent for eight straight months even after 11 rate increases by the Reserve Bank of India since mid-March 2010.
Euro Declines Before German Factory Orders Report, Swiss Franc Advances (Source: Bloomberg)
The euro fell for a fifth day against the Swiss franc before a report forecast to show German factory orders declined in July, adding to concern that the debt crisis will curtail the region’s economic recovery. The 17-nation euro weakened to a one-month low versus the greenback before Finland’s Finance Minister Jutta Urpilainen meets today in Berlin with her German and Dutch counterparts to discuss a Finnish demand for collateral. The franc strengthened against all of its 16 most-traded peers on speculation Asian shares will slump after European stocks fell and before data that economists said will show U.S. service-sector growth slowed, boosting demand for the currency as a haven.
“The euro is being sold because of concern about Europe’s economic slowdown and its debt crisis,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank. “Stock drops boost risk aversion, triggering buying of haven currencies such as the Swiss franc, yen and dollar.”
Berlusconi Seeking Support for Budget as Union Protests Austerity Package (Source: Bloomberg)
Thousands of Italians will converge on Rome today to protest Prime Minister Silvio Berlusconi’s 45.5 billion-euro ($64 billion) austerity package after bond yields surged on concern that the government may backslide on the plan. The general strike called by CGIL, Italy’s biggest union, comes as lawmakers in Rome begin debating the package of spending cuts and tax increases passed by the government last month to shield the country from debt-crisis contagion. The Senate may approve the plan as soon as tomorrow. Passage by the upper house would pave the way for the Chamber of Deputies, where Berlusconi has a narrower majority, to give final approval. The price of the nation’s 10-year bond declined yesterday for an 11th day, pushing the yield to 5.57 percent, the highest since Aug. 5. Milan’s stock benchmark FTSE MIB Index (FTSEMIB) closed down 4.8 percent, with UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), Italy’s biggest banks, dropping 7.3 and 7 percent, respectively.
Finland Searches for Collateral Compromise as IMF Becomes Latest Detractor (Source: Bloomberg)
Finland is stepping up efforts to find a compromise with Europe on its collateral demands amid International Monetary Fund opposition to forcing Greece to give euro members extra security for new loans. “We will seek a solution together everyone can agree on and one that doesn’t hurt anyone,” Finland’s Prime Minister Jyrki Katainen told reporters today in Helsinki after meeting with European Union President Herman Van Rompuy. “We are seeking a solution as soon as possible.” Europe’s efforts to contain its debt crisis risk unraveling as individual nations’ demands for collateral, Greece’s deteriorating economic predicament and wavering commitment to austerity packages from euro members such as Italy throw any recovery in doubt.
ECB Financing to Portuguese Banks Increased to 46 Billion Euros in August (Source: Bloomberg)
The European Central Bank’s financing to Portuguese lenders rose for a second month in August as the debt crisis limited the banks’ ability to borrow. ECB financing increased to 46 billion euros ($65 billion) from 44.2 billion euros in July, the Lisbon-based Bank of Portugal said today on the BPStat portion of its website. ECB financing levels peaked at 49.1 billion euros in August 2010. Portugal in April became the third euro-area country to seek a bailout after Greece and Ireland. It will receive 78 billion euros under the agreement with the International Monetary Fund and the European Union. ECB President Jean-Claude Trichet on April 7 said the central bank “encouraged” Portugal to seek aid, adding that the country’s banks needed to reduce their reliance on ECB funding.
FOREX - Euro knocked by Greece, Italy debt concerns
LONDON, Sept 5 (Reuters) - The euro fell broadly on Monday, touching a three-week trough versus the dollar as worries about Greek and Italian public deficits and a regional election rout for Germany's ruling party cast more doubt on the euro zone's ability to tackle its debt crisis.
"The pressure will be for the euro to move lower given the news flow, but every time we move down to these levels we see (sovereign) rebalancing flows come in," said Richard Falkenhall, currency strategist at SEB in Stockholm.
No comments:
Post a Comment