GLOBAL MARKETS - World stocks, euro rebound after German ruling
LONDON, Sept 7 (Reuters) - World stocks rose from a two-week low on Wednesday and the euro rebounded across the board after Germany's top court rejected lawsuits aimed at blocking Berlin's participation in bailout packages for Greece and other euro zone countries.
"Today's ruling should bring some relief to financial markets as a total chaos scenario has been avoided but it should not lead to euphoria," said ING economist Carsten Brzeski.
World stocks, euro rebound after battering
LONDON, Sept 7 (Reuters) - World stocks steadied above a two-week low and the euro rebounded after some more positive data from the United States and Australia helped calm frayed market nerves.
"All eyes are going to be on the German constitutional court... We don't expect the court to go against the bailouts, but key is the associated red tape which might make closer fiscal integration in the euro zone harder," said Jeremy Batstone-Carr, strategist at Charles Stanley.
Asian Stocks Gain on U.S. Stimulus Hopes (Source: Bloomberg)
Asian stocks gained, with the benchmark regional index rising for a second day, on speculation the U.S. will move to stimulate its economy and Europe may resolve its debt crisis, boosting the outlook for exporters. Toyota Motor Corp., the world’s biggest carmaker, increased 1.1 percent in Tokyo, leading automakers higher. Canon Inc., the world’s largest camera-maker that counts Europe as its No. 1 market for sales, rose 1.4 percent. Sumco Corp., a Japanese maker of silicon wafers for semiconductors, jumped 6.3 percent after saying its net loss narrowed. Woori Investment & Securities Co., a South Korean brokerage, sank 13 percent in Seoul on speculation it may sell new shares. The MSCI Asia Pacific Index climbed 0.6 percent to 122.44 at 9:46 a.m. in Tokyo, with almost six stocks gaining for each that fell. All 10 industry groups gained on the measure, which also rose yesterday after valuations fell to the lowest level in three years.
European Stocks Rebound From Two-Year Low; Richemont Climbs (Source: Bloomberg)
European stocks rose the most in three weeks, rebounding from a two-year low, after three days of losses dragged the Stoxx Europe 600 Index near to the cheapest since 2008. Greek stocks gained as Germany’s top court rejected challenges to the participation of Europe’s largest economy in euro rescue funds. Cie. Financiere Richemont SA, owner of the Cartier watch brand, climbed 7.3 percent after revenue topped analyst estimates. Scor SE (SCR), France’s largest reinsurer, increased 2.5 percent after confirming targets. Renault SA (RNO) led a rally in automakers. The Stoxx 600 rose 3.1 percent to 228.84 at the 4:30 p.m. close in London as all 19 industry groups advanced, the largest gain since Aug. 12. The gauge has still tumbled 21 percent from this year’s high in February as concern grew that Europe’s debt crisis is harming the economy. The decline cut the index’s valuation to 10.4 times reported earnings, near the cheapest since December 2008, according to data compiled by Bloomberg.
Treasuries Advance on Monetary Stimulus Speculation Before Bernanke Speech (Source: Bloomberg)
Treasury 10-year note yields fell, snapping yesterday’s advance, on prospects Federal Reserve Chairman Ben S. Bernanke will today signal that policy makers will consider further stimulus measures to spur the economy. The extra yield investors get to hold 30-year bonds instead of two-year notes was six basis points from the least in more than a year amid speculation the Fed will announce plans to purchase longer-maturity debt while shedding shorter maturities. Benchmark yields yesterday rose from near an all-time low on expectations President Barack Obama’s plan to injected more than $300 billion into the economy will bolster growth. “The Fed is keen to get the economy going and get unemployment down, so they’re going to keep rates on hold and the effect of that is to force people out the curve,” said Warren Potter, a bond portfolio manager at AMP Capital Investors in Wellington, New Zealand. “I can’t see much scope for yields to go substantially higher from here because global growth is slowing.”
Economy Grew Slower in Some Regions: Fed (Source: Bloomberg)
The Federal Reserve said the economy grew at a slower pace in some regions of the country as shoppers limited their spending and factories curbed production. “Economic activity continued to expand at a modest pace, though some districts noted mixed or weakening activity,” the Fed said in its Beige Book survey released today in Washington. Chairman Ben S. Bernanke noted last month that the economy was weaker than anticipated and said policy makers will review ways to bolster growth and reduce unemployment at their Sept. 20-21 meeting. The central bank chief, speaking in Jackson Hole, Wyoming, didn’t say what tools the central bank may use.
Fed’s Evans Calls to Cut Unemployment to 7.5% (Source: Bloomberg)
Federal Reserve Bank of Chicago President Charles Evans said the central bank should move “aggressively” to reduce unemployment, even at the cost of temporarily pushing inflation higher. The Fed’s current commitment to record-low interest rates should be made contingent on pushing the unemployment rate to around 7 percent or 7.5 percent, as long as inflation stays below 3 percent in the medium term, the 53-year-old regional bank chief said today in a speech in London. “Given how truly badly we are doing in meeting our employment mandate, I argue that the Fed should seriously consider actions that would add very significant amounts of policy accommodation,” he said. “Such further policy accommodation does increase the risk that inflation could rise temporarily above our long-term goal of 2 percent.”
Obama Said to Seek $300 Billion Jobs Package (Source: Bloomberg)
President Barack Obama plans to propose sparking job growth by injecting more than $300 billion into the economy next year, mostly through tax cuts, infrastructure spending and direct aid to state and local governments. Obama will call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years. This would be part of a long-term deficit reduction package, including spending and entitlement cuts as well as revenue increases, that he will present next week to the congressional panel charged with finding ways to reduce the nation’s debt. Almost half the stimulus would come from tax cuts, which include an extension of a two-percentage-point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the tax paid by employers.
Obama Faces 27-Week Jobless Rise as This Century Is Different (Source: Bloomberg)
President Barack Obama, under pressure from Republican lawmakers and constituents to reduce the highest jobless levels in more than a quarter century, faces a more persistent, underlying challenge: long-term unemployment. He will lay out his plans in a speech tomorrow to help bring down a jobless rate stuck around 9 percent or higher since April 2009. One hurdle is finding employment for people who’ve been out of work more than half a year as their ranks swell to the largest since the Great Depression. “He needs to come up with a plan that is doable and gets passed by Congress,” said John Silvia, chief economist of Wells Fargo Securities LLC in Charlotte, North Carolina. “An unemployment rate of 9 percent has been associated with not getting re-elected” and “it’s going to be difficult for him to overcome that.”
Obama Jobs Plan Should Channel Summers’ Ideas: William D. Cohan (Source: Bloomberg)
In January, just after the lame-duck session of Congress had extended the costly George W. Bush tax cuts, I spoke with Lawrence Summers, the former chairman of President Barack Obama’s National Economic Council. Summers, who had returned to his professor’s chair at Harvard, was sanguine about the direction of the economy, which he thought had “the wind at its back” thanks to a combination of new fiscal stimuli. For businesses, he said, there was the 2 percent payroll- tax holiday and the 100 percent tax write-off for capital investments made during the year. For consumers, the extension of the Bush tax cuts would, he hoped, encourage individuals to spend the tax money they saved on goods and services. In sum, he predicted the U.S. economy would grow between 3.5 percent and 4 percent in 2011.
U.S. Job Openings Rose in July as Slower Hiring Signals Lack of Confidence (Source: Bloomberg)
Job openings in the U.S. rose in July for a third month, while a slowdown in hiring showed businesses lacked the confidence to take on new staff. The number of positions waiting to be filled climbed by 59,000 to 3.23 million, according to Labor Department figures issued today in Washington. Hiring decreased by 74,000 to 3.98 million. Payrolls were unchanged in August, the weakest showing since September 2010, while revised data last month showed the world’s largest economy grew at a 0.7 percent annual pace in the first half of 2011. Concern the recovery is faltering may cause employers to delay hiring plans even further.
U.S. Stocks Rise on Speculation About Obama’s Job Growth Plan (Source: Bloomberg)
U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest rally in two weeks, as investors speculated President Barack Obama’s plan to inject more than $300 billion into the economy will bolster growth. All 10 groups in the S&P 500 advanced as gains were led by financial, energy and industrial shares. Bank of America Corp. (BAC) added 7 percent after a shakeup in management. Yahoo! Inc. climbed 5.4 percent as the most-visited U.S. Web portal ousted Chief Executive Officer Carol Bartz and announced a strategic review to boost growth. Nvidia Corp. (NVDA) jumped 8.1 percent as the maker of graphics chips forecast sales that beat estimates. The S&P 500 rallied 2.9 percent to 1,198.62 at 4 p.m. in New York. The benchmark gauge for American equities fell 4.4 percent over the previous three days. The Dow Jones Industrial Average added 275.56 points, or 2.5 percent, to 11,414.86.
Dollar Gains Before Obama’s Jobs Speech; Euro Slumps on ECB Rate Outlook (Source: Bloomberg)
The dollar strengthened against the majority of its most-traded counterparts before President Barack Obama unveils proposals to spur job growth and support the U.S. economy. The dollar snapped yesterday’s losses versus the yen and the euro on prospects Obama’s plans will make it less likely that Federal Reserve Chairman Ben S. Bernanke will add further monetary easing. The 17-nation euro slumped versus most of its peers on speculation European Central Bank President Jean-Claude Trichet will signal a less aggressive stance toward inflation. “Bernanke has been arguing for quite a while that fiscal policy needed to do more to help growth,” said Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Potentially, this reduces some of the need for the Fed to take further action. That could potentially be positive for the dollar.”
Japan Stocks Continue Rise on Obama Plan, Europe Crisis Easing (Source: Bloomberg)
Japanese stocks rose the earnings outlook for Asian exporters brightened on President Barack Obama’s plan to inject more than $300 billion into the U.S. economy and signs Europe’s debt crisis is improving. Honda Motor Co., which earns more than 80 percent of its revenue abroad, increased 1.5 percent. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, gained 1.5 percent. Kubota Corp. (6326), a maker of industrial and farm machinery, rose 3.3 percent after announcing plans to pay as much as 10 billion yen to repurchase up to 1.6 percent of its outstanding shares. The Nikkei 225 (NKY) Stock Average rose 1.1 percent to 8,855.00 as of 9:09 a.m. in Tokyo. The broader Topix index gained 1.1 percent to 762.05.
Japan Machinery Orders Drop More Than Expected in Sign Rebound Is Stalling (Source: Bloomberg)
Japan’s machinery orders fell the most in 10 months in July, as the yen’s gain to a postwar record eroded company profits and discouraged investment. Factory orders dropped 8.2 percent in July from June, when they increased 7.7 percent, the Cabinet Office said today in Tokyo. Orders, an indicator of capital spending in three to six months, were projected to decline by 4.2 percent, according to the median forecast of 27 economists surveyed by Bloomberg News. Today’s report adds to concern that a rising yen may derail the nation’s recovery from March’s record earthquake, putting pressure on officials to take action to stem gains in the currency. Finance Minister Jun Azumi, who was sworn in last week, said on Sept. 4 that the government is ready to take decisive action against speculative moves in the yen.
Nomura Sees Most Japan IPOs in Three Years as Market Rebounds After Quake (Source: Bloomberg)
Initial public offerings in Japan will climb to the most in three years as investors regain confidence sapped by a record earthquake, according to Nomura Holdings Inc. (8604), the top-ranked arranger of Japanese stock sales. At least 15 Japanese companies will probably announce debut share sales from Oct. 1, bringing the number of IPOs to 35 to 40 by the end of the year, exceeding last year’s 22 and the 19 in 2009, said Masaharu Kambe, head of Nomura’s IPO department. Medical research ventures, game makers, manufacturers and solar energy firms are among companies preparing offerings, he said. Japan’s equity capital market has begun to recover, with nine companies selling shares in IPOs from the end of May after an 11-week hiatus in the aftermath of the March 11 disaster. RaQualia Pharma Inc., a drugmaker, is among businesses that held first-time sales after postponing the offerings following the catastrophe.
German Stocks Rise The Most in 16 Months as Court Backs European Bailout (Source: Bloomberg)
German stocks jumped the most in 16 months as the nation’s top court rejected lawsuits against its participation in European rescue funds and a report showed industrial production surged in July. Infineon Technologies AG (IFX) and Bayerische Motoren Werke AG (BMW) led gains. EON AG and RWE AG (RWE) rose following a report that the companies may sell their stakes in U.K. nuclear-power company Urenco Group and as Goldman Sachs Group Inc. recommended European utilities. The DAX Index (DAX) advanced 4.1 percent to 5,405.53 at the 5:30 p.m. close in Frankfurt after plummeting 10 percent over the previous four days. The gauge posted its biggest increase since May 10, 2010, according to Bloomberg data. The broader HDAX Index also gained 4.1 percent today.
Berlusconi Austerity Plan Passes Senate in Bid to Appease ECB, Investors (Source: Bloomberg)
Italian Prime Minister Silvio Berlusconi’s revised 54 billion-euro ($76 billion) austerity plan was approved by the Senate as the government seeks to convince investors and the European Central Bank it’s serious about cutting the deficit. The Senate backed the measure in a confidence vote last night after the government beefed up the package the previous day with an increase in sales tax and changes to pension rules. The plan faces final passage in the Chamber of Deputies in a vote that could come as soon as this week. Italy is rushing to pass the measures to ensure the ECB continues to buy its bonds after contagion from the region’s debt crisis pushed borrowing costs for Europe’s second-biggest debtor to the highest in more than a decade. The flap over Italian austerity comes as a second bailout plan for Greece and efforts to shore up the region’s rescue mechanism founder, undermining Europe’s ability to rebuild confidence in the single currency.
IMF to Cut Irish Growth Forecasts as Outlook Worsens for Trading Partners (Source: Bloomberg)
The International Monetary Fund will cut its Irish economic growth estimate for this year and next as the outlook for its main trading partners, the euro region, U.S. and U.K. “worsened substantially.” The Washington-based fund will lower its 2011 gross domestic product forecast for the country to 0.4 percent and 2012 projection to 1.5 percent as part of its world economic outlook this month, it said in a report today. The IMF had been forecasting growth of 0.6 percent and 1.9 percent, respectively. Irish Finance Minister Michael Noonan said in an interview yesterday that the global economy had begun to move against the nation, after spurring growth in the first half of the year. The country’s trade surplus widened to a record in June, driven by exports of dairy, medical and pharmaceutical products.
Swiss Franc Ceiling May Fall Short of Healing Eastern Europe Mortgage Pain (Source: Bloomberg)
The Swiss central bank’s decision to cap the appreciation of the nation’s currency against the euro may fall short of helping eastern European borrowers repay mortgages denominated in francs and get them to spend. The forint and the zloty have climbed 8 percent against the franc since yesterday’s announcement, compared with repayment costs that have risen 77 percent in Hungary and 93 percent in Poland since mid-2008, according to Capital Economics. The collapse of Lehman Brothers Holdings Inc. that year ended an economic boom that spurred demand for franc loans to escape higher local interest rates. “The pain is still there,” Luis Costa, an emerging- markets strategist at Citigroup Inc. in London, said in a telephone interview yesterday. “The fact that at least they are trying to cap the Swiss franc appreciation helps of course. At least it’s not going to get worse. This doesn’t resolve the problem.”
Sweden’s Central Bank Abandons Planned Rate Increase as Turmoil Dominates (Source: Bloomberg)
Sweden’s central bank abandoned a planned interest-rate increase as global recovery prospects deteriorate, while policy makers held on to the option of raising rates in the largest Nordic economy once more this year. The benchmark repo rate was left unchanged at 2 percent, interrupting a cycle of seven consecutive increases since July last year, the Stockholm-based Riksbank said today. The decision was expected by 24 of the 25 economists surveyed by Bloomberg. One had predicted an increase to 2.25 percent. “The concern over public finances abroad has increased and global growth prospects have deteriorated,” the Riksbank said in the statement. “The slowdown in the Swedish economy is thus expected to be more pronounced than was forecast in July.”
Rate-Cut Bets Smallest in Month as Growth Beats Forecast: Australia Credit (Source: Bloomberg)
Traders reduced bets on an interest rate cut in October to the least in a month after the Australian economy grew faster than forecast and the central bank said the nation is well placed to withstand global market turmoil. Reserve Bank of Australia Governor Glenn Stevens said yesterday policy makers have the flexibility to “maintain steady settings” while markets are unstable. Rising consumer spending and a rebound in exports drove the economy’s 1.2 percent growth in the second quarter, versus the 1 percent gain predicted by economists, the statistics bureau said yesterday.
The yield on the October cash-rate future rose as high as 4.62 percent yesterday from 4.48 percent the day before, implying a 54 percent chance of a 25 basis-point cut next month. On Aug. 9, the contract was pricing in 91 basis points of reductions. The two-year bond yield surged 15 basis points to 3.76 percent yesterday, the biggest increase since Feb. 4. Australia is the only developed nation where all government notes yield less than the central bank’s key interest rate.
FOREX - Euro rises as market relieved at German ruling
LONDON, Sept 7 (Reuters) - The euro rose against the dollar on Wednesday on relief the German Constitutional Court did not uphold lawsuits aimed at blocking participation in euro zone bailouts, while it was also buoyed in tandem with high-yielding currencies and stocks.
"The Constitutional Court ruling is probably just one trouble less for the market rather than a potential boost for the euro," said Roberto Mialich, currency strategist at Unicredit in Milan.
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