Most Asian stocks rose, with the benchmark regional index snapping two days of losses, as concern eased about Europe’s debt crisis following a report that China may invest in Italy. BHP Billiton Ltd., the world’s No. 1 mining company, advanced 1.7 percent in Sydney, leading raw material producers higher, after the price of oil and copper rose. Inpex Corp., an energy explorer, advanced 1.2 percent in Tokyo. Westpac Banking Corp., Australia’s second-biggest lender by market value, increased 0.9 percent. Nintendo Co., the world’s largest maker of game players, slumped 2.5 percent on speculation it may sell fewer 3-D handheld players than it is targeting.
The MSCI Asia Pacific Index was little changed at 118.02 at 9:36 a.m. in Tokyo after dropping 3.3 percent in the past two days. More than two shares rose for each that fell on the 1,017- member measure. The gauge 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.
Shares hit hard by Greek worries, G7 inaction
LONDON, Sept 12 (Reuters) - World shares fell close to 1.5 percent with European equities tumbling more than 2 percent as investors worried that Greece would default amid signs of disagreement among euro zone policymakers.
"This is clearly not good news for the market, it is bad news for the banks and the equity markets, it just keeps them under pressure," said Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin.
U.S. Stocks Rise, Erasing Loss in Last Hour, on Report China May Buy Bonds (Source: Bloomberg)
U.S. stocks advanced, erasing earlier losses, as speculation that China may invest in Italy triggered a rally that lifted the Dow Jones Industrial Average more than 200 points in the last 45 minutes of trading. Nine out of 10 groups in the Standard & Poor’s 500 Index rallied, led by technology and financial shares. Bank of America Corp. (BAC), the biggest U.S. lender by assets, gained 1 percent on plans to eliminate 30,000 jobs in the next few years. NetLogic Microsystems Inc. (NETL) surged 51 percent after Broadcom Corp. (BRCM) agreed to buy the semiconductor company for $3.7 billion in cash. The S&P 500 advanced 0.7 percent to 1,162.27 at 4 p.m. in New York, after retreating 1.6 percent earlier. The Dow increased 68.99 points, or 0.6 percent, to 11,061.12.
Obama Gets Credit for Saving Auto Jobs in Michigan Where Voters Disapprove (Source: Bloomberg)
Wes Smith probably would have lost his family-owned company if it weren’t for one of President Barack Obama’s signature economic policies: the $82 billion bailout of General Motors Co. (GM) and Chrysler Group LLC. “I could be out of business,” Smith said. “Do I think about that often? Absolutely.” Instead, E&E Manufacturing Co., the Plymouth, Mich., auto- parts maker Smith’s father-in-law founded in 1962, is rebounding from the depths of the financial crisis. Annual sales of about $75 million are up about 50 percent from their nadir. The company has added about 70 jobs since employment bottomed at 280, down from a pre-crisis high of 480. E&E’s resurgence is part of a broader auto-industry comeback that analysts say vindicates the government’s activism in financing and arranging the 2009 GM and Chrysler bankruptcies.
Obama Proposes Limits on Breaks for Muni Bond Investors (Source: Bloomberg)
President Barack Obama proposed curbing the amount of interest from municipal bonds that top earners can exclude from their taxable income, a step that may diminish demand for state and local-government securities. The president’s $447 billion job-creation plan would pare the tax break for municipal-bond interest to 28 percent for couples earning more than $250,000 a year. Such tax-exempt interest is currently worth 35 percent for earners in the top tax bracket because that’s the amount they would otherwise have to pay on their income. Any move to limit the tax advantage for municipal securities would face resistance from local-government officials because it bolsters demand for their debt, driving down the interest rates they pay when borrowing for public works. Investors in the $2.9 trillion market for municipal bonds are willing to accept lower returns because the income isn’t taxed.
Business Economists Cut U.S. Growth Outlook Through ’12 as Confidence Dims (Source: Bloomberg)
The U.S. economy will grow less than previously estimated through 2012, reflecting a slump in confidence, limited consumer spending and a struggling housing market, a survey showed. Gross domestic product in the world’s largest economy will expand 1.7 percent this year, less than the May forecast of 2.8 percent, according to results of a survey by the National Association for Business Economics issued today in Washington. Growth in 2012 will average 2.3 percent after a previous projection of 3.2 percent. Some 54 percent of respondents lowered their growth forecasts because they said the legislation stemming from the debt-ceiling debate will fail to reduce the long-term budget deficit. Unemployment projected to stay above 8.5 percent until late next year and Europe’s debt crisis were also among panelists’ top concerns.
Fed’s Fisher: ‘High Bar’ for New Monetary Easing (Source: Bloomberg)
Federal Reserve Bank of Dallas President Richard Fisher said he probably won’t support further monetary easing by the Fed, arguing that steps that would boost the recovery are the responsibility of fiscal authorities. “If I believe further accommodation or some jujitsu with the yield curve will do the trick and ignite sustainable aggregate demand, I will support it,” Fisher said today in a speech in Dallas. “But the bar for such action remains very high for me until the fiscal authorities do their job, just as we have done ours. And if they do, further monetary accommodation may not even be necessary.”
Fisher was one of three presidents to dissent from the Fed’s Aug. 9 statement that it expected to hold interest rates near-zero through mid-2013. At its next meeting on Sept. 20-21, the Fed may decide to replace short-term Treasury securities in its $1.65 trillion portfolio with long-term bonds in a bid to lower rates on everything from mortgages to car loans, according to economists at Wells Fargo & Co., T. Rowe Price Associates Inc., Barclay’s Capital Inc. and Goldman Sachs Group Inc.
Japanese Stocks Advance First Time in Three Days on Easing Europe Worry (Source: Bloomberg)
Japanese stocks gained for the first time in three days as reports China may invest in Italy eased concern that Europe’s debt crisis will worsen. Kyocera Corp. (6971), an electronic components maker that gets almost 20 percent of its revenue from Europe, gained 2 percent after European Central Bank President Jean-Claude Trichet said central bankers around the world are ready to support the financial system as the global economy slows. Inpex Corp. (1605), the nation’s No. 1 oil explorer by market value, rose 1.5 percent after crude prices rebounded. Suzuki Motor Corp. (7269) jumped 3 percent after the automaker said it’s seeking to dissolve its alliance with Volkswagen AG. The Nikkei 225 (NKY) Stock Average rose 0.4 percent to 8,566.32 as of 9:28 a.m. in Tokyo. The broader Topix gained 0.2 percent to 742.95, with almost twice as many shares advancing as falling.
Jun Azumi’s Yen Pledge Challenged by Disappearing Yield Gap: Japan Credit (Source: Bloomberg)
Finance Minister Jun Azumi’s pledge to take “bold actions” on the yen may be put to the test after a rally in overseas bonds reduced their yield advantage over Japanese debt. Yields on two-year U.S. securities fell to a 19-year low relative to similar-maturity Japanese notes, a gap that has a “relatively high” correlation with the dollar-yen rate, according to Bank of Japan Governor Masaaki Shirakawa. The spread between Japanese and German debt is the narrowest since at least 1990, as the euro plunged to the lowest level in a decade against the yen. Gains in Japanese bonds have been outpaced by those in the U.S. and Germany amid speculation Greece will default and the Federal Reserve will signal plans to buy longer-dated debt at a meeting starting Sept. 20. Investor demand for a refuge has intensified since last month, when Japan’s biggest currency intervention in seven years failed to stop the yen from gaining to a postwar record.
India Industrial Production Grows at Slowest Pace Since ’09, Missing Estimates (Source: Bloomberg)
India’s industrial production grew in July at the slowest pace in almost two years as consumer demand moderated after record interest-rate increases. The rupee fell to the lowest level in more than a year. Output at factories, utilities and mines rose 3.3 percent from a year earlier, following an 8.8 percent gain in June, the Central Statistical Office said in a statement in New Delhi today. The median of 26 estimates in a Bloomberg News survey was for a 6.2 percent advance. Reserve Bank of India Governor Duvvuri Subbarao has to weigh the risks to expansion posed by Europe’s debt crisis and a faltering U.S. recovery against inflation when he makes his next policy decision on Sept. 16. Asian central banks from South Korea to Malaysia kept borrowing costs unchanged last week as they assess the global economy.
Indonesia’s Stock Market Value to Lure Investors, Panin Says (Source: Bloomberg)
Indonesian stocks have become more attractive to overseas investors after the world’s fourth-most populous nation overtook Malaysia as Southeast Asia’s second- largest equities market by value, PT Panin Sekuritas said. “Foreign investments into Indonesian stocks will likely increase as portfolios are weighted in line with the size of a nation’s stock market,” Winston Sual, who helps manage $991 million at Jakarta-based Panin Sekuritas, said in a Sept. 9 interview. The firm’s $407 million Panin Dana Maksima fund has climbed 40 percent in the past year, beating 35 rival funds, according to data compiled by Bloomberg.
The value of Indonesian equities surged 17 percent to $416 billion this year to Sept. 9, surpassing Malaysia’s $407 billion to become the ninth-biggest stock market in Asia. Singapore’s stock market is the biggest in Southeast Asia at $523 billion. The Jakarta Composite index (JCI) has risen 8 percent in 2011 through last week, compared with a 3.3 percent drop in the FTSE Bursa Malaysia KLCI Index.
European Stocks Decline on Concern Greece May Default; French Banks Tumble (Source: Bloomberg)
European stocks slumped for a second day, dragging the benchmark regional gauge to its lowest level since July 2009, as speculation mounted that Germany is preparing for Greece to default. BNP Paribas (BNP) SA, Societe Generale SA and Credit Agricole SA (ACA) tumbled at least 11 percent after two people with knowledge of the matter said Moody’s Investors Service may cut the banks’ ratings because of their Greek holdings. AXA SA (CS) and ING Groep NV (INGA) lost more than 8 percent as insurers posted the second biggest losses among 19 industry groups on the Stoxx Europe 600 Index. The Stoxx 600 lost 2.5 percent to 218.93 at the 4:30 p.m. close in London. The gauge extended last week’s 3.7 percent slide, bringing its slump from this year’s peak on Feb. 17 to 25 percent, as economic data from the U.S. and Europe trailed forecasts and Standard & Poor’s downgraded America’s AAA sovereign-debt rating.
Draghi May Struggle to Deliver on ECB Stimulus as Stark Resigns Over Bonds (Source: Bloomberg)
Mario Draghi may find it harder to keep the European Central Bank in the vanguard of the battle against the euro region’s debt crisis after Juergen Stark resigned in protest at the bank’s bond purchases. With speculation of a Greek default heaping pressure on the ECB to step up its bond buying and reverse interest-rate increases to ease market tensions, Stark’s shock move has publicly exposed a rift among policy makers that may undermine its ability to act quickly, economists said. German opposition to further ECB stimulus may also make Draghi less inclined to ease policy when he takes over from ECB President Jean-Claude Trichet on Nov. 1, said Marco Valli, chief euro-area economist at UniCredit Group in Milan. “It would be very easy for Germans to say here comes the Italian, he’ll cut rates and buy government bonds in massive amounts,” Valli said. Draghi “will probably prefer to err on the side of hawkishness on standard measures, which means he may be reluctant to go for a rate cut.”
Euro Falls Toward June 2001 Low Versus Yen on Greece Concern, Rate Outlook (Source: Bloomberg)
The euro fell toward its lowest level since 2001 against the yen on speculation Greece is nearing default and before Italy sells bonds today amid concern the region’s debt crisis is deteriorating. The 17-nation currency declined against the dollar as traders wagered the European Central Bank will cut its benchmark interest rate over the next year, according to a Credit Suisse AG index. The New Zealand dollar dipped against 11 of its 16 most-traded peers after a report showed manufacturing volumes unexpectedly fell in the second quarter. The pound dropped for a fourth day after a measure of expectations for U.K. house prices slid in August. “The nerves around the whole euro system are just so frayed now that it’s difficult to see conditions improving all that much,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The euro can easily fall significantly further before the year’s out because there’s still scope for policy easing by the ECB.”
Germany May Surrender in Fight to Save Greece (Source: Bloomberg)
Germany may be getting ready to give up on Greece, as measures in the credit markets signal growing concern about the smaller nation’s ability to repay investors. Yields on Greek two-year notes rose above 60 percent today for the first time. Five-year credit-default swaps to insure the country’s bonds and to speculate on government securities soared 937 basis points to an all-time high of 4,437, according to CMA. The contracts are the highest in the world and more than three times the 1,244 basis points for Portuguese debt. After almost two years of fighting to contain the region’s debt crisis and providing the biggest share of three European bailouts, German Chancellor Angela Merkel is laying the groundwork for what markets say is almost a sure thing: a Greek default.
Italy Seeks $10B as Contagion Slams Demand (Source: Bloomberg)
Italy is auctioning as much as 7 billion euros ($10 billion) of bonds one day after borrowing costs surged at a bill auction, as Greece’s slide toward default roils global markets. The treasury is selling 4 billion euros of a new benchmark five-year bond today, after 10-year yields climbed to a five- week high of 5.571 percent. Investors charged Italy 4.153 percent yesterday in a one-year bill offering, up from 2.959 percent a month ago. “It’s rather unfortunate that the Italian auction is taking place when the market is in a panic mode,” said Fabrizio Fiorini, the head of fixed income at Aletti Gestielle SGR SpA in Milan. “Borrowing costs are likely to remain at elevated levels. The rise in Italian yields is manifestation of a lack of market confidence in European leaders’ ability to tackle the problem.”
Italy Sells 11.5 Billion Euros of Bills as Crisis Causes Yields to Surge (Source: Bloomberg)
Italy sold 11.5 billion euros ($15.6 billion) of Treasury bills as demand waned and borrowing costs rose amid Europe’s sovereign-debt crisis. The Rome-based Treasury sold 7.5 billion euros of one-year bills at an average yield of 4.153 percent compared with 2.959 percent the last time securities of similar maturity were sold on Aug. 10. Demand was 1.53 times the amount on offer, compared with 1.94 times at the previous sale. The Treasury also sold 4 billion euros of 3-month bills. The yield was 1.907 percent, up from the 1.034 percent the last time such securities were sold on March 10. The bid-to-cover ratio was 1.86, compared with 2.42 at the previous sale.
Europe Stress Seen in Commercial Paper Rates (Source: Bloomberg)
Societe Generale SA, BNP Paribas SA and Credit Agricole SA (ACA) are being quoted higher rates than their competitors in the commercial paper market as the crisis in the euro zone spreads beyond Greece, Portugal and Italy. Investors charged the French companies an average 6.7 basis points more to borrow three-month commercial paper on Sept. 8 than the rate the lenders said they could pay in the London interbank offered rate market, according to two buyers who asked not to be identified because the talks are private. As recently as July, the banks received CP rates that were lower than Libor. Premiums on short-term loans are rising as odds of a default by Greece grows, with German Chancellor Angela Merkel preparing plans to aid her nation’s financial companies. BNP, Societe Generale and Credit Agricole, France’s largest banks by market value, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings, two people with knowledge of the matter said.
Inflation Bonds Show Growth Bigger Worry as Rates Point to 1.3% Global CPI (Source: Bloomberg)
Returns on inflation-linked bonds fell below those of government debt by the most in almost three years as the world economic slump makes it less likely that easy monetary policies will trigger spiraling consumer prices. Global sovereign debt gains are 1.3 percentage points higher since the end of July than on so-called linkers according to Bank of America Corp. indexes. The difference is the most since November 2008. The gap in yields for these bonds on Sept. 9 indicated investors anticipated an annual global inflation rate of 1.35 percent, down from 1.86 percent four months earlier. From Australia to the U.K. to the U.S. central bankers are cutting inflation estimates, giving officials scope to try to boost growth rates and employment. President Barack Obama presented a $447 billion package of tax cuts and spending to a joint session of Congress last week. The European Central Bank left interest rates unchanged Sept. 8, saying economic prospects had worsened.
Europe Banks Valued at Post-Lehman Lows Show Sovereign Risks Intensifying (Source: Bloomberg)
Investors are valuing European banks at levels not seen since the depths of the credit crunch that followed the collapse of Lehman Brothers Holdings Inc. as concern over a Greek default and debt contagion escalates. A Bloomberg index shows 46 lenders trading at 0.56 times book value, the cheapest since the post-Lehman lows of March 2009, signaling investors estimate their net assets are worth less than the companies claim and are demanding discounts for perceived risks. Valuations reflect the impact of a potential sovereign default for some banks, according to Barclays Capital analysts led by Jeremy Sigee.
Group of Seven finance chiefs meeting in Marseille, France, over the weekend vowed to support banks amid growing concern that the debt crisis is morphing into a banking crisis. As doubts linger about the ability of some European lenders to withstand a Greek default and its ripple effects, the cost of insuring their debt rose to records, while a measure of their reluctance to lend to each other climbed to a 2 1/2-year high.
Papandreou Unveils Property Taxes, State Wage Cuts to Avert Greek Default (Source: Bloomberg)
Prime Minister George Papandreou, vowing to avoid a default and keep Greece in the euro, approved new measures to help plug a yawning budget gap as resistance builds at home and in Europe to extending more aid to the European Union’s most-indebted nation. The Cabinet yesterday voted to cut one month’s wages from all elected officials and impose an annual charge on all property for two years, to be levied through electricity bills to ensure rapid collection, Finance Minister Evangelos Venizelos told reporters in the northern Greek city of Thessaloniki. The measures will help the country meet deficit targets of 17.1 billion euros ($23.6 billion) in 2011 and 14.9 billion euros in 2012, covering a 2 billion-euro shortfall for this year that has been exacerbated by a deepening recession, he said.
Thailand Shouldn’t Use Rates for Climbing Commodity Costs, Kittiratt Says (Source: Bloomberg)
Thailand’s five-week old government signaled it wants the nation’s central bank to stop raising interest rates as Prime Minister Yingluck Shinawatra seeks to stoke growth in Southeast Asia’s second-biggest economy. “I did not agree with high interest rates to handle inflation if it’s not demand-pull inflation,” Deputy Prime Minister Kittiratt Na-Ranong said in an interview in Bangkok today. Yingluck’s administration has pledged to almost double the minimum wage in parts of the country and buy rice from farmers at above-market rates after winning the July 3 election with support from lower-income voters. The Bank of Thailand has boosted borrowing costs six times this year to damp inflation, raising rates by the most in Asia outside India. Kittiratt’s remarks signal a conflict with the central bank’s stance that may lead to a stalemate in policy making, with one side’s attempt to lift growth undermined by monetary tightening by an authority whose independence is protected by law.
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