Wednesday, September 21, 2011

20110921 1005 Global Market Related News.

Most Asian Stocks Rise on Europe Optimism (Source: Bloomberg)
Most Asian stocks rose on optimism Europe’s debt crisis may ease and lift exporters’ earnings, overshadowing concern after the International Monetary Fund cut its global growth forecast. Brambles Ltd. (BXB), the supplier of wooden pallets that gets more than a third of its sales in Europe, gained 1.2 percent in Sydney. Canon Inc., which also depends on the region for about a third of its sales, climbed 1 percent in Tokyo. BHP Billiton Ltd. (BHP), the world’s biggest mining company, added 0.1 percent. Lynas Corp., a rare-earths mining company slumped 14 percent in Sydney. The MSCI Asia Pacific Index rose 0.2 percent to 118.17 as of 10:03 a.m. in Tokyo, with about three stocks rising for each two that fell on the measure. The gauge has fallen for the past two weeks on concern Europe’s crisis is spreading and on signs of slowing U.S. economic growth.

GLOBAL MARKETS - Italy downgrade, Greek worry dominates
LONDON, Sept 20 (Reuters) - Standard & Poor's downgrading of Italian debt hit the euro on Tuesday, although stock investors shrugged off the move to push European stocks higher.  
Markets remain on edge about Greece's rickety finances and French banking stress and world stocks as measured by MSCI were down slightly. But the pan-European FTSEurofirst 300 gained a third of a percent.

Fed May Extend Duration of Treasuries With ‘Operation Twist,’ Survey Shows (Source: Bloomberg)
Federal Reserve officials tomorrow will probably announce a program for monetary easing that will do little to help 14 million unemployed Americans find work, according to economists in a Bloomberg News survey. The Federal Open Market Committee will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long- term bonds, according to 71 percent of 42 surveyed economists. The move, known as “Operation Twist” for its goal to bend the yield curve, will probably fail to reduce the 9.1 percent unemployment rate, 61 percent of the economists said. Among those, 15 percent predict it will be “somewhat harmful.”
Operation Twist is among a few untested policy tools that Chairman Ben S. Bernanke has said the Fed could use as risks to the U.S. recovery rise and unprecedented easing falls short of fulfilling the Fed’s mandate for full employment. The yield on the 10-year Treasury note already fell to a record low this month on concerns global growth is flagging and Europe’s sovereign-debt crisis will intensify.

Builders Began Work on Fewer U.S. Homes (Source: Bloomberg)
Builders began work on fewer U.S. homes than forecast in August, showing the industry remains flat on its back even as mortgage rates fall to record lows. Housing starts dropped 5 percent to a three-month low 571,000 annual rate, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for a 590,000 pace. Building permits, a proxy for future construction, unexpectedly climbed. Foreclosures, declining prices and a lack of employment are holding back residential construction, which has typically helped spark economic rebounds from past recessions. Tighter lending rules and declining homeowner equity mean fewer buyers are able to take advantage of lower borrowing costs, highlighting the limits faced by Federal Reserve policy makers as they consider new ways to stimulate the economy when they meet today and tomorrow.

Treasury 10-Year Yield Approaches Record Low Before Fed Announces Policy (Source: Bloomberg)
Treasury yields were seven basis points away from a record low as economists said the Federal Reserve will announce plans to buy long-term debt after a meeting today as part of its effort to spur growth. Rates on 30-year Treasury zero-coupon bonds, those most sensitive to inflation, fell to a 30-month low of 3.49 percent. The International Monetary Fund cut its forecast for global growth yesterday and predicted repercussions if Europe fails to contain a debt crisis or if U.S. policy makers deadlock over a fiscal plan. “People will continue to purchase Treasuries,” said Kei Katayama, leader of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd., home to Japan’s second-biggest bond fund. “The market is risk-averse. The flight-to-quality flows will continue.”

U.S. Stocks Drop as Concern Over Greece Crisis Offsets Fed Stimulus Bets (Source: Bloomberg)
U.S. stocks fell, erasing a 1.4 percent rally by the Standard & Poor’s 500 Index, amid concern international officials won’t make a decision on Greece’s next aid payment until October. The yield gap between two- and 30- year Treasuries narrowed to the smallest level in a year. The S&P 500 lost 0.2 percent to 1,202.09 at 4 p.m. New York time. The difference between two- and 30-year Treasury yields fell to 304 basis points amid speculation the Federal Reserve will increase holdings of longer maturities. Credit-default swaps on Italy jumped 25 basis points to a record 514 basis points after S&P cut the nation’s rating. Oil added 1.4 percent.
Officials from the so-called troika, comprising the European Union, European Central Bank and International Monetary Fund, plan to return to Athens in early October to complete their review of the Greek economy, the state-run Athens News Agency reported, without citing sources. Equities rose in Europe and the U.S. earlier as investors speculated the Fed will announce steps tomorrow to shore up the economy and optimism grew that Greece will satisfy requirements for aid.

U.S. Files WTO Complaint Over Chinese Duties (Source: Bloomberg)
The U.S. filed a complaint with the World Trade Organization over what it called unfair trade practices by China that have slashed U.S. poultry exports. The complaint today to the Geneva-based WTO targets Chinese anti-dumping and countervailing duties on American poultry products. A request for consultations is the first step in the case, and the U.S. and China must now hold talks for at least two months in a bid to resolve the dispute. China put in place a duty of as much as 105.4 percent last year on U.S. broiler-chicken products. About 300,000 workers and farmers have been hurt by China’s actions, U.S. Trade Representative Ron Kirk said at a Washington news conference.

China Growth Forecasts Trimmed by IMF (Source: Bloomberg)
The International Monetary Fund cut its China growth estimates for this year and next and indicated that a stronger yuan would help to contain inflation and rebalance the economy. Gross domestic product will grow 9.5 percent this year, less than a June estimate of 9.6 percent, the Washington-based lender said yesterday in its World Economic Outlook report, citing policy tightening and moderating external demand. The 2012 forecast was lowered to 9 percent from 9.5 percent. China has offered a bright spot amid a deepening debt crisis in Europe and the threat of renewed recession in the U.S. At the same time, the nation needs to move more quickly to boost domestic demand as part of rebalancing the global economy for more stable and sustainable growth, the IMF said.

Japan Exports Gain Less Than Forecast on Waning World Demand, Rising Yen (Source: Bloomberg)
Japan’s exports increased less than expected as shipments of electronic parts fell, an indication that slowing growth abroad and a rising yen may weigh on the economy’s recovery. Overseas shipments increased 2.8 percent in August from the same month a year earlier, the first increase since the March 11 earthquake, according to a Ministry of Finance report from Tokyo today. The gain was slower than lowest forecast of 22 economists surveyed by Bloomberg New, whose median estimate was for an 8 percent increase. Analysts are predicting that the world’s third-largest economy will grow this quarter as companies restore facilities damaged by a temblor that left about 19,000 dead or missing. The resurgence in demand may be undermined by slowing overseas economies, with the International Monetary Fund cutting its global growth forecast to 4 percent for this year and next.

Japan Stocks Swing Between Gains, Losses as Investors Await Fed Statement (Source: Bloomberg)
Japanese stocks swung between gains and losses amid uncertainty about a resolution to Greece’s debt crisis and amid speculation the Federal Reserve will take action to spur the world’s biggest economy. Advantest Corp. (6857), a maker of memory-chip testers, fell as much as 4.5 percent after Nomura Holdings Inc. lowered a forecast for semiconductor shipments. Canon Inc. (7751), a camera maker that gets about 80 percent of its sales outside Japan, advanced 1.5 percent. Fanuc Corp (6954), the world’s biggest manufacturer of factory robots, gained 1.8 percent. The Nikkei 225 (NKY) Stock Average dropped 0.1 percent to 8,719.75 as of 9:55 a.m. in Tokyo, after earlier gaining as much as 0.3 percent. The broader Topix index advanced 0.1 percent to 755.94 ahead of the conclusion of a Fed meeting today in Washington.

South Korea Jobless Rate Unexpectedly Falls to 3-Year Low as Economy Grows (Source: Bloomberg)
South Korea’s unemployment rate fell to a three-year low as the economy’s expansion boosted hiring in the service sectors. The jobless rate was at 3.1 percent in August, the lowest since July 2008 and down from 3.3 percent in the previous month, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of eight economists was for a rate of 3.3 percent. Sustained job growth has been fueling inflation exceeding the central bank’s target since January, prompting the bank to raise the benchmark interest rate three times this year. Still, Bank of Korea Governor Kim Choong Soo kept borrowing costs unchanged for a third month on Sept. 8, saying the bank may not be able to resume rate increases until “external” factors such as Europe’s debt crisis look to be under control.

U.K. Government Must Bring Forward Spending to Boost Economy, Huhne Says (Source: Bloomberg)
U.K. Energy Secretary Chris Huhne said the government should speed up spending plans to help the economy, after the International Monetary Fund said ministers may need to consider delaying some of their fiscal squeeze. “We’ve got to be creative and imaginative about bringing forward more spending,” Huhne told a fringe event last night at his Liberal Democrat party’s annual conference in Birmingham, central England. He said the option of “pump-priming” the economy by increasing expenditure is “blocked off to us” because of “the scale of our budget deficit.” Deputy Prime Minister Nick Clegg, the Liberal Democrat leader, said Sept. 14 the government was going to “unblock” 40 infrastructure projects in an effort to spur growth. He said the government wanted to “put its foot on the accelerator.”

Greece Default Would Leave German Taxpayers Facing Bills From ‘Bad’ Banks (Source: Bloomberg)
Germany’s bad banks, backed by the state to prevent the collapse of Hypo Real Estate Holding AG and WestLB AG during the credit crisis, would be the hardest hit in the event of a Greek default, leaving taxpayers to shoulder the bill a second time. Hypo’s FMS Wertmanagement, with 8.76 billion euros ($12 billion) in Greek sovereign investments and loans, and WestLB’s Erste Abwicklungsanstalt, with 1.21 billion euros, bear more than half of German banks’ Greek debt, according to data compiled from company reports and statements. By contrast, Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s two biggest lenders, hold a combined 3.35 billion euros.
The specter of a Greek insolvency was raised this month by members of Chancellor Angela Merkel’s coalition, when Economy Minister Philipp Roesler said there can be no “taboos” when considering action “to stabilize the euro in the short term.” The German government is considering a “Plan B” to help shield banks and insurers from losses if Greece defaults, three coalition officials said on Sept. 9.

Greece Making ‘Good Progress’ in Talks on Receiving Next Bailout Payment (Source: Bloomberg)
Greek Finance Minister Evangelos Venizelos made “good progress” in a second round of talks with the European Union and International Monetary Fund aimed at staving off default, the EU said. The telephone meeting late yesterday, which followed discussions the day before, were intended to damp concerns that Greece may miss deficit-reduction targets required to received rescue loans. The EU statement said a “full mission” will return to Athens next week after Venizelos’s talks in coming days at the IMF annual meeting in Washington. Staying in the euro area is an “irreversible and fundamental national choice,” Venizelos said in a statement yesterday. “We acknowledge that our fiscal data and economic structures are a problem for the euro area, which we are determined to tackle once and for all.”

German Investor Confidence Drops to 2 1/2-Year Low on Debt Crises, Economy (Source: Bloomberg)
German investor confidence fell to the lowest in more than 2 1/2 years in September as Europe’s debt crisis and a global slowdown damped the outlook for growth. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 43.3 from minus 37.6 in August. That’s the lowest since December 2008. Economists expected a drop to minus 45, according to the median of 37 estimates in a Bloomberg News survey. Germany’s benchmark DAX share index has plunged 25 percent since late July as the global outlook worsens and Europe’s debt crisis erodes confidence in its banking sector. The European Commission last week cut its euro-area growth forecasts for the second half and warned the economy may come “close to standstill at year-end.” Standard & Poor’s today lowered Italy’s credit rating, saying weaker growth may mean the nation won’t be able to reduce the region’s second-largest debt load.

Italy’s Rating Cut One Level by S&P as Greek Crisis Fans Contagion Concern (Source: Bloomberg)
Italy’s credit rating was cut by Standard & Poor’s, the country’s first downgrade in five years, as Greece’s worsening fiscal crisis fans concern that contagion will engulf countries such as Spain and Italy. S&P lowered its rating last night to A from A+, with a negative outlook, saying weak economic growth, a “fragile” government and rising borrowing costs would make it difficult to reduce Europe’s second-biggest debt. The yield on Italy’s 10- year bond rose 9 basis points to 5.674 percent, 387 basis points more than similar German debt. The cost of insuring Italy against default surged to a record.
The European Central Bank was forced to buy Italian and Spanish bonds last month after their yields surged to euro-era records on concern they’ll be the next victims of the two-year- old debt crisis that led to bailouts for Greece, Ireland and Portugal. Moody’s Investors Service is set to decide in the next month whether to downgrade Italy and Spain, as Greece struggles to convince international creditors it deserves its next bailout payment to stave off a default.

European Stocks Rise as Greece Calls Debt Talks ‘Productive;’ EON Advances (Source: Bloomberg)
European stocks climbed as Greece described its debt talks with the European Union and the International Monetary Fund as “productive” and investors speculated the Federal Reserve will provide more stimulus. EON AG and RWE AG (RWE), Germany’s biggest utilities, climbed more than 3.5 percent after a court suspended a nuclear-fuel tax. Barratt Developments Plc (BDEV) surged 5.7 percent after Citigroup Inc. advised buying the shares. SAP AG (SAP) rose 2.3 percent. The Stoxx Europe 600 Index rose 1.8 percent to 229.1 at the 4:30 p.m. close in London. The Federal Reserve, led by Chairman Ben S. Bernanke, will decide tomorrow to replace short-term Treasuries with long-term bonds, according to the majority of economists surveyed by Bloomberg. The move is known as “Operation Twist,” for its goal to bend the yield curve.

IMF Cuts Global Growth Estimate on Europe (Source: Bloomberg)
The International Monetary Fund cut its forecast for global growth and predicted “severe” repercussions if Europe fails to contain its debt crisis or U.S. policy makers deadlock over a fiscal plan. The world economy will expand 4 percent this year and next, the IMF said today, compared with June forecasts of 4.3 percent in 2011 and of 4.5 percent in 2012. The U.S. growth projection for 2011 was lowered to 1.5 percent from 2.5 percent in June. “Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing,” the IMF said in its World Economic Outlook report today. In Europe “leaders must stand by their commitments to do whatever it takes to preserve trust in national policies and the euro” while in the U.S. “deep political divisions leave the course of U.S. policy highly uncertain.”

Australia, New Zeland Dollars Pare Early Losses as Asia’s Stocks Rebound (Source: Bloomberg)
The Australian and New Zealand dollars pared earlier losses as Asian stocks snapped a two-day decline, supporting demand for higher yielding currencies. The Aussie was little changed at $1.0275 as of 10:16 a.m. in Sydney from $1.0276 in New York yesterday, after earlier declining as much as 0.4 percent. New Zealand’s dollar was at 82.28 U.S. cents from 82.42 cents.

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