Tuesday, September 27, 2011

20110927 1020 Global Market Related News.

Asia Stocks Rebound From Lowest Since 2010 as Europe Seeks Debt Solution (Source: Bloomberg)
Asian stocks rebounded from their lowest level since May 2010 after two days of gains in U.S. equities amid optimism that European leaders may be closer to agreeing ways to tame the region’s credit crisis. Sumitomo Mitsui Financial Group Inc. (8316), Japan’s No. 2 bank by market value, advanced 3 percent in Tokyo after the European Central Bank was said to be considering restarting covered-bond purchases and further measures to ease monetary conditions. Canon Inc. (7751), the camera maker which depends on Europe for about a third of its sales, rose 1.9 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company and Australia’s largest oil producer, jumped 2.3 percent in Sydney after crude and copper prices advanced.
“There’s no doubt the markets are very oversold,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “There’s a good potential for a bounce and it then becomes about what follow-through reaction we see from Europe. The real issue is whether it’s a durable bounce or whether it’s a dead cat bounce.”

Stocks in U.S. Advance as Dow Average Caps Biggest Increase in One Month (Source: Bloomberg)
U.S. stocks advanced, giving the Dow Jones Industrial Average its biggest increase in a month, amid speculation that European policy makers will act to prevent the region’s debt crisis from getting worse. Bank of America Corp. and JPMorgan Chase & Co. (JPM) rose more than 4.5 percent as the European Central Bank was said to consider restarting covered-bond purchases along with further measures to ease monetary conditions. Berkshire Hathaway Inc. (BRK/A) Class B shares added 8.6 percent as the company plans a stock buyback. Boeing Co. (BA) rallied 4.2 percent as the delivery of the 787 Dreamliner ended more than three years of delays. The Standard & Poor’s 500 Index added 2.3 percent to 1,162.95 at 4 p.m. in New York. The Dow average climbed 272.38 points, or 2.5 percent, to 11,043.86, rebounding from the biggest weekly decline since October 2008.

European Stocks Climb as Banks, Insurers Rally; U.S. Futures Pare Losses (Source: Bloomberg)
European stocks rose for a second day as foreign governments and central banks urged policy makers in Europe to intensify efforts to contain the region’s debt crisis following meetings with the International Monetary Fund. Allianz SE (ALV) and Axa SA (CS), Europe’s biggest insurers, jumped the most in more than a year. Deutsche Bank AG led lenders higher amid speculation the European Central Bank may cut interest rates and as executives called for a U.S.-style Troubled Asset Relief Program in Europe. Fresnillo Plc (FRES) tumbled 6.9 percent as silver had the biggest three-day drop since 1980. The benchmark Stoxx Europe 600 Index advanced 1.9 percent to 220.28 at the 4:30 p.m. close in London, rebounding from an earlier loss of 1.4 percent, as the IMF said that euro-area countries will do whatever is necessary to end the region’s government-debt crisis.

Japan’s Nikkei 225 Rebounds From Two-Year Low on Signs of Europe Action (Source: Bloomberg)
Japanese stocks gained, with the Nikkei 225 (NKY) Stock Average rebounding from its lowest level since April 2009, on expectation European leaders will act to prevent the region’s sovereign-debt crisis from getting worse. Sumitomo Mitsui Financial Group Inc. (8316) advanced 2.1 percent after European and U.S. lenders surged yesterday following a report that the European Central Bank may resume buying some loan-backed bonds. Canon Inc. (7751), a camera maker that depends on Europe for about a third of its sales, climbed 2.1 percent. Inpex Corp. (1605), Japan’s largest oil explorer by market value, gained 2 percent after crude prices increased. “Speculation that Europe may take additional monetary easing measures will likely boost shares” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “A rebound in stocks will be limited as U.S. employment and other significant economic reports are scheduled to be released next week.”

Geithner Predicts Europe Will Move With More Force (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will step up their response to their region’s debt crisis after a chiding from counterparts around the world. “They heard from everybody around the world” at meetings in Washington last week, Geithner said in an interview today on ABC television’s “World News With Diane Sawyer” program. “This was really hurting -- starting to hurt growth everywhere, in countries as far away as China, Brazil and India, Korea. And they heard the same message from us they heard from everybody else, which is it’s time to move.” Speculation that policy makers will intensify their attempt to contain a crisis that threatens to send Greece into default and undermine prospects for the survival of the euro in its current form spurred a gain in stocks. European Central Bank officials have indicated they will consider expanding liquidity provisions when they meet Oct. 6.

Sales of New U.S. Homes Fell to Six-Month Low (Source: Bloomberg)
Purchases of new houses in the U.S. declined in August to a six-month low as the biggest drop in prices in two years failed to lure buyers away from even less expensive distressed properties. Sales, tabulated when contracts are signed, dropped 2.3 percent to a 295,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of 73 economists in a Bloomberg News survey called for a decline to 293,000. The median price slumped 7.7 percent from August 2010, the steepest 12-month drop since July 2009. Foreclosure-driven price decreases for previously owned homes may keep attracting investors away from new properties, hurting builders like Lennar Corp. (LEN) Limited access to credit, rising unemployment and waning consumer confidence also signal the industry that helped precipitate the recession will take time to find its footing.

Two Fed Officials Voice Skepticism on Allowing Higher Inflation (Source: Bloomberg)
Two Federal Reserve policy makers backed the central bank’s record stimulus while signaling they would be skeptical of any plan to tolerate higher inflation as a tool to boost economic growth. Fed Governor Sarah Bloom Raskin said today in Washington that the central bank’s use of tools has been “completely appropriate” and that she would be “quite leery” of allowing higher inflation or price expectations in an attempt to lower real interest rates. St. Louis Fed President James Bullard said in New York that faster inflation won’t reduce the housing glut; at the same time, he said that “monetary policy is ultra-loose right now, and appropriately so.” The comments suggest that policy makers, including Fed Chairman Ben S. Bernanke, would have difficulty agreeing on adopting a specific inflation level as a condition for keeping interest rates near zero. Only Chicago Fed President Charles Evans has publicly supported the idea of allowing price increases faster than 2 percent annually as a way to lower unemployment.

Fed to Purchase Bonds 13 Times a Month, Sell Six Times in Operation Twist (Source: Bloomberg)
The Federal Reserve said it will buy Treasury securities 13 times a month and sell its holdings of U.S. government debt six times under its plan to lower borrowing costs known as Operation Twist. The Fed will sell $8 billion to $9 billion of nominal Treasuries five times a month per operation and $1 billion to $1.5 billion of Treasury Inflation Protected Securities, or TIPS, in one operation, according to a statement today from the Federal Reserve Bank of New York. The Fed will buy Treasuries 12 times a month and TIPS once a month. The Federal Open Market Committee said last week that it would replace $400 billion of short-term debt in its portfolio with longer-term Treasuries in an effort to further reduce borrowing costs and counter rising risks of a recession. The so- called Operation Twist drew three dissents as Chairman Ben S. Bernanke struggled to find consensus to help an economy plagued by 9.1 percent unemployment.

Treasuries Snap Two-Day Slide on Speculation Data to Show Home Prices Fell (Source: Bloomberg)
Treasuries rose, snapping their steepest two-day loss in a month, before an industry report that may show U.S. home prices declined in July. Two-year yields were the highest in a month as the U.S. prepared to sell $35 billion of the securities today, the first of three note auctions this week totaling $99 billion. The S&P/Case-Shiller index of property values in 20 cities fell 4.4 percent from July 2010, the 10th-straight year-on-year drop, according to the median forecast of economists surveyed by Bloomberg News. “The market needs time to confirm an improvement in economic conditions before yields can rise,” said Kei Katayama at Daiwa SB Investments Ltd. in Tokyo. “The economic figures are mixed.” Katayama helps manage the equivalent of $64.9 billion including Asia’s second-biggest bond fund as leader of the foreign fixed-income group.

ECB to Shun Managing Euro Region’s Bailout Fund, Halpenny Says: Tom Keene (Source: Bloomberg)
European Central Bank policy makers are likely to next week debate restarting their covered-bond purchases along with further measures to ease monetary conditions, a euro-region central bank official said. The reintroduction of 12-month loans to banks will also be discussed at the ECB’s Oct. 6 policy meeting, said the person, who spoke on condition of anonymity because the information is confidential. Interest-rate cuts are likely to be discussed, though they are not on the current agenda, the official said. The euro rose half a cent against the dollar to as high as $1.3543. Yield spreads between covered bonds and interest-rate swaps tightened. A spokesman for the Frankfurt-based ECB declined to comment.

World Finance Chiefs’ Patience Running Out as Pimco Sees Europe Recession (Source: Bloomberg)
Pacific Investment Management Co., which runs the world’s biggest bond fund, is forecasting that advanced economies will stall over the next year as Europe slides into a recession, underscoring mounting investor concern about the global economic outlook. There will be little-to-no economic growth in industrial nations in the coming 12 months as Europe’s economy shrinks by 1 percent to 2 percent and the U.S. stagnates, said Mohamed El- Erian, chief executive officer of Newport Beach, California- based Pimco. That will leave worldwide expansion at about 2.5 percent, less than the 4 percent forecast by the International Monetary Fund this year and next. Such gloomy sentiment dominated weekend talks of policy makers, investors and bankers in Washington, where the IMF and World Bank held their annual meetings. The Dow Jones Industrial Average suffered its biggest loss since 2008 last week as the Federal Reserve said risks to the U.S. economy had increased and Europe’s debt crisis went unresolved.

France’s Pre-Louis XIV Government System Caps Debt Cost Amid Euro Turmoil (Source: Bloomberg)
France is paying less to borrow now than at the start of the year, aided by a political consensus on deficit reduction and a centralized system of government dating back before Louis XIV’s reign. As investors seek shelter from the political and debt turmoil in markets such as Greece and Italy, yields on 10-year French government bonds have fallen to 2.6 percent, down from 3.4 percent at the beginning of January and less than half the post-euro-creation high of 5.76 percent on Jan. 18, 2000. “For centuries the French state has been a predatory one,” said Michel Martinez, an economist at Societe Generale in Paris. “It’s not a country where there is implementation risk. When the government decides to do something, it happens.”

Euro Trading Above Average Since 1999 Debut Undermines Calls for Collapse (Source: Bloomberg)
For all the concern about sovereign default in Europe, the euro remains above its average since being created almost 12 years ago, a sign that foreign-exchange traders see little chance of a collapse as officials step up efforts to keep the debt crisis from expanding. “Too much political and ideological capital has been invested into making the euro project work and bringing the continent of Europe closer together since the end of World War II to allow it to unravel now,” Thanos Papasavvas, the head of currency management in London at Investec Asset Management Ltd., which invests about $95 billion, said in a Sept. 20 interview. Investors from billionaire George Soros, whose $10 billion bet in 1992 preceded the Bank of England’s devaluation of the pound, to John Taylor, who runs the world’s biggest currency hedge fund, have predicted the euro’s breakup or forecast it will slump to parity with the dollar.

Euro Declines Against Most Peers (Source: Bloomberg)
The euro fell versus the majority of its most-traded peers as Italy and Spain prepare to sell debt amid a regional fiscal crisis and before data that may add to signs the U.S. economy is struggling. The 17-nation euro traded 1.1 percent from a decade low against the yen after Dutch Prime Minister Mark Rutte said yesterday the Netherlands and Finland have no plans to increase their commitment to the euro area’s rescue fund after talks with his Finnish counterpart Jyrki Katainen. The Australian and New Zealand dollars snapped yesterday’s rally before a report likely to show U.S. consumer confidence stayed near the lowest in two years, curbing demand for currencies linked to growth. “I’m still bearish on the euro,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest listed bank. “Europe’s problems haven’t been resolved at all.”

UK Food Inflation Rate 6% By 2012 (Source: CME)
UK food inflation rate could hit 6% by the end of the year despite a slump in the price of raw materials and unprecedented levels of discount offers in supermarkets, experts said. Consumers have felt the pinch this year as surging food prices have eaten into already hard-pressed household budgets. But now analysts warn prices will keep rising into 2012--despite the falling cost of basic ingredients. According to research by consumer trend analyst Kantar Worldpanel across 75,000 products in U.K. supermarkets, inflation currently stands at 5.2% and should hit 6% by 2012, even with more discount offers. "Shoppers will be looking for opportunities to trade down and brands need to be able to reassure risk adverse shoppers," said director Martin Whittingham.
Anya Gascoine Marco, director of insight at Allegra Strategies, agreed. She said the average cost of a basket in U.K. supermarkets has risen from GBP74.49 in July 2010 to GBP78.59 last month. Furthermore, with increases showing no sign of abating, she predicts inflation will rise to 6% this year. But, many manufacturers are doing their best to cut costs for shoppers. Jim Moseley, regional managing director for General Mills, said the maker of brands like Green Giant and Old El Paso has struggled to offset rising commodity prices this year, and has been forced to pass on 1%-9% of costs to shoppers. But even though agricultural markets have slumped in recent weeks--European coffee and sugar futures have lost 15% this month, while wheat has fallen 8%--Moseley said the lag in pricing of materials and ongoing pressure on manufacturers' margins will keep prices high.
"A lot of our ingredients and commodity inflation can happen very quickly but our ability to be able to execute that in the market can take up to six months," he said. "We have had to take a view of our margin aspirations." For staple products such as bread and tinned goods, many retailers are absorbing price rises to attract increasingly savvy shoppers. Moseley estimated that more than half of products on U.K. shelves are now on offer, while according to Whittingham, consumers save on average 12 pence for every pound they spend in supermarkets because of discounts. A spokesman for J Sainsbury PLC (SBRY.LN), which along with Tesco PLC (TSCO.LN), Wm Morrison Supermarkets PLC (MRW.LN) and Wal-Mart Stores Inc.-owned (WMT) Asda makes up three-quarters of the U.K. supermarket sector, said around 40% of the market tends to feature promotions.
"We're now seeing the highest levels ever seen of the proportion of goods being sold on deal," said Moseley. But Allegra's Gascoine Marco said such moves are unlikely to impress buyers. "A lot of consumers think the inflationary pressure is supermarket led," she said. "There's no brand loyalty anymore when it comes to supermarket shopping."

China Property Bonds Plunge Most Since 2008 (Source: Bloomberg)
China’s property company bonds are delivering the biggest losses in the world among developers this quarter amid speculation the banking regulator may close another avenue of funding. Dollar-denominated debt of Evergrande Real Estate Group Ltd. (3333), Hopson Development Holdings Ltd. and other Chinese homebuilders rated below investment grade has plunged 16.4 percent since June 30, the biggest quarterly decline since the last three months of 2008, according to Bank of America Merrill Lynch data. Junk bonds sold by U.S. homebuilders, including Beazer Homes USA Inc., lost an average 2.3 percent, data show. China is reviewing loans to developers by trust companies, which have become a last resort for many borrowers after the central bank raised interest rates five times over the past year and curbed lending to property companies. The stricter controls on the loans will add further financing pressure, according to a Sept. 23 report from UBS AG.

South Korea Plans to Cut Deficit as Europe Crisis Highlights Debt Concerns (Source: Bloomberg)
South Korea’s government plans to cut its fiscal deficit next year as the European sovereign debt crisis underscored the need for global policy makers to control their borrowing. Total spending will rise 5.5 percent to 326.1 trillion won ($273 billion), while tax revenue will gain 9.5 percent to 344.1 trillion won, the Ministry of Strategy and Finance said in its budget proposal for 2012 released today. The government’s deficit will shrink to 14.3 trillion won, or 1 percent of gross domestic product in 2012, from 25 trillion won, or 2 percent this year, according to its calculations. European shares gained yesterday on speculation officials will intensify their attempt to contain a debt crisis that threatens to send Greece into default. South Korea’s government said it aims to balance the budget in 2013 and post a surplus equivalent to 0.3 percent of the economy by 2015.

South Korea’s Consumer Confidence Remains at Its Lowest Level Since March (Source: Bloomberg)
South Korean consumer confidence remained at the lowest level since March as people braced for a global economic slowdown. The sentiment index was 99 in September, the same as in the previous month, the Bank of Korea said in an e-mailed statement today. A reading below 100 indicates people are more pessimistic than the average between the first quarter of 1999 and the second quarter of 2008. The Bank of Korea left interest rates unchanged for a third straight month in September as the risk of the global recovery stalling outweighed concerns about inflation. Consumer prices climbed 5.3 percent in August, the highest in three years, exceeding the central bank’s 4 percent limit for the eighth straight month.

India’s Inflation ‘Fairly Stubborn,’ Central Bank Governor Subbarao Says (Source: Bloomberg)
India’s inflation rate has been “fairly stubborn” and price pressures beyond a threshold are unacceptable, central bank Governor Duvvuri Subbarao said. “Inflation has been fairly stubborn,” Subbarao said in New York today. “Above a threshold, you can’t accept high inflation to have higher growth,” he said, adding that the price-rise limit is as much as 6 percent for the nation. The Reserve Bank of India on Sept. 16 extended its record- interest rate increases to tame the fastest inflation among the so-called BRICS economies. India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August from a year earlier. Higher food and fuel costs and weakness in the rupee may keep boosting price pressures.

Thailand Stock Decline Stokes Exporter Opposition to Yingluck Wage Policy (Source: Bloomberg)
The biggest drop in Thailand’s main stock index since 2008 prompted brokerages, fund managers and the bourse to call on Prime Minister Yingluck Shinawatra’s two- month-old government to alter plans to raise the minimum wage. The Federation of Thai Capital Market Organizations, a six- member grouping that includes the Stock Exchange of Thailand and Association of Investment Management Companies, urged policy makers to review any measures that would hurt exporters. The SET Index fell the most among Asian benchmark gauges yesterday, declining 5.7 percent, the biggest drop since Oct. 27, 2008. The sell-off “might bring some more common sense into the equation,” said Terry Weir, chief financial officer of Hana Microelectronics Pcl (HANA), Thailand’s biggest publicly traded semiconductor packager, which fell 6.1 percent. “If the minimum wage goes up far quicker than the productivity increase, then of course that will have a negative impact on our profits and on our competitiveness.”

Baltic index rises, ship market outlook fragile
LONDON, Sept 23 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, rose for a fourth session on Friday helped by continued iron ore and coal cargo bookings to Asia.
Brokers said growing vessel supply, which was outpacing commodity demand, was set to cap dry bulk freight rate gains in the coming months with growing challenges to the world economy adding to headwinds.

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