Thursday, October 6, 2011

20111006 1010 Global Market Related News.

Asian Stocks Rise First Day in Five Europe Debt, U.S. Optimism (Bloomberg)
Asian stocks rose for the first time in five days as better-than-expected U.S. economic data and optimism European leaders will contain the region’s debt crisis boosted the earnings outlook for exporters. Toyota Motor Corp. (7203), the world’s biggest carmaker, rose 1.6 percent in Tokyo. Mitsubishi UFJ Financial Group Inc., Japan’s largest listed lender by market value, added 1.9 percent. James Hardie Industries SE, a building-materials supplier that gets almost 70 percent of its sales from the U.S., climbed 7.4 percent Sydney. BHP Billiton Ltd. (BHP), the No. 1 global mining company, gained 2.7 percent as commodity prices advanced. The MSCI Asia Pacific Index rose 1.8 percent to 109.29 as of 9:59 a.m. in Tokyo. About 11 stocks rose for each that fell and all 10 industry groups climbed. The gauge tumbled 16 percent in the third quarter, the biggest drop since 2008, amid concern that Europe’s debt crisis and a U.S. economic slowdown will drag the world back into recession.

Service Industries in U.S. Grew at Slower Pace in September (Bloomberg)
U.S. service industries expanded in September at a slower pace than a month earlier, a sign the recovery is struggling to gain speed. The Institute for Supply Management’s non-manufacturing index fell to 53 from 53.3 in August. The median forecast of 75 economists surveyed by Bloomberg News was for a drop to 52.8. A reading of 50 is the dividing line between expansion and contraction in services, which cover about 90 percent of the economy. Orders picked up, the report showed. The lack of job and income growth, deepening pessimism about the economic outlook in the wake of Europe’s debt crisis, and a slumping stock market may hamper consumers’ willingness to increase their spending. The services reading underscores Federal Reserve Chairman Ben S. Bernanke’s comments yesterday that the recovery will be “somewhat slower” in coming quarters.

S&P 500 Caps Biggest Two-Day Rise Since August (Bloomberg)
U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest two-day gain in more than a month, as economic data topped estimates and investors speculated Europe will act to contain the region’s debt crisis. Alcoa Inc. (AA) and Cisco Systems Inc. (CSCO) added at least 2.7 percent to pace gains among companies most-tied to the economy. Financial stocks rebounded as Morgan Stanley jumped 3.4 percent. Monsanto Co. (MON) climbed 5.2 percent as the world’s largest seed company forecast higher-than-expected earnings. Yahoo! Inc. surged 10 percent, the most since 2008, after a report that Microsoft Corp. (MSFT) may make a bid. Apple Inc. (AAPL) gained 1.5 percent, preventing the longest decline since 1998. The S&P 500 advanced 1.8 percent to 1,144.03 at 4 p.m. New York time, rallying 4.1 percent in two days. The Dow Jones Industrial Average added 131.24, or 1.2 percent, to 10,939.95.

Fed Isn’t Repeating Japan Error, Nomura’s Sheard Says: Tom Keene (Bloomberg)
The U.S. has avoided monetary policy missteps that should prevent it from following Japan into a deflationary spiral while Europeans haven’t been so adept, according to Nomura Securities International’s Paul Sheard. “Japan slipped into deflation and stayed there, and that was due largely to policy error,” said Sheard, global chief economist in New York at the unit of Nomura Holdings Inc., in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I don’t think those policy errors are being repeated in the U.S., and I don’t see the U.S. falling into deflation and into a long-term nominal stagnation.” Efforts of the Federal Reserve to keep borrowing costs low have helped stave off concern that the U.S. is starting to look like Japan in the 1990s, when the Bank of Japan struggled to revive the economy, said Sheard, whose firm is one of the 22 primary dealers that trade directly with the U.S. central bank.

Bernanke Signals Political Pressure Wouldn’t Halt More Monetary Easing (Bloomberg)
Federal Reserve Chairman Ben S. Bernanke signaled he’ll push forward with further expansion of monetary stimulus if needed, resisting pressure from Republicans concerned that he’s fanning inflation. Bernanke said yesterday in testimony to Congress’s Joint Economic Committee that the Fed is “prepared to take further action as appropriate” after using unconventional tools to boost growth in August and September. He rejected comments by Senator Jim DeMint of South Carolina and Senator Mike Lee of Utah that record central bank stimulus has spun inflation and the money supply out of control. Some Republicans are trying to remove the half of the Fed’s congressional mandate to achieve “maximum employment,” focusing it only on keeping inflation low. Representative Mick Mulvaney said the Fed chief could legitimately push ahead with more stimulus so long as he keeps price increases in check.

U.S. Legislation Targeting China Yuan Hits Republican Opposition (Bloomberg)
U.S. Senate legislation that would punish China for an undervalued currency ran into opposition from senators and a roadblock by House Speaker John Boehner, who said the bill was “pretty dangerous.” Boehner’s opposition may derail a bill backed by 225 House members, including 61 Republicans. The bill is aimed at forcing China to address what Federal Reserve Chairman Ben S. Bernanke yesterday called a currency policy that’s “blocking what might be a more normal recovery process in the global economy.” In the Senate, Republicans sought an amendment yesterday to make it harder for unilateral U.S. action, something China’s government said this week would risk triggering a trade war and affecting how it overhauls exchange-rate policy. The Obama administration has said it’s reviewing the bill, citing the need to comply with global trade obligations.

ADP Estimates U.S. Companies Added 91,000 Jobs in September (Bloomberg)
Companies in the U.S. added 91,000 jobs in September, according to data from ADP Employer Services. The increase followed a revised 89,000 gain the prior month, Roseland, New Jersey-based ADP said today. The median forecast of economists surveyed by Bloomberg News called for an advance of 75,000. Job gains haven’t been sufficient to bring down the unemployment rate, which has held at or above 9 percent for 26 of the past 28 months. A Labor Department report in two days is projected to show businesses added 90,000 jobs in September, according to the median forecast of economists surveyed. “Employment is likely to languish over the intermediate term until business leaders see an improvement in both actual demand and their demand expectations,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, said before the report.

Treasuries Snap Decline as Data May Show Employment Stagnating (Bloomberg)
Treasuries snapped a two-day drop before government reports this week that economists said will show employment isn’t improving enough to lower the jobless rate. Ten-year yields were 21 basis points away from the record low. The central bank plans to sell $8 billion to $9 billion of Treasuries due from January 2012 to July 2012 today, according to the Federal Reserve Bank of New York website. The sales are part of its effort to reduce borrowing costs by cutting holdings of shorter-term debt and buying longer tenors with the proceeds. “The rally isn’t over,” said Tsutomu Komiya, who invests in Treasuries for Daiwa Asset Management Co. in Tokyo, which oversees the equivalent of $120.8 billion and is a unit of Japan’s second-biggest brokerage by market value. “The market expects the Fed to buy more bonds, to do further easing.”

Steve Jobs’s Death Follows 8-Year Battle Against Rare Pancreatic Cancer (Bloomberg)
Apple Inc. (AAPL) co-founder Steve Jobs’s death today at age 56 follows years of health struggles that began in 2003, when he was diagnosed with a rare form of pancreatic cancer. Jobs had a neuroendocrine tumor, which is less aggressive than some other types of pancreatic malignancies. He eventually resigned as chief executive officer on Aug. 24, saying he could “no longer meet my duties and expectations.” Neuroendocrine tumors can grow slowly and be treated successfully with early removal. Those that spread to other organs, such as the liver, can be life-threatening. Without specifying a reason, Jobs had a liver transplant in 2009, a treatment that can prolong the lives of patients with his type of cancer.

Japanese Stocks Rise, Snapping Four-Day Losing Streak, on Europe Optimism (Bloomberg)
Japanese stocks rose for the first time in five days as optimism that Europe will act to contain its debt crisis boosted the earnings outlook for Asian exporters. Sony Corp., Japan’s No. 1 exporter of consumer electronics, rose 2.9 percent. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, led banks higher after the International Monetary Fund said Europe is working on plans to shelter banks from the region’s debt crisis. Nissan Motor Co., a carmaker that gets 33 percent of its revenue in the U.S. and Canada, gained 4.1 percent after U.S. economic reports beat estimates. The Nikkei 225 (NKY) Stock Average rose 1.8 percent to 8,535.32 as of 9:44 a.m. in Tokyo. The broader Topix index gained 1.8 percent to 739.24. The gauge lost 10 percent last quarter, the steepest decline since the three months through June 2010, amid slowing U.S. growth and an escalating crisis in Europe.

European Stocks Advance Amid Speculation Policy Makers Will Assist Banks (Bloomberg)
European stocks advanced for the first time in four days amid speculation policy makers are examining measures to shield banks from the region’s sovereign- debt crisis. Dexia SA (DEXB) snapped a four-day plunge after France and Belgium said a “bad bank” will be set up to hold its troubled assets. BNP Paribas SA and Societe Generale (GLE) SA, France’s biggest lenders, climbed more than 8 percent. Rio Tinto Group led mining companies higher. European Aeronautic, Defence & Space Co. rose 5.7 percent after saying 2011 will be a “very good” year. The Stoxx Europe 600 Index advanced 3.1 percent to 224.15 at the 4:30 p.m. close in London, the biggest increase in a week. The gauge had declined 5 percent in the previous three days, leaving it trading at 9.1 times estimated earnings, near the cheapest since March 2009, data compiled by Bloomberg show.

Euro Maintains Losses Amid Prospects for a Rate Cut at ECB Meeting Today (Bloomberg)
The euro held a decline from yesterday against the dollar on speculation signs of a deteriorating economy and debt crisis in the region will prompt the European Central Bank to ease monetary policy today. The 17-nation currency maintained losses as 11 out of 52 economists in a Bloomberg News survey predict the bank’s policy makers will cut borrowing costs. The euro also weakened versus the yen ahead of a report forecast to show no gains in factory orders for August in Germany, Europe’s biggest economy. The New Zealand dollar held a two-day advance against its U.S. counterpart as Asian stocks extended a global rally in equities. “The markets are nervous the ECB might cut rates,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan’s biggest brokerage. “The markets are waiting for new news and a new sign of any kind of stimulus from the ECB. I think that’s bearish euro.”

Europe Debt Crisis Poses Global Risk: Geithner (Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner will tell lawmakers that the European financial crisis is increasing the risks to global growth, according to testimony prepared for delivery tomorrow. “Our direct financial exposure to those governments and their financial institutions is quite small, but Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand,” Geithner says in testimony to the House Financial Services Committee. Geithner calls for a more “powerful financial backstop” for European banks and government borrowers, one that is “conditioned on policy actions that credibly address the underlying causes of concern.”

European Services, Manufacturing Contract (Bloomberg)
Euro-area services and manufacturing output contracted more than estimated in September, adding to signs of a deepening slowdown as governments struggle to contain the region’s debt crisis. A composite index based on a survey of purchasing managers in both industries fell to 49.1 in September from 50.7 in the previous month, London-based Markit Economics said today. That is less than an initial estimate of 49.2 published on Sept. 22. The index fell below 50, indicating contraction, for the first time in more than two years. European governments are seeking ways to contain the region’s worsening debt crisis, which threatens to push the 17- nation economy back into a recession. Moody’s Investors Service yesterday cut Italy’s credit rating for the first time in almost two decades and European economic confidence slumped more than economists forecast in September.

U.K. Economy Second-Quarter Growth Estimate Cut as Consumer Spending Falls (Bloomberg)
U.K. economic growth slowed more than initially estimated in the second quarter as consumer spending fell the most in more than two years, adding to pressure on Bank of England policy makers to provide more stimulus. Gross domestic product rose 0.1 percent from the first quarter instead of the 0.2 percent previously published, the Office for National Statistics said today in London. Consumer spending plunged 0.8 percent, the most since the first quarter of 2009. On the year, GDP rose 0.6 percent. A separate report showed services growth unexpectedly accelerated in September. The data comes as Bank of England policy makers meet to decide whether they’ll revive their bond-purchase program as the government’s fiscal squeeze and Europe’s debt crisis harm growth prospects. Chancellor of the Exchequer George Osborne this week announced a plan to aid credit-starved small companies.

Don't Bet Against the Euro Surviving Debt Crisis (Bloomberg)
Investors betting against the euro- area surviving its debt crisis in one piece may be overlooking one thing: the will of politicians to hold it together. German Chancellor Angela Merkel is intensifying her defense of the currency. French President Nicolas Sarkozy says there’s no alternative to channeling aid to Greece without risking the kind of cataclysm set off by the 2008 collapse of Lehman Brothers Holdings Inc. Greek Premier George Papandreou this week proposed 6.6 billion euros ($8.7 billion) of fresh austerity measures in a recession headed into a fourth year. The euro is “a political project,” said Erik Nielsen, global chief economist at UniCredit Group in London. “The market may not have believed them, but leaders have repeatedly said they will do whatever it takes to keep it together.”

Italy Rating Cut Three Levels by Moody’s on Debt Crisis, Matching S&P Move (Bloomberg)
Italy’s credit rating was cut by Moody’s Investors Service for the first time in almost two decades on concern that chronically weak growth will make it difficult to reduce the region’s second-largest debt while fallout from the region’s debt crisis boosts financing costs. Moody’s lowered Italy’s rating three levels to A2 from Aa2, with a negative outlook, the New York-based company said in a statement yesterday. The action comes after Standard & Poor’s downgraded Italy on Sept. 20 for the first time in five years. Italy was last cut by Moody’s in May 1993. Moody’s also said that all European countries with ratings below the top mark of AAA may face downgrades as many euro-area governments are facing “a profound loss” in investor confidence as policymakers have failed to stop debt-crisis contagion. Italy’s borrowing costs have fallen from euro-area highs in August after the European Central Bank began buying its bond to stop the slide in the country’s debt.

India’s Budget-Deficit Target May Be ‘Difficult’ to Meet, Mukherjee Says (Bloomberg)
India may find it hard to meet its budget-deficit target in the current fiscal year, Finance Minister Pranab Mukherjee said after the government last week decided to sell more debt. “It is difficult to maintain the ceiling,” Mukherjee told the Bloomberg UTV television channel in Mirati, his village in the Indian state of West Bengal, referring to the budget- shortfall goal. “I can’t say how I will be able to maintain it now without looking at the cash flows,” he said in the interview that was broadcast yesterday. India’s budget gap may exceed the government’s estimate as tax revenue may fall short because of slowing economic growth, said Anubhuti Sahay, a Mumbai-based economist at Standard Chartered Plc. Ten-year bond yields in India have climbed to the highest level in three years on concern demand for existing securities will decrease as the government boosts debt sales.

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