Monday, October 10, 2011

20111010 1154 Global Market Related News.

GLOBAL MARKETS-U.S. stocks, euro slip after euro-zone downgrades
By Walter Brandimarte
NEW YORK, Oct 7 (Reuters) - U.S. stocks ended lower on Friday, but European and Asian equities markets mostly finished higher, after several days of gains supported by assurances that European banks would be recapitalized to help deal with a potential debt default by Greece.
"The employment data was viewed as being relatively good, but this issue in Europe keeps rearing its head. We just can't seem to escape Europe's debt crisis," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

Most Asian Stocks Rise as Merkel Eases Concerns (Source: Bloomberg)
Most Asian stocks rose, led by exporters and mining companies, after the heads of Europe’s two biggest economies pledged to shield banks from a debt crisis, easing concern the region’s troubles will derail a global economic recovery. Rio Tinto Group, the world’s second-largest mining company by sales, gained 2.1 percent in Sydney after commodity prices climbed. Billabong International Ltd., a global surfwear maker, advanced 2.2 percent. Samsung Electronics, the world’s second- biggest maker of mobile phones, rose 2.7 percent in Seoul, while Hanjin Heavy Industries & Construction Co., which gets 62 percent of its revenue overseas, surged 14 percent.
The MSCI Asia Pacific Excluding Japan Index advanced 0.6 percent to 384.75 as of 10:12 a.m. in Tokyo. More than three stocks rose for each that fell after German Chancellor Angela Merkel said European leaders would do “everything necessary” to ensure banks have adequate capital. The gauge dropped 14 percent in September on speculation Europe’s sovereign-debt crisis and slowing U.S. economic growth may derail a global recovery.

U.S. Stocks Advance on European Debt Optimism, Economic Data (Source: Bloomberg)
U.S. stocks rose this week, driving the Standard & Poor’s 500 Index up from the threshold of a bear market, amid optimism European leaders will tame the region’s debt crisis and after American economic data improved. Equities fell yesterday after Fitch Ratings cut Italy and Spain’s debt ratings, overshadowing faster-than-estimated U.S. job growth. Raw-material producers in the S&P 500 surged 6.2 percent this week, the most among 10 groups, while energy stocks and companies reliant on discretionary consumer spending climbed more than 3.4 percent. Hewlett-Packard Co. (HPQ) and Cisco Systems Inc. (CSCO) jumped at least 7.4 percent, leading gains in the Dow Jones Industrial Average. The S&P 500 advanced 2.1 percent to 1,155.46, breaking a two-week losing streak. It surged 6 percent between Oct. 3 and Oct. 6, the biggest three-day rally since August. The Dow rose 189.74 points, or 1.7 percent, to 11,103.12 this week.

U.S. Stock Futures Rise on Merkel Bank Pledge (Source: Bloomberg)
U.S. stock futures gained, indicating the Standard & Poor’s 500 Index will extend last week’s rally, after German Chancellor Angela Merkel said European leaders will do “everything necessary” to ensure that banks have adequate capital. Merkel joined French President Nicolas Sarkozy to persuade investors they can stamp out the debt crisis roiling global markets. At a joint press conference in Berlin, Sarkozy set a Nov. 3 deadline for a response that addresses the immediate crisis in Greece and what he called the structural defects in the 17-nation euro area. No details were provided. S&P 500 futures expiring in December advanced 0.8 percent to 1,163.70 at 9:35 a.m. Tokyo time.

Retail Sales Likely Rose in September (Source: Bloomberg)
U.S. retail sales increased in September at the fastest pace in six months, providing a sign of optimism for some merchants heading into the holiday shopping season, economists said before a report this week. The projected 0.7 percent gain would follow no change in the previous month, according to the median of 69 forecasts in a Bloomberg News survey ahead of Commerce Department figures on Oct. 14. The trade gap widened in August, other data may show. Macy’s Inc. (M) and Kohl’s Corp. (KSS) are among retailers adding more workers than last year in anticipation demand will hold up even amid limited job growth and stock-market volatility that’s left Americans more pessimistic. President Barack Obama, lawmakers and the Federal Reserve face pressure to spur the employment gains needed to support household spending, which accounts for about 70 percent of the world’s largest economy.

Payroll Gain in U.S. Beats Forecasts, Easing Recession Concerns (Source: Bloomberg)
American employers added more workers in September than forecast and earnings and hours also rose, allaying concern the economy is slipping into another recession. Payrolls increased by 103,000 after a 57,000 gain in August, the Labor Department said yesterday in Washington. The median forecast in a Bloomberg News survey of economists called for an increase of 60,000. The figures reflected the end of a strike at Verizon Communications Inc. (VZ) that brought 45,000 people back to work. The jobless rate held at 9.1 percent. Treasuries fell as the report added to evidence the world’s largest economy is maintaining its expansion. The pace of job growth is still too slow to push down the unemployment rate as companies hold back on hiring amid a debt crisis in Europe, political gridlock in the U.S. and a plunge in stock prices.

Business Jet Sales May Increase in 2012 as Asia Blunts Slow Global Economy (Source: Bloomberg)
Business-jet sales may increase worldwide starting in 2012 as emerging-market demand blunts a sluggish U.S. economy that fueled a probable decline this year, Honeywell International Inc. (HON) projected. Purchase expectations are growing in Asia, followed by the Middle East and Africa, while the free-fall in developed markets like North America following 2008’s recession has stabilized, according to an annual survey of 1,500 companies by the Morris Township, New Jersey-based avionics and cockpit-instruments maker. Companies also have cash to spend now, compensating for individuals that might hold back amid economic uncertainty, Rob Wilson, president of Honeywell’s business and general aviation unit, said in an interview. Replacement of aging planes has combined with international travel demand to boost potential sales of longer-range models, he said.

Corporate Profit Rebound Loses Steam (Source: Bloomberg)
This year’s rebound in corporate earnings is losing steam as slower economic growth and greater strain on consumers threaten sales and profit margins at companies from Texas Instruments Inc. (TXN) to Google Inc. (GOOG) Earnings per share for the Standard & Poor’s 500, excluding financial companies, rose 14 percent in the third quarter, the smallest gain since the end of 2009, analysts’ estimates compiled by Bloomberg show. That compares with 19 percent in the second quarter and 20 percent in the first. Analysts have begun reducing forecasts for the current quarter and beyond. Chipmaker Texas Instruments and air conditioner maker Ingersoll Rand Plc are among companies that have lowered their guidance because of faltering demand. With U.S. unemployment stuck above 9 percent, political squabbling about the government debt ceiling and a downgrade of the nation’s credit rating, confidence has been sapped, said Matt McCormick, who helps manage $4 billion with Bahl & Gaynor Inc. in Cincinnati.

Treasuries Decline on European Optimism, Improved U.S. Employment Outlook (Source: Bloomberg)
Treasuries fell, pushing 10-year note yields up the most since July, on optimism Europe’s leaders will adopt a coordinated approach to supporting banks and as U.S. employers added more jobs last month than forecast. Yields rose this week even as the Federal Reserve began buying longer-term debt and selling shorter maturities to keep borrowing costs low under a policy known as Operation Twist. The U.S. Treasury Department is scheduled to sell $66 billion of notes and bonds next week. “Markets have caught the idea that something is coming or something seems to be coming out of policy talks in Europe,” said David Ader, head of government bond strategy at CRT Capital Group LLC in Stamford, Connecticut. “That has taken some of the flight-to-quality rally out of Treasuries.”

Pakistan Reduces Key Rate, Beating Forecasts to Boost Expansion (Source: Bloomberg)
Pakistan’s central bank cut its benchmark interest rate by a more-than-expected 1.5 percentage points to spur investment after terrorism and floods undermined economic growth. The State Bank of Pakistan lowered the discount rate to 12 percent from 13.5 percent, Syed Wasimuddin, a central bank spokesman, said in Karachi yesterday. Three of five economists surveyed by Bloomberg News predicted a 1 percentage point cut, and the remainder forecast a 0.5 percent reduction. Acting Governor Yaseen Anwar had room to act and join emerging markets from Russia to Brazil in lowering borrowing costs after Pakistan’s inflation rate dropped 2 percentage points in the past three months. A rate cut might support an economy that’s seen growing less than half the pace of fellow South Asian nations India, Bangladesh and Sri Lanka this year.

Merkel, Sarkozy Pledge Bank Recapitalization (Source: Bloomberg)
Angela Merkel and Nicolas Sarkozy, racing to stamp out the euro debt crisis threatening to engulf the financial system, gave themselves three weeks to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance. “By the end of the month, we will have responded to the crisis issue and to the vision issue,” the French president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office. Under increasing pressure to defuse turmoil that has raged for 18 months and facing growing concern that Greece is headed to default, Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 summit.

Euro Drops Versus Yen for Sixth Week as Region’s Debt Crisis Damps Demand (Source: Bloomberg)
The euro weakened against the yen for a sixth straight week, matching a string of losses ended in June 2010, after Italy and Spain saw their ratings cut even after the European Central Bank said it would aid regional banks. The 17-nation currency slid against most of its major counterparts amid increased speculation Greece may have to default, deepening the region’s debt crisis. Higher-yielding currencies, such as the Brazilian real and Mexican peso, rose as stocks advanced and after a report showed employment in the world’s biggest economy rose more than forecast. Group of 20 finance ministers meet in Paris Oct. 14-15 before a G-20 summit in Cannes in November. “The U.S. dollar has some legs to gain against the euro going into the end of the year,” said John Doyle, a strategist in Washington at currency-trading firm Tempus Consulting Inc. “It’s not a matter of if, it’s a matter of when Greece is going to default, and that’s going to weigh on the common currency.”

Euro Maintains Declines as Sarkozy, Merkel Fail to Reassure on Debt Crisis (Source: Bloomberg)
The yen fell against the majority of its most-traded counterparts as optimism Europe can contain its debt crisis spurred a climb in U.S. equity futures, damping demand for haven currencies. The euro strengthened versus most of its 16 peers after French and German leaders pledged to deliver a plan in three weeks to recapitalize banks and reiterated their intention to keep Greece in the euro. The Australian dollar gained for a fifth day against the U.S. currency before a report this week that may show employment in the South Pacific nation increased. “People are cautiously optimistic,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “The European economy is probably going to strengthen over the third quarter. The yen will probably weaken a little bit as funds maybe start to trickle out of Japan into risk assets.”

European Stocks Post Second Weekly Advance on BOE Easing, U.S. Jobs Data (Source: Bloomberg)
European stocks advanced for a second week as central banks eased lending, investors speculated that policy makers will act to support the region’s debt crisis and U.S. jobs data spurred optimism the world’s largest economy will avoid a recession. Antofagasta Plc (ANTO), Rio Tinto Group and Eni SpA led gains in commodity shares as base metals and oil climbed. Axa SA, Europe’s second-biggest insurer, rallied 11 percent after reiterating its earnings target. Dexia SA (DEXB) sank 42 percent as Belgium’s biggest bank headed toward a breakup. National Bank of Greece SA (ETE) slid the most since August.
The Stoxx Europe 600 Index advanced 2.6 percent to 231.99 this past week as the Bank of England expanded its bond-purchase program and German Chancellor Angela Merkel said she’s ready to discuss recapitalizing lenders. The gauge has still retreated 20 percent since this year’s high on Feb. 17 and is trading at 9.8 times its companies’ estimated earnings, near the cheapest since March 2009, according to data compiled by Bloomberg.

U.K. Stocks Advance on U.S. Jobs Report; Rio Tinto Advances (Source: Bloomberg)
U.K. stocks gained for a third day after a report showed employers in the U.S. added more jobs than forecast last month, easing concern amid investors that the economic recovery is faltering. Commodities companies, whose profits are closely tied to growth, led the advance, with Rio Tinto Group rising 1.2 percent. Royal Bank of Scotland Group Plc (RBS) and Lloyds Banking Group Plc (LLOY) retreated more than 3 percent as Moody’s Investors Service cut the ratings on their debt. Premier Foods Plc (PFD) plunged 42 percent after saying third-quarter results were “significantly” below forecasts. The FTSE 100 Index (UKX) gained 12.14, or 0.2 percent, to 5,303.4 at the 4:30 p.m. close in London. The gauge has rallied 3.4 percent this week as investors speculated policy makers will reach agreement to shield financial institutions from the European debt crisis and as the Bank of England expanded its bond-purchase program. The FTSE All-Share Index added 0.3 percent today, while Ireland’s ISEQ Index rallied 0.5 percent.

BoE’s Weale Says the Bank Has a ‘Lot of Scope’ to Increase Asset Purchases (Source: Bloomberg)
Bank of England policy maker Martin Weale said the central bank has “a lot of scope” to increase asset purchases if it’s deemed necessary to boost economic growth. “There is quite a lot of scope for further quantitative easing,” Weale said in an interview on Sky News yesterday. The U.K. central bank last week raised the ceiling for its asset purchases, or so-called quantitative easing, to 275 billion pounds ($428 billion) from 200 billion pounds. Governor Mervyn King said the move, the first loosening of U.K. monetary policy since the depths of the recession in 2009, was a response to what may be the worst financial crisis ever. Asked if he agreed with King’s description, Weale said there are similarities to the 1930s and the economic situation is “very difficult.” He cautioned that central banks can’t resolve all the world’s economic woes.

Stevens Rate Cut Seen Smallest in Two Months on Europe: Australia Credit (Source: Bloomberg)
European efforts to avert a banking crisis are reducing expectations for lower interest rates in Australia, bond market measures show. Reserve Bank of Australia Governor Glenn Stevens suggested less than a week ago that he’s willing to lower the developed world’s highest benchmark rate of 4.75 percent as Greece’s struggle to avoid default damps investor confidence and growth. As markets rallied last week after the European Central Bank said it will give banks access to unlimited cash, bond investors pared bets the RBA will repeat the series of cuts that followed Lehman Brothers Holdings Inc.’s collapse in 2008. “The market has now got it into its head that there’s going to be some sort of solution,” Matthew Johnson, a strategist at UBS AG in Sydney, said in a telephone interview on Oct. 7. “There are some serious headwinds playing out there, so I don’t really see the market moving away from pricing in rate cuts because the RBA is now talking about it as well.”

Australian Lawmakers Will Vote on Carbon Tax Proposal This Week, Swan Says (Source: Bloomberg)
Australia’s parliament will vote this week to put into law the nation’s first tax on greenhouse gas emissions aimed at cutting reliance on fossil fuels and boosting renewable energy. “Putting a price on carbon will break the link between emissions growth and economic growth, driving innovation to find better, less polluting ways of producing power, goods and services,” Treasurer Wayne Swan said in a statement yesterday. The developed world’s biggest per capita polluter will raise A$27.8 billion ($27.2 billion) in three years by making companies pay for carbon emissions, Prime Minister Julia Gillard said in July when unveiling details of the policy.

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