Asian Stocks Rise on Recovery Optimism (Source: Bloomberg)
Asian stocks rose for a sixth day as European leaders edged closer to a plan for taming the debt crisis and the U.S. Federal Reserve said it talked about more asset purchases, reducing concern about a global recovery. Honda Motor Co., Japan’s second-largest automaker by revenue, gained 1.9 percent in Tokyo. Sony Corp. climbed 2.1 percent, even after saying it recalled 1.6 million Bravia flat- panel TVs. BHP Billiton Ltd. (BHP), the world’s biggest mining company, rose 1.2 percent in Sydney after metal prices rallied yesterday. Iluka Resources Ltd. (ILU), the world’s biggest zircon producer, jumped 6.1 percent after reporting that third-quarter sales more than doubled. The MSCI Asia Pacific Index rose 0.9 percent to 117.23 as of 9:41 a.m. in Tokyo, taking the measure’s advance in the past six days to 9.2 percent.
U.S. Senate Shelves Obama’s $447B Job Plan (Source: Bloomberg)
President Barack Obama’s effort to enact a $447 billion jobs plan was derailed by the U.S. Senate, falling short of the 60 votes needed to advance what he has proposed to revive a faltering economy. Two Democrats joined the Republican minority to block the plan in a test vote. Yesterday’s tally was 50-49, shelving the measure in its current form. “We will not take no for an answer,” Obama said today at an American Latino Heritage Forum sponsored by the White House and the Interior Department. The president said lawmakers will hold separate votes on the stimulus portions of his proposal including spending to hire more teachers and pay for road and bridge improvements and middle-class tax cuts. Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell today said they will start looking for specific provisions that can get enough support to pass.
Some Fed Officials Sought to Retain QE3 Option (Source: Bloomberg)
The Federal Reserve said some officials last month wanted to keep further asset purchases as an option to boost the economy as policy makers saw “considerable uncertainty” that U.S. growth will pick up. Most participants favored giving additional information on the central bank’s goals and how they influence the Fed’s decisions, and most “saw advantages” in tying the Fed’s near- zero interest rates to more specific developments in the economy, the Fed said in minutes of the Sept. 20-21 session, released today in Washington. Such changes may be expressed in ways other than the post-meeting statement, the Fed said.
The debate culminated in the Federal Open Market Committee’s decision to replace $400 billion of Treasuries in the central bank’s portfolio with longer-term debt to reduce borrowing costs. Three officials dissented. Chairman Ben S. Bernanke said last week the so-called Operation Twist program is a “significant step but not a game changer” for reviving growth and reducing unemployment stuck near 9 percent.
Senate Triggers China Backlash as Bill Targets Yuan’s Value (Source: Bloomberg)
The U.S. Senate passed a bill aimed at punishing China for keeping the yuan undervalued, triggering a backlash from Chinese officials who said the measure risks damaging trade relations and undermining the global recovery. The Senate voted 63-35 for the legislation, which would let U.S. companies seek duties to compensate for “misaligned” currencies. House Speaker John Boehner said today he has “grave concerns” with the bill, casting doubt on whether it will become law. China protested in government statements. Failure to allow faster gains in the yuan against the dollar has impeded a shift in demand toward emerging markets that would bolster the global economy, according to Federal Reserve Chairman Ben S. Bernanke. The yuan has appreciated 10 percent, adjusted for inflation, since mid-2010, a pace that’s too slow, Treasury Secretary Timothy F. Geithner said yesterday.
U.S. Will Intensify Pressure on Europe at G-20, Brainard Says (Source: Bloomberg)
The U.S. will intensify its call for forceful action to stem Europe’s debt crisis at a meeting of Group of 20 nations in Paris this week, the Treasury Department’s top international official said. “The consequences of delay are growing,” Lael Brainard, Treasury undersecretary for international affairs, said in a press briefing in Washington today. “Against a backdrop of elevated risks to the recovery, the United States will intensify our call for resolute action.” Treasury Secretary Timothy F. Geithner will attend the G-20 finance ministers meeting Oct. 13-14. European officials are trying to resolve the continent’s debt crisis, which has pushed Greece to the brink of default, shaken world markets and fueled speculation the 17-nation euro currency might not survive in its current form.
Goldman’s O’Neill Says U.K., U.S. Economies Need More ‘Targeted’ Policies (Source: Bloomberg)
Goldman Sachs Asset Management Chairman Jim O’Neill said conventional quantitative easing may not be enough for the U.S. and U.K. economies and more “targeted” policies are needed to boost confidence and growth. “It’s not obvious to me that conventional QE in the U.K. or the U.S. has got that much bang for its buck,” O’Neill said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse” program in London today. “More imaginative QE or forms of specific targeted easing, probably involving more infrastructure or doing something to get bank funding spreads down, would be more likely to get a stronger result.” His comments were echoed by former Bank of England policy maker Sushil Wadhwani, who said today that global central banks need to do “more creative” forms of monetary policy to prevent the global economy slipping into a recession.
Job Openings Fell in August, Hiring Climbed (Source: Bloomberg)
Job openings in the U.S. fell in August for the first time in four months, signaling a sustained labor market recovery will take time to unfold. The number of positions waiting to be filled dropped by 157,000 to 3.06 million, according to Labor Department figures issued today in Washington. Hiring increased by 38,000 to 4.01 million. Payrolls climbed by 103,000 workers in September, a better- than-forecast outcome that included 45,000 returning Verizon Communications Inc. strikers. With unemployment hovering above 9 percent, the economy slowing and concerns of a European default mounting, employers may be slow to further boost hiring. “Companies don’t want to risk making additional hires with the outlook so uncertain,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “Corporations are playing it very close to the vest and keeping payrolls lean.”
Dow Erases 2011 Decline on Europe’s Plan (Source: Bloomberg)
U.S. stocks rose, briefly erasing the Dow Jones Industrial Average’s 2011 loss, as European leaders provided a road map to tame the debt crisis and the Federal Reserve said it discussed further asset purchases. Financial and industrial shares rose the most among 10 groups in the Standard & Poor’s 500 Index. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) jumped at least 2.7 percent, following a rally in European lenders. General Electric Co. (GE) and 3M Co. (MMM) added more than 1.6 percent to pace gains among companies most- reliant on economic growth. PepsiCo Inc., the largest snack-food maker, increased 2.9 percent as profit beat analysts’ estimates. The S&P 500 advanced 1 percent to 1,207.25 at 4 p.m. New York time, rallying 4.5 percent in three days. The index rose as much as 2.1 percent earlier before paring gains in the final hour of trading. The Dow climbed 102.55 points, or 0.9 percent, to 11,518.85. The 30-stock gauge is down 0.5 percent for 2011.
U.S. Joblessness Tops 6% in 2015 in Best Case: Chart of the Day (Source: Bloomberg)
It will take at least until 2015 for the U.S. jobless rate to drop to 6 percent if the labor force and employment keep growing at the current pace. The CHART OF THE DAY shows the projected path of unemployment assuming monthly payroll gains match the 124,167 increase averaged over the past 12 months and the labor force expands as it’s done since January 2010. “If anything, the estimate of when we would return to the target unemployment rate is optimistic,” said Patrick O’Keefe, chief of economic research at JH Cohn LLP in Roseland, New Jersey, and a former deputy assistant secretary at the Labor Department. “This jobs recovery is so weak that it will take years before we get back to an unemployment rate that, prior to the recession, would have been considered high.”
Japanese Stocks Advance as Europe Considers Solutions to Tame Debt Crisis (Source: Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average heading for its highest close in almost a month, as European leaders offered a road map to tackle the debt crisis and machinery makers gained on rising orders. Mazda Motor Corp., the Japanese carmaker most dependent on European sales, jumped 5.1 percent. Fanuc Corp., the world’s biggest maker of controls that run machine tools, gained 2.1 percent. Mitsubishi Corp., a trader that gets about 43 percent of sales from commodities, increased 2.2 percent after a gauge of metals rallied yesterday in London. The Nikkei 225 Stock Average rose 1.1 percent to 8,834.50 as of 9:55 a.m. in Tokyo, poised for its highest close since Sept. 16. The broader Topix gained 0.9 percent to 760.34, with more than twice times as many shares advancing as declining.
BOJ Members Said More Easing May Become Needed, Minutes Say (Source: Bloomberg)
Several Bank of Japan (8301) board members said that more monetary easing steps may become needed depending on economic developments, a record of the board’s Sept. 6-7 meeting said. The members said that downside risks to the economy remain high, with the outcome of the European sovereign debt crisis unclear, the record published in Tokyo today said.
Singapore Economic Growth Seen Near Zero (Source: Bloomberg)
Singapore’s economic growth probably nearly stalled last quarter as a faltering global recovery hurt exports, putting pressure on the central bank to join nations from Indonesia to Pakistan in easing monetary policy. Gross domestic product probably rose an annualized 0.8 percent last quarter from the previous three months, when it fell 6.5 percent, according to the median of 16 estimates in a Bloomberg News survey. The Monetary Authority of Singapore, which uses the island’s dollar as its main tool to manage inflation, may slow or end currency appreciation, a separate survey showed. Both reports will be released at 8 a.m. tomorrow. Any return to recession for the global economy would threaten a Singaporean economy that saw an 11 percent collapse in exports in 2009. With a potential Greek default threatening to reverberate through world financial markets, Singapore may shift to stimulus measures just six months after its last monetary tightening.
South Korea Free-Trade Agreement Passes U.S. Senate, Biggest Since Nafta (Source: Bloomberg)
The U.S. Senate voted final passage for legislation on the U.S.-South Korea free-trade agreement, the biggest for the U.S. since the North America Free-Trade Agreement in 1994. The Senate voted 83-15 tonight, and will send the measure to President Barack Obama for his signature.
India Inflation Must Ease Before Rates Reduced: Subbarao (Source: Bloomberg)
India’s inflation must ease before the central bank can reduce interest rates, Governor Duvvuri Subbarao said, signaling policy makers may maintain a tight monetary stance for now. “We are deeply sensitive in making India a low interest- rate regime but that will take time,” Subbarao said in the northern Indian city of Jaipur yesterday. “First, we need to bring inflation down in order to bring interest rates down.” Emerging-market nations from Brazil to South Korea have turned from fighting price gains to supporting growth as a struggling U.S. recovery and deepening debt crisis in Europe threaten the global economy. In India, the fastest inflation in more than a year is sustaining pressure for higher borrowing costs even as consumer demand wanes.
Australia Unemployment Falls; Aussie Jumps (Source: Bloomberg)
Australia’s unemployment rate declined for the first time since March as employers last month added more workers than economists forecast, boosting bond yields and sending the local currency to a three-week high. The number of people employed rose by 20,400, from a revised 10,500 fall in August, the statistics bureau said in Sydney today. That was more than twice the median estimate for a 10,000-job gain in a Bloomberg News survey of 24 economists. The jobless rate fell to 5.2 percent from 5.3 percent. The Reserve Bank of Australia last week left its benchmark interest rate unchanged at 4.75 percent, citing a “softer” labor market and consumers who are “more concerned about the possibility of unemployment rising.” The RBA signaled less concern about wage pressure from a mining investment boom and said there’s more scope to cut rates if necessary.
European Stocks Rise to Two-Month High; Alpha Bank, ASML Climb (Source: Bloomberg)
European stocks climbed to a two- month high as the European Commission’s Olli Rehn said the debt crisis can be resolved, outweighing earnings from Alcoa Inc. (AA) that missed estimates. Greek banks rallied, with Alpha Bank SA and National Bank of Greece SA (ETE) soaring at least 15 percent. Burberry Group Plc (BRBY), the U.K.’s largest luxury-goods maker, climbed 3.5 percent as sales topped forecasts. ASML Holding NV (ASML) added 6.3 percent after Europe’s biggest semiconductor-equipment maker reported income that beat projections. YIT Oyj (YTY1V), Finland’s largest builder, slid 4.1 percent after cutting its profit outlook. The Stoxx Europe 600 Index rose 1.7 percent to 239.16 at the close of trading, the highest since Aug. 4. The measure has rallied 10 percent since Oct. 4 for the biggest six-day gain since January 2009. The gauge has still tumbled 18 percent from its high on Feb. 17 amid concern that the sovereign debt crisis in Europe will spread from Greece to the larger economies of Italy and Spain.
German Stocks Gain for Sixth Day; Carmakers, Chemicals Lead Advance (Source: Bloomberg)
German stocks advanced, for their biggest six-day gain since 2008, after European Union Economic and Monetary Affairs Commissioner Olli Rehn said there is a fairly good chance of averting calamity in the region. Carmakers and chemical firms led the increase. Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) rose at least 2 percent. K+S AG and Bayer AG (BAYN) also added more than 2 percent. Phoenix Solar AG (PS4) sank 21 percent after lowering its yearly outlook. The benchmark DAX Index (DAX) advanced 2.2 percent to 5,994.47 at the close in Frankfurt. The gauge has surged 15 percent over the past six days, the most since November 2008. The measure has still fallen 20 percent from this year’s high on May 2 amid concern global economic growth is slowing and policy makers are struggling to contain the European debt crisis. The broader HDAX Index (HDAX) climbed 2.2 percent today.
U.K. Stocks Advance on Euro-Area Optimism; Banks, Insurers Rally (Source: Bloomberg)
U.K. stocks climbed to their highest level in more than two months, led by a rally in financial and mining companies, amid growing optimism that euro-area policy makers will contain the region’s debt crisis. Barclays Plc (BARC) and Aviva Plc (AV/) both jumped more than 5 percent in London trading. Antofagasta Plc (ANTO) and Randgold Resources Ltd. (RRS) climbed with metal prices. Burberry Group Plc (BRBY) gained 3.5 percent after the retailer posted sales that topped analysts’ estimates. The benchmark FTSE 100 Index (UKX) gained 46.1, or 0.9 percent, to 5,441.8 at the 4:30 p.m. close in London, its highest level since Aug. 3. The gauge earlier fell as much as 0.9 percent. The FTSE All-Share Index gained 1 percent, while Ireland’s ISEQ Index rose 1.9 percent in Dublin.
Slovakia Clears Road to Complete Approval of Enhanced Euro Bailout Fund (Source: Bloomberg)
Slovakia will approve Europe’s enhanced bailout fund today or tomorrow, completing the ratification process across the 17 euro countries as the region’s leaders prepare for a summit this month. Party leaders in Bratislava yesterday secured backing for the European Financial Stability Facility in a second vote, Robert Fico, head of the largest opposition party Smer, said. Prime Minister Iveta Radicova’s SDKU party in exchange agreed to back early elections to be held on March 10. “We will proceed with ratification of the bailout mechanism immediately after the constitutional law on early elections is approved,” Fico told reporters. The timing of the EFSF vote depends on how quickly lawmakers get through tomorrow’s debate and ballot on the early election, said Mikulas Dzurinda, the chairman of Radicova’s party.
Spain’s ‘Blank Check’ May Offer Rajoy Room to Reduce Deficit: Euro Credit (Source: Bloomberg)
Spaniards will probably hand opposition head Mariano Rajoy a record mandate in elections next month. Unwilling to risk his lead in polls, the People’s Party leader hasn’t told voters what he’d do with it. Five weeks before the Nov. 20 election that polls suggest he’ll win, Rajoy hasn’t said how he’ll cut spending or change labor rules. He’s pledged tax breaks for small businesses, said he “wouldn’t like” to cut pensions and vowed a “true” bank restructuring, without saying what that means. Voters don’t know who would be his finance minister. That hasn’t stopped Spaniards from telling pollsters they’ll hand the PP its largest-ever majority as the country struggles with Europe’s highest jobless rate amid a three-year economic slump. With an outright majority and few election pledges to deliver on, Rajoy may be free to slash the budget deficit, overhaul labor rules and shield lenders from the sovereign-debt crisis.
Unemployment in U.K. Increases to Highest Level in 15 Years With 8.1% Rate (Source: Bloomberg)
The U.K. unemployment rate rose to the highest in 15 years in the three months through August, adding pressure on the government to loosen its fiscal squeeze as the economy struggles to avoid recession. The jobless rate increased to 8.1 percent from 7.9 percent in the three months through July, the Office for National Statistics said in London today. The number of unemployed reached 2.57 million, the most since 1994. In September, jobless claims rose for a seventh month. They climbed 17,500, less than the 24,000 forecast in a Bloomberg News survey. Chancellor of the Exchequer George Osborne has pledged to maintain the biggest fiscal squeeze since World War II even as the outlook for the recovery deteriorates. Bank of England policy makers restarted their asset-buying program last week amid an escalating debt crisis in Europe and slowing global growth, a move Governor Mervyn King described as a response to what may be the worst financial crisis ever.
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