Friday, October 21, 2011

20111021 0942 Global Market Related News.

Asian Stocks Advance as Europe Considers $1.3 Trillion for Crisis Fund (Source: Bloomberg)
Asian stocks rose, narrowing a weekly decline on the regional benchmark index, as European governments considered deploying $1.3 trillion to fight the region’s debt crisis, boosting the earnings outlook for Asian exporters. The MSCI Asia Pacific Index rose 0.2 percent to 115.46 as of 9:11 a.m. in Tokyo. The measure has dropped about 1.2 percent this week.

Sales of Existing U.S. Homes Fell as Forecast in September (Source: Bloomberg)
Sales of existing homes fell in September, extending a pattern of declines and gains that show the industry continues to be buffeted by consumer pessimism and unemployment above 9 percent. Purchases dropped 3 percent to a 4.91 million annual rate, matching the median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. The median price dropped 3.5 percent from a year ago and about one in five real-estate agents polled said contracts had been canceled, the group said. Growing pessimism about the economy, unemployment above 9 percent and limited access to credit are keeping some Americans from taking advantage of near record-low mortgage rates. Foreclosures that are adding to the supply of homes for sale and driving down prices remain a hurdle for an industry that’s made little progress more than two years after the recession ended.

Factories Help to Support U.S. Economy as Labor, Housing Markets Struggle (Source: Bloomberg)
Manufacturing in the Philadelphia area unexpectedly expanded in October at the fastest pace in six months, signaling factories are helping support a U.S. economy weighed down by weakness in the housing and labor markets. The Federal Reserve Bank of Philadelphia’s general economic index increased to 8.7 from minus 17.5 last month, the biggest one-month rebound in 31 years. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Companies such as hydraulic equipment-maker Parker Hannifin Corp. (PH) are raising sales forecasts as they benefit from rising business investment and overseas demand. Other reports today showed purchases of existing homes declined and Americans’ confidence in the economic outlook slumped with unemployment stuck near 9 percent and wages stagnant.

U.S. Leading Economic Indicators Rose 0.2% in September (Source: Bloomberg)
The index of U.S. leading economic indicators increased in September at a pace that suggests a slower rate of growth in the coming months. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.2 percent after a 0.3 percent gain in August, the New York-based research group said today. The September increase, the lowest since a decline in April, matched economists’ projections, according to the median forecast in a Bloomberg News survey. A Federal Reserve survey published yesterday said the economy maintained its expansion last month even as more companies reported more doubt about the strength of the recovery. An acceleration in growth is needed to support the job gains that drive household spending, the biggest part of the U.S. economy.

Consumers Most Negative Since Recession (Source: Bloomberg)
Consumer confidence in the U.S. economic outlook slumped in October to the lowest level since the recession, highlighting the challenges facing the biggest part of the economy. The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 45, the worst reading since February 2009. The weekly measure of current conditions was minus 48.4 for the period ended Oct. 16, up from minus 50.8 the prior week that was close to a record low. A volatile stock market, little hiring and a lack of wage gains are souring Americans’ moods, raising the risk that the consumer spending that accounts for 70 percent of the economy will slump. Policy makers from Federal Reserve Chairman Ben S. Bernanke to President Barack Obama are taking steps to spur growth in the world’s largest economy.

Treasuries Set for Weekly Gain as Solution to Europe’s Debt Crisis Delayed (Source: Bloomberg)
Treasuries were set for their first weekly gain in a month, as prospects European leaders will need more time to resolve the region’s sovereign debt crisis spurred demand for the relative safety of U.S. government securities. Ten-year yields snapped an advance from yesterday after German Chancellor Angela Merkel and French President Nicolas Sarkozy planned a second meeting on Oct. 26 to agree on a package of measures to address the crisis after this weekend’s leaders summit in Brussels. The Federal Reserve is scheduled to buy $4.25 billion to $5 billion of Treasuries due from November 2019 to August 2021 as part of its plan to swap shorter maturities in its holdings for longer ones.
“Treasuries will be well supported by this news,” said Hiromasa Nakamura, who helps oversee the equivalent of $43 billion as an investor in Tokyo at Mizuho Asset Management Co., a unit of Japan’s second-largest lender. There is “a flight to quality in the market from risk assets. There are many problems in Europe. It will take much time to resolve them.”

Japan Stocks Swing Between Gains, Losses (Source: Bloomberg)
Japanese stocks swung between gains and losses amid concern European leaders won’t deliver a plan to resolve the region’s debt crisis at a summit this weekend. Nissan Motor Co., a carmaker that gets about 15 percent of sales from Europe, lost 0.9 percent. Mizuho Financial Group Inc., Japan’s third-biggest lender by market value, slipped 0.9 percent. Kawasaki Heavy Industries Ltd. climbed 3.5 percent after the maker of heavy machinery beat its earnings forecast. The Nikkei 225 (NKY) added 0.1 percent to 8,691.39 as of 9:14 a.m. in Tokyo, after losing as much as 0.1 percent. The broader Topix was little changed at 745.84. The gauge tumbled 17 percent this year through yesterday as Europe’s crisis threatens to spread.

Japan May Add Extra $52B Aid on Strong Yen (Source: Bloomberg)
Japan is preparing to unveil plans to spend an extra 4 trillion yen ($52 billion) to help its exporters cope with a surging yen and spur job creation, according to documents obtained by Bloomberg News. The government will add 2 trillion yen to the 8 trillion yen in foreign-exchange reserves being shifted to the state-run Japan Bank for International Cooperation to aid exporters and spur acquisitions overseas, one document shows. A further 2 trillion yen will be allocated to encourage investment in domestic plants and to hire workers, according to another document obtained from two government officials who declined to be identified because the plan isn’t public. A yen appreciation of almost 6 percent this year has prompted the government to adopt a multi-pronged approach to currency policy. While threatening intervention, Japanese authorities have offered aid to companies hit by the yen’s move and highlighted the lower cost of making overseas acquisitions. Japan imports about 80 percent of its energy needs.

EU Said to Mull Wielding $1.3T to Break Impasse (Source: Bloomberg)
European governments may unleash as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, seeking to break a deadlock between Germany and France that is forcing leaders to hold two summits within four days. Negotiations on combining the European Union’s temporary and planned permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash, two people familiar with the discussions said. They declined to be identified because political leaders will have to decide.
That option may be one way out of the impasse between Europe’s two biggest economies Finance ministers meet in Brussels today from about 2 p.m. to lay the groundwork for an Oct. 23 meeting of government leaders that had been the deadline for a solution to the debt crisis. A summit for Oct. 26 was set yesterday after Germany and France said the EU needs more time to seal a “global and ambitious” accord.

France Likely to Lose Top Rating: S&P (Source: Bloomberg)
France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario, according to Standard & Poor’s. The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios, the ratings firm said in a report dated today. These assume low economic growth and a double-dip recession in the first set of circumstances, and add an interest-rate shock to the recession in the second. “Ballooning budget deficits and bank recapitalization costs would likely send government borrowings significantly higher under both scenarios,” S&P analysts led by Chief Credit Officer Blaise Ganguin in Paris wrote in the report. “Credit metrics would deteriorate sharply as a result.”

Papandreou Prevails in Austerity Vote (Source: Bloomberg)
Greek Prime Minister George Papandreou won a parliamentary vote on a new round of austerity designed to secure more financial aid, risking further unrest that left one person dead after protests turned violent. Papandreou secured the backing of a majority of lawmakers in the 300-seat chamber in Athens late yesterday as European leaders announced a second summit next week to give them more time to work on a “global and ambitious” strategy to combat the sovereign debt crisis that is roiling global markets. The vote in Athens capped a day in which hooded protesters in gas masks fought running battles with riot police firing tear-gas rounds outside the parliament building on the capital’s Syntagma Square. Ringed by a cordon of police, lawmakers debated the second round of austerity measures in four months that are necessary to secure the next tranche of international aid to stave off default and win any reduction in Greece’s debt burden.

ECB Said to Weigh Increasing Loans to Banks Revealing More on Collateral (Source: Bloomberg)
The European Central Bank is considering lending more money against asset-backed securities where issuers provide additional information about the loans securing the bonds, said a person familiar with the matter. Banks can borrow money from the ECB’s liquidity facility by posting collateral with a discount applied depending on its perceived safety. The bank’s Eurosystem Risk Management Committee is discussing lowering the reduction on asset-backed bonds from the 16 percent levied now, said the person, who declined to be identified because the talks are private. The proposed change is part of a broader ECB initiative to encourage banks to improve transparency in asset-backed bonds they sell to investors and boost confidence in a market blamed for worsening the credit crisis in 2007. The Frankfurt-based lender also said in April 2010 that it was seeking ways to control the quality of the assets it takes in as collateral for loans to financial institutions.

European Officials Said to See Market Risk in Greek Bondholder Debt Swap (Source: Bloomberg)
European Union officials weighing deeper losses for Greek bondholders in a revamped bailout are concerned that any investor involvement risks further roiling markets, say people familiar with the EU’s deliberations. Greece has accumulated at least 20 billion euros ($27 billion) in additional financing needs since a 159 billion-euro package was set in July, because of a deepening recession and delays in enacting the plan, said the people, who declined to be identified because euro-area leaders have yet to agree on their strategy. French President Nicolas Sarkozy and German Chancellor Angela Merkel yesterday demanded “immediate talks” with investors to reduce Greece’s debt load. The EU is considering five scenarios, ranging from sticking with July’s voluntary swap to a so-called hard restructuring, where investors could be forced to exchange Greek bonds for new ones at 50 percent of their value, the people said.

European Stocks Slide as Leaders Split; UniCredit, Actelion Fall (Source: Bloomberg)
European stocks declined the most in two weeks amid concern the euro area’s leaders are far from agreeing on a plan to end the region’s debt crisis. Intesa Sanpaolo SpA (ISP) and UniCredit SpA (UCG) led a selloff in banks, sliding more than 9 percent, as corporate bond risk advanced. Actelion Ltd. (ATLN) sank the most in more than 18 months as Europe’s largest biotechnology company said it expects drug sales to decrease next year. Schneider Electric SA (SU), the world’s biggest maker of low- and medium-voltage equipment, plunged 7.6 percent after trimming its 2011 profit target. The benchmark Stoxx Europe 600 Index slid 1.5 percent to 233.07 at the close of trading, extending losses after Die Welt reported that Germany hasn’t ruled out postponing a euro-area summit planned for Oct. 23. That’s the biggest decline since Oct. 4 and brings the retreat from this year’s high in February to 20 percent.

Thai Floods Hit Apple, Toyota Supply Chains (Source: Bloomberg)
Apple Inc. (AAPL) and Toyota Motor Corp. (7203) are facing the worst supply disruptions since the March earthquake that crippled Japan, leading investors to scramble assessing the financial toll of the floods in Thailand. Apple Chief Executive Officer Tim Cook said this week Thailand’s worst floods in half a century set back supply of components used in Mac computers, while Toyota suspended production of its Camry and Prius vehicles in the kingdom. Western Digital Corp. (WDC), the world’s largest maker of hard-disk drives, warned it will post a loss this quarter and production won’t return to normal for months.
The floods have claimed more than 300 lives since July and shuttered more than 14,000 businesses in a country that makes about a quarter of the world’s hard-disk drives and serves as the Southeast Asian production hub for Japanese carmakers. While the government estimates damages of as much as 120 billion baht ($3.9 billion), disruptions to the global supply chain may be underestimated, according to BGC Partners Inc. (BGCP)

Olympus Scandal Prompts Record Speculation (Source: Bloomberg)
A record number of shares in Olympus Corp. (7733) are being bought and sold through Japanese margin-trading accounts as investors seek to capitalize on volatility amid a scandal over payments to advisers. The number of Olympus shares being held through margin accounts has surged to the highest since at least 1997, according to data from Japan Securities Finance Co., a provider of loans and lending services. Olympus has lost almost half of its value since Michael C. Woodford was fired as president on Oct. 13 after calling for a probe of $687 million in payments during a $2 billion takeover in 2008. “The volatility of Olympus is rising and the share price is likely to swing wildly in both directions,” said Kenichi Hirano, a general manager and strategist at Tachibana Securities Co. in Tokyo. “Investors see this as a rare opportunity to gain big profits in the short term.”

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