Asia Stocks Rise, Snapping 4-Day Losing Streak (Source: Bloomberg)
Asian stocks advanced for the first time in five days as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates, reducing concern that the debt crisis will cause a credit crunch. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded lender, gained 1.8 percent in Tokyo as Greece scrapped a referendum on Europe’s bailout package. Komatsu Ltd. (6301), Asia’s biggest maker of construction equipment by market value, surged 6.3 percent after a report showed orders at American factories unexpectedly increased in September. BHP Billion Ltd., the world’s largest mining company, jumped 3.6 percent as metal and oil futures rose.
“There’s less risk today because people are little less concerned that Greece will run on its own direction,” Michael Vogelzang, chief investment officer at Boston Advisors LLC, told Bloomberg Television. “It sounds like there is some progress and the markets moved up. We think the ECB moves were helpful. It’s better to aggressively attack these issues than sit idly by.”
China’s Stocks Rise, Extend Weekly Gain, on Europe, Looser Policy Outlook (Source: Bloomberg)
Chinese stock-index futures rose, signaling gains for the benchmark index, after Greece signaled it won’t hold a referendum on a bailout package and investors speculated China will take more measures to boost the economy. Futures on the CSI 300 Index (SHSZ300) expiring in November, the most active contract, gained 0.8 percent to 2,776.80 as of 9:16 a.m. local time. Jiangxi Copper Co. and coal producer China Shenhua Energy Co. may rise on higher raw-material prices. China Vanke Co., the nation’s biggest listed property developer, may decline after sales fell 33 percent in October. Asian stock markets climbed as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates.
“The rate cut and recent progress on the Greek debt problem help local investors psychologically by increasing their appetite for risk assets,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “Domestically, the period for policy over-tightening is over and that’ll help the economy get on a smooth track and is positive for stocks.”
Japanese Stocks See First Gain in Four Days on Greece, U.S. Factory Orders (Source: Bloomberg)
Japanese stocks rose for the first time in four days after the European Central Bank unexpectedly lowered interest rates and Greece signaled it won’t hold a referendum on a bailout package. Honda Motor Co., Japan’s second-largest carmaker by market value, jumped 4.3 percent. Mitsubishi Corp. (8058), Japan’s biggest commodities trader by revenue, climbed 2.9 percent after prices for oil and metals advanced. Komatsu Ltd., Asia’s No. 1 maker of heavy machinery by market value, jumped 5.1 percent after U.S. factory orders unexpectedly increased. The Nikkei 225 (NKY) Stock Average rose 1.4 percent to 8,758.15 as of 10:38 a.m. in Tokyo. The broader Topix Index advanced 1.5 percent to 749.26, with more than three shares rising for each that fell.
Stocks in U.S. Rise After ECB Rate Cut as Greece Moves Closer to Bailout (Source: Bloomberg)
U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second straight day, as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates. Qualcomm Inc. (QCOM) jumped 7.5 percent as the biggest maker of mobile-phone chips forecast sales that beat analysts’ projections. Kraft Foods Inc. (KFT) added 3.3 percent after raising its earnings estimate. Estee Lauder Cos. jumped 18 percent after the maker of Clinique skin care raised its profit forecast, boosted its dividend and set plans for a stock split. The S&P 500 climbed 1.9 percent to 1,261.15 at 4 p.m. in New York, extending its two-day gain to 3.5 percent and erasing its 2011 decline. The Dow Jones Industrial Average increased 208.43 points, or 1.8 percent, to 12,044.47 today.
“They’re pushing the Greeks to the wall,” Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.5 billion of assets, said in a telephone interview. “It’s a sobering up moment. On top of that, the ECB’s decision to cut rates will take some of the pressure off of the upcoming financing for the Spanish and Italian markets.”
European Stocks Advance on ECB Interest Rate Cut and Optimism Over Greece (Source: Bloomberg)
European stocks advanced after the euro-area central bank unexpectedly cut the benchmark interest rate and Greek Prime Minister George Papandreou signaled he won’t call a referendum on the latest bailout package. National Bank of Greece SA led the country’s lenders higher. Swiss Re Ltd. and Man Group Plc (EMG) gained more than 2 percent after reporting better-than-expected earnings. Cable & Wireless Communications Plc (CWC) jumped 7.8 percent after saying restructuring is ahead of schedule. The benchmark Stoxx Europe 600 Index climbed 2.1 percent to 242.2 at the close in London, after the European Central Bank’s rate decision. The stocks earlier erased their losses amid speculation that Greece will cancel the referendum asPapandreou’s ruling Pasok party split over the question.
Dollar Holds Two-Day Decline Versus Euro Before Reports on U.S. Employment (Source: Bloomberg)
The dollar held a two-day drop versus the euro before data forecast to show U.S. jobs growth slowed and the unemployment rate was unchanged, supporting the case for the Federal Reserve to consider monetary easing. Europe’s common currency climbed versus the greenback yesterday, paring this week’s drop, after Greek Prime Minister George Papandreou signaled he won’t call for a referendum on a bailout plan. The yen is set for its first five-day drop against the dollar in three weeks after Japan on Oct. 31 sold its currency to curb appreciation. Australia’s dollar declined against the yen after its central bank cut forecasts for economic growth and inflation for the next two years.
“If you get a better-than-expected payrolls result, but it’s not good enough to bring the unemployment rate down, then that will probably keep expectations that there may be further policy easing down the track alive,” said John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd. That “tends to hurt the U.S. dollar,” he said.
U.S. Service Industries Cool in Support of Fed Forecast for Slow Recovery (Source: Bloomberg)
Service industries in the U.S. expanded at a slower pace and consumer confidence plunged, supporting Federal Reserve Chairman Ben S. Bernanke’s forecast that the economic recovery will be “frustratingly slow.” A gauge of non-manufacturing industries making up about 90 percent of the economy fell to 52.9 in October from 53 in September, the Tempe, Arizona-based Institute for Supply Management said today. A reading above 50 signals growth. The Bloomberg Consumer Comfort Index dropped to the lowest level since the depths of the recession in 2009. The figures, along with European Central Bank President Mario Draghi’s forecast for a “mild recession” in Europe, underscored Bernanke’s warning yesterday that the U.S. economy faces “significant downside risks.” At the same time, a decline in jobless claims and an increase in factory orders reported today showed the economy is maintaining its expansion.
Productivity in U.S. Climbs for First Time This Year as Firms Cut Costs (Source: Bloomberg)
The productivity of U.S. workers rose in the third quarter for the first time this year as companies tried to cut costs following a slowdown in growth. The measure of employee output per hour increased at a 3.1 percent annual rate, following declines in each of the previous two quarters, figures from the Labor Department showed today in Washington. Expenses per employee fell at a 2.4 percent rate after a 2.8 percent gain in the second quarter. Employers sought to cut costs by keeping payrolls down and squeezing more output from existing staff. Lower labor expenses, which account for about two-thirds of the cost of producing a good or service, may help hold down inflation, giving Federal Reserve leeway to take additional steps if needed to spur the world’s largest economy.
Jobless Claims Fell to a One-Month Low (Source: Bloomberg)
Fewer Americans filed applications for unemployment benefits last week, signaling limited progress in the labor market. Jobless claims fell by 9,000 to 397,000 in the week ended Oct. 29, the fewest in a month, Labor Department figures showed today in Washington. The median forecast of 49 economists in a Bloomberg News survey called for a drop to 400,000. The total number of people on unemployment benefit rolls decreased to a six-month low. Fewer dismissals, a precursor to bigger gains in payrolls, may help sustain the spending by households that accounts for about 70 percent of the economy. Federal Reserve officials yesterday projected that it will be 2013 before the jobless rate drops below 8 percent.
“The trend remains very constructive,” said Eric Green, chief market economist at TD Securities Inc. in New York, who forecast 395,000 claims. “It’s back below 400,000, which seems to be the pivot point in terms of a strengthening labor market as opposed to a weakening one.”
Treasuries Head for Weekly Gain on U.S. Jobs Outlook, Europe Debt Crisis (Source: Bloomberg)
Treasury 10-year notes headed for their steepest weekly gain since August as European leaders struggled to contain the region’s debt crisis and before a report that may show hiring in the U.S. slowed. Banks are becoming more reluctant to lend as investors seek the safest assets, yields indicate. The difference between the rates for three-month dollar loans and the overnight index swap widened to 35 basis points, a 28-month high. The spread measures the gap between the London interbank offered rate and the so- called OIS, or what traders expect the Federal Reserve’s target for overnight loans to average over the term of the contract. “We’re bullish on Treasuries,” said Hiromasa Nakamura, a senior investor at Mizuho Asset Management Co. in Tokyo, which oversees the equivalent of $42.2 billion and is a unit of Japan’s second-largest bank. “The flight to quality will continue. The U.S. and European economies are very weak.”
China to Commit on Currency Flexibility: Brainard (Source: Bloomberg)
China will make commitments on currency flexibility as part of a Group of 20 action plan that will call upon export-oriented economies to boost domestic consumption, said Lael Brainard, U.S. Treasury undersecretary for international affairs. Brainard said China is “playing a quite constructive role” in conversations that will commit trade “surplus countries” to stepping up domestic consumption. Currency flexibility “will be part of the action plan” announced at the end of the summit, Brainard said at a briefing in Cannes, France. G-20 leaders are meeting in Cannes to discuss Europe’s efforts to deal with its debt crisis and update their plans on rebalancing the global economy.
Chinese President Hu Jintao called for reform of the international monetary system to be advanced “in a steady manner,” according to the text of remarks he made to French President Nicolas Sarkozy at the G-20 meeting.
Deflation Driving Up Real Yield Hampers Effort to Weaken Yen: Japan Credit (Source: Bloomberg)
Japan’s slide back toward deflation means bond investors are getting some of the highest returns among developed nations even with the world’s lowest yields. Annual inflation slowed to zero in September, meaning investors in the nation’s benchmark 10-year securities receive the full 0.995 percent yield. That’s the highest so-called real yield for any Group of Seven nation except Italy’s 2.79 percent. The Bank of Japan cut its inflation forecast last week and said it would buy more government bonds to underpin an economic recovery being threatened by the yen’s surge to a postwar record. The government intervened on Oct. 31 to weaken the currency for the third time this year. With the Federal Reserve discussing more steps to spur its economy and Treasuries yielding less than U.S. inflation, Japan’s efforts may not curb the yen’s strength.
G-20 Urges EU to Quell Crisis as Greece Teeters (Source: Bloomberg)
World leaders expressed impatience and irritation with Europe’s inability to defeat its two-year financial crisis as they urged swift resolution for the sake of the global economy. With Greece’s debt-ridden government at risk of collapsing as soon as today, Group of 20 chiefs meeting in Cannes, France, yesterday pushed European authorities to flesh out and enact a week-old rescue plan that has already shown signs of unraveling. “We are grappling with a lack of confidence in markets that leaders will act,” Australian Prime Minister Julia Gillard said in the French seaside resort. “It is therefore very important for leaders to act.” Such calls -- echoed by the U.S., Britain, China and Russia -- highlight international disappointment that Europe missed the G-20’s deadline of this week to deliver a fix for its fiscal woes. German Chancellor Angela Merkel and French President Nicolas Sarkozy sought to regain the initiative by keeping aid for Greece on ice and demanding Italy accelerate austerity.
Draghi Chooses ECB Rates Over Printing Press (Source: Bloomberg)
European Central Bank President Mario Draghi signaled he’d rather use interest rates than the printing press to bolster growth as the debt crisis drags the euro-area economy toward recession. Chairing his first policy meeting after succeeding Jean- Claude Trichet on Nov. 1, Draghi unexpectedly cut the benchmark rate yesterday by a quarter point to 1.25 percent and left the door open to a further move. At the same time, he ruled out ramping up ECB bond buying to reduce governments’ borrowing costs, saying the program is “temporary” and “limited.” “It’s back to basics on the crisis fighting; rates rather than bond purchases,” said Julian Callow, chief European economist at Barclays Capital in London. “He must be the first ECB President to utter the word ‘recession’ before it has actually happened.”
Papandreou Struggles to Hold on To Power (Source: Bloomberg)
Prime Minister George Papandreou struggled to hold on to power after Greece’s largest opposition party rebuffed his overtures to form a national government, raising the prospect of elections that could delay aid needed to prevent default. Opposition leader Antonis Samaras rejected sharing power with Papandreou and called on the premier to quit. Papandreou, 59, scrapped a referendum on an accord with the European Union to avert a split in his party before a confidence vote scheduled for midnight tonight. “I never excluded any topic from the discussion, not even my own position,” Papandreou told lawmakers in Parliament. “I am not tied to a particular post. I repeat I am not interested in being re-elected but just in saving the country.”
European Chiefs Pressed for Debt-Crisis Action (Source: Bloomberg)
Europe’s debt crisis dominated and distracted a summit of world leaders as Greece’s government veered towards collapse and Italy came under renewed pressure to prove its credit-worthiness. As Group of 20 chiefs began talks in the French resort of Cannes, their focus was on Athens where Prime Minister George Papandreou was clinging to power after abandoning a referendum that triggered a suspension of European aid. Amid concern Italy may be the next domino to fall as its bond yields jumped to an euro-era record, Prime Minister Silvio Berlusconi was pushed by Germany and France to accelerate an austerity drive. Europe’s failure to fix two years of turmoil drew rebukes from foreign leaders concerned global economic growth is under threat. The European Central Bank offered relief with an unexpected interest-rate cut although its new president, Mario Draghi, said a euro-area recession is looming.
U.K. Faces 50% Chance of Recession as Europe Curbs Recovery, Niesr Says (Source: Bloomberg)
The U.K. economy will grow less than previously forecast this year and next and there is a 50 percent chance it will slip back into recession, the National Institute for Economic and Social Research said. The economy faces “significant downside risks,” Niesr said in a report published in London today as it cut its forecast for 2012 by more than half. It sees growth of 0.9 percent this year and 0.8 percent next year, down from 1.3 percent and 2 percent respectively in August. “Recent poor performance has been driven by weak domestic demand, rather than developments in the euro area, but going forward these too will reduce economic growth,” it said. “The baseline forecast assumes a successful resolution of the euro area crisis; there are therefore significant downside risks.”
RBA Cuts Australia Growth, CPI Forecasts (Source: Bloomberg)
The Reserve Bank of Australia cut its forecasts for economic growth and inflation for the next two years as financial turmoil abroad makes businesses more reluctant to hire and consumers cautious about spending. “The mining-related parts of the economy are growing strongly,” the central bank said today in its quarterly monetary policy statement. “In contrast, in a number of other industries, the high exchange rate, the fading injections from the earlier fiscal stimulus and changes in household spending and borrowing behavior are contributing to subdued conditions.” The RBA sees growth of 4 percent in the 12 months to June 30, 2012, down from its Aug. 5 estimate of 4.5 percent. Consumer prices will rise 2 percent over the period, from a previous prediction of 2.5 percent; underlying inflation is predicted at 2.5 percent from a previous 3 percent, the central bank said. The estimates are based on the overnight cash rate target remaining unchanged, it said.
Indonesia Economic Growth Likely Accelerated, Buoyed by Domestic Spending (Source: Bloomberg)
Indonesia’s economic growth probably quickened last quarter as domestic spending withstood the impact of a weakening global recovery that prompted the central bank to cut interest rates for the first time in more than two years. Gross domestic product climbed 6.6 percent from a year earlier, compared with a 6.49 percent pace in April through June, according to the median of 16 estimates in a Bloomberg News survey ahead of the data on Nov. 7. The pickup may be insufficient to dissuade policy makers from lowering rates for a second meeting, as Europe’s worsening debt crisis and faltering U.S. growth threaten exports. Bank Indonesia will cut borrowing costs by a quarter of a percentage point to 6.25 percent on Nov. 10, seven of 16 economists said in another survey, with the rest predicting no change.
Yingluck Banks on $26B Plan After Flood ‘Stumble’ (Source: Bloomberg)
Thai Prime Minister Yingluck Shinawatra plans to win back confidence in her 12-week-old government with a reconstruction package after Bangkok residents blamed her for an inadequate response to the country’s worst floods since 1942. “The floods may be a blessing in disguise for the government to wake up and do the things it needs to do to improve this country,” Energy Minister Pichai Naripthaphan, who has proposed spending as much as 800 billion baht ($26 billion) on recovery efforts, said in a phone interview. “It’s just like a kid who starts walking and a strong wind blows. You might stumble, but then you need to get up and start walking again.”
Mixed messages over the severity of the flooding, which fueled panic in Bangkok, threaten to erode Yingluck’s popularity and energize opponents whose protests led to the demise of her brother, Thaksin Shinawatra, five years ago. To regain the trust of voters who have seen floods swamp their homes and shutter factories employing more than 600,000 workers she will have to rebuild damaged roads, bridges, homes and factories.
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