World Economy Faces ‘Significant’ Risks: APEC (Source: Bloomberg)
The world economy is facing “significant downside risks” stemming in part from the European debt crisis, leaders at the Asia-Pacific Economic Cooperation forum said. Growth and job creation have weakened in many countries and further trade liberalization is “essential” to boost economic expansion, the leaders said in a statement in Honolulu today. Europe’s sovereign-debt crisis was a frequent topic at the summit aimed at improving economic ties in the Asia-Pacific region. Officials said they are bracing for a worsening of the situation in Europe that may push the global economy into a recession and increase volatility in financial markets. Emerging-market nations from Brazil to China to Indonesia have started to cut interest rates or increase fiscal measures to shield growth.
“We meet at a time of uncertainty for the global economy,” the leaders said in the statement. “We firmly resolve to support the strong, sustained, and balanced growth of the regional and global economy.”
Asian Stocks Rise on New Europe Leaders, China Economy (Source: Bloomberg)
Asian stocks rose, paring two weeks of losses, amid optimism new governments in Greece and Italy will help contain Europe’s debt crisis and amid signs China may engineer an economic “soft landing,” boosting confidence. Honda Motor Co., Japan’s second largest carmaker by market value, increased 1.9 percent after a report showed the nation’s economy expanded for the first time in four quarters. Komatsu Ltd. (6301), a Japanese machinery maker that gets 23 percent of its sales in China, climbed 3.8 percent after as two of China’s best-known economists said the country’s economy was responding to policies to reduce lending, lower inflation and curb property prices will have a “soft landing.” Woodside Petroleum Ltd. (WPL), Australia’s oil and gas producer, advanced 1.7 percent after oil prices rose.
“The situation in Greece has dramatically improved with the appointment of a unity government out there, and Italy looks like it’s getting close to a resolution,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “Two of the largest concerns of the market are being partially taken off the table.”
Japanese Stocks Advance as GDP Expands 6%, Italy Names New Prime Minister (Source: Bloomberg)
Japan stocks rose, with the Nikkei 225 (NKY) Stock Average paring two weeks of losses, after the nation’s economy expanded in the third quarter and amid optimism new governments in Europe will help prevent a worsening of the region’s debt crisis. Sumitomo Mitsui Financial Group, Inc., Japan’s second- largest lender by market value, rose 3 percent. Nippon Electric Glass Co. led gains among makers of the material, rising 5.3 percent, after Barron’s said shares of industry-leader Corning Inc. are poised to surge. Olympus Corp. (7733) was set to rise by the daily limit after a report the scandal-hit company may avoid delisting. The Nikkei 225 advanced 1.2 percent to 8,617.27 at the 11 a.m. break in Tokyo, set for its biggest gain since Nov. 4. The broader Topix index climbed 0.9 percent to 735.69. Stocks gained after Japan’s economy grew for the first time in four quarters as exporters rebounded from the March earthquake.
U.S. Stocks Gain on Consumer Confidence (Source: Bloomberg)
U.S. stocks rose this week, restoring the year-to-date gain for the Standard & Poor’s 500 Index, as improving economic data and leadership changes in Greece and Italy bolstered investor optimism. Walt Disney Co. (DIS) and Cisco Systems Inc. (CSCO) advanced more than 5.4 percent, helping lead the Dow Jones Industrial Average (INDU) higher, after reporting better-than-estimated profits. Health- care stocks advanced the most in the S&P 500 as Merck & Co. gained 5.7 percent after increasing its dividend. E*Trade Financial Corp. slipped 14 percent after the board rejected putting the company up for sale. The S&P 500 rose 0.9 percent to 1,263.85, overcoming a 3.7 percent decline on Nov. 9 that was the largest one-day loss since Aug. 18. The Dow advanced 170.44 points, or 1.4 percent, to 12,153.68 this week.
“With abated fears on Europe and abated fears on the U.S. economy, there is a general sense that the world is not going to come to an end,” Uri Landesman, who helps oversee $1 billion as managing general partner of New York-based hedge fund Platinum Partners LLP, said in a telephone interview. “Neither the bulls nor the bears are digging in their heels, so there is overreaction to the news.”
European Stocks Gain as Carlsberg Rises on Profit Outlook, Holcim Drops (Source: Bloomberg)
European stocks climbed this past week as Italy’s Senate approved austerity measures, easing concern the country will need a bailout, and U.S. consumer confidence rose in November more than economists had predicted. Carlsberg A/S surged 16 percent after reiterating its prediction that adjusted net income will rise 5 percent to 10 percent this year. Stada Arzneimittel AG jumped 16 percent after saying the Serbian government guaranteed to settle its agencies’ bills with drugmakers. PostNL NV slid 13 percent as the biggest Dutch postal operator said profit decreased. The benchmark Stoxx Europe 600 Index gained 0.5 percent to 240.98 this past week on optimism a new government led by former European Union Competition Commissioner Mario Monti will take charge in Italy. The Stoxx 600 will rally 14 percent to 275 through the end of next year as earnings growth supports valuations and “extreme pessimism” abates, according to Barclays Plc.
Obama Promotes Trade Deal to Boost U.S. in Asia (Source: Bloomberg)
Nine Asia-Pacific nations including the U.S. outlined a framework for a free trade accord and agreed to accelerate negotiations with the aim of completing an agreement within the next year. Leaders involved in the Trans-Pacific Partnership trade talks are setting July as a target for reaching an agreement, Malaysian Prime Minister Najib Razak said in Honolulu on Nov. 12. President Barack Obama said the aim is to reach a formal pact in the next 12 months and a U.S. official said there is “no firm deadline.” Negotiators will meet in early December and schedule more discussions then, the leaders said in a statement.
An accord among the Pacific Rim nations would be the first trade deal that Obama signed rather than inherited and the biggest for the U.S. since the North American Free Trade Agreement with Canada and Mexico that took effect in 1994. It would also help the U.S. regain economic influence it has ceded to China in a region that contains sea lanes vital to world commerce, as well as coal, oil and other commodities.
Obama Pressures China on Yuan, Property Rights (Source: Bloomberg)
President Barack Obama used his role as host of the Asia-Pacific Economic Cooperation summit to pressure China on currency and intellectual property rights while telling voters that nations in the region are counting on U.S. leadership. Obama told Chinese President Hu Jintao yesterday that the American public and businesses are growing “increasingly impatient and frustrated” with the pace of progress in relations between the two nations, said Michael Froman, White House deputy national security adviser. Hu told Obama that a large appreciation of the yuan won’t solve U.S. problems, a statement on the Chinese Foreign Ministry’s website said. Obama’s strong language came only hours after he announced the U.S. and eight other nations will join in forging an Asia- Pacific trade accord within the next year, a move he said demonstrates that “American leadership is still welcome.”
Obama Meets Gillard as Embattled First Leaders Shadowed by China Resources (Source: Bloomberg)
President Barack Obama arrives this week in an Australia whose economy is reliant on billions of dollars in mineral and energy contracts from emerging superpower China and whose security depends on an alliance with the U.S. -- China’s biggest rival. Personal ties between Obama and Prime Minister Julia Gillard, born within two months of each other, underscore the nations’ political bonds as China expands its security interests toward southeast Asia. Obama, the first black U.S. president, and Gillard, Australia’s first woman prime minister, share a struggle to overcome resistance to their agendas -- from universal health care in the U.S. to a mining tax in Australia. “This relationship between Obama and Gillard has some warm, fuzzy atmospherics -- their interests are congruent,” said Michael McKinley, a lecturer in international relations at the Australian National University in Canberra.
“China is the elephant in the room for Obama and Gillard,” said McKinley, whose analysis has been used in parliamentary testimony.
Retail Sales, Manufacturing in U.S. Probably Climbed to Give Economy Boost (Source: Bloomberg)
Retail sales probably rose in October and U.S. manufacturing accelerated, helping give the world’s biggest economy a boost entering the final months of 2011, economists said before reports this week. The 0.3 percent rise in purchases would follow a 1.1 percent gain that was the most in seven months, according to the median forecast in a Bloomberg News survey ahead of Commerce Department figures on Nov. 15. Industrial production climbed 0.4 percent, twice as much as in September, according to the survey median. The cost of living was little changed and home construction cooled, other data may show. Unemployment at 9 percent and limited wage growth help explain why retailers like Macy’s Inc. (M) and Kohl’s Corp. (KSS) plan to use more discounts to lure consumers this holiday shopping season. At the same time, equipment purchases and record exports are propelling manufacturing and sustaining a recovery that’s yet to extend to the housing market.
Treasuries Decline as Europe’s Leadership Changes Ease Debt-Crisis Concern (Source: Bloomberg)
Treasuries fell, extending a decline from last week, on speculation new governments in Greece and Italy will be able to tackle Europe’s debt crisis. Demand for the relative safety of U.S. bonds waned as Asian stocks rose after Prime Minister Lucas Papademos took charge as head of an interim Greek government. Mario Monti, a former European Union commissioner, agreed to lead a new Italian government. The extra yield 10-year U.S. notes offer over same- maturity German bunds widened to 25 basis points from 17 basis points last week. The average for 2010 is 14 basis points. “I’m bearish for Treasuries,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “We have some political stability from Greece and Italy. Now those two governments can get on with the necessary reforms to ensure that the euro-zone crisis can be stabilized.”
Hu Pushes Imports; IMF’s Zhu Sees ’Soft Landing’ (Source: Bloomberg)
China’s President Hu Jintao pledged to boost imports as the world’s second-biggest economy heads for what the top Chinese International Monetary Fund official said was a successful downshift from inflationary growth. IMF Deputy Managing Director Zhu Min and China’s National Economic Research Institute Director Fan Gang yesterday told the Asia Pacific Economic Cooperation forum in Honolulu that the economy was heading for a “soft landing” as growth slows. They cited lower inflation and less bad debt at banks, and what Fan said were timely measures to avoid a property market bubble. “It has become ever clearer that the Chinese economy is moving to a soft landing,” Zhu said. “The Chinese economy today is really moving to an inflection point, moving to more services and capital-intensive economy.”
Hu Says ‘Large’ Yuan Appreciation Won’t Fix U.S. Trade Deficit, Employment (Source: Bloomberg)
The U.S. trade deficit and unemployment are not caused by the yuan exchange rate and a “large” appreciation in the currency won’t solve U.S. problems, Chinese President Hu Jintao said in comments posted on the foreign ministry’s website today. China’s foreign exchange policy is a “responsible” one and the country will continue reforming its exchange rate mechanism, according to the statement, which cited Hu at a meeting with U.S. President Barack Obama.
Hu Pushes Imports; IMF’s Zhu Sees ’Soft Landing’ (Source: Bloomberg)
China’s President Hu Jintao pledged to boost imports as the world’s second-biggest economy heads for what the top Chinese International Monetary Fund official said was a successful downshift from inflationary growth. IMF Deputy Managing Director Zhu Min and China’s National Economic Research Institute Director Fan Gang yesterday told the Asia Pacific Economic Cooperation forum in Honolulu that the economy was heading for a “soft landing” as growth slows. They cited lower inflation and less bad debt at banks, and what Fan said were timely measures to avoid a property market bubble. “It has become ever clearer that the Chinese economy is moving to a soft landing,” Zhu said. “The Chinese economy today is really moving to an inflection point, moving to more services and capital-intensive economy.”
China ’Ready’ to Let Foreign Firms Sell Shares (Source: Bloomberg)
China is “basically ready” to allow foreign companies to sell equity in the world’s second- biggest stock market, according to the Shanghai Stock Exchange official in charge of the so-called international stocks board. The exchange has finished working on listing and trading rules, while the technological, regulatory, and system requirements are “basically ready,” Xu Ming, executive vice president of the Shanghai Stock Exchange, said in a Nov. 11 interview at the bourse. While there is no timetable for introducing the board, it should start “as soon as possible when the time is ripe,” he said. “The internationalization of the securities market will benefit the whole nation and overseas companies are highly motivated,” Xu said.
Shanghai, home to one of China’s two stock exchanges, is luring overseas companies to list as part of the local government’s drive to make the city a global financial center by 2020. HSBC Holdings Plc, Coca-Cola Co. (KO) and NYSE Euronext are among the multinational companies that have expressed interest in selling shares to investors in China. Shanghai, the nation’s financial hub, has been contacted by foreign companies in the finance, telecommunications, consumer goods and manufacturing industries, Fang Xinghai, head of the city’s financial services office, said in a May 2010 interview.
Japan Emerges From Post-Quake Slump on Exports (Source: Bloomberg)
Japan’s economy expanded for the first time in four quarters, recovering from the record March earthquake as exports and consumer spending rose. Gross domestic product grew at an annualized 6 percent in the three months ending Sept. 30, the fastest pace in 1 1/2- years, the Cabinet Office said today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was for a 5.9 percent increase. Japan’s return to growth after three quarters of contraction was driven by companies including Toyota Motor Corp. making up for lost output from the March disaster. A sustained rebound hinges on rebuilding demand expected to kick in this quarter as the yen’s climb to post-World War II highs and Europe’s fiscal woes threaten the outlook for exports. “The level of real GDP has now returned” to pre-quake levels, said Takuji Aida, senior economist at UBS AG in Tokyo. Reconstruction spending will help “offset pressure from the slowdown in the European economy,” he said.
Swan Says Europe’s Debt Woes Will Make Australian Budget Surplus Tougher (Source: Bloomberg)
Australian Prime Minister Julia Gillard’s pledge to return to a budget surplus in 2013 is being made “a lot tougher” by Europe’s sovereign debt crisis, Treasurer Wayne Swan said. “The hit to government revenue caused by the global turbulence means we’ll have to continue making tough budget decisions,” Swan said in an e-mailed statement yesterday. The crisis is flowing “through to government revenue, and will add to the A$130 billion ($134 billion) in revenue writedowns we’ve seen since the global financial crisis first struck.” Australia is unlikely to meet its pledge without policy changes, Deloitte Access Economics said on Nov. 7, forecasting the shortfall will be A$1.9 billion in 2012-13, or A$5.4 billion worse than Treasury’s estimate of a A$3.5 billion surplus. Failure to achieve the target may stoke criticism of the Labor government’s fiscal management by the opposition Liberal- National coalition, which leads in opinion polls.
Euro Gains as New Governments in Italy, Greece Boost Investor Confidence (Source: Bloomberg)
The euro rose for a third day on prospects market confidence in Italy’s ability to contain its debt will be revived after Mario Monti, a former European Union competition commissioner, takes over as prime minister. The 17-nation currency advanced against the yen after Greece’s finance minister said his priority is to ensure the country receives a sixth loan under an EU-led bailout after Prime Minister Lucas Papademos took charge as head of an interim government. Australia’s dollar gained as rising Asian stocks boosted demand for higher-yielding assets. The New Zealand dollar strengthened against most major peers after a report showed retail sales increased by the most since 2006. “We’ve seen a more positive start to the week with the new technocrat governments in Italy and Greece, but there’s still a lot of uncertainty,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “We’ll try and test to the upside for the euro and the Aussie.”
More Than 1,000 MF Global Staff Fired (Source: CME)
The trustee liquidating the broker-dealer business of MF Global Holdings Ltd. fired the unit's 1,066 employees effective immediately, according to a statement. Between 150 and 200 staff will be rehired to help with the wind-down process, including the handling of claims on the collapsed firm's estate. James Giddens, the trustee, aims to vacate MF Global's midtown Manhattan offices as soon as possible and rent out smaller, less expensive office space to handle the liquidation, according to the statement. MF Global's Chicago offices will continue to be leased for a limited time period. Some employees of MF Global in New York and Chicago already had been let go last Friday. Salaries for those terminated in the trustee's action will be paid through Nov. 15. The 1,066 let go represent a little more than one-third of the 2,847 staff listed by MF Global as of March 31.
The broker-dealer unit is not being restructured and the termination of employees is a "necessary part" of the liquidation, according to the trustee's statement. "We are saddened by the trustee's actions today to terminate to many of our colleagues," a spokeswoman for MF Global said in a statement. The mood in MF Global's New York office was described as grim, as human resources staff went from floor to floor to speak to employees. Some complained of suddenness of the announcement, with numerous people learning of the terminations via newswires or television. Some employees were said to have been let go with no severance and health care coverage is being continued through the end of November, according to a person familiar with the matter. Concerns were also raised as to whether the firings would hinder efforts to hunt down an estimated $600 million in MF Global's customer funds that was discovered missing on Oct. 31, the day the firm filed for bankruptcy, according to the person.
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