Asian Stocks Retreat as U.S. Debt Committee Said to Be Close to Failure (Source: Bloomberg)
Asian stocks fell for a fifth day amid concern a U.S. congressional committee will fail to agree on ways to cut the nation’s indebtedness and as Deutsche Bank AG Chief Executive Officer Josef Ackermann said Europe needs a “firewall” to contain its debt crisis. Toyota Motor Corp., which receives 24 percent of revenue from the U.S., dropped 2.3 percent in Tokyo amid concern the failure of debt talks could undermine recovery in the world’s largest economy. Fanuc Corp, a maker of industrial robots, declined 1.8 percent as Japan’s exports fell faster than estimated. BHP Billiton Ltd., the world’s biggest mining company by market capitalization and Australia’s No. 1 oil producer, fell 0.5 percent as crude traded near a 7-day low. The MSCI Asia Pacific Index retreated 0.5 percent to 113.64 at 9:51 a.m. in Tokyo, set for its longest streak of losses since August. Almost two stocks fell for each that rose on the gauge.
Japanese Stocks Decline on U.S. Deficit Talks, Europe Crisis (Source: Bloomberg)
Japanese stocks fell for a second day, sending a benchmark gauge for the lowest close since April 2009, on speculation a U.S. congressional committee will struggle to reach an agreement on deficit-cutting measures and on concern Europe’s debt crisis will linger. Honda Motor Co., Japan’s second-largest carmaker by market value, fell 2.9 percent. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, slid 2.4 percent after a report showed Japan’s exports declined more than expected in October. Osaka Securities Exchange Co. rose 1.9 percent after a newspaper reported the bourse will announce a merger agreement with Tokyo Stock Exchange Group Inc. tomorrow. The Nikkei 225 (NKY) Stock Average fell 0.3 percent to 8,353 as of 10:05 a.m. in Tokyo, set for the lowest close since April 1, 2009. The Topix Index dropped 0.4 percent to 716.95, heading for the lowest close since March 12, 2009, with 19 of 33 industry groups on the gauge falling.
Emerging-Market Stocks Post Biggest Weekly Loss Since September on Europe (Source: Bloomberg)
Emerging-market stocks fell, driving the benchmark index to its worst week in two months, as Europe’s debt crisis deepened and Chinese bank shares slid after home prices declined in some of its biggest cities. The MSCI Emerging Markets Index dropped 1.9 percent to 934.08 today. The gauge retreated 3.8 percent this week, the most since the week ended Sept. 23. The Bovespa index retreated 0.5 percent after a report showed Brazil created fewer jobs than forecast in October. South Korea’s Kospi index declined 2 percent and benchmark indexes fell by at least 1 percent in Russia, Poland, Hungary, South Africa and Turkey.
Banks led a 3 percent decline in the Hang Seng China Enterprises Index after new home prices fell last month in some cities including Shanghai and a person with knowledge of the matter said China’s banking regulator warned lenders that some projects backed by local governments may run out of funds. The yield on Spanish 10-year bonds rose as much as 41 basis points to as high as 6.897 percent. German Chancellor Angela Merkel yesterday rejected French calls to deploy the ECB as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil.
European Stocks Drop for Second Week in Three as Crisis Spreads (Source: Bloomberg)
European stocks declined for the second week in three as sovereign borrowing costs surged to record levels in the euro area and policy makers disagreed over their response to the spreading debt crisis. Cable & Wireless Worldwide Plc sank 35 percent after suspending future dividends. Dexia SA (DEXB) and KBC Groep NV (KBC), Belgium’s biggest lenders, slumped more than 20 percent. PSA Peugeot Citroen and Renault SA paced losses on a gauge of the region’s automakers. Voestalpine AG fell the most in more than three months after cutting its earnings outlook. The benchmark Stoxx Europe 600 Index dropped 3.7 percent this week to 232.17, its lowest close in six weeks, as Italian, Spanish and French bond yields soared, renewing concern that contagion from the debt crisis is infecting more euro members. The European Central Bank was said to have bought government bonds throughout the week offering bouts of respite to equities.
U.S. Stock-Index Futures Decline as Prospects Fade for Agreement on Budget (Source: Bloomberg)
U.S. stock-index futures retreated as signs lawmakers will fail to reach an agreement to cut the budget deficit added to concern spurred by Europe’s debt crisis. Futures on the Standard & Poor’s 500 Index expiring in December dropped 0.7 percent to 1,205.50 at 8:38 a.m. Tokyo time. The benchmark gauge for American equity lost 3.8 percent last week, the biggest retreat in two months, as Spanish, French and Italian bond yields rose and Fitch Ratings said Europe’s debt crisis poses a threat to American banks. The deficit-cutting congressional supercommittee will probably say that no agreement has been reached on at least $1.2 trillion in federal budget savings, a Democratic aide said.
U.S. Consumer Spending Likely Rose in October (Source: Bloomberg)
Consumer spending probably climbed in October as incomes grew by the most since May, indicating the biggest part of the U.S. economy will bolster the recovery, economists said a report will show this week. Purchases rose 0.3 percent last month, according to the median estimate of 69 economists in a Bloomberg News survey before Commerce Department figures due on Nov. 23. Incomes also climbed 0.3 percent, the report may show. An October gain in household spending, which accounts for about 70 percent of the economy, bodes well for the holiday shopping season that kicks off this week. Improving demand and the year-end expiration of a tax break may also spur companies to buy more equipment in the final months of 2011, helping the U.S. weather the effects of Europe’s debt crisis.
Fed’s Williams Says Fiscal Actions ‘Badly Needed’ to Spur Economic Growth (Source: Bloomberg)
Federal Reserve Bank of San Francisco President John Williams called for fiscal aid for the economy, saying government actions beyond Fed easing are imperative for bolstering the recovery and reducing joblessness. “Strong countercurrents” including a decline in wealth, tight credit and concern about financial markets are impeding growth, Williams said today at a forum in Santiago. “Fiscal policy actions that reduce uncertainty and stimulate recovery are badly needed” and should “work in tandem with monetary policy,” he said. Fed officials are increasingly calling on other parts of government to help lower unemployment that Williams forecasts will remain above acceptable levels until 2016. He cited as an example a recent U.S. government program to let more homeowners refinance mortgages, which could lower foreclosures and give a “modest boost” to consumption.
Treasuries Rise as Possible Budget Committee Failure Spurs Refuge Demand (Source: Bloomberg)
Treasuries rose, becoming the best- performing major bond market over three months, including currency changes, as stocks fell on speculation U.S. lawmakers will fail to agree on how to cut the budget deficit. U.S. securities extended a gain from last week that was driven by concern Europe’s leaders aren’t able to contain the region’s debt crisis, boosting demand for haven assets. The Treasury Department is scheduled to sell $35 billion of two-year notes today, the first of three auctions of coupon-bearing debt this week totaling $99 billion. “The policy in the U.S. is as bad as the policy in Europe,” said Roger Bridges, who oversees the equivalent of $15 billion of debt as the Sydney-based head of fixed income at Tyndall Investment Management Ltd., a unit of Japan’s Nikko Asset Management Co. “Investors will be attracted in a flight to quality,” to U.S. government debt.
Southeast Asian Slowdown Looms as Thai Floods Compound Europe Demand Slump (Source: Bloomberg)
Growth in Southeast Asian economies including Malaysia and Thailand may have peaked last quarter as the European debt crisis and Thai floods hurt the outlook for exports, adding pressure on policy makers to cut interest rates. Malaysia’s gross domestic product increased 4.8 percent in the three months through September from a year earlier, after a 4 percent expansion the previous quarter, according to the median of 25 estimates in a Bloomberg News survey. Thailand’s growth probably quickened to 4.5 percent from 2.6 percent, according to a survey of 11 economists. “Exports will likely soften in the coming months as Europe slides into a recession,” said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. “Both Bank Negara Malaysia and Bank of Thailand will keep their options open and ease if growth readings turn ugly in coming months.”
Japan Exports Fall on Yen Gains, Europe Crisis (Source: Bloomberg)
Japan’s exports fell for the first time in three months, indicating that the yen’s appreciation and financial turmoil in Europe are slowing the nation’s recovery from the March disaster. Shipments dropped 3.7 percent in October from a year earlier, the Ministry of Finance said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg News was for a 0.3 percent decline. The report suggests the rebound of the world’s third- largest economy from the record earthquake in March is losing momentum. Weakening overseas demand has led companies including Toshiba Corp. and Nippon Yusen K.K. to call on the government to follow up on last month’s yen intervention with steps to prevent the currency from appreciating further.
Singapore Economic Growth May Slow in 2012 (Source: Bloomberg)
Singapore said its economic growth may slow next year, extending a moderation in expansion that’s already prompted the central bank to ease monetary policy. The economy will grow 1 percent to 3 percent in 2012 after expanding 5 percent this year, the trade ministry said in a statement today. Non-oil domestic exports will probably rise 2 percent to 3 percent in 2011, lower than a previous forecast for shipments to grow 6 percent to 7 percent, the trade promotion agency said in a separate statement today. Europe’s debt crisis and disruption caused by flooding in Thailand threaten to hurt Southeast Asian growth, pressuring officials to shield their economies. Indonesia cut interest rates to a record low this month, and Singapore’s central bank, which uses the exchange rate to manage inflation, said in October it will slow gains in the local dollar.
‘Hard Times Ahead’ After Election Win: Rajoy (Source: Bloomberg)
Mariano Rajoy won the biggest parliamentary majority in a Spanish election in almost 30 years, and told Spaniards to brace for difficult times as the nation fights to avoid being overwhelmed by the debt crisis. Rajoy’s People’s Party swept the ruling Socialists from power after eight years, winning 186 of the 350 seats in Parliament, compared with 110 for the ruling party’s candidate Alfredo Perez Rubalcaba. That’s the worst result for the Socialists in more than three decades. Opinion polls in the month before the vote showed the PP winning 184 to 198 seats. “Hard times lie ahead,” Rajoy told supporters outside the PP’s headquarters in Madrid, giving no new details of his plans. “We are going to govern in the most delicate situation Spain has faced in 30 years.”
Monti Wins Final Confidence Vote as Government Moves to Tackle Debt Crisis (Source: Bloomberg)
Italian Prime Minister Mario Monti won a final parliamentary confidence vote, granting full power to his new government after pledging to spur growth and reduce debt in the euro-region’s third-largest economy. The 630-seat Chamber of Deputies voted 556 to 61 in favor of Monti’s new administration of technocrats, following the Senate’s approval yesterday. Monti said today he wanted his government to last until elections scheduled in 2013, though that depended on retaining the support of parties. The Northern League’s lawmakers 59 voted against him today. “I know that the economic, social and political crisis is due to the serious malfunction of the financial situation and the markets, but I believe that the first thing to do, and I say this particularly to the Italians, is to stop being so comfortable with saying that others are responsible,” the former European Union commissioner told lawmakers in Rome.
Yen, Dollar Advance on Haven Demand as Prospects Fade for U.S. Debt Accord (Source: Bloomberg)
The yen and the dollar rose against most of their major counterparts on demand for safer assets after a Democratic aide said a U.S. congressional committee is likely to announce today it failed to agree on deficit cuts. The Australian dollar declined for a sixth day against the yen as futures showed U.S. stocks will fall, damping demand for higher-yielding currencies. The euro held last week’s biggest loss versus the yen since September even as Spain’s opposition won a parliamentary majority in a general election. “If the agreement isn’t reached, then that does lead to a spike in risk aversion,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia, the nation’s biggest lender. “That would support the U.S. dollar and also perhaps gives a little bit of support for the yen.”
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