Asian Stocks Fall After U.S. Deficit Talks Fail (Source: Bloomberg)
Asian stocks erased earlier loses after Standard & Poor’s and Moody’s Investors Service said they won’t lower credit ratings on the U.S. following a congressional committee’s failure to agree on deficit cuts. The MSCI Asia Pacific Index rose 0.1 percent to 112.51 as of 10:21 a.m. in Tokyo after falling as much as 0.7 percent.
S&P 500 Posts Worst Losing Streak in 2 Months (Source: Bloomberg)
U.S. stocks slumped, giving the Standard & Poor’s 500 Index its longest decline since September, amid concern the U.S. government will be forced to submit to $1.2 trillion in automatic spending cuts. All 10 industries in the benchmark measure declined as 468 out of 500 companies retreated. Bank of America Corp. tumbled 5 percent to pace losses in financial shares. Hewlett-Packard Co. (HPQ) and Caterpillar Inc. (CAT) dropped at least 2.9 percent. The Dow Jones Transportation Average slid 2.3 percent. Gilead Sciences Inc. (GILD) plunged 9.1 percent after agreeing to buy Pharmasset Inc. (VRUS) for about $11 billion in cash. Pharmasset soared 85 percent. The S&P 500 fell 1.9 percent to 1,192.98 at 4 p.m. New York time. The benchmark gauge for American equities has lost 5.2 percent in four days. The Dow Jones Industrial Average declined 248.85 points, or 2.1 percent, to 11,547.31 today. The supercommittee created to cut the deficit said after the close of U.S. exchanges that it failed to reach a deal.
European Stocks Tumble Amid U.S. Budget Concern; Banks Retreat (Source: Bloomberg)
European stocks dropped the most in three weeks amid signs U.S. lawmakers may fail to reach an agreement on budget cuts, raising the prospect the world’s largest economy could face another credit downgrade. KBC Groep NV (KBC) led banks lower as dollar funding costs and bond yields climbed. Mining and energy companies dropped with metal and crude oil prices on signs of slowing growth in Asia. Carrefour SA (CA) slipped 3.2 percent after the retailer’s largest shareholders were said to consider replacing its chairman and chief executive officer. The benchmark Stoxx Europe 600 Index sank 3.2 percent to 224.76 at the close, the gauge’s biggest retreat since Nov. 1. The Stoxx 600’s slump extended last week’s 3.7 percent selloff. Stocks tumbled around the world last week as the yields on Italian and Spanish bonds climbed, and the cost of insuring against losses on the nations’ debt rose.
Sales of Existing U.S. Homes Unexpectedly Increase: Economy (Source: Bloomberg)
Sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers. Purchases increased 1.4 percent to a 4.97 million annual rate, the National Association of Realtors said today in Washington. The median forecast of 75 economists surveyed by Bloomberg News was for a 4.8 million rate. The median house price dropped 4.7 percent from a year earlier, and the number of properties for sale was the lowest for any October since 2005. Borrowing costs near a record low are helping homebuyers take advantage of housing that’s growing more affordable as prices drop. At the same time, the end of a temporary halt on foreclosures may push more properties onto the market, triggering further slides in value that may prevent the industry from recovering for years.
Supercommittee Fails to Identify Even Bogus Cuts: Caroline Baum (Source: Bloomberg)
It took a fictional jury of “12 Angry Men” 96 minutes to agree on a verdict of not guilty. It took “12 good people,” as supercommittee co-chairman Jeb Hensarling referred to them, three months and countless hours to produce ... nothing. Just to put things in perspective, the Joint Select Committee on Deficit Reduction was charged with finding a minimum of $1.2 trillion in savings over 10 years. These wouldn’t have been cuts in the normal sense. A salary cut means my paycheck is smaller each month. A deficit cut, in federal budget speak, isn’t a reduction in the deficit. The only thing being cut is the rate at which the deficit is growing. Had the supercommittee fulfilled its mission, the U.S. would face cumulative deficits of $3.5 trillion over the next 10 years, compared with $4.7 trillion without cuts, according to projections by the Congressional Budget Office.
U.S. Ratings Affirmed by S&P, Moody’s After Supercommittee Fails on Budget
U.S. Congress deadlocks over energy and jobs: John Kemp
-- John Kemp is a Reuters market analyst. The views expressed are his own --
NEW YORK, Nov 18 (Reuters) - The failure of the planned national cap-and-trade scheme to curb greenhouse emissions in 2009-2010 has left the United States without a coherent policy for addressing either the threat posed by climate change or problems of energy affordability and security.
Instead there is an incoherent muddle as the White House and Congress fail to integrate hyper-partisan demands from energy producers and groups concerned about carbon emissions, pollution and the environment.
U.S. Ratings Affirmed by S&P, Moody’s (Source: Bloomberg)
Standard & Poor’s and Moody’s Investors Service said they won’t lower ratings on the U.S. after the congressional committee charged with finding $1.5 trillion of deficit cuts failed to reach an agreement. S&P, which stripped the U.S. of its top AAA grade on Aug. 5, said yesterday that the supercommittee’s inability to reach agreement didn’t merit another downgrade because the inaction will trigger $1.2 trillion in automatic spending cuts. The deliberations were “not decisive,” Moody’s spokesman Eduardo Barker said in an e-mail after the panel issued a statement. Fitch Ratings reiterated that the talks failure would likely lead to a revision of the U.S. rating outlook to negative.
The August downgrade sparked the biggest quarterly rally in U.S. Treasuries since the end of 2008, while global equities lost $9.7 trillion in market value during that period. The lack of a deal raises the risk of slower growth and deprives President Barack Obama of a vehicle to extend a payroll tax cut and insurance benefits for unemployed Americans, which expire at the end of the year.
U.S. Debt Panel Fails to Agree on Cuts (Source: Bloomberg)
A special debt-reduction committee in the U.S. Congress failed to reach agreement, extending partisan gridlock into the 2012 election year and setting the stage for $1.2 trillion in automatic spending cuts. President Barack Obama blamed Republicans, saying in remarks at the White House they “refused to listen to the voices of reason and compromise.” The president said he would veto any move to avoid the automatic spending cuts that are supposed to start in 2013 as a result of panel’s failure. Committee co-chairmen Representative Jeb Hensarling of Texas, a Republican, and Senator Patty Murray of Washington, a Democrat, said in an e-mailed statement that “after months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline.”
Treasuries Drop, Snapping Gain, as Auction Poised to Draw Record Low Yield (Source: Bloomberg)
Treasuries snapped a gain from yesterday as the U.S. prepared to sell $35 billion of five-year notes today, with the auction poised to draw a record low yield. Benchmark 10-year rates were little changed at 1.97 percent of 9:48 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security maturing in November 2021 changed hands at 100 9/32. The five-year notes being auctioned today yielded 0.93 percent in pre-auction trading, versus 1.055 percent at the prior sale on Oct. 26. The record low auction yield was 1.015 percent on Sept. 28. Treasuries rallied yesterday as investors sought safety amid U.S. budget gridlock and a debt crisis in Europe.
Treasuries Rising Most Since 2008 as Budget Paralysis Seen (Source: Bloomberg)
With Congress at an impasse on how to reduce the U.S. budget deficit, the biggest rally in government bonds since 2008 shows no signs of letting up even as yields are about the lowest on record. Treasuries have returned 0.9 percent this month, 3.4 percent since the U.S. was downgraded to AA+ by Standard and Poor’s Aug. 5, and 8.9 percent this year, according to Bank of America Merrill Lynch index data. The cost of derivatives to protect against a U.S. default is about half that for AAA rated Germany or the U.K. as Europe’s debt crisis has spread from Greece, according to data provided by CMA.
After the downgrade, and with lawmakers said to have failed to reach agreement on cutting $1.2 trillion from the deficit ahead of a deadline, U.S. bonds have still been the best investment this year. Yields may stay low as the Federal Reserve holds down rates and political wrangling in the U.S. threatens the global recovery. Spending cuts triggered by lack of a budget plan would lop as much as 2 percentage points off growth in the first quarter of 2013, according to JPMorgan Chase & Co.
No Deficit Deal as Focus Turns to 2012 (Source: Bloomberg)
Lawmakers on a special debt- reduction committee are poised to announce they failed to reach agreement and dissolve congressional gridlock, kicking tax and spending issues into the 2012 election year. Treasuries rallied while riskier assets declined as the congressional supercommittee’s deadlock spurred demand for safer assets. Senator Jon Kyl of Arizona, a Republican on the 12-member panel, said on CNBC the Republican and Democratic committee co- chairmen, Representative Jeb Hensarling of Texas and Senator Patty Murray of Washington, would make a formal announcement “toward the end of the day.” They are expected to say the panel can’t agree on deficit reduction of at least $1.2 trillion, triggering across-the-board cuts of the same amount starting in 2013.
“The next election certainly will have a big bearing on the question of what’s the scope and size of the federal government, and do we want to try to tax our way out of this or grow our way out,” Kyl said. There will be efforts to “ameliorate” effects of the cuts over the next year, he said.
Yuan Halts Two-Day Decline After Wen Pledges Further Exchange-Rate Reform (Source: Bloomberg)
Yuan forwards fell by the most in more than a month on speculation capital outflows will take pressure off policy makers to speed up gains in the currency. The yuan also declined as concern U.S. lawmakers won’t be able to reach agreement on cutting the budget deficit reduced demand for emerging-market assets. Yuan holdings at Chinese banks fell for the first time since December 2007, dropping a net 24.9 billion yuan ($3.9 billion) in October, according to a statement on the People’s Bank of China website today. Economists watch the numbers for signs of inflows or outflows of so-called hot money. “Given the external environment, China will slow down the yuan’s appreciation,” said Rees Kam, a Hong Kong-based senior strategist at SJS Markets Ltd. “The likely collapse of an agreement among the U.S. congressional budget deficit panel would hurt risk sentiment.”
Japanese Exports Decline as China Sees Prolonged Global Slowdown: Economy (Source: Bloomberg)
Japanese exports dropped more than forecast in October, Singapore said its growth may slow to 1 percent next year and China signaled the global economy faces an extended slide. The reports may raise pressure on policy makers in export- reliant Asia to implement further stimulus measures. A record of the Bank of Japan’s Oct. 27 meeting today showed one board member favored adding 10 trillion yen ($130 billion) in asset purchases, and Chinese Vice Premier Wang Qishan said his nation must adopt more “forward looking” and flexible monetary policy. “Things are going to get worse before they get better,” said Vishnu Varathan, a Mizuho Corporate Bank Ltd. economist in Singapore. “Export growth will slow across Asia and we may see financial shocks coming through. Asian policy makers are going to become stimulatory all over again.”
Thailand Says GDP May Shrink 3.7% on Floods, Adding to Case for Rate Cut (Source: Bloomberg)
Thailand’s economy may shrink 3.7 percent this quarter following the worst flooding in almost 70 years, the government said, adding to the case for an interest- rate cut as early as next week. Gross domestic product rose 3.5 percent in the three months through September from a year earlier, after climbing a revised 2.7 percent in the previous quarter, the National Economic and Social Development Board said in Bangkok today. It also forecast the contraction and lowered its estimate for 2011 growth to 1.5 percent, from as much as 4 percent earlier. The floods have killed more than 600 people, swamped thousands of factories and disrupted supplies for companies from Apple Inc. to Toyota Motor Corp. The damage may reach 300 billion baht ($9.7 billion), the board said, and the Bank of Thailand has signaled room to cut rates to prop up growth as well as counter threats from Europe’s sovereign-debt crisis.
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