Asia Stocks Gain on Europe Optimism (Source: Bloomberg)
Asian stocks (MXAPJ) rose on speculation the European leaders meeting this week in Brussels will step up efforts to fight the debt crisis to stave off lower national credit ratings that will make funding bailouts more costly. Nintendo Co., a maker of video-game players that gets 34 percent of its sales in Europe, rose 1.2 percent in Osaka after a report that sales of a handheld game machine will reach target ahead of schedule. Meiji Holdings Co., a Japanese dairy-products producer, gained 3.6 percent after slumping the most since March 15 yesterday on a report radioactive cesium was found in some its products. Hyundai Development Co. (012630), a South Korean builder, rose 3.3 percent after a report the government will announce measures to spur housing markets.
“There is an expectation in the market that Europe will advance measures to overcome the debt issues,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “While there’s a sense of expectation in the market, investors still want to see the results of meetings this week of the European Union and European Central Bank.”
Asia Surviving EU ‘Test’ Boosts Upgrade Chance (Source: Bloomberg)
Asian economies are withstanding Europe’s debt crisis so well that some investors are positioning for credit-rating upgrades in the region. Five-year credit-default swaps for China, South Korea, Indonesia, Malaysia, the Philippines and Thailand climbed an average 63 basis points to 161 this year, while contracts for 17 eurozone countries, excluding Greece, jumped 118 to 301. Moody’s Investors Service is watching the trading in the swaps, which protect against non-payment, and how Asia copes with capital flows as it weighs rating changes, said Thomas Byrne, a senior vice president at Moody’s in Singapore.
Asia’s 10 biggest economies excluding Japan grew an average of 5.2 percent in the third quarter, triple the euro-zone’s 1.4 percent rate, and their central banks hold $5.2 trillion in currency reserves, more than half the global total of $10.2 trillion. Threadneedle Asset Management and Manulife Asset Management say they favor Indonesian notes, ranked Ba1 by Moody’s, one level below investment grade, while Aviva Investors says the Philippines, rated Ba2, is most likely to win an upgrade.
U.S. Stocks Advance on Speculation Europe Will Move to Tame Debt Crisis (Source: Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher a second day, on speculation European leaders may act to contain the debt crisis after S&P put 15 euro nations on review for possible downgrade. 3M Co. (MMM) added 1.5 percent as revenue may increase as much as 6 percent next year amid a boost from acquisitions. General Electric Co. (GE) rose 2.4 percent as Sanford C. Bernstein & Co. raised its recommendation. Darden Restaurants Inc. (DRI), operator of the Red Lobster chain, tumbled 12 percent after cutting its full-year sales and profit growth forecasts. The S&P 500 advanced 0.1 percent to 1,258.47 at 4 p.m. New York time, rebounding from an earlier drop of 0.3 percent. The Dow Jones Industrial Average added 52.30 points, or 0.4 percent, to 12,150.13. About 6.3 billion shares changed hands on U.S. exchanges, or 19 percent below the three-month average.
Japanese Stocks Gain on Optimism Europe Will Act to Stem Crisis at Summit (Source: Bloomberg)
Japanese stocks rose before a meeting of European leaders tomorrow on speculation policy makers will step up efforts to fight the debt crisis as 15 euro nations face the threat of credit-rating downgrades. Sony Corp. (6758), which depends on Europe for 20 percent of its sales, climbed 1.6 percent. Mitsui O.S.K. Lines Ltd., the world’s largest shipping fleet, jumped 4.3 percent after saying it will cut costs by jointly operating crude-oil tankers. Meiji Holdings Co. rebounded 3.6 percent from yesterday’s plunge after radiation was found in its baby-milk formula. “There is an expectation in the market that Europe will advance measures to overcome the debt issues,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “While there’s a sense of expectation in the market, investors still want to see the results of meetings this week of the European Union and European Central Bank.”
European Stocks Decline as S&P Puts 15 Euro Nations on Review; Metro Sinks (Source: Bloomberg)
European stocks fell, snapping two days of gains for the benchmark Stoxx Europe 600 Index, as Standard & Poor’s put 15 euro-area nations on watch for potential rating downgrades. RWE AG (RWE) tumbled 7.2 percent as Germany’s second-largest utility company sought to sell shares. Metro AG (MEO), Germany’s biggest retailer, plunged 14 percent as it forecast falling sales and earnings this year. Yara International ASA jumped the most since April 2009. The Stoxx 600 slipped 0.3 percent to 241.92 at the close. The gauge rallied 0.8 percent yesterday as Italy’s Prime Minister Mario Monti introduced a proposal to cut his nation’s debt. The gauge posted its biggest rally since November 2008 last week as central banks lowered the interest rate on dollar funding and China reduced its reserve ratio for banks.
German Stocks Fall After S&P Ratings Review; RWE, Metro Slump (Source: Bloomberg)
German stocks dropped, snapping a two-day advance for the DAX Index, after Standard & Poor’s put Germany and 14 other euro-area nations on watch for potential credit-rating downgrades. RWE AG slumped 7.2 percent after Germany’s second-largest utility raised 2.1 billion euros ($2.8 billion) in a share sale to reduce debt. Metro AG (MEO) sank the most on record as the retailer cut its profit forecast. Commerzbank AG (CBK) and Deutsche Bank AG (DBK), the nation’s biggest lenders, lost more than 1.5 percent. The benchmark DAX slipped 77.27, or 1.3 percent, to 6,028.82 at the close of trading in Frankfurt. The gauge has retreated 13 percent this year as the sovereign-debt crisis spread through Europe and investors speculated economic growth will stall in the region next year.
Drop in U.S. Jobless Rate Sign of Demo Shift (Source: Bloomberg)
The drop in U.S. unemployment so far this year may be an early glimpse of what’s to come as the workforce ages. The jobless rate, which was 9.4 percent in December 2010, declined to 8.6 percent last month, according to Labor Department data issued Dec. 2. The report also showed payrolls have climbed by 132,000 a month on average in 2011, around the pace most economists say would keep the rate stable as the population grows. At play is a decline in the share of the working-age population, known as the participation rate, meaning that the economy needs to create fewer jobs to bring down unemployment. While some of the decrease has been caused by discouraged workers dropping out of the labor force, another driver is that the baby-boom generation is starting to move into retirement, according to economist Dean Maki.
S&P Says Euro Region’s EFSF May Lose Rating If Any AAA Member Downgraded (Source: Bloomberg)
The European Financial Stability Facility may lose its top credit rating if any of the bailout fund’s six guarantors face a downgrade from AAA, Standard & Poor’s said. “We could lower the long-term credit rating on EFSF by one or two notches if we were to lower the AAA sovereign ratings, which are currently on creditwatch, on one or more of EFSF’s guarantor members,” S&P said in a statement today. At the same time, the ratings company said it “could affirm the AAA ratings on EFSF and its issues if we affirm the rating on all six of EFSF’s guarantor members currently rated AAA.” Germany, France, the Netherlands, Finland, Austria and Luxembourg are the top-rated nations backing the rescue fund.
Geithner Backs Merkel’s Crisis Plan (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner backed a German-French push for closer economic cooperation in Europe, urging policy makers to work with central banks to erect a “stronger firewall” to end the debt crisis. Geithner, speaking in Berlin today after talks with German Finance Minister Wolfgang Schaeuble, praised the commitment to reform programs put in place by new governments in Spain, Italy and Greece, saying that he is “very encouraged” by recent efforts to buttress the euro area. He welcomed “progress toward a fiscal compact for the euro zone,” echoing language used last week by European Central Bank President Mario Draghi. “This of course will take time” and “a very substantial commitment and a sustained commitment of political will,” he told reporters. “Financial crises are ultimately resolved when governments and central banks succeed in creating conditions that make it compelling for investors to take the risk involved in lending to governments and to banks.”
U.S. Senate Democrats Offer Smaller Surcharge in Payroll Tax Cut Proposal (Source: Bloomberg)
Democrats in the U.S. Senate will seek another vote on a payroll tax cut for workers this week in an attempt to pressure more Republicans to support an extension into 2012. Legislation proposed by Senate Democrats yesterday would cut the payroll tax paid by employees to 3.1 percent next year from the current 4.2 percent. The $185 billion cost would be covered by a 1.9 percent surtax on annual incomes exceeding $1 million and by raising the fees charged to lenders by government-owned mortgage giants Fannie Mae (FNMA) and Freddie Mac. The proposal was sponsored by Senator Robert Casey, a Pennsylvania Democrat who is facing a tough race for re-election next year.
French-German Plan Gets Geithner Backing (Source: Bloomberg)
A German-French push for closer economic ties in Europe won the backing of U.S. Treasury Secretary Timothy F. Geithner, who urged governments to work with central banks to erect a “stronger firewall” to end the debt crisis. Geithner, speaking in Berlin yesterday after talks with German Finance Minister Wolfgang Schaeuble, praised the commitment to fiscal programs put in place by new governments in Spain, Italy and Greece, and said he was “very encouraged” by recent efforts to buttress the euro area. He welcomed “progress toward a fiscal compact for the euro zone,” echoing language used last week by European Central Bank President Mario Draghi. Geithner’s comments backing German Chancellor Angela Merkel and French President Nicolas Sarkozy were more upbeat than his recent remarks urging Europe to move faster. In a September trip to Europe, Geithner asked leaders to set aside their differences to excise “catastrophic risks” from markets, prompting European criticism of U.S. debt levels.
Bank of England Starts New Sterling Liquidity Facility as Crisis Escalates (Source: Bloomberg)
The Bank of England introduced a new sterling liquidity facility to address potential financial- market strains as Europe’s sovereign debt crisis intensifies. The central bank announced the move “in light of the continuing exceptional stresses in financial markets,” it said in a statement in London today. “This facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity.” The measure comes a week after the Bank of England, the Federal Reserve and four other central banks made it cheaper for banks to borrow dollars in emergencies and agreed to create temporary bilateral swap programs to provide funding if needed in each central bank’s currency. The moves indicate officials are taking preemptive measures in case Europe’s debt crisis escalates further and freezes markets.
Australia Economy Grew More Than Forecast (Source: Bloomberg)
Australia’s economy expanded more than economists forecast last quarter, driven by consumer spending and mining. The local currency gained. Third-quarter gross domestic product advanced 1 percent from the previous three months, when it rose a revised 1.4 percent, a Bureau of Statistics report released in Sydney today showed. The result compared with the median of 24 estimates in a Bloomberg News survey for a 0.8 percent gain. The report covers a period before Europe’s sovereign-debt crisis began to weigh on Asian demand for commodities that yesterday prompted Reserve Bank Governor Glenn Stevens to make back-to-back interest-rate cuts for the first time since 2009 to shore up domestic demand. A A$456 billion ($465 billion) pipeline of resource projects driven by companies such as BHP Billiton Ltd. (BHP) has cushioned a slump in manufacturing and services hit by a record currency and subdued consumer spending.
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