Asian Stocks Decline on Drop in U.S. Home Prices (Source: Bloomberg)
Asian stocks (MXAP) fell for a second day, with the regional benchmark index headed for the worst year since 2008, after a report showed U.S. housing prices fell, damping the earnings outlook for Asian exporters. Canon Inc. (7751), the world’s biggest camera maker, slipped 1.3 percent. Billabong International Ltd. (BBG), a maker of surfwear that gets about 50 percent of sales from the Americas, fell 0.3 percent. Tokyo Electric Power Co. (9501) declined 7.1 percent after Industry Minister Yukio Edano said the utility should consider temporary government control. The MSCI Asia Pacific Index dropped 0.2 percent to 113.43 as of 9:18 a.m. in Tokyo. The measure has fallen 18 percent this year, the most since 2008.
Stocks in U.S. Little Changed as Europe Concerns Offset Confidence Index (Source: Bloomberg)
U.S. stocks were little changed, with the Standard & Poor’s 500 Index poised for the biggest fourth-quarter rally since 1999, while oil gained as higher- than-estimated consumer confidence helped offset concern about a drop in American home prices. Copper and gold declined. The S&P 500 (SPX) rose less than 0.1 percent to 1,265.43 at 4 p.m. New York time, and the Dow Jones Industrial Average fell 2.65 points to 12,291.35. Both are among the 10 best performers in 2011 among 91 national indexes tracked by Bloomberg, and the S&P 500 has surged 12 percent this quarter. Crude jumped 1.7 percent after Iran threatened to block transportation through the Straight of Hormuz. Copper lost 1.7 percent, and gold fell 0.7 percent.
The Conference Board’s measure of consumer sentiment topped the median economist projection and climbed to the highest level in eight months, adding to evidence that the U.S. economy is improving. The S&P 500 erased its 2011 loss last week after the fewest Americans since 2008 filed first-time claims for unemployment benefits. Data earlier today showed home prices in 20 U.S. cities dropped more than economists predicted.
Indonesia Stocks to Gain 20% in 2012 on Debt Rating Upgrade, Manulife Says (Source: Bloomberg)
Indonesia’s stocks (JCI) may climb 20 percent next year after posting the third-biggest gains in Asia in 2011 on the prospect of credit-rating upgrades and increased infrastructure spending, said the nation’s third-largest fund. Standard & Poor’s and Moody’s Investors Service may follow Fitch Ratings in upgrading the nation’s debt rating to investment grade, said Yudhistia Susanto, the Jakarta-based head of equity at PT Manulife Asset Management, which manages about $3.8 billion. Susanto favors banking and cement stocks as they will benefit from falling interest rates and higher spending on road, port and airport projects, without naming any shares. “Starting with Fitch and next year Moody’s and Standard & Poor’s, the investment grade story will have a positive impact on our cost of capital,” Susanto said in a Dec. 23 interview. “It will provide sustainability for a low interest-rate environment.”
European Stocks Trade Little Changed; BCP Advances as UniCredit Declines (Source: Bloomberg)
European stocks closed little changed after data on U.S. house prices and consumer confidence gave conflicting signals about the strength of the world’s largest economy. Banco Comercial Portugues SA and Banco Espirito Santo SA (BES) rallied more than 7 percent after a report that Portugal may recapitalize its banks without taking an equity stake. Chemical makers also advanced. Italian lenders UniCredit SpA (UCG) and Mediobanca (MB) SpA retreated at least 4 percent. The benchmark Stoxx Europe 600 Index rose less than 0.1 percent to 241.91 at the close of trading, having fluctuated between gains and losses at least 10 times. The measure rallied 3.5 percent last week as a decline in U.S. jobless claims and increases in consumer confidence and durable-goods orders spurred optimism that the economy is strengthening. The gauge has still retreated 12 percent this year as Europe’s debt crisis spread from Greece to Italy and Spain.
U.S. Seeks RMB Gains; Avoids ‘Manipulator’ Label (Source: Bloomberg)
The Obama administration said it will press for further appreciation of the yuan and called the currency undervalued, while declining to brand China a manipulator of its exchange rate. The Treasury Department, releasing its semi-annual report to Congress on the currency policies of major trading partners, said today it will “closely monitor the pace” of yuan appreciation and “press for policy changes that yield greater exchange-rate flexibility.” The U.S. contends that China uses an undervalued currency to give its exporters an unfair advantage in overseas markets and boost growth. At the same time, the administration of President Barack Obama has sought to avoid actions that could cause friction with the world’s No. 2 economy and the second- largest U.S. trade partner.
Consumer Confidence Rose More Than Forecast (Source: Bloomberg)
Confidence among consumers rose to an eight-month high in December as an improving job market helped Americans regain all the ground lost following the mid- year government budget battle and credit-rating downgrade. The Conference Board’s index increased to 64.5, exceeding all estimates in a Bloomberg News survey and the highest since April, from a revised 55.2 reading in November, figures from the New York-based private research group showed today. Another report showed home prices fell more than projected in October. Unemployment that dropped last month to its lowest in more than two years and the cheapest gasoline since February are prompting households to take advantage of discounts during the holiday shopping season. The improvement in sentiment may help sustain household purchases, which account for about 70 percent of the economy, into the new year.
U.S. Home Prices Fell More Than Forecast (Source: Bloomberg)
Residential real estate prices dropped more than forecast in the year ended October, showing a broad-based decline that indicates the U.S. housing market continues to be weighed down by foreclosures. The S&P/Case-Shiller index of property values in 20 cities dropped 3.4 percent from October 2010 after decreasing 3.5 percent in the year ended September, the New York-based group said today. The median forecast of 27 economists in a Bloomberg News survey projected a 3.2 percent decrease. The real-estate market is bracing for another wave of foreclosures that may keep pressure on home prices, indicating any housing recovery will take time to develop. Nonetheless, rising builder confidence, a pickup in construction and fewer unsold new properties for sale are among signs the industry that triggered the last recession is steadying.
Obama to Choose Powell, Stein for Fed Board (Source: Bloomberg)
President Barack Obama said he will nominate two former U.S. Treasury Department officials for the Federal Reserve Board, including one who served in a Republican administration. Jerome Powell, an attorney who was a Treasury undersecretary for former President George H.W. Bush, and Jeremy Stein, a Harvard University economist who has advised the current administration, are Obama’s picks. Pairing candidates who served under both parties may help ease approval by a Senate where the Democrats’ majority narrowed last year, letting Republicans block administration nominees. The Fed’s seven-member Board of Governors has two vacancies. While the term of Elizabeth Duke, an appointee of President George W. Bush, expires Jan. 31, she can continue to serve until a successor is appointed.
Obama to Seek $1.2 Trillion Increase in U.S. Debt Limit Dec. 30 (Source: Bloomberg)
The Obama administration will ask Congress to increase federal borrowing authority by $1.2 trillion as the nation approaches the debt limit set by law, according to a Treasury Department official. The White House will send the request to Congress on Dec. 30, the day the debt is projected to rise to within $100 billion of the $15.194 trillion limit, the Treasury official told reporters today on condition of anonymity. Congress will be notified under the terms of a deal to raise the limit worked out on Aug. 2 after a more than two-month standoff between the administration and Republican lawmakers that was followed by a cut in the U.S. debt rating by Standard & Poor’s. The Budget Control Act of 2011 gives Congress 15 days to pass a joint resolution disapproving the increase in the limit. The president can veto such a measure.
Obama Wins Most Demand for Debt of U.S. Presidents Since Before First Bush (Source: Bloomberg)
The U.S. government received record demand for its bonds in 2011, pushing longer-maturity Treasuries to their best performance since 1995 in a sign that President Barack Obama may have little difficulty financing a fourth consecutive year of $1 trillion budget deficits. The Treasury Department attracted $3.04 for each dollar of the $2.135 trillion in notes and bonds sold, the most since the government began releasing the data in 1992 during the George H. W. Bush administration. The U.S. drew an all-time high bid-to- cover ratio of 9.07 for $30 billion of four-week bills it auctioned on Dec. 20 even though they pay zero percent interest.
While Standard & Poor’s stripped the U.S. of its AAA credit rating on Aug. 5, Treasuries due in 10 years or more returned 25.6 percent this year. The spreading sovereign debt crisis in Europe and slower global growth are driving investors to the safety of U.S. assets, helping to contain borrowing costs and making it cheaper as a percentage of gross domestic product to finance deficits than when the nation last had budget surpluses.
Wen Urges Protection for Farmer Rights in China, End to Cheap Land Grab (Source: Bloomberg)
Chinese Premier Wen Jiabao called on officials to better protect the rights of farmers and ensure they receive a bigger share of profits from the conversion of their land to industrial and residential use. “We can no longer sacrifice farmers’ land ownership rights to reduce urbanization and industrialization costs,” the official Xinhua News Agency reported Wen as saying at an annual national work conference on rural affairs yesterday. “It’s both necessary and possible for us to significantly increase farmers’ gains from the increase in land value.” Wen’s comments follow a victory by residents of a southern Chinese village this month who staged a two-week protest that forced authorities to back down in a dispute over land. Strikes, demonstrations and other protests in China doubled to at least 180,000 in 2010 from four years earlier, according to Sun Liping, a sociology professor at Beijing’s Tsinghua University.
Yen Intervention Failing Means World’s Best Currency Poised to Strengthen (Source: Bloomberg)
There’s been no better currency in 2011 than the yen and strategists forecast more gains, even as Japan promises to intervene again in foreign-exchange markets and expands the world’s biggest debt burden. The yen’s advance against every major currency, including a 4.1 percent climb against the dollar, illustrates the anxiety in global markets as Europe’s debt crisis stretched into a second year on the heels of the collapse of Lehman Brothers Holdings Inc. and the U.S. housing market crash. Though bond yields in Japan are the second-lowest in the world and government borrowings are double the size of the economy, foreign ownership of its debt is the highest since 2008.
Japanese officials sold at least 14.3 trillion yen ($183 billion) this year to stem gains that cut profits for exporters from Toyota Motor Corp. to Nintendo Co., and Finance Minister Jun Azumi has pledged more action. Intervention in 2012 may fail again as financial turmoil attracts investors to the world’s third-most traded currency for its low volatility.
Japan Factory Output Falls on Global Slump (Source: Bloomberg)
Japan’s industrial production declined in November as the strong yen and slowing overseas demand hamper the nation’s recovery from the March disaster. Factory output fell 2.6 percent from October, when it rose 2.2 percent, the trade ministry said in a report in Tokyo today. The median estimate of 29 economists surveyed by Bloomberg News was for output to decrease 0.8 percent. Bank of Japan Governor Masaaki Shirakawa said last week that the European debt crisis is the biggest risk for Japan’s economy. Manufacturers including Toyota Motor Corp. (7203) and Nissan Motor Co. (7201) are also under threat from a yen that is hovering close to a postwar high against the dollar.
Japan Turns Activist on Reserves as Rank Slips (Source: Bloomberg)
Japan is crafting ways of using its $1.2 trillion of currency reserves, the world’s second largest, helping bolster its role in international finance as economic stagnation diminishes its share of global output. Prime Minister Yoshihiko Noda, who is in New Delhi today, is likely to seal an agreement making about $10 billion of Japan’s reserves available to India if needed, according to a Japanese government official speaking on condition of anonymity. Noda three days ago oversaw a deal with China to expand use of the yuan and yen in bilateral trade and purchase Chinese bonds. At home, officials are deploying 10 trillion yen ($128 billion) in a fund aiding companies in overseas acquisitions.
“While Japan is losing its influence in various areas in the global economy, foreign reserves can work as an effective tool to yield Japanese influence and show its presence,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo and a former chief foreign-exchange dealer at Japan’s central bank. “This is still a remote concept, but Japan’s recent moves are also considered as a significant step to foresee a future possible unification of Asian economies.”
Japan Set to Unveil $10 Billion India Currency Swap Deal During Noda Visit (Source: Bloomberg)
Japan is poised to unveil a currency-swap line with India in its second international financial agreement with top Asian powers this week. Finance Minister Jun Azumi told reporters today in Tokyo that Japan is negotiating an agreement with India, the third- largest economy in Asia behind China and Japan. The deal is likely to be unveiled during a trip by Prime Minister Yoshihiko Noda to India that starts today, with the amount of the swap line about $10 billion, a Japanese government official said on condition of anonymity. Japan agreed with China two days ago to promote direct trading of the yen and yuan without using dollars and start purchases of Chinese bonds for its foreign-exchange reserves. The deal with India would expand the ability to respond to financial shocks as Prime Minister Manmohan Singh’s administration contends with a slump in the rupee that risks stoking inflation.
Austerity Fuels Worst Christmas in 10 Years for Italy’s Retailers: Economy (Source: Bloomberg)
Italian retailers had the worst Christmas in 10 years, consumer group Codacons said, as austerity measures to combat the sovereign debt crisis prompted households to cut spending. Italians spent 48 euros ($62.75) less per person this holiday season than the average of the past five years, Rome- based Codacons said in a statement on its website. The shoe and clothing sector was hit the most, with sales dropping 30 percent from previous years, it said, adding retailers won’t recover the decline during seasonal promotions that start in January. The discount period “will be a flop,” with sales declining as much as 40 percent compared with 2010, Carlo Rienzi, the head of Codacons, said in the statement.
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