Asian Stocks Advance on U.S. Optimism (Source: Bloomberg)
Asian stocks (MXAP) climbed in the last trading day of 2011, with the region’s benchmark index trimming its biggest yearly decline since 2008, as rising U.S. home sales signaled the world’s largest economy is weathering Europe’s debt crisis. Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, gained 1 percent. James Hardie Industries SE (JHX), a building-materials supplier that gets almost 70 percent of sales from the U.S. rose 1.2 percent. Billiton Ltd., Australia’s top oil producer, climbed 0.3 percent after crude prices increased. The MSCI Asia Pacific Index (MXAP) added 0.2 percent to 113.04 as of 9:52 a.m. in Tokyo. The measure has lost 0.5 percent this month and is set for an 18 percent drop this year. For the week, the gauge is down 0.6 percent.
Stocks in U.S. Advance on Bets Economy Will Weather European Debt Crisis (Source: Bloomberg)
U.S. stocks rose, restoring the 2011 gain in the Standard & Poor’s 500 Index, as data signaled the world’s largest economy is weathering Europe’s debt crisis. All 10 groups (SPXL1) in the S&P 500 advanced as financial, industrial and commodity gauges had the biggest gains. Bank of America Corp. (BAC), General Electric Co. (GE) and Alcoa Inc. increased at least 1.2 percent. A measure of 12 homebuilders (S15HOME) in S&P indexes climbed 4.4 percent as PulteGroup Inc. and Lennar Corp. (LEN) jumped more than 4.6 percent. The Dow Jones Transportation Average, a proxy for economic growth, added 1.4 percent. The S&P 500 rose 1.1 percent to 1,263.02 at 4 p.m. New York time, almost wiping out yesterday’s slump. The Dow Jones Industrial Average climbed 135.63 points, or 1.1 percent, to 12,287.04 today. About 4.2 billion shares changed hands (MVOLUSE) on U.S. exchanges, or 46 percent below the three-month average.
European Stocks Climb as U.S. Business Activity Expands More Than Forecast (Source: Bloomberg)
European (SXXP) stocks advanced for the fourth time in five days as business activity in the U.S. expanded more than forecast. Bayer AG (BAYN) led a gauge of chemical companies higher. Fiat SpA retreated 1.9 percent after Banca IMI SpA cut its recommendation on the shares. Mining companies followed a drop in copper. The Stoxx Europe 600 Index (SXXP) gained 0.9 percent to 242.46 at the close in London. The gauge has rallied 13 percent (SXXP) from this year’s low on Sept. 22 amid better-than-estimated U.S. economic data and optimism that policy makers will contain the euro-area debt crisis. “Generally news from the U.S. has been better than expected,” although projections had been muted, said Didier Abbato, a vice president and senior trading adviser at Saxo Bank in Copenhagen. “In absolute terms, U.S. figures are not great. They’re just slightly better than expectations.”
U.S. Business Activity, Housing Beat Forecasts (Source: Bloomberg)
Companies cranked out more goods in December and pending sales of existing homes jumped in November for a second month, pointing to a pickup in U.S. economic growth as 2011 comes to a close. The Institute for Supply Management-Chicago Inc. said today its business barometer (CHPMINDX) was little changed at 62.5 from a seven- month high of 62.6 in November. The index of signed contracts (USPHTMOM) to buy previously owned houses rose 7.3 percent after climbing 10.4 percent the prior month, the National Association of Realtors said. Both figures surpassed the median estimate of economists surveyed by Bloomberg News. “2011 is ending on a solid note,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who forecast a reading of 63 for the Chicago index. “Manufacturing has some momentum,” he said, and “we’re starting to see some signs of life in housing.”
Sales of U.S. Homes Beat the Forecasts (Source: Bloomberg)
The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand. The index of pending home sales (USPHTMOM) increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1.5 percent gain, according to the median estimate in a Bloomberg News survey. The industry that triggered the 18-month recession that ended in June 2009 is showing signs of stabilizing as construction (CNSTTMOM) picks up, builder confidence improves and the number of houses on the market declines. Nonetheless, another wave of foreclosures may weigh on real-estate values next year.
Consumer Comfort Fell From Five-Month High (Source: Bloomberg)
Consumer confidence in the U.S. retreated last week from a five-month high, showing an improvement in sentiment will take time to develop. The Bloomberg Consumer Comfort Index (COMFCOMF) dropped to minus 47.5 in the period ended Dec. 24 from minus 45 the prior week, the highest reading since July. A gauge of the buying climate fell by the most in three months. Declining home prices (SPCS20Y%), stagnating wages and an unemployment rate at 8.6 percent may be weighing on sentiment. At the same time, household spending, which accounts for about 70 percent of the world’s largest economy, continues to increase.
Jobless Claims in U.S. Drop to Three-Year Low (Source: Bloomberg)
Fewer Americans filed applications for unemployment benefits over the past month than at any time in the past three years, a sign the U.S. labor market is on the mend heading into the new year. The four-week moving average for claims, a less volatile measure than the weekly figures, dropped to 375,000 last week, the lowest level since June 2008, Labor Department figures showed today in Washington. Applications (INJCJC) rose for the first time in a month in the week ended Dec. 24, climbing by a more-than- forecast 15,000 to 381,000. The jump in claims last week may say more about their volatility during this time of year than about the state of the job market, according to economists like Eric Green. Their recent decline has stoked speculation the world’s largest economy was on the cusp of showing bigger gains in employment.
Fed Says Wall Street Dealers Tighten Terms on Hedge-Fund Securities Trades (Source: Bloomberg)
Wall Street dealers made it tougher for hedge funds to finance trading of securities and derivatives in the three months through November, a Federal Reserve survey showed today. Responses “indicated a broad but moderate tightening of credit terms applicable to important classes of counterparties,” especially hedge-fund clients, trading real estate investment trusts and nonfinancial corporations, according to the quarterly survey of senior credit officers at 20 dealers covering the period of September to November. The central bank released the report in Washington. The report adds to evidence of stress in the financial system from Europe’s sovereign-debt crisis. Investor concern about the continent’s turmoil has helped drive the premium banks pay to borrow dollars to the highest in more than two years. The Fed survey didn’t discuss causes of the tighter financing terms.
Rail-Freight Surge Shows U.S. Skirting Recession (Source: Bloomberg)
North American railroads’ freight volumes surged 17 percent last week, the most in a year, in an indication that the U.S. economy will avoid a second recession. Rising shipments of retail goods helped drive the jump in carloads for the period ended Dec. 24, the Association of American Railroads said today. The trade group released the results after government data showed U.S. jobless claims fell to a three-year low in the past month. The double-dip recession “that people feared only six, eight, 10 weeks ago never materialized,” said Tony Hatch, an independent railroad analyst in New York. “Things are going pretty well in a variety of the commodities that the railroads carry.” Analysts focused on pre-Christmas rail traffic this year because record retail sales over the Thanksgiving weekend suggested that the seasonal peak in freight shipping might extend into December. Many retailers delayed building inventory amid concerns that the economy was weakening.
Slowing Chinese Growth Means Ore-Vessel Rates at Lowest in Decade: Freight (Source: Bloomberg)
The weakest growth in demand in at least a decade for shipments of iron ore, the second-biggest commodity cargo after crude oil, means rates for the largest vessels will plunge to the lowest level since 2002. Capesizes, each hauling about 160,000 metric tons of ore, will earn an average of $15,000 a day next year, about 4 percent less than in 2011, the median estimate in a Bloomberg survey of 10 analysts shows. While that implies losses for ship owners and investors in their companies, speculators can profit because forward freight agreements, handled by brokers and used to bet on transport costs, are anticipating an average of $16,367, according to data from the London-based Baltic Exchange.
Owners are contending with the biggest fleet in history as vessels ordered when rates reached $233,988 in 2008 continue to leave ship yards. The glut may widen because trade in iron ore will expand 2.5 percent next year as the number of capesizes rises 9.8 percent, according to Clarkson Plc, the world’s biggest shipbroker. Economic growth in China, whose steel mills consume 65 percent of all seaborne ore, will slow to the weakest since 2001, economist estimates compiled by Bloomberg show.
South Korean Inflation Above Target Signals BOK May Hold Off on Rate Cut (Source: Bloomberg)
South Korea’s inflation remained above the central bank’s target range this month, bolstering the case for officials to refrain from cutting benchmark interest rates in January. Consumer prices (KOCPIYOY) rose 4.2 percent from a year earlier, matching November's gain, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 12 economists was for a 4 percent increase. Prices increased 0.4 percent in December from the prior month, the biggest gain since August. Geopolitical risk from the death of North Korea’s leader this month is adding to uncertainty for Asian policy makers who have paused rate tightening or cut interest rates due to the European sovereign-debt crisis and global economic slowdown. The Bank of Korea will likely cut interest rates by March to support growth as average consumer price gains moderate to 2.6 percent next year and production is set to be weakest in the first quarter of 2012, according to HSBC Holdings Plc.
Singapore GDP Probably Fell in Fourth Quarter (Source: Bloomberg)
Singapore’s economy probably contracted in the fourth quarter as manufacturing slumped, increasing pressure on the island’s policy makers to stimulate growth even as inflation accelerates. Gross domestic product (SGDYTY) probably dropped an annualized 5 percent in the three months through December from the previous quarter, when it rose 1.9 percent, according to the median (SGAVYOY) of 11 estimates in a Bloomberg News survey. The report is scheduled for release at 8 a.m. on Jan. 3. Singapore forecasts economic expansion will moderate next year as a faltering global recovery weighs on demand for goods and services. The island’s exports have dropped even after the central bank, which uses the local dollar to manage inflation, moved in October to slow gains in the currency, which has retreated 4.7 percent against the dollar in the past two months.
Thai Central Bank May Be Saddled With Debt (Source: Bloomberg)
Thailand’s government will today press the central bank chief to take on $35 billion of legacy debt from bank bailouts as Prime Minister Yingluck Shinawatra looks for fiscal scope to finance flood defenses. Bank of Thailand Governor Prasarn Trairatvorakul meets with cabinet members in Bangkok over the proposal to shift the debt to the BOT’s balance sheet. Deputy Prime Minister Kittiratt Na- Ranong said yesterday the step would save the government as much as 65 billion baht ($2 billion) in annual interest costs that could be used to fund anti-flood measures. The push risks deepening concern that Yingluck’s administration is infringing on the central bank’s independence, after Kittiratt in October said the BOT should lower interest rates to help businesses cope with the country’s worst flooding since 1942. The government itself lacks unanimity on the move, with Finance Minister Thirachai Phuvanatnaranubala warning it could hurt investor confidence and stoke inflation.
ECB Has More Scope to Cut Rates as Prices Wane (Source: Bloomberg)
The European Central Bank has more room to cut interest rates to a record low early next year after reports showed the sovereign debt crisis is damping inflation pressures. The rate of growth in M3 money supply, which the ECB uses as a gauge of future inflation, fell to 2 percent in November from 2.6 percent in October, the Frankfurt-based central bank said today. Growth in loans to households and companies across the 17-nation euro area also slowed, while inflation in Germany, the region’s largest economy, decelerated in December. The data reinforce the view “that underlying inflationary pressures are easing and that the ECB has ample scope to cut interest rates again in the early months of 2012,” said Howard Archer, chief European economist at IHS Global Insight in London. “Euro-zone inflation is poised to retreat markedly over the coming months.”
Italy Auctions $25.8 Billion of Bonds in Week as ECB Buoys Investor Demand (Source: Bloomberg)
Italy auctioned 7 billion euros ($9 billion) of debt to bring the total raised this week to almost 20 billion euros, underscoring how the European Central Bank is helping the world’s fourth-biggest borrower tap markets. Today’s sale by the Treasury in Rome fell short of the 8.5 billion-euro target even as borrowing costs declined from last month. Italy sold 9 billion euros in bills yesterday at about half the rate of the previous sale last month in its first auction since the ECB loaned 489 billion euros to banks to ease credit amid the region’s debt crisis. “Italy was not able to raise the maximum amount they wanted to, but the fact that they managed to sell this much at the end of the year should be taken as a positive sign,” said Eric Wand, a fixed-income strategist at Lloyds TSB Bank Plc in London. “The level of excess liquidity from the ECB will remain elevated for a while and some of that may get recycled into sovereign debt. That should support short-dated peripheral bonds.”
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