Asian Stocks Decline on European Concern (Source: Bloomberg)
Asian stocks (MXAP) dropped for a second day as higher borrowing costs in a French bond auction stoked concern Europe’s debt crisis is deepening, overshadowing improving economic data in the U.S. Sony Corp. (6758), a Japanese electronics maker that gets 21 percent of its sales from Europe, fell 2 percent. Elpida Memory Inc. (6665), a manufacturer of computer memory chips, sank 4 percent after Nomura Holdings Inc. cut its growth forecast for chips used to help computers juggle programs. Daewoo Shipbuilding & Marine Engineering Co. dropped 2.3 percent after the Korea Development Bank said it will revive plans to sell its stake in the South Korean shipyard.
“Europe is going to be a headwind with all the bond auctions coming up,” said Belinda Allen, a Sydney-based senior investment analyst at Colonial First State Global Asset Management, which oversees about $145 billion. “The first bond auctions from Germany and France did relatively OK, but there’s a risk Italy won’t perform as well. Markets are a lot more comfortable with the U.S. economy at this point in time. The outlook really hinges on Europe and China.”
Most U.S. Stocks Advance on Employment Reports, Rally Among Financials (Source: Bloomberg)
Most U.S. stocks rose, sending the Standard & Poor’s 500 Index (BKX) higher for a third day, as a rally by banks and improving jobs data offset reduced profit forecasts at companies including Target (TGT) Corp. and J.C. Penney Co. Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) rallied at least 1.2 percent after Deutsche Bank AG saw “encouraging signs” for the industry’s fourth-quarter earnings. Bank of America Corp. (BAC) soared 8.6 percent amid speculation that the Obama administration may introduce a nationwide loan refinancing program. Target and J.C. Penney lost more than 2.6 percent. Chevron Corp. (CVX) slipped 1 percent as oil prices tumbled. About three shares rose for every two that fell on U.S. exchanges as of 4 p.m. New York time. The S&P 500 climbed 0.3 percent to 1,281.06, after tumbling as much as 0.9 percent earlier. The Dow Jones Industrial Average (INDU) dropped 2.72 points, or less than 0.1 percent, to 12,415.70 today.
Japan Alternative Exchanges Have Best Year (Source: Bloomberg)
Japan’s alternative equity markets won more business than ever from the Tokyo Stock Exchange as investment funds sought better prices and places to buy and sell when traditional channels failed. Markets including SBI Japannext and Chi-X Japan as well as dark pools, or venues that don’t display prices, handled 7.8 percent of the volume in Topix Index (TPX) stocks last year, up from 6 percent in 2010, data compiled by Bloomberg show. That’s the biggest annual increase and the most market share since such platforms were introduced in 2007, the data show. The venues, known as proprietary trading systems, handled more volume in Tokyo Electric Power Co. (9501), Canon Inc. and Olympus Corp. than the Tokyo Stock Exchange on some days, the first time that’s ever happened, because of stock halts and price differences across venues, data compiled by Bloomberg show. The Nikkei Stock Average Volatility Index posted its biggest two-day gain in March after the nation’s largest earthquake and tsunami.
European Stocks Slide on Bank Capital Raising Concern; UniCredit Tumbles (Source: Bloomberg)
European stocks (SXXP) declined for a second day as concern that the region’s banks will have to raise capital overshadowed a report showing that U.S. companies added more workers to their payrolls than economists had predicted. UniCredit SpA, which announced a rights offer at a 43 percent discount yesterday, slumped to a 19-year low. Societe Generale SA dropped 5.4 percent after announcing it will cut corporate- and investment-banking staff. The Stoxx Europe 600 Index fell 0.9 percent to 247.39 at the close in London. The gauge lost 11 percent last year as policy makers struggled to contain the euro area’s debt crisis.
Japanese Stocks Decline as Euro Weakens Amid Debt Crisis Concern (Source: Bloomberg)
Japanese stocks (TPX) declined for a second day as the euro fell to an 11-year low against the yen, clouding the earnings outlook for exporters and outweighing better-than- expected U.S. employment data. Sony Corp. (6758), which gets about 20 percent of its sales in Europe, slid 1.3 percent after higher borrowing costs in a French bond auction added to concern the debt crisis is deepening. Olympus Corp. (7733), the camera maker mired in an accounting scandal, slumped 4 percent after former Chief Executive Officer Michael Woodford said he won’t battle for control of the company. Fast Retailing Co. rose 1.4 percent after the clothier’s sales jumped. The Nikkei 225 (NKY) slipped 0.4 percent to 8,451.41 as of 9:32 a.m. in Tokyo. The broader Topix fell 0.5 percent to 732.54, heading for a weekly gain of 0.5 percent.
Consumer Comfort Climbs to Five-Month High (Source: Bloomberg)
Consumer confidence in the U.S. rose last week to the highest level in more than five months and the pace of firings declined, showing an improving job market is bolstering the biggest part of the economy. The Bloomberg Consumer Comfort Index (COMFCOMF) climbed to minus 44.8 in the period ended Dec. 31, the best reading since mid-July, from minus 47.5 the prior week. Applications for jobless benefits (INJCJC) decreased by 15,000 during the same time to 372,000, according to Labor Department figures. A pickup in hiring will further lift Americans’ moods, raising the odds household spending, which accounts for about 70 percent of the economy, will keep climbing. A Labor Department report tomorrow may show employers added more workers to payrolls in December, brightening the outlook for growth this year.
Companies Add 325,000 to Payrolls in December (Source: Bloomberg)
Companies added more workers than forecast in December, a sign that the U.S. labor market was gaining momentum heading into 2012, according to a private report based on payrolls. The 325,000 increase was the highest in records going back to 2001 and exceeded the highest projection in a Bloomberg News survey after a revised 204,000 gain the prior month, the report from the Roseland, New Jersey-based ADP Employer Services showed today. The median estimate called for an advance of 178,000. An acceleration in hiring may spur further gains in consumer spending, which accounts for about 70 percent of the world’s largest economy. A Labor Department report tomorrow may show payrolls rose by 150,000, not enough to keep the unemployment rate (USURTOT) from rising to 8.7 percent, economists in a Bloomberg survey projected.
U.S. Service Economy Expands as ISM’s December Index Rises to 52.6 From 52 (Source: Bloomberg)
Service industries in the U.S. expanded less than forecast in December, indicating improvement in the economy will be uneven. The Institute for Supply Management’s index (NAPMNMI) of non- manufacturing industries, which account for almost 90 percent of the economy, rose to 52.6 last month from 52 in November, the Tempe, Arizona-based group said today. The median forecast of economists surveyed by Bloomberg News called for an increase to 53. Fifty is the dividing line between expansion and contraction. Slow wage growth, limited job gains and depressed real estate values may make it tougher for Americans to boost their spending after the holiday shopping season. The figures stand in contrast to recent data showing declining claims for jobless benefits and the strongest pace of manufacturing in six months.
Alcoa Earnings Estimates Plunge After Aluminum Drop: Commodities (Source: Bloomberg)
Alcoa Inc. (AA) earnings estimates have plunged the most in three years as analysts’ expectations mount that the biggest U.S. aluminum producer may even record a fourth-quarter loss. Net income will tumble 96 percent to 1 cent a share from 21 cents a year earlier, according to the average of 18 analysts’ estimates compiled by Bloomberg. That’s 88 percent less than the average projection from a month ago. Nine of the 12 estimates (AA) compiled within the last 28 days are for New York-based Alcoa to post a loss in the fourth quarter. The average price of aluminum was 11 percent lower in the quarter from a year earlier after global growth decelerated amid a sovereign-debt crisis in Europe and government action to control inflation in China. Supply is exceeding demand and inventories have soared, leaving some smelters unprofitable at current metal prices. Alcoa said today it would close 12 percent of its smelting capacity amid falling prices.
Jobless Claims Drop by 15,000 Last Week (Source: Bloomberg)
Fewer Americans filed claims for unemployment insurance payments last week, showing the labor market is starting 2012 on better footing than a year earlier. Applications for jobless benefits (INJCJC) decreased 15,000 in the week ended Dec. 31 to 372,000, Labor Department figures showed today. The median estimate of 38 economists in a Bloomberg News survey forecast 375,000 claims. The average over the past four weeks declined to the lowest level in more than three years. The decrease in firings indicates employers may be getting more comfortable with their headcounts and their economic outlooks as the year begins. Economists forecast a Labor Department report tomorrow will show hiring picked up and joblessness held below 9 percent in December.
Job Cuts in U.S. Jumped 31% From Prior Year’s Decade Low, Challenger Says (Source: Bloomberg)
Job cuts announced by U.S. employers increased in December from the prior year’s decade low. Planned firings (CHALTOTL) rose 31 percent to 41,785 last month from 32,004 in December 2010, which were the fewest since June 2000, according to Chicago-based Challenger, Gray & Christmas Inc. Job cuts totaled 606,082 for all of 2011, up 14 percent from the previous year, the report showed. Government and financial services accounted for four of every 10 announcements last year, and the areas will probably struggle this year as federal agencies try to reduce budget deficits and the European debt crisis threatens to cut off credit, the report said. At the same time, the year’s total was less than half the recession peak of 1.29 million firings announced in 2009.
Fed Study Says Greater Mortgage-Agency Losses May Aid U.S. Housing Revival (Source: Bloomberg)
A report from Federal Reserve Chairman Ben S. Bernanke called the weakness in the housing market a “significant barrier” to U.S. economic health and said Fannie Mae (FNMA) and Freddie Mac might have to bear greater losses to stoke a broader recovery. The study, delivered today to leaders of the Senate Banking and House Financial Services committees, noted “tension” between aiding the economy and minimizing losses of the failed government-sponsored enterprises, which depend on taxpayer aid for survival. “Some actions that cause greater losses to be sustained by the GSEs in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery,” according to the study.
Bullard Says Fed ‘Very Close’ to Consensus on Inflation Target: Tom Keene (Source: Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard said that policy makers at the central bank may be nearing consensus about clearly stating their goals for the rate of inflation. “I think we’re very close to having inflation targeting in the U.S.,” Bullard said in a Bloomberg Radio interview today. “This may be the opportunity to get something done that everyone on the committee can rally around.” “I think it would come in the form of some kind of statement from the committee that would name a target but would also reiterate some of the things we’ve said over the years about how keeping inflation low and stable contributes to great economic performance overall,” Bullard said, referring to the policy-setting Federal Open Market Committee.
China Seeks to Boost Consumption, Chen Says (Source: Bloomberg)
China will roll out measures to boost consumption this year as it strives to meet challenges posed by a global slowdown, Commerce Minister Chen Deming said. The government is studying policies to encourage spending on energy-saving products, and will take other measures including the promotion of online shopping and tourism, Chen told the ministry’s annual works conference, according to a statement posted on its website yesterday. Policy makers have cut taxes to spur consumption and help sustain growth in the world’s second-largest economy as Europe’s debt crisis clouds the outlook for exports and a property crackdown damps investment at home. Premier Wen Jiabao said Jan. 3 that business conditions may be “relatively difficult” this quarter.
Germany Is Biggest Obstacle to Raising Emergency Fund, Klaas Knot Says (Source: Bloomberg)
European Central Bank Governing Council member Klaas Knot said Germany should support raising the European emergency fund to help end the region’s debt crisis. “The most important obstacle lies in Germany, not in the Netherlands,” Knot said in an interview on Dutch public television last night. “I think that more money is needed and we will use the time to convince our German colleagues.” German Chancellor Angela Merkel has resisted calls to ratchet up bailout funding amid warnings that the current amount isn’t enough to safeguard nations such as Italy and Spain. Germany has instead focused on budget discipline as the best means to stem the crisis now in its third year.
U.K. Services Expanded at Fastest Pace in Five Months in December: Economy (Source: Bloomberg)
Service industries in the U.K. grew at the fastest pace in five months in December and strengthened in the U.S., suggesting their economies are partly withstanding the euro-area debt crisis. A gauge of U.K. services activity based on the survey of purchasing managers (PMITSUK) rose to 54 from 52.1 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said today in London. A U.S. services index rose to 52.6 in December from 52 the previous month. The data suggest the U.K. economy strengthened in December after surveys earlier this week showed construction and manufacturing improved. Still, the euro-area crisis is clouding the outlook for the global recovery. The Bank of England said today banks may toughen loan terms because of the debt turmoil, hampering growth, while some Federal Reserve officials have said prospective economic conditions may warrant “additional policy accommodation.”
Euro Drops on Crisis Concern; Dollar Gains on U.S. Job Growth (Source: Bloomberg)
The euro fell to an 11-year low against the yen and the weakest level in 15 months versus the dollar on concern Europe’s debt crisis is worsening and as reports showed the U.S. labor market is strengthening. The 17-nation currency weakened against most major peers after France’s borrowing costs rose at a bond sale today as credit-rating companies threaten to cut the nation’s top AAA ranking. Sterling strengthened to a 15-month high versus the euro. The Australian and New Zealand dollars dropped against the greenback for a second day as investors sought safer assets. “Europe trumps better U.S. data right now,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “The market is very concerned about the sovereign debt and also the bank debt on the European side. Sentiment is very dour.”
Soros Says Fracture of Euro Area Would Have ‘Catastrophic’ Consequences (Source: Bloomberg)
Billionaire investor George Soros said a fracturing of the euro area would have “catastrophic” consequences and that markets have started pricing in the possibility of the region breaking up. The disintegration of the 17-nation currency bloc would affect Europe and the “entire global financial system,” Soros said in the southern Indian city of Hyderabad today in response to questions. Leaders in the euro region have struggled to solve a sovereign-debt crisis that’s hampered the global recovery and is now in its third year. Greece, Ireland and Portugal have already been forced into bailouts and the European Central Bank has provided unprecedented cash injections, easing borrowing costs for Italy, Spain and Belgium.
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