Most Asia Stocks Drop as Greece Struggles on Debt Deal, Japan Profits Fall (Source: Bloomberg)
Most Asian stocks fell, retreating from a three-month high, as Greece and its creditors struggled to reach an agreement on a debt swap and companies from Mazda Corp. to Nippon Sheet (5202) Glass Co. forecast losses. Nippon Sheet, a Japanese glassmaker, slumped 11 percent in Tokyo after forecasting a 2 billion yen ($26 million) loss for the year ending March 31 on slumping demand in Europe, its biggest market. Mazda Motor Corp., the most unprofitable company among Japan’s carmakers, slipped 1.5 percent after it forecast its biggest annual loss in 11 years. Hynix Semiconductor Inc., the world’s second-largest maker of computer-memory chips, dropped 2.4 percent after posting wider-than-expected losses.
“There’s still a lot of headwinds out there in terms of global growth, particularly in Europe,” said Belinda Allen, a senior investment analyst at Colonial First State Global Asset Management in Sydney, which oversees about $145 billion. “The biggest headwind is the implementation risk surrounding the fiscal compact in Europe and negotiations on a Greek debt deal.”
Japan’s Topix Index Swings Between Gains, Losses Ahead of U.S. Jobs Report (Source: Bloomberg)
Japan’s Topix Index (TPX) swung between gains and losses as investors waited on monthly U.S. employment data to gauge the strength of the recovery in the world’s largest economy. Mazda Motor Corp. (7261), which relies on the U.S. for about 20 percent of its sales, lost 2.4 percent after the carmaker said its losses would widen. Trading house Mitsui & Co. added 1.2 percent after profit jumped. Canon Inc. (7751), the world’s biggest camera maker, gained 2.7 percent after announcing a share buyback. Nippon Sheet Glass Co. tumbled 11 percent after saying it would post a loss on slumping demand in Europe. “Investors are unlikely to buy or sell today ahead of the U.S. job report,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Market expectations for the employment report are high.”
Most U.S. Stocks Advance as Investors Await Tomorrow’s Employment Report (Source: Bloomberg)
Most U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second straight day, as investors awaited tomorrow’s employment report to gauge the strength of the recovery in the world’s largest economy. Gap Inc. (GPS), the largest U.S. specialty apparel chain, surged 11 percent after forecasting earnings that beat analysts’ estimates. MasterCard Inc. (MA), the world’s second-biggest payments network, jumped 6.7 percent as profit climbed 24 percent. Citigroup Inc. (C) and Bank of America Corp. (BAC) added at least 1.2 percent. Internet and social media companies rose after Facebook Inc. filed to raise $5 billion in an initial public offering. Zynga Inc. and Groupon Inc. (GRPN) rallied more than 7.3 percent. About three stocks gained for every two that declined on U.S. exchanges as of 4 p.m. New York time. The S&P 500 advanced 0.1 percent to 1,325.54 today. The Dow Jones Industrial Average dropped 11.05 points, or 0.1 percent, to 12,705.41.
European Stocks Rise as U.S. Jobless Claims Fall; Xstrata Rallies on Talks (Source: Bloomberg)
European (SXXP) stocks climbed for a third day as a report showed that U.S. jobless claims dropped more than economists had estimated and Glencore International Plc held talks to buy Xstrata Plc (XTA), boosting mining companies. Xstrata jumped 9.9 percent after confirming that Glencore made an approach about an offer for the coal, copper and nickel miner. Unilever dropped 4.4 percent as the world’s second- largest consumer-goods maker posted revenue growth that missed analysts’ estimates. AstraZeneca Plc (AZN) sank 3.4 percent after saying 2012 will be challenging for the industry. The Stoxx Europe 600 Index rose 0.2 percent to 260.11 at the close for the gauge’s highest level since Aug. 1. The benchmark measure swung between gains and losses at least 20 times earlier today.
Jobless Claims in U.S. Fell Last Week (Source: Bloomberg)
Claims for U.S. jobless benefits fell last week and productivity cooled in the fourth quarter, signaling hiring may accelerate as companies reach the limits of how much efficiency they can wring from existing workforces. Applications (INJCJC) for unemployment insurance payments dropped by 12,000 to 367,000 in the week ended Jan. 28, according to Labor Department figures issued today in Washington. Worker output per hour increased at a 0.7 percent annual rate from October through December, down from a 1.9 percent gain in the prior three months, another report showed. After focusing on cutting costs during the recession, American businesses are taking on more staff as they gain confidence the recovery will be sustained. In prepared remarks to Congress today, Federal Reserve Chairman Ben S. Bernanke today highlighted improvements in the job market and production, while cautioning the outlook remains “uncertain.”
Productivity in U.S. Increased at a Slower Annual Pace in Fourth Quarter (Source: Bloomberg)
The productivity of U.S. workers rose in the fourth quarter at a slower pace than in the prior three months, showing companies are reaching the limits of how much efficiency they can squeeze from existing workforces. The measure of worker output per hour increased at a 0.7 percent annual rate following a 1.9 percent gain in the prior three months, figures from the Labor Department showed today in Washington. Expenses per employee climbed at a 1.2 percent rate after dropping 2.1 percent in the third quarter. Businesses in the U.S. that are growing more confident about the economy may be hiring more workers after the recession and its aftermath led them to search for ways to lift efficiency without creating new jobs. Payrolls grew by 145,000 in January, a Labor Department report is forecast to show tomorrow.
Bernanke Won’t Trade Inflation Goal for Jobs (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke said the central bank will seek to keep prices rising at a 2 percent rate and rejected suggestions that it would sacrifice its inflation goal to boost employment. “Over a period of time we want to move inflation always back toward 2 percent,” Bernanke said today in Washington in response to a question from Republican Representative Paul Ryan of Wisconsin, chairman of the House Budget Committee. “We’re always trying to bring inflation back to the target.” Bernanke defended the central bank’s newly established inflation goal after Ryan suggested it might be willing to tolerate higher inflation to fulfill the second part of its mandate from Congress, which is to seek maximum employment.
Consumer Confidence in U.S. Increases for a Second Week in Bloomberg Index (Source: Bloomberg)
Consumer confidence in the U.S. climbed for a second week as Americans became less pessimistic about the prospects for the world’s largest economy. The Bloomberg Consumer Comfort Index (COMFCOMF) rose to minus 44.8 in the period to Jan. 29 from minus 46.4 the previous week. A measure of Americans’ view of the state of economy climbed to the highest since June. Gains in employment and post-holiday clearance sales at retailers also helped create a better buying climate for consumers, the report showed. At the same time, increasing gasoline costs threaten to hinder progress in household spending, which accounts for about 70 percent of the economy.
Fed’s Evans Seeks Clearer Interest-Rate Pledge or ‘Ambitious’ Asset Buys (Source: Bloomberg)
Federal Reserve Bank of Chicago President Charles Evans said the central bank needs a clear low- rate commitment or a third round of purchases of Treasuries and mortgage bonds to further stimulate a still struggling economy. People outside the Fed have “mentioned that maybe you needed to do well over a trillion dollars in asset purchases in order to begin to move things,” the regional chief told reporters today during a meeting at the bank. “I don’t have a particular number in mind, but it would be more ambitious than most numbers being bandied about.” Evans reiterated his view that the central bank should keep the benchmark U.S. interest rate near zero until unemployment falls below 7 percent or medium-term inflation rises above 3 percent, and underscored his position as the Fed’s most vocal proponent for easing. Chairman Ben S. Bernanke said last week the Fed was considering easing policy further to sustain the recovery after the Fed extended its pledge to keep borrowing costs low until at least late 2014.
Treasuries Head for Second-Straight Weekly Gain as Fed Pledge Drives Yield (Source: Bloomberg)
Treasuries headed for a second weekly gain as the Federal Reserve’s pledge to keep interest rates low fueled demand for debt even as economists said a report today will show employers added jobs in January. U.S. government securities have returned 0.3 percent this year, on top of a 9.8 percent rally in 2011, according to Bank of America Merrill Lynch indexes. Improvement in the economy has yet to increase inflation expectations. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.15 percentage points, in line with the 10-year average. “The rally in Treasuries can keep going for the coming months,” said Hiromasa Nakamura, a senior investor at Mizuho Asset Management Co. in Tokyo, which oversees the equivalent of $43.2 billion and is a unit of Japan’s second-largest publicly traded bank by assets. “Inflation will be kept at bay for several years.”
China Economy Heading for ‘Hard Landing’ as Exports Falter, Shilling Says (Source: Bloomberg)
China’s economy is headed for a “hard landing” this year as weaker demand overseas chokes off exports, said Gary Shilling, who correctly forecast the U.S. recession that began in December 2007. A Chinese government report yesterday showed that export orders fell last month even as manufacturing expanded. The Shanghai Composite Index (SHCOMP) dropped 1.1 percent yesterday as stronger manufacturing boosted concern that the world’s second- largest economy will decelerate further as the government refrains from loosening monetary policy to tame inflation and curb property prices. “They slammed on the brakes,” Shilling, president of A. Gary Shilling & Co., a Springfield, New Jersey-based consultancy firm, said at the Bloomberg Link China Conference in New York yesterday. “Transition is not easy because they are geared up to exports.”
China’s Wen Raises Euro Funding Prospect (Source: Bloomberg)
Chinese Premier Wen Jiabao raised the prospect of contributing to the euro-area’s bailout programs, telling Chancellor Angela Merkel that China may be prepared to assist in resolving its debt crisis. The Chinese government is considering funding options for the temporary European Financial Stability Facility and its permanent successor, the European Stability Mechanism, through the International Monetary Fund to help stabilize the monetary union, Wen said yesterday after meeting Merkel in Beijing. China has previously said that it needs more detail on any plan to contribute funds to the euro area. China is “investigating and evaluating ways, through the IMF, to be more deeply involved using the ESM and EFSF channels in solving the European debt issue,” Wen said at a briefing alongside Merkel, who arrived in China early yesterday on her fifth visit to the world’s most populous country as chancellor.
Korean Won Set for Fourth Weekly Gain on Inflows Into Stocks; Bonds Rise (Source: Bloomberg)
South Korea’s won headed for a fourth weekly gain as signs the global economy is recovering spurred inflows into the nation’s stocks. The Kospi (KOSPI) Index of shares rose 0.5 percent this week as overseas investors bought $1.3 billion more shares than they sold through yesterday, exchange data show. A U.S. report today may show employers boosted payrolls in January by 140,000 workers and the jobless rate held at an almost three-year low of 8.5 percent, according to median estimates in a Bloomberg survey. Bonds advanced before the central bank meets to review borrowing costs next week. “The won is under consistent appreciation pressure with global economy data improving a lot and foreign investors boosting Korean stock purchases,” said Hwang Sun Min, a Seoul- based currency trader at Kookmin Bank. “Investors may refrain from betting on a weaker dollar today as they stay cautious ahead of the U.S. payrolls figure.”
Indonesia Economy Growth Probably Exceeded 6% (Source: Bloomberg)
Indonesia’s growth probably exceeded 6 percent for a fifth quarter as domestic demand helped Southeast Asia’s largest economy withstand the European debt turmoil that has hurt exports across Asia. Gross domestic product increased 6.45 percent in the fourth quarter from a year earlier, compared with a 6.5 percent pace in the previous three months, according to the median of 17 estimates in a Bloomberg News survey ahead of a government report due Feb. 6. Bank Indonesia will keep its benchmark rate at a record-low 6 percent, according to 11 of 15 estimates before a Feb. 9 decision.
Indonesia is outperforming its neighbors including Thailand and the Philippines (PHGDPYOY), as two rate cuts in the last quarter aided President Susilo Bambang Yudhoyono’s efforts to increase gross domestic product by an average 6.6 percent a year. The country regained investment-grade rating from Moody’s Investors Service and Fitch Ratings for the first time since the Asian financial crisis in recent weeks, boosting investment prospects as it plans transport and utility projects.
Europe’s Leaders Shouldn’t Sacrifice Union to Save Euro: View (Source: Bloomberg)
The euro-area crisis is forcing many of the European Union’s long-running political disputes to the surface at the same time. As they wrestle to save the currency, Europe’s leaders -- above all Britain’s David Cameron, France’s Nicolas Sarkozy and Germany’s Angela Merkel -- need to make sure they don’t dismantle the union in the process. Political tensions peaked in December, as Europe’s leaders were rushing to put together a fiscal compact that would convince markets that euro-area countries can get their sovereign debts under control. Cameron tried to leverage the need for a treaty to protect the U.K.’s lucrative financial sector from new EU regulations, in particular a transactions tax that is being proposed by France. When he failed, he vetoed the treaty, forcing the others to work outside the EU.
As after any domestic fight, it’s taking awhile for EU leaders to figure out whether their marriage of 27 can be the same again. In one positive sign, despite political opposition within his party, Cameron agreed this week to make an important concession: The U.K. won’t stand in the way of letting other EU members use the union’s buildings and bureaucracy to carry out their new, non-EU, fiscal compact.
Spanish Unemployment Grows Most in Three Years as Recession Looms: Economy (Source: Bloomberg)
Spanish unemployment registrations jumped by the most in three years in January as the economy edged into its second recession since the end of 2009. The number of people signing on for jobless benefits increased by 177,470 to 4.6 million, the Labor Ministry in Madrid said in an e-mailed statement today. That was the biggest increase since January 2009 and the total is the most since records began 16 years ago. Data last week showed overall unemployment in the fourth quarter reached a 15-year high. Spanish Prime Minister Mariano Rajoy is battling to trim the budget deficit while nurturing growth and creating jobs in an economy home to a third of the euro region’s unemployed and where almost half of young people are out of work. Today’s data underscores the divergence of Europe’s economy as indebted countries struggle with the threat of persisting recessions while Germany enjoys unemployment at a two-decade low.
Greece Aiming to Close Swap in Second Bailout Faces Fight to Stay in Euro (Source: Bloomberg)
Greece’s fight to win its second international bailout may only open a new chapter in its struggle to remain in the euro area. The rescue plan, which European officials and Greek creditors say may be wrapped up in coming days, includes a loss of more than 70 percent for bondholders in a voluntary exchange and loans likely to exceed the 130 billion euros ($171 billion) now on the table. That won’t stanch the bleeding, say economists including Holger Schmieding of Berenberg Bank in London. Greece will be saddled with too much debt, too little growth and too large a budget hole to do without even more money that euro nations led by Germany are increasingly reluctant to offer, they say.
Egypt Leaves Benchmark Rate Unchanged at 9.25% After Requesting IMF Loan (Source: Bloomberg)
Egypt’s central bank left its key interest rate unchanged after the government requested a $3.2 billion loan from the International Monetary Fund and parliamentary elections eased concerns over political stability. The Monetary Policy Committee left the overnight deposit rate at 9.25 percent and the overnight lending rate at 10.25 percent, the central bank said today on its website. Three of five economists surveyed by Bloomberg anticipated the move, while two forecast an increase. “Interbank rates and government borrowing costs continue to rise, but the decline in the currency looks gradual and measured, and pressures may ease somewhat following the completion of the elections and in the event that external financing starts to materialize,” Liz Martins, Dubai-based senior economist at HSBC Middle East, said in response to e- mailed questions before the announcement.
Australia’s Service Industry Grew Last Month, Snapping Three-Month Decline (Source: Bloomberg)
Australia’s services industry expanded in January, snapping three straight months of declines, as back-to-back interest-rate reductions boosted businesses including accommodation, cafes, finance and recreation. The performance of services index advanced 2.9 points to 51.9 in January, the highest reading since August, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction. Reserve Bank of Australia Governor Glenn Stevens lowered the overnight cash rate target to 4.25 percent from 4.5 percent on Dec. 6, citing turbulence in financial markets and an increased chance of a “further material slowing in global growth” as Europe’s sovereign debt crisis intensified. The local dollar touched a five-month high yesterday after government data showed a record trade surplus last year.
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