Asian Stocks Decline After Disappointing U.S., European Economic Reports (Source: Bloomberg)
Asian stocks declined as sales of previously owned homes in the U.S. trailed estimates and Europe’s services and manufacturing output unexpectedly shrank, adding to signs the global economy is slowing. The MSCI Asia Pacific Index fell 0.2 percent to 127.50 as of 9:18 a.m. in Tokyo.
Japan Stocks Fall on Signs Market Overbought (Source: Bloomberg)
Feb. 23 (Bloomberg) -- Japanese stocks declined, with the Nikkei 225 (NKY) Stock Average falling from a six-month high, as technical indicators signaled shares may be overbought and U.S. housing data missed estimates. Mazda Motor Corp. (7261), which forecast its largest annual loss in 11 years, lost 6.8 percent after announcing plans to raise as much as 232.8 billion yen ($2.9 billion). Mitsubishi UFJ Financial Group Inc. (8306) led declines among banks on speculation the market is overheating. Panasonic Corp. (6752) dropped 1.5 percent after the electronic company’s rating was cut by Standard & Poor’s. The Nikkei 225 fell 0.2 percent to 9,536.57 as of 9:23 a.m. in Tokyo. The broader Topix Index lost 0.3 percent to 823.17. Declines were limited as the yen’s drop to a seven-month low against the dollar buoyed the earnings outlook for exporters.
Stocks in U.S. Decline as Concern Intensifies Over Global Economic Growth (Source: Bloomberg)
U.S. stocks fell, a day after the Standard & Poor’s 500 Index failed to hold at an almost four- year high, as sales of previously owned houses missed estimates and data from Europe and China spurred economic concern. Dell Inc. (DELL), the world’s third-largest maker of personal computers, tumbled 5.8 percent after its sales forecast missed estimates. Toll Brothers Inc. (TOL) and KB Home dropped more than 4.1 percent to pace a slump in homebuilders. Banks had the biggest loss in the S&P 500 among 24 groups, falling 1.7 percent. Gannett Co., the owner of 82 newspapers including USA Today, surged 4.2 percent as it will boost its dividend. The S&P 500 retreated 0.3 percent to 1,357.66 at 4 p.m. New York time. The Dow Jones Industrial Average lost 27.02 points, or 0.2 percent, to 12,938.67 after the 30-stock gauge rose above 13,000 (INDU) yesterday for the first time since 2008. The Russell 2000 Index of small companies dropped 0.8 percent to 816.50.
Stocks in Europe Decline After Worse-Than-Expected PMI Data; TUI Retreats (Source: Bloomberg)
European stocks retreated for a second day after a report showed services and manufacturing output in the euro area unexpectedly contracted in February. Straumann Holding AG (STMN), the world’s biggest maker of dental implants, fell the most since November after full-year profit missed analysts’ estimates. TUI AG (TUI1), Europe’s largest travel company, declined 7.6 percent after Banco CAM SAU sold a 12.9- million block of shares. PSA Peugeot Citroen, Europe’s second- largest carmaker, surged 12 percent. The Stoxx Europe 600 Index (SXXP) fell 0.8 percent to 264.59 at the close. The gauge has still rallied 8.2 percent this year amid speculation that the euro area’s sovereign-debt crisis will be contained and as U.S. economic data exceeded forecasts.
Most Emerging Stocks Advance as Oil Gain Offsets Europe, China Slowdown (Source: Bloomberg)
Most emerging-market stocks climbed as higher prices for oil boosted producers, offsetting data showing a contraction in manufacturing in Europe and China. The MSCI Emerging Markets Index (MXEF) was little changed at 1064.56 at the close in New York, as 411 stocks gained and 369 declined. Brazilian oil driller HRT Participacoes em Petroleo SA advanced the most since October after a partner released oil reserve estimates for an exploration area. OGX Petroleo & Gas Participacoes SA (OGXP3) reached a ten-month high. Argentina’s Merval index (MERVAL) neared a one-month high as Tenaris SA (TS), the world’s largest producer of seamless steel tubes used in the oil industry, advanced to the highest level in seven months.
Oil rose to a nine-month high as officials from the International Atomic Energy Agency were denied access to an Iranian military base, increasing speculation tensions between Iran and Western nations will disrupt oil shipments. European services and manufacturing output unexpectedly shrank in February after expanding the prior month, data from Markit Economics showed today. China’s manufacturing may shrink for a fourth month, according to data from HSBC Holdings Plc and Markit.
Dollar Remains Higher After Yesterday’s Gain as Oil Damps Growth Outlook (Source: Bloomberg)
The dollar maintained gains from yesterday against the majority of its most-traded counterparts on concern oil prices at a nine-month high will restrain global growth, increasing demand for haven assets. The U.S. currency yesterday climbed against 10 of its 16 major peers as a report showed European services and manufacturing output unexpectedly shrank in February. The Ifo institute will today release its business climate index for Germany, Europe’s largest economy. The greenback halted a five- day gain against the yen before a U.S. report forecast to show initial claims for jobless benefits rose from a four-year low. “There’s a strong element of geo-political tensions, particularly in Iran, impacting oil prices and that’s a negative for risk,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “It could be a factor that undermines risk confidence and sees a return to U.S. dollar strength.”
Tax Cuts Should Create Growth, Not Junk Spending: Amity Shlaes (Source: Bloomberg)
Payroll-tax cut equals growth. Consumer spending equals growth. Consumer spending is 70 percent of the economy. All growth is equal. These are the axioms that motivated lawmakers to secure an extension of a payroll-tax cut this month. They felt like heroes for passing and signing a temporary break allowing citizens to skip Social Security payments. President Barack Obama, too, was pleased. He trumpeted the payroll-tax news when he was visiting a Boeing Co. (BA) plant in Washington. An aim of that trip was to persuade American companies to do more business in America. In fact, by even going to Washington, Obama was highlighting what the administration believes is Boeing’s shame: Boeing does business offshore. But Obama took the time to go off message and praise Congress on the payroll-tax issue.
Construction Jobs Rebound as U.S. Homeowners Increase Remodeling Projects (Source: Bloomberg)
Construction hiring is picking up as Americans invest in renovating their homes amid signs that the worst of the housing-market declines may be over. The number of people working in residential remodeling grew 5.8 percent in December to 250,700 from a year earlier, based on preliminary data released Feb. 3 by the Bureau of Labor Statistics. This was the highest growth for these jobs -- which account for about 5 percent of construction employment -- since December 2006, before the housing bubble burst. Sales of existing homes, which rose 4.3 percent in January, precede spending on improvement projects by about six months, as new owners often do a lot of “fix-ups” soon after they move in, said Kermit Baker, a senior fellow at Harvard University’s Joint Center for Housing Studies. That means there’s now a “strengthening market” for this work, buoyed by demand that’s more discretionary in nature -- such as minor kitchen remodels - - and mild winter weather in much of the U.S.
Distressed Properties Help Boost Home Sales (Source: Bloomberg)
Sales of previously owned U.S. homes rose in January to the highest level since May 2010 as investors took advantage of lower prices to buy distressed properties. Purchases climbed 4.3 percent to a 4.57 million annual rate, less than forecast, from a revised 4.38 million pace in December that was slower than previously estimated, a report from the National Association of Realtors showed today in Washington. Distressed properties made up the largest portion of all purchases since April. Almost one in four of all transactions was made by investors. That’s helping to clear the market of unsold properties and may stabilize prices. While the threat of more foreclosures risks slowing progress, housing may get a boost from gains in employment and mortgage rates that are near record lows.
“I don’t think we’re seeing a full-fledged recovery in housing,” said Michelle Meyer, a senior economist at Bank of America Corp. in New York. “Outside of investors and people wanting to buy distressed properties, the primary housing demand is recovering much more gradually.”
Premier Wen Seen Paring China Growth Target (Source: Bloomberg)
China’s Premier Wen Jiabao is seen signaling next month that curbing pollution, inequality and the risk of financial instability eclipse the benefits of faster economic growth, a survey of analysts indicated. Wen will target an expansion of less than 8 percent in his report to the National People’s Congress in Beijing on March 5, the equivalent of the U.S. President’s State of the Union address, according to 8 of 15 economists surveyed by Bloomberg News. The median estimate of 7.5 percent compares with the 8 percent goal maintained from 2005 to 2011, even amid the 2008-09 world recession. A cut may indicate policy makers are prepared to tolerate a slower expansion as they move the economy’s drivers to consumption from exports and investment, a shift that may address global imbalances blamed for the last financial crisis. The survey results tally with state economist Fan Jianping’s prediction last week that a reduced goal will be set to send a message to local officials bent on chasing growth.
China Manufacturing Data Show Risk of Deeper Slowdown on Exports: Economy (Source: Bloomberg)
China’s manufacturing may shrink for a fourth month in February, indicating the world’s second- biggest economy remains vulnerable to a deeper slowdown as Europe’s crisis caps exports and the housing market cools. The preliminary 49.7 reading of an index from HSBC Holdings Plc (HSBA) and Markit Economics today compared with a final 48.8 in January. A number below 50 points to a contraction. January and February economic data are distorted by a weeklong holiday. China is cutting banks’ reserve requirements from Feb. 24 to support an economic expansion that Nomura Holdings Inc. estimates may be 7.5 percent this quarter, the least since the global financial crisis. In today’s report, a measure of export orders fell to an eight-month low, underscoring Commerce Minister Chen Deming’s Feb. 9 caution that the government is not optimistic about the outlook for trade after a decline in shipments in January.
“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” said Qu Hongbin, a Hong Kong-based economist for HSBC. The central bank “should step up policy easing as inflation pressures continue to ease,” he added.
Europe Struggles to Rebound With China’s Output Poised to Shrink: Economy (Source: Bloomberg)
European services and manufacturing output unexpectedly shrank in February as the euro-area economy struggled to rebound from a contraction in the fourth quarter. A euro-area composite index based on a survey of purchasing managers in both industries dropped to 49.7 from 50.4 in January, London-based Markit Economics said in an initial estimate today. Economists had forecast a reading of 50.5, according to the median of 16 estimates in a Bloomberg News survey. A reading below 50 indicates contraction. Budget cuts by governments may curb the pace of Europe’s recovery as countries across the region battle the sovereign- debt crisis. At the same time, China’s manufacturing may shrink for a fourth month in February, indicating the world’s second- biggest economy remains vulnerable to a deeper slowdown as Europe’s crisis caps exports.
ECB May Wind Down LTRO Program After Three-Year Loans, Deutsche Bank Says (Source: Bloomberg)
The European Central Bank’s second tranche of three-year loans next week may mark the end of its “generous” provision of long-term funding, according to Deutsche Bank AG. (DBK). While markets are hoping for “a continuation of the program through the rest of the year,” another large long-term refinancing operation, or LTRO, after this one “seems unlikely,” London-based Deutsche Bank chief economist Thomas Mayer said in a note to clients today. “We expect the more hawkish ECB council members, coming mainly from the AAA-rated countries, to oppose continuing generous LTROs on the grounds that these operations will reduce adjustment pressure on both governments and banks,” Mayer wrote. “Unless the euro crisis deteriorates significantly further,” Deutsche Bank expects the ECB “to wind down these operations” after the next three-year operation, he said.
Greek Bailout Wins Cheers From Wary Investors (Source: Bloomberg)
Greece’s bailout reinforces a rally that has driven yields for Italy and Spain down from euro-era records, giving the region’s leaders time to convince investors they can deliver both economic growth and spending discipline. “It is good to have cleared the Greek Damocles sword for a few months,” said Raphael Gallardo, the head of economic research at Axa Investment Managers in Paris, which oversees about 515 billion euros ($680 billion). “The euro area governments and European Central Bank have won some time, two months at least. It is positive for risk assets in the short run.” Italy’s average 10-year borrowing cost has dropped to below 5.4 percent this year from 7.1 percent at the end of December. Spain’s 10-year yield is 5.08 percent, down from more than 6.7 percent in mid-November and compared with its 2011 average of 5.4 percent.
Euro-Area Manufacturing, Services Unexpectedly Contract Amid Budget Cuts (Source: Bloomberg)
European services and manufacturing output unexpectedly shrank in February as the euro-area economy struggles to rebound from a contraction in the fourth quarter. A euro-area composite index based on a survey of purchasing managers in both industries dropped to 49.7 from 50.4 in January, London-based Markit Economics said in an initial estimate released by e-mail today. Economists had forecast a reading of 50.5, according to the median of 16 estimates in a Bloomberg News survey. A reading below 50 indicates contraction. Budget cuts by governments may curb the pace of Europe’s recovery as countries across the region battle the sovereign- debt crisis. At the same time, China’s manufacturing may shrink for a fourth month in February, indicating the world’s second- biggest economy remains vulnerable to a deeper slowdown as Europe’s crisis caps exports.
Merkel Signals She’ll Keep Pressure on Greece (Source: Bloomberg)
German Chancellor Angela Merkel indicated she will maintain pressure on Greece to meet debt- cutting pledges required for its second financial rescue, saying fiscal discipline is needed to hold the euro area together. “If you have a single currency you naturally have to be able to trust each other,” she told members of her Christian Democratic Union party in Demmin, Germany, today. While “it is right” to bail out Greece, Portugal and Ireland, “we have to say again and again that everyone must do their homework because otherwise this Europe can’t hold together.”
Merkel’s renewed backing for European unity in the face of the debt crisis marked her first public comments since euro-area finance ministers signed off yesterday on a 130 billion-euro ($172 billion) rescue for Greece aimed at averting the first sovereign default in the currency union’s 13-year history.
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