Friday, March 9, 2012

20120309 0952 Global Market Related News.

Asian Stocks Rise a Second Day as Greece Moves to Complete Debt-Swap Deal (Source: Bloomberg)
Asian stocks rose for a second day as Greece moved closer to completing the biggest sovereign-debt restructuring in history, easing concern the nation at the center of Europe’s credit crisis will default. Sumitomo Mitsui Financial Group Inc. (8316), Japan’s No. 2 publicly traded bank, gained 1.4 percent. Hitachi Construction Machinery Co (6305), a machinery maker whose biggest market is China, gained 2.8 percent in Tokyo as economists forecast reports today will show China’s economic growth is slowing, which may prompt the government to boost stimulus measures. Newcrest Mining Ltd. (NCM) advanced 3.4 percent in Sydney after metal prices gained. The MSCI Asia Pacific Index gained 0.7 percent to 126.84 as of 9:16 a.m. in Tokyo. The measure has lost 1.1 percent this week, snapping a record 11-week increase.
“People have got ammunition to be a bit more upbeat about investment markets,” said Angus Gluskie, who manages more than $350 million at White Funds Management in Sydney. “What we are likely to see today and overnight is a reminder for people that the Greek risk, at least for the moment, has been taken off the table and economic data is all heading in the right direction.”

Japanese Stocks Advance for Second Day as Greek Debt Swap Looks Certain (Source: Bloomberg)
Japanese stocks rose for a second day, with the Nikkei 225 (NKY) Stock Average heading for its highest close since August, as Greece moved closer to the biggest sovereign-debt restructuring in history. Sony Corp., which depends on Europe for more than a fifth of its sales, climbed 2.2 percent after the euro strengthened against the yen, boosting the earnings outlook for Japanese exporters. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 publicly traded bank, gained 1.7 percent. Mitsubishi Corp. (8058), Japan’s biggest commodities trader by revenue, rose 1.5 percent after oil and metal prices increased. “It looks like the negotiations on the Greek debt-swap are going to pass without any big storm,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Shares may be bought as Greece is moving nearer to restructuring its debts. Many investors were waiting for a buy chance.”
The Nikkei 225 rose 1.4 percent to 9,904.16 as of 9:30 a.m. in Tokyo, heading for a weekly gain of 1.3 percent. The broader Topix (TPX) gained 1.2 percent to 846.01, with more than five times as many shares advancing as falling.

S&P 500 Caps Biggest Two-Day Advance of the Year (Source: Bloomberg)
U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest two-day advance of the year, as Greece moved closer to completing its debt swap. Banks (S5BANKX) had the biggest increase in the S&P 500 among 24 groups. Wells Fargo & Co. and JPMorgan Chase & Co. (JPM) rose at least 1.2 percent. Alcoa Inc. (AA) and Caterpillar Inc. (CAT) added more than 1.8 percent to pace gains among the biggest companies. Coach Inc. (COH), the largest U.S. luxury handbag maker, climbed 4.6 percent after saying its business continues to be “strong” in China. McDonald’s (MCD) Corp. lost 3.2 percent as sales trailed estimates. The S&P 500 rose 1 percent to 1,365.91 at 4 p.m. New York time, adding 1.7 percent in two days. The Dow Jones Industrial Average rose 70.61 points, or 0.6 percent, to 12,907.94. The Russell 2000 Index of small companies gained 1.3 percent to 806.34. About 6.1 billion shares changed hands on U.S. exchanges today, or 8.8 percent below the three-month average.
“Greece has no choice and the bondholders have no choice,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees $10.5 billion. “They’re both in the mud. The swap will go through. That will cause a moderate sigh of relief in the market. How long it will extend? That’s the big question mark.”

European Stocks Gain Before Greek Debt-Swap Deadline; EADS Rises on Payout (Source: Bloomberg)
European stocks rallied the most in a month as the deadline on Greece’s debt swap approached and Germany’s industrial output increased more than forecast. European Aeronautic, Defence & Space Co. climbed to a five- year high after doubling its dividend and predicting earnings will climb. BNP Paribas SA jumped 3.7 percent as Simon Property Group Inc. agreed to buy some of the French bank’s stake in Klepierre SA. Enel SpA (ENEL), Italy’s largest energy company, sank 5.7 percent after cutting its dividend. The Stoxx Europe 600 Index (SXXP) advanced 1.6 percent to 264.16 at the close in London, the biggest increase since Feb. 3. The gauge rose 0.6 percent yesterday after a private report showed hiring in U.S. companies accelerated last month. The measure has surged 8 percent this year as the European Central Bank lent the region’s lenders more than 1 trillion euros ($1.3 trillion) for three years to ease liquidity.
“Investors will be able to draw a line under Greece that has been going on for too long,” said Mike Lenhoff, chief strategist at Brewing Dolphin Securities Ltd. in London. “In the U.S., economic news flow has been very encouraging. The overall trend of employment has been positive.”

Jobless Claims in U.S. Rose 8,000 Last Week (Source: Bloomberg)
The number of Americans filing claims for jobless benefits rose to 362,000 last week, a level consistent with an improving labor market. Applications for unemployment insurance payments increased by 8,000 in the week ended March 3, Labor Department figures showed today. Economists forecast 352,000 claims, according to the median estimate in a Bloomberg News survey. The average over the past four weeks held close to a four-year low. The rate of firings indicates companies have grown more comfortable with headcounts and could take on additional employees when demand picks up. Economists forecast a Labor Department report tomorrow will show that employers boosted payrolls in February and the jobless rate held at an almost three-year low. “The level of claims is still quite low,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “I’m still encouraged by what we’ve seen in the labor market in recent months.”

Global Insurers Are Targeted in Latest U.S. Bid to Expand Iran Sanctions (Source: Bloomberg)
U.S. lawmakers are targeting global insurers as they seek to expand sanctions aimed at crippling Iran’s economy and forcing its leaders to make concessions involving the country’s disputed nuclear program. Representative Brad Sherman, a California Democrat, introduced legislation yesterday to penalize underwriters that insure or reinsure any deals with Iran prohibited under U.S. law, including oil and gas investments or insurance for companies or banks that are subject to U.S. sanctions. Senator Mark Kirk, an Illinois Republican, intends to introduce a similar measure in the Senate, according to his staff. The legislation would mostly affect Asia-Pacific or Russian underwriters because European insurance companies have scaled back or eliminated coverage of Iran-related deals. The European Union banned insurance and reinsurance to Iranian entities or their agents in 2010. U.S. insurance companies are banned from underwriting Iran-related business unless they get a special license from the U.S. government.

Success in Public-Spending Cuts Turns to Hurdle in Japan Quake Rebuilding (Source: Bloomberg)
After years of criticism for public- works spending that rewarded political constituents at the cost of adding debt, Japan succeeded in cutting the largesse in half. Now, that legacy of success is hampering an economic rebound. Reconstruction bids are going unmet one year after the earthquake that devastated the northeast region, because builders lack resources to fill them. Builders’ payrolls fell 24 percent nationwide in the decade through March 2011. Sendai, where the airport was wrecked by the post-quake tsunami on March 11, has 14 ready-mix cement factories, compared with 30 in 1998.
The longer it takes to complete the resurrection of towns, utilities and transport networks under Prime Minister Yoshihiko Noda’s 20 trillion yen ($246 billion) in relief spending, the more limited the economic impact it will have, says Akio Makabe, who has written books on behavioral finance. With limited scope to speed the projects along, Noda’s administration has instead pressed the central bank into stepping up monetary stimulus. “There will be a huge difference, psychologically -- the speed and timing really matters in disaster reconstruction,” Makabe, a professor of economics at Shinshu University in central Japan, said in an interview. “Economists expect stimulus from reconstruction demand will peak in the April-to- June period, but given the current pace of progress, we must assume such a projection is already being pushed backward.”

Investors Agree to Swap About 85% of Greek Debt (Source: Bloomberg)
Private investors agreed to swap about 85 percent of their Greek government bonds for new securities in the biggest sovereign debt restructuring in history, according to a banker briefed on the results. Preliminary indications showed that as much as 155 billion euros ($205 billion) of the 177 billion euros of Greek-law bonds were offered, said the banker, who declined to be identified. Twelve billion euros of debt not under Greek law was also tendered, as was 7 billion euros of bonds from state-owned companies guaranteed by the government, the banker said. With Greece again the focus of the euro-area debt crisis now in its third year, the goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent. Together with a 130 billion-euro second Greek aid package, the writedown is a key element in European leaders’ efforts to turn the tide against the crisis that has roiled Europe, forcing Ireland and Portugal to follow Greece in requiring bailouts.
The euro and stocks gained before the offer’s close at 10 p.m. in Athens as Prime Minister Lucas Papademos told his Cabinet ministers he looked forward to “the maximum possible participation of the private sector,” according to an e-mailed transcript of his comments.

Hong Kong’s Tang Vows to Tackle Wealth Gap to Revive Leadership Campaign (Source: Bloomberg)
Hong Kong Chief Executive candidate Henry Tang pledged to boost government spending to tackle a widening wealth gap as he sought to reverse a slump in public support ahead of this month’s election. The former chief secretary said in an interview yesterday he will expand public housing by a further 60 percent in five years, spend HK$6 billion ($774 million) annually more on schools, and create 100,000 jobs for the middle class should he win election on March 25. “The middle class has been squeezed,” said Tang, 59. “Every government in the western world is reexamining its role in the market place. I would say government can be more proactive.”
The promises from Tang, who is backed by some of the city’s richest men, are an attempt to address growing public anger over surging property prices and a perception of collusion between government and business that have brought thousands onto the streets. Tang, who has been beset by personal scandals that have eroded his popularity, is battling to revive his candidacy as he trails his main rival by more than 30 percentage points.

China Hard Landing Concerns Vastly Overblown, Yale’s Roach Says (Source: Bloomberg)
Concerns that China will enter a so- called hard landing are “vastly overblown” even as economic growth becomes more unbalanced, according to Yale University Professor Stephen Roach. China’s government has done a terrific job in controlling inflation, Roach, former non-executive chairman for Morgan Stanley in Asia and chief economist, said at a conference in Shanghai yesterday. The greatest risk to economic growth is the increasing reliance on fixed-asset investment and the declining contribution of private consumption, he said. China, the world’s second-largest economy, pared the nation’s economic growth target to 7.5 percent from an 8 percent goal in place since 2005, according to a state-of-the-nation speech that Premier Wen Jiabao delivered to about 3,000 lawmakers at the annual meeting of the National People’s Congress that started on March 5 in Beijing. Officials will also aim for inflation of about 4 percent this year, unchanged from the 2011 goal, it said.
“I don’t think the banking system will collapse and the property bubble will burst,” Roach said in Shanghai. “These are all exaggerations.”

Canada Joins ECB Keeping Stimulus as Risks Ease (Source: Bloomberg)
The Bank of Canada today joined its peers in the euro region and U.K. in prolonging monetary stimulus and said the risks are edging toward quicker inflation and away from another global recession. The central bank kept its main interest rate at 1 percent, extending the longest pause since the 1950s, and said there is less slack in the economy amid easing global tensions and faster domestic spending that may lift prices. The Canadian dollar rose after the announcement, which came on the same day European Central Bank President Mario Draghi said inflation will probably breach the bank’s 2 percent limit this year “with upside risks prevailing.” Two Bank of England policy makers said last week that inflation may be firmer than the central bank has projected.
The Bank of Canada is “trying to bring a broader range of risks to the attention of financial markets, households and businesses,” including inflation, said Dawn Desjardins, assistant chief economist at Royal Bank of Canada in Toronto. “The economy still requires tender loving care of low interest rates.”

Draghi Lays Groundwork for ECB Stimulus Exit as Inflation Takes Spotlight (Source: Bloomberg)
European Central Bank President Mario Draghi signaled he’s done enough to battle the sovereign debt crisis, laying the groundwork for an eventual exit from record-low interest rates and emergency lending measures. Declaring that the environment “has improved enormously” and there are “many signs of returning confidence in the euro,” Draghi yesterday turned the spotlight on “upside risks” to inflation, which is now forecast to remain above the ECB’s 2 percent limit this year. That suggests policy makers don’t plan to cut rates further or add to their 1 trillion euros ($1.32 trillion) of long-term loans to banks, economists said. “The ECB adopted a significantly less dovish tone, dropping anything that could hint at any additional non-standard measure or a further rate cut to come,” said Holger Schmieding, chief economist at Berenberg Bank in London. “Instead, the tone suggests that the ECB expects its eventual next move to be a reversal of some non-standard measures or even a rate hike.”
The ECB’s unprecedented crisis-fighting measures have swelled its balance sheet to more than 3 trillion euros, prompting Bundesbank President Jens Weidmann to write a letter to Draghi warning that the central bank may be taking on too much risk. While the ECB has repeatedly been forced to retreat from exit plans as the debt crisis spread, Draghi indicated he may share Weidmann’s desire for a return to more conventional policy settings.

Greece Debt-Swap Deadline Looms as Investors Signal Agreement (Source: Bloomberg)
The Greek government’s deadline for the biggest sovereign restructuring in history passed with a majority of investors signaling their readiness to participate in the debt swap. The euro and stocks gained before the offer’s close at 10 p.m. in Athens today as Greek Prime Minister Lucas Papademos told his Cabinet ministers that Greece had made “an appropriate framework with significant incentives” for bondholders. “For this reason I look forward to the maximum possible participation of the private sector,” Papademos said, according to an e-mailed transcript of his comments. Finance Minister Evangelos Venizelos told Parliament that “a historic process will be completed tonight,” and the results announced tomorrow.
Holders of at least 60 percent of the Greek bonds eligible for the deal, including Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas SA and Commerzbank AG (CBK), have agreed to the offer. That brings the total to at least 125 billion euros ($166 billion), based on data compiled by Bloomberg from company reports and government statements.

Greece Readies Record Debt Swap (Source: Bloomberg)
Greece moved closer to sealing the biggest sovereign restructuring in history as investors indicated they’ll participate in the nation’s debt swap. Holders of about 60 percent of the Greek bonds eligible for the deal, including Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas (BNP) SA and Commerzbank AG (CBK), have agreed to the offer so far. That brings the total to about 124 billion euros ($163 billion), based on data compiled by Bloomberg from company reports and government statements. The euro and stocks gained on speculation Greece was on the verge of reaching its participation target by the deadline of 10 p.m. in Athens today. The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and turn the tide against the debt crisis that has roiled Europe for more than two years.
“A historic process will be completed tonight,” Greek Finance Minister Evangelos Venizelos told Parliament in Athens today. “If all goes well, tomorrow we can announce that we are relieving Greeks of 105 billion euros of debt.”

Draghi Says Inflation to Exceed 2% in 2012 (Source: Bloomberg)
European Central Bank President Mario Draghi said inflation will probably breach the bank’s 2 percent limit this year and signaled the worst of the sovereign debt crisis may be over even as the economy stalls. “Inflation rates are now likely to stay above 2 percent in 2012, with upside risks prevailing,” Draghi said in Frankfurt today after the ECB kept its benchmark interest rate at a record-low 1 percent. While risks to the economic outlook remain on the downside, “the risk environment has improved enormously,” he said. “We see many signs of returning confidence in the euro.”  Draghi’s comments are “certainly hawkish,” said James Nixon, an economist at Societe Generale SA in London. “Basically, the ECB is confident that the crisis has been averted and the focus is now back on inflation.”
The debt crisis is damping growth across the euro region and making banks reluctant to lend. Having flooded the banking sector with more than 1 trillion euros ($1.31 trillion) to avert a credit crunch, the ECB is now confronted with an oil-price increase that’s propping up inflation at a time when at least six of the 17 euro nations are in recession.

Brazil Accelerates Interest Rate Cuts Amid Signs of Lackluster Growth (Source: Bloomberg)
Brazil’s central bank surprised analysts by accelerating the pace of interest rate cuts, bringing borrowing costs below 10 percent for only the second time amid signs of lackluster growth in Latin America’s biggest economy. In a split vote yesterday, policy makers led by bank President Alexandre Tombini cut the Selic (BZSTSETA) rate by 75 basis points to 9.75 percent. Two dissenting members voted to lower the rate by a half point for a fifth straight meeting. “They just lost patience,” said Nomura Securities’ Tony Volpon, one of just two economists who anticipated the move in a Bloomberg survey of 62 analysts. “The government clearly is afraid, given what they know up to now, that 2012 could be another weak growth year, and they want to buy insurance against that.” A report yesterday showing industrial production in January fell by the most in three years may have tipped the balance in favor of a deeper cut.
The government believes that “drastically” reducing real interest rates that are the second-highest in the Group of 20 richest nations after Russia will also help fight currency gains, said Volpon, the chief emerging markets economist for the Americas at Nomura, in a telephone interview. The real has gained 31 percent since 2008, the second-biggest gainer of the 25 most-traded emerging market currencies tracked by Bloomberg after the Chilean peso.

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