Wednesday, December 5, 2012

20121205 0948 Global Markets Related News.

Asia FX By Cornelius Luca - Tue 04 Dec 2012 17:07:08 CT (CME/
The appetite for risk was selectively higher on Tuesday. The markets remained vulnerable to leaks, rumors and personal guesses about the success of the "fiscal cliff" negotiations. Once again, partisan politics dominate at the expense of the large public. Most major foreign currencies advanced, but the franc declined amid increasing talk about negative interest rates in Switzerland. The euro extended gains to a 1 ½-month high on optimism over Greece's plan to buy back debt. The US stock markets, gold, oil and silver fell. The short-term outlook for most foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short on all European currencies. Good luck!

Canada: The BoC left interest rates at 1%, as expected.

Today's economic calendar
Australia: AiG Performance of Services Index for November
UK: BRC Shop Price Index for November
Australia: Gross Domestic Product for the third quarter
China:   HSBC Services PMI for November

Asian Stocks Decline as U.S. Budget Talks Reach Impasse (Bloomberg)
Asian stocks fell as President Barack Obama held his ground on raising tax rates for the highest- income Americans, with lawmakers at an impasse less than a month before more than $600 billion in tax increases and spending cuts start taking effect. Honda Motor Co. (7267), a Japanese carmaker that gets about 44 percent of sales from North America, declined 1.4 percent. Western Areas NL sank 4.4 percent in Sydney after the nickel sulphide producer raised A$50 million ($52.4 million) selling shares at a discount. Santos Ltd., Australia’s third-biggest oil producer, slid 0.7 percent as crude futures fell. The MSCI Asia Pacific Index (MXAP) lost 0.2 percent to 124.64 as of 9:27 a.m. in Tokyo. Markets in Hong Kong and China have yet to open. The gauge advanced last month amid signs China’s economic slowdown may be ending and optimism U.S. lawmakers would agree on a budget deal to avert the so-called fiscal cliff.
“The fiscal cliff has the potential to frighten the market until the end of the year, but I don’t think it’ll be substantially surprising,” said Peter Esho, chief market strategist at City Index Ltd., a provider of equities, bonds and currency trading in Sydney. “The market’s consolidating after a good run.”

U.S. Stocks Fall as Obama Holds Ground on Income Taxes (Bloomberg)
U.S. stocks fell, sending the benchmark Standard & Poor’s 500 Index lower for a second straight day, after President Barack Obama held his ground about raising tax rates for the highest-income Americans. Las Vegas Sands Corp. and Wynn Resorts Ltd. (WYNN) dropped at least 2.7 percent, joining a slump in Macau casinos, on speculation China may increase scrutiny of junket operators, who provide credit to high-stake gamblers. Intel Corp. (INTC) advanced 2.2 percent on plans to sell bonds in a four-part offering to repurchase stock that’s trading at the lowest in 16 months. The S&P 500 retreated 0.2 percent to 1,407.05 at 4 p.m. New York time. The Dow Jones Industrial Average fell 13.82 points, or 0.1 percent, to 12,951.78. More than 5.9 billion shares traded hands on U.S. exchanges, or 4.7 percent below the three- month average, according to data compiled by Bloomberg.
“The clock is ticking,” said Quincy Krosby, market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than 1 trillion. She spoke in a phone interview. “The focus is on what goes on in Washington. The market will be volatile. You’ve got to be very well hedged given that the market is so much headline-driven.” U.S. President Obama’s administration rejected a Republican plan for tackling the fiscal cliff that omitted higher tax rates for top-earning Americans, leaving the issue unresolved with about four weeks left before more than $600 billion in tax increases and federal spending cuts start taking effect. European (SXXP) stocks rose as finance ministers met to discuss moves to stem the debt crisis.

Recap Stock Index Market Report (CME)
The December S&P 500 spent most of the session carving out a tight trading range. The market rallied during the initial morning hours, supported by gains in Europe and a further decline in Italian bond yields. Meanwhile, the upside appeared limited in the wake of back and forth negotiations over the US budget. Disappointing Q2 earnings guidance from Darden Restaurants, which warned of sluggish consumer spending, helped send the index to its low of the session. Some traders were encouraged by the markets' ability to bounce from the 1400.00 area. However, most of the major S&P sector indices finished in negative territory, led by weakness in consumer discretionary names. Meanwhile, the CBOE Volatility Index jumped to a new 11-day high, perhaps from growing uncertainty that US leaders will reach a near term agreement on the fiscal cliff.

European Stocks Rise for Second Day; Oerlikon Climbs (Bloomberg)
European stocks climbed for a second day, erasing an earlier drop, as American lawmakers continued to debate plans to address the so-called fiscal cliff. U.S. index futures and Asian shares were little changed. OC Oerlikon (OERL) Corp. rallied 4.5 percent as the world’s largest maker of textile machinery raised its earnings forecast and sold units. TUI Travel Plc gained 2.7 percent after Europe’s largest tour operator reported earnings that topped analyst estimates. United Internet AG (UTDI) tumbled 7.5 as Warburg Pincus LLC offered its 5.5 percent stake for sale. The Stoxx Europe 600 Index (SXXP) increased 0.3 percent to 276.9 at 9:42 a.m. in London. The gauge has climbed 18 percent from this year’s low on June 4, boosted by central-bank measures to support growth. The Reserve Bank of Australia today cut its benchmark interest rate for the sixth time in 14 months.
“We still anticipate a deal will be done to avoid the cliff,” Daniel Morris, global market strategist at JPMorgan Asset Management in London, said on Bloomberg Television. “We may go a bit over the fiscal cliff and scramble back up again but ultimately the impact, especially on the real economy, will not be significant. If you see equities sell off because of worries about the cliff, you should see that as a buying opportunity.” Standard & Poor’s 500 Index futures rose less than 0.1 percent after the benchmark gauge for U.S. equities fell 0.5 percent yesterday. The MSCI Asia Pacific Index was almost unchanged for a second day.

Trafigura Predicts China Rebound on Emerging Markets (Bloomberg)
The economy in China, the world’s biggest user of energy and copper, is expected to improve in the first half of next year, according to Trafigura Group, the third-largest independent oil trader. “The news flows about China are starting to look more positive and we are looking for that to translate into the real economy,” Chief Financial Officer Pierre Lorinet said in an interview in Singapore yesterday. “Especially in the emerging world, we have come out of the cyclical downturn and will be back on the upswing.” A recovery in the second-largest economy may lift commodity prices and trading, aiding companies such as Amsterdam-based Trafigura, which Lorinet said posted a drop in sales and “slightly” lower net income last financial year, and rival Glencore (GLEN) International Plc. Goldman Sachs Group Inc. has forecast a 7 percent return from commodities over the next 12 months, with energy leading the way.
“We have seen some volumes down in some of our activities,” said Lorinet, describing 2012 as a challenging and complicated year with uncertainties generated by Europe’s debt crisis, unrest in the Middle East, the U.S. presidential election and the shift to new leadership in China. Sales at the privately held company, which doesn’t publicly disclose financial data, dropped 1.6 percent to $120 billion in the 12 months to September, after gaining 53 percent the year before, he said. Crude trading decl

Obama Says He Would ‘Love’ a Business Leader on Economic Team (Bloomberg)
President Barack Obama said he would “love” to pick a business leader for his economic team in a second term, though talented executives may be discouraged from serving by the U.S. Senate confirmation process. “Not only is it something I’m considering, I’d love to do it,” the president said on Bloomberg Television in his first interview since winning re-election. “It’s something I would have loved to have done in the first term.” “One of the biggest problems we’ve got in terms of recruiting business leaders into the administration is the confirmation process has become so miserable, so drawn out, that for successful folks to want to put themselves through that process, you know, a lot of folks are just shying away,” he said. Obama’s advisers have considered Chief Executive Officer Mohamed El-Erian of Pacific Investment Management Co., which manages the world’s biggest bond fund, for a role in the administration, said a person familiar with the matter.
Obama also sounded optimistic about the economy if the administration and Congress can avoid a repeat of what he called the “crisis” that preceded raising the nation’s debt ceiling last year. “America is poised to take off,” he said. “Let’s make sure that we don’t have a self-inflicted wound, because there are a lot of silly games played up on Capitol Hill.”

China, S. Korea to Boost Use of Local Currencies in Trade (Bloomberg)
South Korea said it agreed with China to allow banks in both countries to borrow funds from an existing swap arrangement to encourage trade settlement in local currencies. A 64 trillion won ($59 billion) swap line will be made available for loans to allow companies in both countries to settle deals in the won and yuan, according to a statement today from the Finance Ministry and the Bank of Korea. The system is scheduled to start later this month, it said. The agreement is part of a push among emerging countries to internationalize local currencies after the global financial crisis, according to the South Korea statement. Both China and South Korea acknowledge that the use of the won and yuan is “very low” even as trade between the two countries is increasing, it said. “We expect several benefits, such as reduced foreign- exchange risk and transaction costs for companies,” according to the statement.
Alleviating “external vulnerabilities due to decreased dependence on the major reserve currencies” is also a reason for pursuing the deal, it said. The won was little changed at 1,083.45 per dollar at the close today in Seoul, according to data compiled by Bloomberg. The Kospi index of stocks fell 0.3 percent

RBA Cuts Key Rate to Match Half-Century Low as Currency Holds Up (Bloomberg)
The Reserve Bank of Australia cut its benchmark interest rate to the half-century low set during the 2009 global recession as hiring falters and an elevated currency hurts industries such as manufacturing and tourism. Governor Glenn Stevens and his board reduced the overnight cash-rate target by a quarter percentage point to 3 percent, the central bank said in a statement in Sydney today. The sixth cut in the past 14 months was predicted by 20 of 28 economists surveyed by Bloomberg. The rate matches the level reached from April-October 2009 that was the lowest since 1960. In his statement, Stevens said the local dollar remains “higher than might have been expected” given lower export prices and a weaker global outlook. His decision to ease the highest policy rate among major developed economies reflects Australia’s contained wage pressure, lower projected mining spending and an unemployment rate at a 2 1/2-year high.
“The cut is an attempt to smooth the transition from resources to the broader sectors of the economy that are currency and interest-rate sensitive,” said Martin Whetton, interest-rate strategist for Australia at Nomura Holdings Inc. in Sydney. “There feels like there’s a level of frustration in the statement about the currency.” The so-called Aussie advanced after the decision, buying $1.0437 at 4:56 p.m. in Sydney compared with $1.0426 before the decision. The yield on three-year government debt advanced to 2.62 percent, up four basis points from yesterday. Australian financial stocks declined, with the S&P/ASX 200 Finance Index falling 0.5 percent.

Euro Finance Chiefs Confident Greek Buyback to Succeed (Bloomberg)
European finance ministers voiced confidence that Greece will pull off a successful bond buyback, the key element in a revamped effort to stem the debt crisis in the country where it started. Greece began the 10 billion-euro ($13 billion) repurchase of bonds maturing from 2023 to 2042 yesterday, offering a higher-than-planned price in order to increase demand for the debt-reduction measure. “I’m confident it will go well,” French Finance Minister Pierre Moscovici told reporters after euro-area finance chiefs met in Brussels. “It seems to be happening under satisfactory conditions.” European governments are counting on the buyback as a market-based way of cutting Greece’s debt, paving the way for continued aid payouts. Finance ministers set a Dec. 13 meeting to release the next 34.4 billion euros for Greece and possibly wrap up bailout talks with Cyprus, which would become the fifth country to tap international aid since the crisis erupted in late 2009.
Once dismissed by European officials as a high-risk, low- reward method of debt reduction, the buyback became part of the Greek package after Germany rejected the writeoff of official loans as a way of easing the country’s financial plight. The euro fetched $1.3070 as of 7:47 a.m. in London from $1.3054 yesterday, when it touched $1.3076, the most since Oct. 23.

Osborne Urged to Boost Growth as BCC Cuts U.K. Outlook: Economy (Bloomberg)
Britain’s recovery will be slower than previously forecast and the economy needs more support from the government through a program of business investment, according to the British Chambers of Commerce. The BCC cut its 2013 growth forecast to 1 percent from 1.2 percent in September and its 2014 projection to 1.8 percent from 2.2 percent, the London-based group said in a report today, citing a weaker global backdrop and the likelihood of further fiscal tightening by the government. A separate release from Markit Economics showed construction output unexpectedly shrank in November as orders and confidence plunged. Chancellor of the Exchequer George Osborne will deliver his autumn economic statement to Parliament tomorrow and must manage a commitment to his fiscal squeeze alongside a risk that excessive tightening will prevent a recovery. Acknowledging this, the BCC called for measures to boost company investment while protecting Britain’s top credit rating.
“Growth is still too weak,” said BCC Director General John Longworth. “We have always been behind the chancellor’s aim of reducing the deficit, but this has to be supported with the right conditions that allow businesses to thrive, or we will fail to see the growth the economy so desperately needs.” Britain’s double-dip recession ended with 1 percent growth in the third quarter, though the BOE has forecast a “zig-zag” pattern for gross domestic product and sees a possible contraction this quarter. King said on Nov. 14 that the recovery will be “long and winding.”

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