Asian Stocks Decline as South Korean Carmakers Slide (Bloomberg)
Asian stocks fell, led by South Korean carmakers, on findings they overstated claims about gas mileage. Losses were limited as Samsung Electronics Co. advanced on a report it may release a new smartphone. Hyundai Motor Co. and Kia Motors Corp. (000270) each slumped more than 5 percent in Seoul after saying they will compensate U.S. customers for overstating the fuel efficiency of their latest models. Japanese rival Toyota Motor Corp., which gets about a quarter of its sales in North America, gained 1.9 percent. Samsung advanced 1.4 percent after South Korea’s Maeil Business Newspaper said the company may offer a new Galaxy smartphone as early as the second quarter next year.
The MSCI Asia Pacific (MXAP) Index slid 0.2 percent to 122.30 as of 10:01 a.m. in Tokyo before the open of markets in China and Hong Kong. The regional benchmark gained 7.6 percent this year through the end of last week as central banks in Europe, the U.S., Japan and China added stimulus measures to counter a global economic slowdown and the European debt crisis. “This could be a game-changing event in Hyundai’s success story,” said James Yoon, a Seoul-based analyst at BNP Paribas SA. “The financial loss is immaterial compared to the potential reputational loss” to its brand. Futures on the Standard & Poor’s 500 Index rose 0.2 percent ahead of the U.S. presidential election tomorrow. The gauge dropped 0.9 percent on Nov. 2 as the Thomson Reuters/Jefferies CRB Index of raw materials retreated 1.6 percent, the biggest slide in a month.
Shares declined in the U.S. even after the Labor Department said 171,000 workers were added to payrolls last month and September’s gain was more than first estimated. The increase surpassed the most optimistic forecast in a Bloomberg survey in which the median called for an advance of 125,000. Unemployment rose to 7.9 percent. Japan’s Nikkei 225 Stock Average (NKY) lost 0.2 percent and South Korea’s Kospi slid 0.4 percent. Australia’s S&P/ASX 200 Index retreated 0.1 percent.
Japanese Stocks Decline on Commodities, Sharp Bailout (Bloomberg)
Japanese stocks fell, halting a three-day gain, as commodity prices slid and Sharp Corp. dropped on speculation the electronics maker will seek a bailout after forecasting a record loss. Mitsui & Co., a trading house that counts commodities as its biggest source of revenue, fell 1.6 percent as oil and metals fell. Sharp lost 3.6 percent. Yamada Denki Co. (9831) plunged 5.4 percent after the electronics retailer cut its earnings forecast. Utilities fell after a regulator delayed a decision on whether to take reactors at a Kansai Electric Power Co. plant offline. “In Japan, many companies cut their earnings forecasts, discouraging investors to buy shares,” said Kenichi Hirano, general manager and strategist at Tachibana Securities in Tokyo. “Judging from the current real economy, the conditions aren’t there for commodity prices to rise.”
The Nikkei 225 Stock Average (NKY) fell 0.5 percent to 9,010.89 as of 9:22 a.m. in Tokyo, with volume 8.9 percent below the 30- day average. The broader Topix (TPX) Index lost 0.4 percent to 749.20, with more than two shares dropping for each that gained. The Topix rose 4.6 percent through Nov. 2 from Sept. 6 after the European Central Bank started a global wave of stimulus to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the equity gauge traded at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. Futures on the Standard & Poor’s 500 Index were little changed ahead of the U.S. presidential election tomorrow. The gauge dropped 0.9 percent on Nov. 2 as the Thomson Reuters/Jefferies CRB Index of raw materials retreated 1.6 percent on Nov. 2, the biggest slide in a month.
Recap Stock Index Market Report (CME)
The December S&P 500 broke out to a new eight day high during the morning hours, supported by a better than expected increase in October Non-Farm Payrolls. However, early optimism seemed to evaporate as the session drew on. Some traders indicated that while the jobs data was positive, there remained uncertainty over the outcome of next week's presidential election. Further weakness in the stock market came from a selloff in commodity markets, which weighed on energy and material-related shares. Shares of Chevron were down more than 2.5% on the session in reaction to Q3 results that came in below estimates and showed a significant decline in net income compared to the year ago quarter.
S&P 500 Advances in Shortened Week Ahead of Elections (Bloomberg)
The Standard & Poor’s 500 Index rose in a three-day trading week, as the market reopened after Hurricane Sandy caused the longest weather-related shutdown since 1888, and American voters prepared to choose a president. Equities retreated on the last day of the week as a better- than-forecast payrolls report failed to keep technology and commodity shares from slumping. Visa Inc. (V) and General Motors Co. (GM) climbed at least 3.6 percent as earnings beat projections. Macy’s Inc. rallied 5.5 percent after raising its sales forecast. Apple Inc. (AAPL) sank 4.5 percent, capping a sixth weekly decline, the longest losing streak since October 2008. The S&P 500 rose 0.2 percent to 1,414.20 for the week. The Dow Jones Industrial Average slid 14.05 points, or 0.1 percent, to 13,093.16. The equity market was closed Oct. 29 and 30.
“You have the hurricane, the election, the employment report and the earnings numbers all impacting the market,” David Sowerby, a fund manager at Boston-based Loomis Sayles & Co., said in a telephone interview. His firm oversees about $175 billion. “Earnings continue to surprise on the upside. We’ve had a slight improvement in manufacturing. That’s favorable for stocks.” The S&P 500 gained as 71 percent of companies that released quarterly results have beaten analysts’ estimates, according to data compiled by Bloomberg. Reports showing better-than-forecast manufacturing data and a surge in consumer confidence gave benchmark indexes their biggest gains in seven weeks on Nov. 1. Hiring in the U.S. increased more than forecast in October as employers looked past slowing global growth and political gridlock at home.
European Stocks Advance as U.S. Jobs Data Beat Forecasts (Bloomberg)
European stocks advanced this week as companies from Royal Dutch Shell Plc to Deutsche Bank AG (DBK) reported earnings that topped estimates, American jobs data beat forecasts and U.S markets reopened after Hurricane Sandy forced their closure for two days. UBS AG, Switzerland’s biggest bank, jumped to a 15-month high after saying it will cut about 10,000 jobs to boost profitability. Shell, Europe’s biggest oil company, and Deutsche Bank AG, Germany’s largest lender, advanced more than 3 percent. Air France-KLM Group (AF) and Deutsche Lufthansa AG (LHA) surged after posting earnings that beat analyst estimates. BG Group Plc (BG/) tumbled 18 percent after it said growth next year will be flat.
The Stoxx Europe 600 Index added 1.6 percent to 274.85 this week. The benchmark completed its fifth monthly rally on Wednesday and has surged 18 percent from this year’s low on June 4 as European Central Bank President Mario Draghi pledged to defend the euro at all costs and Federal Reserve Chairman Ben S. Bernanke announced a third round of quantitative easing. “The non-farm payroll figures confirm a U.S. private sector that is printing jobs year-on-year at the same pace as back in 2004-05, which is good.” Peter Garnry, an equity strategist at Saxo Bank A/S in Copenhagen wrote in a message. “The job report was better than expected, which adds to the other good reports this week, and it will likely carry the momentum for the week all the way home to show solid gains in stocks across the board.”
Emerging Stocks Rise to Best Week Since September After Payrolls (Bloomberg)
Emerging-market stocks rose, adding to the benchmark index’s biggest weekly gain in almost two months, as industrial and technology companies’ profits beat estimates and hiring in the U.S. increased more than forecast. Samsung Heavy Industries Co., the world’s second-largest shipbuilder, rallied the most in eight months and Wipro Ltd. (WPRO), India’s third-largest software-services exporter, rose for a fifth day after earnings topped analysts’ forecasts. OAO Gazprom, the world’s biggest natural gas producer, snapped a five-day decline after quarterly earnings exceeded estimates. The MSCI Emerging Markets Index advanced 0.5 percent to 1,004.68 at the close of trading in New York. The gauge climbed 1.4 percent this week, the most since the period ended Sept. 14. Its 30-day historical volatility, a measure of price swings, fell to a six-year low of 8.9 yesterday after data on U.S. manufacturing and employment topped forecasts.
A net 171,000 workers were added to payrolls after a 148,000 gain in September, Labor Department figures showed today in Washington. “The job creation was stronger than we anticipated, and that’s certainly a positive sign for the U.S. economy,” Nick Chamie, global head of foreign-exchange strategy and emerging markets research at Royal Bank of Canada, said in a phone interview from Toronto. “The data is consistent with a mild basing out of the growth slowdown, and with relatively weak growth moving forward. The market is pricing out a little bit of the more dire scenarios.” The median forecast on U.S. payrolls from 91 economists surveyed by Bloomberg called for an advance of 125,000. The jobless rate rose to 7.9 percent from 7.8 percent as more people entered the labor force.
Treasuries Snap Gain Before U.S. Service Industries Data (Bloomberg)
Treasuries snapped a gain from last week before a data economists said will show service industries in the U.S. expanded in October, while China also reported faster growth in non-manufacturing businesses. Benchmark 10-year yields were 34 basis points from the record low as Americans prepared to choose a leader who will face unprecedented debt levels and the so-called fiscal cliff, which threaten to slow the economy. President Barack Obama and challenger Mitt Romney are each trying to convince voters he can best create jobs before tomorrow’s vote. “Investors should be cautious on Treasuries,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “We’re seeing signs of recovery in the two largest economies,” he said, referring to the U.S. and China. U.S. 10-year notes yielded 1.72 percent as of 9:47 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent note due in August 2022 was 99 1/8.
The yield declined three basis points, or 0.03 percentage point, last week. The record low was 1.38 percent set July 25. The Institute for Supply Management’s non-manufacturing index, which covers almost 90 percent of the economy, was probably 54.5 last month, little changed from 55.1 in September, according to the median forecast in a Bloomberg News survey before today’s figures at 10 a.m. New York time. Readings above 50 signal growth. An index of China’s non-manufacturing industries rose to 55.5 in October from 53.7 the month before, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on Nov. 3.
Treasuries Rise for Second Week Before Economy-Themed Election (Bloomberg)
Treasuries rose for a second week as Americans prepared to choose a president who will face unprecedented debt levels and the so-called fiscal cliff, which threaten to derail an economy hobbled by elevated unemployment. Benchmark 10-year note yields traded close to a two-week low on concern Hurricane Sandy has disrupted business and will hinder the economic recovery. Pacific Investment Management Co.’s Bill Gross said the Federal Reserve will continue its monetary stimulus, even with the nation adding more jobs than forecast last month. The U.S. will sell $72 billion in notes and bonds next week. “There is a lot of uncertainty in the market -- the election being a contributing factor -- and whoever wins will have their plate full of all of the things that have kept rates low,” said Jay Mueller, who manages about $2 billion of bonds at Wells Capital Management in Milwaukee. “The theme for next week will be politics, written large.”
The yield on 10-year notes fell three basis points, or 0.03 percentage point, this week to 1.72 percent in New York. It touched 1.68 percent, the least since Oct. 16. The 1.625 percent note due in August 2022 fell 9/32, or $2.81 per $1,000 face amount, to 98 6/32. Thirty-year bond yields finished the week little changed at 2.91 percent.
Pound Rises Versus Euro for Second Week on Waning Stimulus Bets (Bloomberg)
The pound strengthened against the euro for a second week, touching a one-month high, as signs of improvement in the U.K. economy damped expectations for more monetary stimulus. Sterling fell for the fifth week in six against the dollar after a report yesterday showed the U.S. economy added more jobs than expected last month. The Bank of England’s Monetary Policy Committee meets on Nov. 7-8 to decide whether to extend its asset-purchase program, known as quantitative easing, beyond 375 billion pounds ($601 billion). Gilts were little changed after a report yesterday showed the construction industry unexpectedly expanded last month. “We’ve had more supportive news for the U.K. economy from the U.K. construction survey,” said Audrey Childe-Freeman, head of foreign-exchange strategy at Bank of Montreal (BMO) in London. “Sterling should continue to benefit against the euro as long as we see the economy hanging on. The market is not now expecting more QE next week and that should come as a relief for sterling.”
The pound rose 0.3 percent in the week to 80.12 pence per euro at 5 p.m. London time yesterday, when it advanced to 79.97 pence, the most since Oct. 3. Sterling fell 0.5 percent to $1.6031.
Payroll Growth Shows U.S. Labor Market Healing Before Election (Bloomberg)
American employers hired more workers than forecast in October while an influx of people joining the labor force pushed the jobless rate higher, according to the last job market report before the presidential election. Payrolls expanded by 171,000 workers following a 148,000 gain in September that was bigger than first estimated, figures from the Labor Department showed yesterday. October’s increase exceeded the highest forecast in a Bloomberg survey with a median projection of 125,000. Unemployment rose to 7.9 percent. The broad-based job gains -- from positions at car dealers and hospitals to factories and construction sites -- indicate consumers will likely spend more freely, shoring up the three- year expansion in the face of a global economic slowdown and political gridlock in Washington over taxes and spending.
“This was a solid report,” said Dean Maki, chief U.S. economist at Barclays Plc in New York. “What was striking is that jobs grew in all the major sectors. The U.S. economy is better equipped to handle shocks now than it would have been this summer, when growth was slowing down and job growth was weakening.” Stocks slipped yesterday, trimming a weekly gain. The Standard & Poor’s 500 Index fell 0.9 percent to 1,414.19 at 4 p.m. in New York. President Barack Obama campaigned yesterday in Ohio, one of the battleground states that will decide the outcome of the Nov. 6 election. Noting that private-sector firms hired the most employees in eight months, he told a campaign rally in Hilliard, Ohio, that the country has “made real progress.”
U.S. jobless rate seen rising, offering Obama no relief (Reuters)
The U.S. unemployment rate probably rose in October as employers stepped up hiring only slightly, underscoring President Barack Obama's vulnerability in next week's presidential election.
Economy Set for Better Times Whether Obama or Romney Wins (Bloomberg)
Mitt Romney says Barack Obama’s policies will consign the U.S. to an extended period of sluggish economic growth, at best. The president says his Republican challenger’s plans will sow the seeds of another mammoth recession. Both are wrong. No matter who wins the election tomorrow, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009. “The die is cast for a much stronger recovery,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up.
The big proviso, according to Zandi and Yale University professor Ray Fair, is how the president-elect tackles the task of shrinking the $1.1 trillion federal-budget deficit. The Congressional Budget Office has warned that the U.S. will suffer a recession if more than $600 billion in scheduled government- spending reductions and tax increases -- the so-called fiscal cliff -- take effect next year.
Fiscal Fears Flip to U.S. From Europe as G-20 Sees Modest Growth (Bloomberg)
The focus of global finance chiefs pivoted toward fiscal challenges in the U.S. after three years of pressuring Europe to restore budget control. Two days before the U.S. presidential election, Group of 20 finance ministers and central bankers meet in Mexico City today with the U.S. facing a larger budgetary pullback than Europe in 2013 regardless of whether President Barack Obama or Republican nominee Mitt Romney wins the White House. How deep the U.S. will cut is a worry for foreign officials concerned that global growth will be hammered if the world’s largest economy topples over the so-called fiscal cliff of tax increases and spending cuts that will take effect next year unless Congress acts. The International Monetary Fund already forecasts the richest G-20 economies will pare deficits an average 1.1 percentage points of gross domestic product next year, up from this year’s 0.7 point.
“Those watching the clock on attempts to deal with very difficult economic problems are now seeing the clock tick down more quickly on the United States than on Europe, where there is a bit more breathing space,” said Daniel Price, a former G-20 adviser to President George W. Bush and now managing director of Rock Creek Global Advisors LLC, a Washington-based consultancy. A draft of the statement to be issued by the G-20 tomorrow identifies the potential for sharp fiscal tightening in the U.S. and Japan as dangers to already modest growth, according to an official from one of the countries who declined to be identified because the text hasn’t been finalized.
Services Probably Sustained Expansion: U.S. Economy Preview (Bloomberg)
Service industries in the U.S. probably kept growing in October, lifted by gains in consumer spending that are helping bolster the expansion, economists said before a report this week. The Institute for Supply Management’s non-manufacturing index, which covers almost 90 percent of the economy, was at 54.5 last month, little changed from 55.1 in September, according to the median forecast in a Bloomberg survey before tomorrow’s figures. Readings above 50 signal growth. Another report this week may show the trade deficit widened in September as exports cooled. Retailers Macy’s Inc. (M) and Kohl’s Corp. (KSS) may keep benefitting from a pickup in hiring and consumer sentiment heading into the holiday shopping season, while homebuilders enjoy a rebound in demand. Meanwhile, manufacturing is being restrained by a global slowdown and a lack of clarity on U.S. fiscal policy that is preventing the economy from strengthening further.
“The non-manufacturing part of the economy, which is the bulk of the economy, is a lot less weak,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics LLC in Valhalla, New York. “The manufacturing sector is more exposed to the weakening in foreign growth and exports. When you add it all up it’s still pretty sluggish growth.” The Tempe, Arizona-based ISM’s services report will be the last piece of economic data before the Nov. 6 election, when voters decide between giving President Barack Obama another four years and changing course with Republican challenger Mitt Romney.
China’s Non-Manufacturing Industries Signal Rebound Ahead (Bloomberg)
China’s services industries rebounded from the slowest expansion in at least 19 months, adding to manufacturing gains that indicate the world’s second-biggest economy is recovering from a seven-quarter slowdown. The purchasing managers’ index rose to 55.5 in October from 53.7 the previous month, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing on Nov. 3. The growth follows two reports last week that showed a pickup in manufacturing industries. The improvements may ease pressure on China’s leaders to roll out more stimulus as they start a once-a-decade power transfer this week. The nation’s central bank said the economy is expected to maintain “steady and relatively rapid growth” as earlier government policies to support expansion take effect.
“Investors expecting a big stimulus package after the Party Congress will likely be disappointed, although the new leaders will probably introduce some new projects,” said Huang Yiping, chief economist for emerging Asia at Barclays Plc in Hong Kong. Indicators including employment and inflation “suggest that even today, growth is probably not significantly below its potential,” he said. A separate services index will be released by HSBC Holdings Plc and Markit Economics in Beijing at 9:45 a.m. today. China’s economic expansion cooled to a three-year low of 7.4 percent in the third quarter as Premier Wen Jiabao’s campaign to curb consumer and property prices damped domestic demand and a sluggish global recovery capped the nation’s exports.
Hidden Billionaire in Indonesia Reaps Gains From Palm Oil (Bloomberg)
Gains from a share sale of Bumitama Agri (BAL) Ltd., an Indonesian palm oil producer, and the growth of mining in Southeast Asia’s largest economy have made Lim Hariyanto Wijaya Sarwono a billionaire. The 84-year-old chairman of Harita Group, a closely held conglomerate based in Jakarta, is worth at least $1.8 billion, according to the Bloomberg Billionaires Index. The billionaire and his son, Lim Gunawan Hariyanto, own about 53 percent of Bumitama Agri, whose shares have outpaced other companies that raised at least $50 million in an initial public offering in Singapore this year. Lim had also planned to sell shares in its nickel mining business in the city-state’s stock exchange.
“Driven by demand from Asia and principally China and India, the natural resources boom has created significant wealth both for established ultra-high net worth families already in the natural resources business, as well as for new fortune hunters riding on the commodities boom,” said Noor Quek, previously the head of business development in Southeast Asia at Citigroup Inc.’s private-banking unit, who now runs Singapore- based family office adviser NQ International Pte. The richest man in Indonesia is Eka Tjipta Widjaja, whose most valuable asset is his family’s 50 percent stake in Golden Agri-Resources Ltd., the world’s second-largest palm oil grower, according to the Bloomberg ranking. The country may surpass Germany and the U.K. by 2030 to be the world’s seventh-largest economy, generating $1.8 trillion in annual sales from agriculture, consumer and energy companies by that year, McKinsey & Co. said in a report in September.
Lim, whose family declined to comment on his net worth, has never appeared on any international wealth ranking.
Australian Services Industry Shrank for Ninth Month in October (Bloomberg)
Australia’s services industry contracted in October for a ninth straight month, reinforcing the central bank’s decision last month to cut its benchmark interest rate, a private survey showed. The performance of services index was 42.8 in October compared with 41.9 in September, Commonwealth Bank of Australia (CBA) and the Australian Industry Group said in Sydney today. Fifty is the dividing line between expansion and contraction. The Reserve Bank of Australia last month ended a three- meeting pause in rate reductions as it seeks to revive demand in industries outside a resource boom that policy makers say may crest at a lower level than previously expected. The strength of mining investment has boosted the local currency, which in turn has hurt tourism, education and retail industries.
The survey reflects the economy’s “significant structural adjustment due to the high Australian dollar, very cautious consumers, and the substantial fiscal tightening under way,” John Peters, senior economist economist in Sydney at Commonwealth Bank, said in a statement. RBA Governor Glenn Stevens and his board lowered the overnight cash-rate target by a quarter percentage point last month to 3.25 percent. Traders are pricing in a 49 percent chance policy makers will do so again tomorrow, according to swaps data compiled by Bloomberg. Today’s report showed the index’s gauge for sales edged down to 37.6 from 37.8, and the reading for new orders rose to 40.9 from 36.9. The employment indicator slid to 44.1 from 48.4, the report showed. Selling prices climbed to 44.7 from 43.7, while the wages measure dropped to 54.3 from 58.4, the report showed.
Today’s report, based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index. The report measures sales, new orders, deliveries, inventories and employment for companies such as banks, real-estate agents, insurers, restaurants, transport firms and retailers to compile the overall performance of services index.
Bunds Gain Second Week as Europe’s Economic Slump Deepens (Bloomberg)
German government bonds rose for a second week as reports showed Europe’s economic slump is deepening and Spain delayed asking for a bailout that may help reduce borrowing costs across the region. Germany’s two-year note yield dropped to the lowest in eight weeks yesterday as data revealed manufacturing in Spain and Italy contracted in October. Spanish bonds fell after the nation said a debt sale next week will include the longest maturity it has auctioned in 18 months. Bunds pared gains after hiring in the U.S. jumped more than economists predicted last month. Greece’s bonds slid as coalition government lawmakers squabbled over austerity demanded by its creditors. “The bund market is well supported given the prevarication by the Spanish about the sovereign bailout,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “The Greek negotiations are dragging on with no sign of a solution at the moment. That’s keeping bunds pretty well underpinned in the short term.”
Germany’s 10-year bund yield dropped nine basis points, or 0.09 percentage point, this week to 1.45 percent at 5 p.m. London time yesterday. The 1.5 percent security maturing in September 2022 gained 0.79, or 7.90 euros per 1,000-euro ($1,284) face-amount, to 100.46. Two-year yields fell five basis points from a week earlier to zero, the least since Sept. 6.
European Debt Crisis Seen Hindering Closer Trade Ties With Asia (Bloomberg)
European and Asian leaders will this week discuss a stalled trade agenda between the world’s fastest and slowest-growing regions, as the debt crisis undermines expansion of commercial ties. Europe’s economic woes may exacerbate protectionist tendencies that make it harder to expand trade with its biggest commerce partner at a time when the U.S. and Australia are forging new agreements, according to Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. Apart from a trade deal with South Korea, the 27-member European Union has seen talks lag with China, Japan, India and Southeast Asian countries since 2007. “Europe needs to improve its policy toward the entire Asian region in order to take up a greater part of Asia’s economic expansion, but we’re not really seeing it,” he said by phone. “The train is about to leave the station and Europe certainly isn’t on it.”
Europe’s leaders face pressure to boost ties with Asia after U.S. President Barack Obama declared a pivot to the region and Australian Prime Minister Julia Gillard unveiled a strategy last week to make her country “a winner in the Asian century.” At stake is safeguarding links that European economies are increasingly counting on, with the 19 Asian nations participating in a summit starting in Laos today accounting for 38 percent of the EU’s total trade last year, up from 30 percent a decade ago.
Euro Area Resolve for Single Currency Faces Greek Test (Bloomberg)
European leaders’ determination to keep Greece in the euro area will be tested this week as Prime Minister Antonis Samaras struggles to secure political support for measures to assure the country’s financial lifeline. Samaras pledged yesterday that the raft of wage and pension cuts in the latest austerity package will be the last and that Greek society won’t tolerate any more, according to comments made to lawmakers of his New Democracy party. The first parliamentary vote in Athens may come as early as Nov. 7. “The Greek risk could come to a head this week,” Holger Schmieding, chief economist at Berenberg Bank AG, wrote in a Nov. 2 note. “Greece matters as a trigger of potential contagion to the much bigger economies of Italy and Spain.”
Negotiations between Greece and its troika of international creditors have sought to keep the country inside the 17-member monetary union. In Athens, coalition leaders are squabbling over the terms of the latest package, while in other European capitals politicians are debating how to ease the country’s debt burden. As Samaras delivered his warning, he urged lawmakers to cast their votes with the nation in mind. An exit from the euro area would lead to an 80 percent drop in living standards from 2009 levels, while passage of the measures will free Greece from an investment “quarantine,” the prime minister said. “Those betting that we would fail, those betting on the drachma, for the first time are seeing that they are losing that bet,” he said, according to an e-mailed transcript.
