20110728 1051 Global Market Related News.

DJIA chart reading :  side way range bound.

Hang Seng chart reading : side way range bound.

Asian Stocks Fall Amid U.S. Debt Impasse, U.S. Durable Goods Order Decline (Source: Bloomberg)
Asian stocks fell for a third day this week as U.S. lawmakers failed to break a deadlock over raising the federal debt limit, and durable goods orders in the world’s biggest economy unexpectedly declined. Toyota Motor Corp. (7203), the No. 1 carmaker, slid 1.5 percent in Tokyo. BHP Billiton Ltd. (BHP), the world’s largest mining company by market value, retreated 1.8 percent in Sydney after oil and metal prices declined. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded lender, fell 1.7 percent. Hitachi Construction Machinery Co. jumped 3.9 percent in Tokyo after boosting its net income forecast. “In addition to the recent debt impasse in the U.S., investors need to be more conscious about the deterioration of the actual economy,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Risk avoidance is increasing again.”

Growth Slowed in 8 of 12 U.S. Regions: Fed (Source: Bloomberg)
The Federal Reserve said the economy grew at a slower pace in more parts of the country since the beginning of June as shoppers restrained spending and factory production eased. “Economic activity continued to grow,” the Fed said in its Beige Book survey released today in Washington. “However, the pace has moderated in many districts.” Growth slowed in eight of the Fed’s 12 regions, compared with four in the last survey, the central bank said. The report underscores Fed Chairman Ben S. Bernanke’s message to Congress earlier this month that maintaining record monetary stimulus is necessary to bolster the economy. Bernanke left the door open to additional action, including buying more government bonds, should the recovery appear in danger of stalling.

Bernanke May Need to Stay ‘Above Politics’ in Standoff Over Debt Ceiling (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke has steered clear of the political brawl over raising the U.S. debt limit. Lawmakers say he should keep his distance. The central banker would risk angering politicians and roiling markets should he get involved in talks, recommend a specific tax and spending plan or repeat the force of his 2008 pleas for a financial rescue, members of Congress from both parties said. “If you’re the Fed chairman, you’ve got to be above politics,” said Jon Kyl, the No. 2 Senate Republican. Staying above the debt-limit fray may give Bernanke and his colleagues a freer hand to inject monetary stimulus into a sputtering U.S. economy, or remove it later. The Fed’s $600 billion in bond purchases from November to June sparked a political backlash from Republicans who took control of the House of Representatives in last year’s elections.

U.S. May Lose AAA Rating Even With a Debt Deal, BlackRock, Templeton Say (Source: Bloomberg)
BlackRock Inc., Franklin Templeton Investments, Loomis Sayles & Co., Pacific Investment Management Co. and Western Asset Management said the U.S. faces losing its top-level debt rating as officials struggle to raise the $14.3 trillion borrowing limit and reduce spending. Investors are warning a cut is likely as President Barack Obama and House Speaker John Boehner argue over how to increase the debt ceiling, while also trying to curb borrowing. The government needs to boost the cap by Aug. 2 so it can keep paying its bills, according to the Treasury Department. The comments suggest that the world’s biggest bond managers are resigned to the fact that the U.S. rating will be cut. Standard & Poor’s, which has rated the U.S. AAA since 1941, said July 14 that the chance of a downgrade is 50 percent in the next three months and it may cut the nation as soon as August if there isn’t a “credible” plan to reduce the nation’s deficit.

Orders for U.S. Durable Goods Unexpectedly Fall as Inventory Growth Slows (Source: Bloomberg)
Orders for U.S. durable goods unexpectedly dropped in June, raising the risk that a slowdown in business investment will weigh on the world’s largest economy in the second half of the year. Bookings for goods meant to last at least three years fell 2.1 percent after a 1.9 percent gain the prior month that was smaller than last reported, the Commerce Department said today in Washington. Demand for business equipment, including machinery and computers, also dropped. Manufacturers face a slowdown in consumer spending just as they are poised to rebound from the parts shortages caused by Japan’s earthquake, indicating production may keep cooling. Companies are also cutting back on hiring, which may further temper household demand.

U.S. Stocks Drop on Debt-Ceiling Concern, Decline in Durable Goods Orders (Source: Bloomberg)
U.S. stocks fell, dragging the Standard & Poor’s 500 Index down the most in almost two months, as lawmakers indicated they were no closer to reaching a compromise on the federal debt limit. Technology and industrial stocks led declines among 10 S&P 500 groups. Caterpillar Inc. (CAT) and General Electric Co. (GE) decreased more than 2.4 percent after a government report showed orders for durable goods unexpectedly decreased. Corning Inc. (GLW) dropped 7.2 percent after reducing its forecast for glass demand amid lower television-sales projections. Amazon.com Inc. (AMZN) rallied 3.9 percent after its Kindle e-reader and digital-media services helped second-quarter results beat analysts’ estimates. The S&P 500 slipped 2 percent, its biggest decline since June 1, to 1,304.89 at 4 p.m. in New York. The Dow Jones Industrial Average retreated 198.75 points, or 1.6 percent, to 12,302.55.
Treasury yields, which dropped yesterday on speculation lawmakers would reach an accord on the nation’s debt ceiling, rose today as the political stalemate continued.

US home price rise fails to lift housing gloom
WASHINGTON, July 26 (Reuters) - Prices for new U.S. single family homes rose to a five-month high in June even as sales slipped, but recovery for the broader housing market continues to be frustrated by an oversupply of properties.
The Commerce Department said on Tuesday the median sales price for a new home increased 5.8 percent last month to $235,200. Compared to June of last year, prices rose 7.2 percent.

Partisan Washington sends investors to safety
LONDON, July 27 (Reuters) - Gold soared to a record high for the sixth time in two weeks  and the dollar collapsed to another record low against the Swiss franc as investors sought safety from a possible U.S. debt default.
"Our base scenario is still that some sort of eleventh hour deal will be reached. However, there is always a risk that they do not come to a compromise. The impact would be formidable and the U.S. economy may not be strong enough to take this," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

No Fear in China Options as Prices Drop (Source: Bloomberg)
Traders betting on gains in China’s biggest companies are pushing options prices to the most bullish level in almost two years on speculation higher interest rates won’t curb the world’s second-largest economy. The premium investors pay for puts to sell the iShares FTSE China 25 Index versus calls to buy has tumbled to 15 percent from 31 percent on June 22, according to data on three-month options compiled by Bloomberg, and fell as low as 13 percent this week. That compares with the average of 20 percent since the start of 2005 for the U.S.-traded fund tracking Chinese companies listed in Hong Kong. “It’s almost like there’s no fear in China,” Jonathan Masse, a money manager at Walnut Creek, California-based Baochuan Capital Management LLC, which invests in Chinese stocks and options, said in an interview. “That’s where the world’s growth is coming from. People are more confident, so there’s less need for them to protect themselves from downside.”

Japanese Stocks Drop for Second Day on U.S. Goods Orders, Debt Stalemate (Source: Bloomberg)
Japanese stocks dropped for a second day after U.S. durable goods orders unexpectedly declined and a stalemate between Democrats and Republicans dragged on ahead of a deadline next week for raising the federal debt limit. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, sank 2 percent. Nikon Corp., a camera maker that gets about a quarter of its revenue from Europe, sank 2 percent after Greece had its debt rating cut by Standard & Poor’s and the euro weakened against the yen. Inpex Corp., the nation’s No. 1 oil explorer by market value, fell 1.7 percent after crude prices declined. The Nikkei 225 (NKY) Stock Average fell 1.1 percent to 9,936.10 as of 9:02 a.m. in Tokyo. The broader Topix lost 1.1 percent to 849.85, with more than nine shares dropping for each that gained.

South Korean Current-Account Surplus Widens as Exports Withstand Won Gains (Source: Bloomberg)
South Korea’s current-account surplus rose to an eight-month high in June as global demand for cars and steel boosted exports. The surplus was $2.99 billion, compared with a revised $2.18 billion in May, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income. The Bank of Korea raised its forecast for this year’s current-account surplus to $15.5 billion from $11 billion on July 15, citing strong export growth and stabilizing raw material costs. Goldman Sachs Group Inc. said July 19 that the won may keep appreciating as the government seeks to damp inflation and exports benefit from a recovery in Japan and a “moderate” acceleration in U.S. growth.

S.Korea Q2 growth slows; exports, construction prove to be drags
SEOUL, July 27 (Reuters) - South Korea's economic growth eased slightly more than expected in the second quarter on weaker exports although a sustained expansion in domestic demand reinforced chances the central bank would have to raise rates again.
Gross domestic product grew a seasonally adjusted 0.8 percent in the April-June period from the first quarter, slightly less than the 0.9 percent seen in a Reuters poll, the central bank's advance estimates showed on Wednesday, slower than a revised 1.3 percent rise in the January-March period.

Greek Central Bank Head Urges Government to Exceed Targets for Budget Cuts (Source: Bloomberg)
Bank of Greece Governor George Provopoulos called on the government to exceed its budget- cutting targets to restore investor confidence in the debt- ridden nation. The European Union’s second rescue package for Greece provides “breathing space” that should be used “not only to put the program back on track, but to go beyond the targets of the program,” Provopoulos, who sits in the European Central Bank’s Governing Council, said in an interview in Athens yesterday. “If we did that -- and we certainly can do that -- we would help turn around the psychology of the market.” Greek lawmakers on June 29 backed a 78 billion-euro ($113 billion) austerity plan that was a condition for receiving another EU bailout. The program aims to reduce the budget deficit to 1.1 percent of gross domestic product in 2015 from 10.5 percent last year. Spanish and Italian bond yields are nevertheless rising on investor concern that the crisis will spread as Greece teeters on the brink of a debt default.

Spain’s Biggest-Deficit Region Rules Out Tax Increases to Tame Shortfall (Source: Bloomberg)
Castilla-La Mancha, which has Spain’s biggest regional deficit, aims to cut the shortfall fivefold this year without raising taxes as it stays shut out of debt markets, President Maria Dolores de Cospedal said. Cospedal said in an interview today she will seek to shrink a deficit that reached 6.5 percent of regional gross domestic product last year to meet a goal of 1.3 percent in 2011. Her government there currently has enough cash to pay wages through September, she said. “Of course we are going to try to meet the target, it’s our obligation,” Cospedal, who is also deputy leader of the opposition People’s Party, said at the party’s headquarters in Madrid. “We rule out raising taxes, it’s against what we want and believe. Spain has never emerged from an economic crisis by raising taxes.”

Greece Will Default on Debt After EU Plan: S&P (Source: Bloomberg)
Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill of a second bailout agreed to last week in Brussels, Standard & Poor’s said. The rating company also cut its ranking for Greece to CC, two steps above default, from CCC, according to a statement published in London today. The outlook on the debt is negative. “The proposed restructuring of Greek government debt would amount to a selective default under our rating methodology,” S&P said. “We view the proposed restructuring as a ‘distressed exchange’ because, based on public statements by European policy makers, it is likely to result in losses for commercial creditors.”

Brazil Stocks Plunge Into Bear Market on Inflation Surge, Investment Taxes (Source: Bloomberg)
Brazilian stocks plunged into a bear market after new measures to stem currency gains and concern that quickening inflation will squelch earnings growth pushed the benchmark index down 20 percent from a November high. The Bovespa fell 1.8 percent in Sao Paulo to 58,288.46 at the 4:15 p.m. New York time close, extending the worst performance this year among major equity markets. A bear market is typically defined as a drop of at least 20 percent from the preceding bull-market peak. The real tumbled 1.2 percent to 1.5582 per dollar today after the government said it will levy a tax on some investments in currency derivatives. “These measures reinforce the negative sentiment that foreign investors already had on Brazil,” said Eduardo Favrin, who helps manage $3.2 billion as head of equities at HSBC Global Asset Management’s Brazil unit in Sao Paulo.

Most Emerging-Market Stocks Fall on U.S. Concern; Lira Rallies (Source: Bloomberg)
Most emerging-market stocks fell as concern that the U.S. may lose its top credit rating overshadowed signs of improving corporate earnings. The MSCI Emerging Markets Index slipped 0.7 percent to 1,148.99 at 4:40 p.m. in New York, with 465 stocks retreating and 308 gaining. Brazil’s Bovespa index plunged into a bear Market, falling 1.8 percent and extending the worst performance this year among major equity markets. Argentina’s Merval index sank 2.9 percent, the most in eight months. Russia’s benchmark slid for a fourth straight day while India’s Sensitive Index declined for a second day. The lira strengthened after Prime Minister Recep Tayyip Erdogan said the Turkish currency, this month’s worst performer in emerging markets, will find a “middle ground.”
Profit growth helped lift the MSCI emerging-market index to its highest close since July 8 yesterday even as U.S. lawmakers struggled to reach an agreement to raise the federal debt limit before an Aug. 2 deadline. Net income at the 100 companies in the MSCI index that reported results this month rose 20 percent on average, topping analysts’ estimates, data compiled by Bloomberg show.

FOREX-Debt deadlock dents dollar, lifts Swiss franc, yen
LONDON, July 27 (Reuters) - The dollar fell to a record low against the Swiss franc and a four-month low against the yen on Wednesday as talks aimed at averting a U.S. debt ratings downgrade or default remained deadlocked.
With Democrat and Republican lawmakers still unable to agree on a plan to raise the government's $14.3 trillion debt ceiling before an Aug. 2 deadline, the dollar stayed close to a three-month low versus a currency basket, More dollar falls were seen likely if no deal is reached.