20110804 1006 Global Market Related News.

GLOBAL MARKETS-Stocks tumble as growth, debt fears intensify
LONDON, Aug 3 (Reuters) - World stocks tumbled towards five-month lows  and top-rated government bonds rallied as worries grew that fiscal cutbacks and stagnating factory output would prolong a global economic slowdown and aggravate Europe's debt crisis.
"Disappointing economic data on both sides of the Atlantic, as well as surging Italian and Spanish bond yields, has seen risk appetite plummet as pessimism about the global recovery starts to take hold with a vengeance," CMC Markets analyst Michael Hewson said.

Asian Stocks Swung Between Gains And Losses (Source: Bloomberg)
Most Asian stocks gained after Japan intervened in the foreign-exchange market to sell yen. Stocks earlier fell amid concern the U.S. economic recovery is faltering following weak economic data. Canon Inc., the world’s biggest camera maker, advanced 2 percent in Tokyo after Japan’s Finance Minister Yoshihiko Noda said the country intervened to stem the yen’s gains against the dollar. Hitachi Ltd. and Mitsubishi Heavy Industries Ltd. both jumped at least 3 percent after the two companies were said to be in talks to merge some businesses. BHP Billiton Ltd., the world’s No. 1 mining company by market value, increased 0.6 percent in Sydney after copper and oil prices increased. The MSCI Asia Pacific Index fell 0.2 percent to 133.37 as of 10:14 a.m. in Tokyo, after falling as much as 0.3 percent and gaining as much as 0.2 percent.
More than two stocks rose for each that fell on the gauge, which slumped 1.6 percent last week on concern the U.S. Congress would be unable to reach an agreement to raise the nation’s debt ceiling before yesterday’s deadline.

U.S. Service Industries Grow at Slowest Pace in 17 Months on Job Prospects (Source: Bloomberg)
Service industries expanded in July at the slowest pace in 17 months as orders and employment cooled, indicating the biggest part of the U.S. economy had little spark to begin the second half of the year. The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, dropped to 52.7 from 53.3 in June. Readings above 50 signal expansion, and the median projection in a Bloomberg News survey was for 53.5 in July. Companies hired fewer workers last month than in June, a report from ADP Employer Services showed. The absence of sustained strength in services along with limited manufacturing growth adds to evidence of a broader economic slowdown. Package-delivery company United Parcel Service Inc. (UPS) is among businesses bracing for weaker demand as unemployment holds above 9 percent and wages stagnate.

JPMorgan Chase Cuts U.S. Third-Quarter GDP Forecast to 1.5% on Consumption (Source: Bloomberg)
JPMorgan Chase & Co. cut its forecast for U.S. economic growth in the third quarter by a percentage point to 1.5 percent, partly because of a slowdown in consumer spending, chief U.S. economist Michael Feroli wrote in a note today. Feroli also lowered the forecast for fourth-quarter growth to 2.5 percent from a prior estimate of 3 percent. The world’s largest economy will expand 2 percent in the first six months of 2012, less than a previous projection of 2.5 percent. With the economy expanding at that pace, the jobless rate will hold at 9 percent or above until the third quarter of 2012, he said. Recent production data wasn’t “setting up well” for the current quarter, while early surveys suggested activity “may have stalled” amid wrangling over the debt-ceiling extension, Feroli said.

Odds of Renewed U.S. Recession Seen Rising by Majority of Economic Panel (Source: Bloomberg)
The two-year-old U.S. recovery’s staying power may be diminishing as consumers and the government pare spending, say five of the nine economists on the academic panel that dates recessions. “This economy is really balanced on the edge,” Harvard University economics professor Martin Feldstein, a member of the Business Cycle Dating Committee of the National Bureau of Economic Research, said yesterday in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “There’s now a 50 percent chance that we could slide into a new recession. Nothing has given us much growth.” A greater-than-expected slowdown in the first half of 2011 poses risks for the world’s largest economy, said economist Robert Hall of Stanford University, the panel’s chairman. Gross domestic product climbed at a 1.3 percent annual rate from April through June after a 0.4 percent gain in the prior quarter that was less than earlier estimated, Commerce Department figures showed July 29.

Balanced-Budget Bill Fails Fiscal Test: Stephen L. Carter (Source: Bloomberg)
At a Washington event in the early 1990s, I happened to find myself seated beside an official fairly high in the White House of George H.W. Bush. We got to chatting, and he waxed poetic about a constitutional amendment requiring the federal government to balance its annual budget. He even had a new draft in his pocket, words he had scribbled on a cocktail napkin. I don’t recall the precise language, but his version was short, and began something like this: “Except in time of war, the federal government shall not ..." A free and frank exchange of views ensued. Fast-forward to today: Republican lawmakers want a quick vote on a balanced-budget amendment (or BBA, as the cognoscenti, I am sad to report, are now calling it). This is an understandable demand given Congressional Budget Office estimates of near trillion-dollar deficits into the near future.

Shipping Boom Seen for U.S. Ports Catering to Japan Needs: Freight Markets (Source: Bloomberg)
Longshoremen at ports in Washington state and Vancouver are set to load more timber and lumber onto vessels destined for Japan as the world’s third-biggest economy rebuilds from a $220 billion natural disaster. The March 11 9.0-magnitude earthquake and resulting tsunami that left more than 20,000 people dead or presumed so will require the biggest importation of logs, timber and plywood since 2008, according to Wood Resources International LLC., a forest-industry consulting firm based in Bothell, Washington. Increased Asian demand may be the lone bright spot for dry- bulk shippers including Hyundai Merchant Marine Co. and Mitsui O.S.K. Lines Ltd. that are suffering from a glut of new ships that’s pushing down charter rates. For timber companies such as Weyerhaeuser Co. (WY) and Rayonier Inc., it’s a source of strength at a time when the U.S. housing market is floundering.

Treasury Yield Seven Basis Points From Eight-Month Low Before Jobs Report (Source: Bloomberg)
Treasury yields were seven basis points away from an eight-month low before government reports today and tomorrow that economists said will show the nation isn’t creating enough jobs to reduce the unemployment rate. U.S. securities have outperformed an index of bonds around the world as investors sought the relative safety of America’s debt. Bank of America Merrill Lynch’s Global Broad Market Index returned 2.53 in the past three months, versus 3.87 percent for the U.S. Treasury Master index. “There’s more to go” for the U.S. bond rally, said Hideo Shimomura, who helps oversee the equivalent of $77.9 billion as Tokyo-based chief fund investor at Mitsubishi UFJ Asset Management Co., a unit of Japan’s biggest bank. “The U.S. is in slowdown mode.”

Dollar Falls a Second Day Versus Euro as Slowdown Spurs Easing Prospects (Source: Bloomberg)
The dollar fell versus the euro for a second day on speculation the Federal Reserve will consider increasing monetary stimulus to counter a slowdown in the U.S. economy. The U.S. currency dropped against most of its major counterparts before reports forecast to show U.S. initial jobless claims rose and the unemployment rate remained above 9 percent. The yen held a two-day decline against the euro on prospects the Bank of Japan will follow its Swiss counterpart in easing monetary policy to curb currency strength. “The dollar will still continue to fall significantly,” said Kurt Magnus, executive director of currency sales at Nomura Holdings Inc. in Sydney. In the U.S. there’s “no recovery whatsoever. I think interest rates will remain zero for the whole of 2012.”

Dollar’s Reserve Status Is Waning, U.S. Treasury Borrowing Committee Says (Source: Bloomberg)
The committee of bond dealers and investors that advises the U.S. Treasury said the dollar’s status as the world’s reserve currency “appears to be slipping” in quarterly feedback presented to the government. The Treasury Borrowing Advisory Committee, which includes representatives from firms ranging from Goldman Sachs Group Inc. to Pacific Investment Management Co., said the outperformance of haven currencies and those from emerging nations has aided in the debasement of the dollar’s reserve status, according to comments included in discussion charts presented ahead of the quarterly refunding. The Treasury published the documents today. “The idea of a reserve currency is that it is built on strength, not typically that it is ‘best among poor choices’,” page 35 of the presentation made by one committee member said. “The fact that there are not currently viable alternatives to the U.S. dollar is a hollow victory and perhaps portends a deteriorating fate.”

Stocks in U.S. Climb, Preventing Longest Retreat of Dow Average Since 1978 (Source: Bloomberg)
U.S. stocks advanced, preventing the longest Dow Jones Industrial Average slump since 1978, amid speculation the Federal Reserve may consider another economic stimulus program to prevent a recession. MasterCard Inc. (MA), the second-biggest payments network, gained 13 percent after profit rose 33 percent as customers’ spending increased. Coca-Cola Co. (KO) and General Electric Co. (GE) added at least 1.5 percent, leading the Dow’s gain. Technology stocks in the Standard & Poor’s 500 Index climbed 1.2 percent, the most among 10 groups. Sprint Nextel Corp. (S) jumped 3.8 percent as Macquarie Group Ltd. raised its recommendation for the shares. The Dow rose 29.82 points, or 0.3 percent, to 11,896.44 at 4 p.m. in New York after posting a 166-point loss earlier, which was the ninth straight drop. The S&P 500 advanced 0.5 percent to 1,260.34, snapping a seven-day decline.

Obama says more needed to boost U.S. economy
WASHINGTON, Aug 2 (Reuters) - President Barack Obama said on Tuesday a just-passed bill to raise the U.S. debt ceiling and cut spending was a first step toward ensuring the United States lives within its means but that more was needed to rebuild the world's largest economy.
Speaking at the White House, Obama made clear he expects tax reform to emerge from deliberations by a new committee of Democrats and Republicans to be established by the legislation and that a "balanced approach" in which the wealthier pay more taxes is needed for more deficit reduction.

U.S. automakers warn of fragile demand
DETROIT, Aug 2 (Reuters) - U.S. auto sales ticked higher in July, but the industry's top salesmen cautioned the prospect for a second-half recovery remained clouded with consumers hurting in a weak economy.
Chrysler's U.S. sales chief, Reid Bigland, called the market "tougher than a cheap steak," while his equivalent at General Motors Co , Don Johnson, said "consumer confidence is pretty fragile right now because of everything that's happened in the past few months."

China’s Non-Manufacturing Industries Expanded in July, PMI Surveys Show (Source: Bloomberg)
A Chinese non-manufacturing index rose for the first time in three months in July, indicating some industries are withstanding the government’s campaign to cool inflation in the world’s fastest-growing major economy. A purchasing managers’ index rose to 59.6 from 57 in June, the China Federation of Logistics and Purchasing said on its website today. A reading above 50 indicates growth. A separate measure released by HSBC Holdings Plc and Markit Economics showed a moderating pace of expansion. Today’s data may ease concerns that Premier Wen Jiabao’s policies to rein in consumer and property prices will trigger a deeper slowdown in the economy that’s been the main contributor to global growth. The government’s drive to boost wages and build 10 million low-income housing units this year may help counter weakening demand for exports as the U.S. and European recoveries falter.

Japanese Stocks Swing Between Gains, Losses on U.S. Economy: Hitachi Rises (Source: Bloomberg)
Japanese stocks swung between gains and losses as weakening economic data in the U.S. increased concern the world’s biggest economy is faltering while a report on merger talks between Hitachi Ltd. (6501) and Mitsubishi Heavy Industries Ltd. (7011) boosted the stocks. Honda Motor Co., a carmaker which gets more than 40 percent of sales in North America, dropped 1.7 percent after a report showed U.S. service industries expanded in July at the slowest pace since February 2010. Hitachi and Mitsubishi Heavy Industries rose at least 3 percent after a person familiar with the matter said they are discussing merging some businesses, following a Nikkei newspaper report on the possible deal. Japan Steel Works Ltd. (5631), a maker of machinery for castings, rallied 6.8 percent after the company said first-quarter profit jumped.
The Nikkei 225 Stock Average gained 0.2 percent to 9,652.28 as of 9:45 a.m. in Tokyo, after falling as much as 0.2 percent. The broader Topix index was little changed at 826.80 with about four stocks advancing for every three that retreated.

Australia Rate-Rise Signal Unheeded by Bond Market Seeing Cut by Year-End (Source: Bloomberg)
Reserve Bank of Australia Governor Glenn Stevens signaled he will raise interest rates when global risks dissipate, a message dismissed by a bond market seeing an escalation in risks among the nation’s trading partners. Stevens held the overnight cash rate target at 4.75 percent yesterday and for the first time since October -- a month before the last increase in borrowing costs -- cited in his statement the prospect of raising the benchmark. He indicated an “acute sense of uncertainty in global financial markets” had stayed his hand. With U.S. growth struggling to rebound from a near-stall, and ratings companies further cutting euro-area debt grades, interbank cash-rate futures are pricing in an RBA rate cut by year-end. At stake for who’s right on the outlook are prospects for mortgage holders and retailers, who will be hit by any further boost to the developed world’s highest borrowing costs.

Aussie Dollar Weakens for a Sixth Day as Traders Increase Rate Cut Bets (Source: Bloomberg)
Australia’s currency declined for a sixth day against the dollar as signs that growth in the South Pacific nation is slowing prompted traders to increase bets on interest-rates cut by the central bank. The so-called Aussie weakened as swaps traders priced in 69 basis points of rate cuts by the Reserve Bank of Australia following data yesterday that showed an unexpected decline in retail sales. New Zealand’s dollar fell against the greenback as Asian stocks failed to extend an advance in U.S. equities, even after employment rose in the second quarter at the fastest annual pace since 2007. “The market is still concerned about the possibility of a sharper than expected slowdown” in the Australian economy, said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “There’s been some spillover from poor retail sales data.” yesterday,’’ said Callum Henderson, global head of currency

SNB Cuts Rate to Curb ‘Overvalued’ Swiss Franc (Source: Bloomberg)
The Swiss central bank unexpectedly cut interest rates and said it will increase the supply of francs to money markets to curb the “massively overvalued” currency. The franc dropped from a record. The Swiss National Bank lowered its target for the three- month Libor to “as close to zero as possible” from 0.25 percent. The Zurich-based central bank said it will also expand banks’ sight deposits, or cash which can be withdrawn on demand, to 80 billion Swiss francs ($104 billion) from 30 billion francs and repurchase outstanding SNB Bills, according to an e-mailed statement today. The franc, considered a haven in times of turmoil, has surged 10 percent against the euro over the past two months as Europe’s debt crisis worsened, hurting Swiss exports and economic growth. The SNB joins the U.S. Federal Reserve and the Bank of Japan, which have also cut their benchmark rates to near zero in an effort to boost their economies.

Zapatero Interrupts Spanish Vacation on First Day for Talks on Debt Crisis (Source: Bloomberg)
Spanish Prime Minister Jose Luis Rodriguez Zapatero returned to Madrid to discuss the worsening fiscal crisis with ministers, less than a day after departing for a vacation in the south of the country. The premier was back at his desk in Moncloa Palace hours after his office said he left the Spanish capital for a vacation in the southern region of Andalusia yesterday. Zapatero maintained close contact with other European leaders and the European Commission and met with Finance Minister Elena Salgado and government spokesman Jose Blanco after the country’s borrowing costs approached the 7 percent mark that heralded bailouts of Greece, Portugal and Ireland. Political leaders are responding to the latest stage of the European debt crisis that has pushed Spanish and Italian 10-year borrowing costs above 6 percent, stoking concern they could become the next victims of Europe’s debt crisis.

Berlusconi Drives Italian Growth Agenda as Bond Yields Stoke Debt Concern (Source: Bloomberg)
Prime Minister Silvio Berlusconi will meet with executives, bankers and unions to discuss overhauling Italy’s economy as surging bond yields stoke concern the country might be the next victim of Europe’s debt crisis. The meeting in Rome today comes after the premier, rejecting calls to resign, addressed both houses of Parliament yesterday on Italy’s economy. Berlusconi said he’d seek to liberalize the labor market, adding that the country is “up to the task” of tackling the debt crisis as its economic fundamentals are solid. “Our banks are liquid, they passed the stress tests, and Italian families are less indebted than others among the major economies,” he told the lower house Chamber of Deputies. “If to our deficit we add the savings of our families, we’d be second in the European Union in terms of solidity.”

Berlusconi Says Italy Is ‘Up to the Task’ on Debt Crisis as Economy Solid (Source: Bloomberg)
Prime Minister Silvio Berlusconi, facing record bond yields and calls for his resignation, said Italy is “up to the task” of tackling the debt crisis as its economic fundamentals are solid. “Our banks are liquid, they passed the stress tests, and Italian families are less indebted than others among the major economies,” Berlusconi said today in a speech to the Chamber of Deputies, the lower house of Parliament. “If to our deficit we add the savings of our families, we’d be second in the European Union in terms of solidity.” Pier Luigi Bersani, leader of the main opposition Democratic Party, repeated a call for the premier to resign. Berlusconi, who reiterated that his government will see out the end of its term in 2013, is due to address the Senate at 7:30 p.m. in another speech on the state of Italy’s economy.

FOREX-Swiss franc hits new highs on debt, growth woes
NEW YORK, Aug 2 (Reuters) - The safe-haven Swiss franc soared to record highs against the dollar and euro on Tuesday, with more gains likely as investors fretted about sluggish global growth and debt loads in the United States and Europe.
While Congress buried the specter of a U.S. debt default by passing a deficit-cutting package, concerns lingered of a possible downgrade of the top-notch American credit rating despite soothing comments from Fitch.