20110809 1447 Global Market Related News.

GLOBAL MARKETS-Shares hit by U.S. unease; ECB supports Italy, Spain
LONDON, Aug 8 (Reuters) - World stocks racked up more losses on Monday on deep-rooted jitters about the U.S. ratings cut, but signs the European Central Bank was buying Italian and Spanish debt gave some respite to battered bond markets.
"The downgrade to the U.S. is not great. These markets are going to remain unsettled for a while, we had recommended investors to raise cash in anticipation of this volatility," said Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin.

Asian Stocks Extend Biggest Slide Since 2008 as U.S.-Debt Rout Continues (Source: Bloomberg)
Asian stocks fell, with the region’s benchmark index plunging the most in almost three years, as the ripple effects of Standard & Poor’s downgrade of U.S. debt continued to roil global equity markets. Toyota Motor Corp., the world’s largest carmaker, retreated 4.9 percent in Tokyo. Sony Corp. (6758), which earns almost half its revenue in the U.S. and Europe, slumped 4.2 percent. Samsung Electronics Co., South Korea’s No. 1 exporter of consumer electronics, fell 7.2 percent in Seoul. BHP Billiton Ltd. (BHP), the biggest global mining company, sank 3.9 percent in Sydney as commodity prices tumbled. National Australia Bank Ltd. (NAB), the country’s largest business lender, slumped 4.3 percent even after saying third-quarter profit surged. The MSCI Asia Pacific Index, which last week entered a so- called correction after falling more than 10 percent from its May peak, slumped as much as 5.5 percent.
It was down to 4.9 percent to 116.84 as of 11:38 a.m. in Tokyo. Just 13 of the 1,018 companies on the gauge advanced. All industry groups tracked by the measure dropped.

Group of Seven’s Tools May Be Wrong Fit for Stocks Seeing Recession Danger (Source: Bloomberg)
The Group of Seven nations’ pledges of liquidity injections and exchange-rate cooperation may be ill-suited to addressing the concern at the heart of the past week’s stock-market rout: another global recession. Currency markets lack the systemic misalignment of the sort seen with the dollar strength in 1985 that distorted global demand, according to Atsushi Ito, a senior rate strategist in Tokyo at UBS AG. With fiscal policies across developed nations restrained by attempts to shore up sovereign ratings, and U.S. companies and households boosting their savings, the challenge this time may be lack of a source of demand to sustain global growth.
While European banks have faced risks of losses on securities issued by nations from Greece to Italy, global money markets show little sign of the types of strains experienced in 2008 that the G-7 combated by pumping cash into the system. The U.S. Libor-OIS spread -- a stress barometer for dollar-based bank-to-bank lending markets -- stood at 0.20 percentage point today, down from 0.22 percentage point a year ago.

G-7 Vows to Take ‘All Necessary Measures’ to Stabilize Economies, Markets (Source: Bloomberg)
Group of Seven nations sought to head off a collapse in investor confidence after the U.S. sovereign- rating cut and a slump in Italian and Spanish debt intensified threats to the global economy. G-7 finance ministers and central bank governors pledged in a statement to “take all necessary measures to support financial stability and growth.” Officials will inject liquidity and act against disorderly currency moves as needed, they said after a call late yesterday European time. The G-20, which includes emerging markets, issued a similar communique. Stocks extended declines that have wiped $5.4 trillion off equity markets since July 26, driven investors to Treasuries and gold and rattled consumer confidence already hurt by European fiscal tightening and elevated American unemployment. The European Central Bank signaled it will buy Italian and Spanish bonds, and Japan warned it may intervene again to stem gains in the yen.

Global Banks Poised to Slash 101,000 Jobs in Fastest Reductions Since 2008 (Source: Bloomberg)
The biggest global banks are cutting jobs at the fastest rate since 2008 as a weak U.S. economy squeezes revenue, regulators push firms to hold more capital and companies restructure businesses to improve profitability. The 50 largest banks, including HSBC Holdings Plc (HSBA), Credit Suisse Group AG (CSGN) and Bank of America Corp. (BAC), disclosed plans for almost 60,000 reductions since Jan. 1, according to company statements and data compiled by Bloomberg Industries. At that pace, they’ll cut more than 101,000 jobs this year -- the most since 192,000 positions were targeted in 2008 amid loan losses, a global credit crunch and unprecedented government bailouts. HSBC’s aim to shed 30,000 workers, unveiled by the London- based firm on Aug. 1, was the single biggest job-cutting announcement since Bank of America said in December 2008 that it would eliminate as many as 35,000 positions, the data show.

Central Bankers Confront Decision on Which Risk Scares Them Most (Source: Bloomberg)
Central bankers from the U.S. to China may have to decide which is their worst nightmare: the Great Inflation of the 1970s or Great Depression of the 1930s. As stock markets slump worldwide and the global economy sputters, monetary-policy makers are struggling to come up with new strategies to spur growth. The catch is that they risk adding to price pressures if they pump more money into the financial system as inflation climbs. It’s what “are you most scared of” -- the risk of spiraling prices or a plunging economy, said Vincent Reinhart, who was the Federal Reserve’s chief monetary-policy strategist from 2001 until 2007 and is now a resident scholar at the American Enterprise Institute in Washington.

Bernanke May Try to Boost Confidence Amid Financial Turmoil (Source: Bloomberg)
Federal Reserve officials tomorrow may move to bolster investor confidence after an unprecedented downgrade to America’s credit rating and concern the U.S. may be headed for a recession sent global share prices tumbling. Chairman Ben S. Bernanke and his colleagues may prolong a pledge to maintain record monetary stimulus, said economists at JPMorgan Chase & Co., BNP Paribas and Goldman Sachs Group Inc. The Fed could do so by making a commitment to hold its $2.87 trillion balance sheet steady for an “extended period.” The Fed also may replace shorter-term securities with longer maturities to reduce rates on longer-term debt. “Those steps are all about bolstering confidence,” said Michael Feroli, chief U.S. economist at JPMorgan Chase in New York and a former Fed economist. “It wouldn’t do tons to alter economic and financial conditions, but the perception that the Fed will act and do something is reassuring.”

Employers Ready to Hire in U.S. Can’t Find Qualified Workers Among Jobless (Source: Bloomberg)
Bill Begal says he has spent almost $2,000 since March on help-wanted ads in newspapers, websites, and state employment services up and down the East Coast to find sales and administrative staff for his Rockville, Maryland-based disaster-cleanup company. “I want people to come out and work for me,” said Begal, 42, whose teams responded to hurricanes Katrina and Wilma, which struck New Orleans and Florida in 2005. “Where are they? I just don’t see it.” Behind the highest unemployment levels in more than a quarter century is an unexpected twist: Employers like Begal and Microsoft Corp. (MSFT) are having a difficult time filling some positions, even as 13.9 million Americans remain without work. The problem is especially acute in pockets such as Washington, D.C., and North Dakota, which bucked the worst of the 18-month recession that ended June 2009, and in industries such as technology where competition for recruits remains high.

Geithner Decision to Stay Gives ‘Continuity’ Amid Market Turmoil (Source: Bloomberg)
Timothy F. Geithner’s decision to stay on as Treasury secretary allows the Obama administration to maintain continuity in economic policy amid investor concern that the two-year-old expansion may be stalling. Geithner, the last remaining member of President Barack Obama’s original economic team, will continue at least through the 2012 election, according to an administration official who wasn’t authorized to comment publicly. Geithner, 49, made his announcement after months of speculation over his future. He told White House officials this year that he was considering leaving once a deal to raise the nation’s borrowing limit was reached. Obama signed an increase in the limit on Aug. 2.

S&P Cuts AAA Muni Ratings Linked to U.S. (Source: Bloomberg)
Standard & Poor’s lowered the AAA ratings of thousands of municipal bonds tied to the federal government, including housing securities and debt backed by leases, following its Aug. 5 downgrade of the U.S. The rating company assigned AA+ scores to securities in the $2.9 trillion municipal bond market including school- construction bonds in Irving, Texas; debt backed by a federal lease in Miami; and a bond series for multifamily housing in Oceanside, California. Olayinka Fadahunsi, an S&P spokesman, said he couldn’t provide a dollar figure on the affected debt. S&P also cut ratings on securities backed by Fannie Mae and Freddie Mac, prerefunded issues and munis repaid by using federal assets, also known as defeased or escrow bonds. No state general-obligation ratings were affected and the company said some may remain unchanged.

Rogoff: Fed Will Embark on QE3, Act ‘Decisively’ (Source: Bloomberg)
Federal Reserve policy makers are likely to embark on a third round of large-scale asset purchases, moving “more decisively” to secure the U.S. recovery, said Harvard University economist Kenneth Rogoff. “They certainly should do something right away,” said Rogoff, a former International Monetary Fund chief economist who attended graduate school with Fed Chairman Ben S. Bernanke. It’s “hard to know” if Bernanke would immediately be able to gain the support of Federal Open Market Committee members, Rogoff said in an interview today on Bloomberg Television. The FOMC meets today in Washington a day after the worst day for U.S. stocks since December 2008. Bernanke last month outlined policy options including additional asset purchases or strengthening the commitment to low interest rates after the first two rounds of so-called quantitative easing failed to keep the unemployment rate below 9 percent.

U.S. Stocks Fall as S&P 500 Has Biggest Slump Since November ’08 (Source: Bloomberg)
U.S. stocks tumbled, giving the Standard & Poor’s 500 Index its worst slump since November 2008, amid concern that a downgrade of the nation’s credit rating by S&P may worsen an economic slowdown. The 10 groups in the S&P 500 fell between 1.7 percent and 5.6 percent. Ford Motor Co. (F), Dow Chemical Co. (DOW) and Caterpillar Inc. (CAT) slumped at least 5.1 percent, pacing losses in stocks most- tied to the economy. Bank of America Corp. (BAC) tumbled 15 percent to lead a gauge of financial companies lower. Energy shares had the second-biggest decline in the S&P 500, sinking 4.4 percent as oil fell to an eight-month low. Newmont Mining Corp. (NEM) rallied 4.9 percent after gold climbed to a record. The S&P 500 fell 3.7 percent to 1,154.64 at 12:29 p.m. in New York. The gauge slumped 8.5 percent in three days, the most since November 2008, and fell to the lowest since Oct. 4, on a closing basis.
The Dow Jones Industrial Average slid 339.33 points, or 3 percent, to 11,105.28. Equity indexes extended losses after S&P changed the outlook for Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) to "negative" from "stable."

U.S. stock index futures tumble on S&P downgrade
LONDON/NEW YORK, Aug 8 (Reuters) - U.S. stock index futures fell sharply on Monday, pointing to further declines in equities, as Standard & Poor's decision to cut the country's top-tier AAA credit rating rattled already jittery investors.
"It won't be long now before other ratings agencies follow suit, considering the state of the U.S.'s finances. One thing is for certain, and that's that volatility will continue to remain high, making trading conditions difficult," said Angus Campbell, head of sales at Capital Spreads.

Stocks Could Rebound From Downgrade Plunge, U.S. Equity Strategists Say (Source: Bloomberg)
America’s debt downgrade won’t keep the nation’s stocks down in the long term, and investors should consider buying large companies and dividend-paying stocks, according to U.S. equity strategists. Bigger companies will do better than smaller ones because they hold so much cash and will be viewed as safer, according to an Aug. 7 Citigroup Inc. (C) note. Investors should also look for stocks that pay dividends as the world’s largest economy slow, Oppenheimer & Co. wrote in a note today. JPMorgan Chase & Co. (JPM) said that while the next two weeks may be “turbulent” for equities, the overall impact will be minimal.
Standard & Poor’s lowered the U.S. long-term rating one level to AA+, from AAA, after markets closed on Aug. 5 while keeping the outlook “negative,” citing less confidence that Congress will end Bush-era tax cuts or tackle entitlements. Fitch Ratings and Moody’s Investors Service still hold a AAA rating. Some strategists say that while the downgrade may hurt the economy, last week’s 7.2 percent drop in the Standard & Poor’s 500 Index shows equity investors were anticipating it.

China’s Inflation May Limit Response to Crisis (Source: Bloomberg)
China’s inflation accelerated to the fastest pace in three years in July, limiting the scope for monetary easing to support growth as plunging stock markets signal the global recovery is weakening. Consumer prices climbed 6.5 percent from a year earlier as food costs surged, reports from the Beijing-based National Bureau of Statistics showed today. That was more than the 6.4 percent median estimate in a Bloomberg News survey of 26 economists. In June, inflation was 6.4 percent. Shanghai stocks extended losses after tumbling into a bear market yesterday on a widening European debt crisis and Standard & Poor’s downgrade of the U.S. debt rating. Elevated inflation shows that China is still dealing with the after-effects of an unprecedented monetary expansion during the last global slump and may have limited room for more stimulus.

China's Stocks Slump to One-Year Low as Inflation Quickens, Markets Tumble (Source: Bloomberg)
China’s stocks fell, dragging the benchmark index to a 12-month low, amid concern the global recovery will falter and as inflation increased at the fastest pace in three years. PetroChina Co. and Jiangxi Copper Co., the nation’s largest oil and copper producers, paced declines by commodity companies after crude and metal prices slumped. China Shipping Container Lines Co., the nation’s second-biggest container line, led shipping lines lower on concern global trade will be curtailed. Consumer prices rose 6.5 percent in July from a year earlier, the National Bureau of Statistics said today. “The overwhelming pessimism has swept all markets,” said Sun Zhanjun, a fund manager at Bosera Asset Management Co., which oversees more than $29 billion. “The economic turmoil may drag down the stock market for the short term and keep it fluctuating at a bottom for some time.”

Singapore Narrows 2011 Growth Forecast Range as Global Risks Threaten Asia (Source: Bloomberg)
Singapore reduced the top end of its growth forecast for 2011 as a faltering U.S. economy and the European debt crisis heightened the risks to global expansion. The Southeast Asian nation’s gross domestic product will probably rise 5 percent to 6 percent this year, Prime Minister Lee Hsien Loong said in a televised message yesterday on the eve of the island’s National Day. The government previously predicted growth of as much as 7 percent. “Asia, led by China and India, is expected to continue growing but the global outlook remains uncertain,” Lee said. “Europe’s debt problems are far from solved despite the recent bailout of Greece by the European Union. The U.S. economy remains sluggish.”

ECB Financing to Portuguese Lenders Rose 0.8% Last Month on Debt Crisis (Source: Bloomberg)
The European Central Bank’s financing to Portuguese lenders rose in July for the first time in three month as the sovereign-debt crisis drove up bond yields across Europe’s periphery. ECB financing increased 0.8 percent to 44.2 billion euros ($62.7 billion) from 43.9 billion euros in June, the Lisbon- based Bank of Portugal said today on the BPStat portion of its website. ECB financing levels peaked at 49.1 billion euros in August 2010. Portugal in April became the third euro-area country to seek a bailout after Greece and Ireland. It will receive 78 billion euros under the agreement with the International Monetary Fund and the European Union. ECB President Jean-Claude Trichet on April 7 said the central bank “encouraged” Portugal to seek aid, adding that the country’s banks needed to reduce their reliance on ECB funding.

ECB Buying Italian, Spanish Bonds in High-Risk Strategy to Defuse Crisis (Source: Bloomberg)
The European Central Bank bought more Italian and Spanish government bonds to drive yields lower, according to four people with knowledge of the transactions. The ECB also bought Irish and Portuguese bonds, said two of the people, who asked not to be identified because the deals are confidential. A spokesman for the central bank declined to comment. The yield on the Italian 10-year bond slid 74 basis points to 5.35 percent at 1:55 p.m. in London, with the Spanish yield dropping 82 basis points to 5.24 percent.

ECB buying steadies Europe, U.S. downgrade weighs
LONDON, Aug 8 (Reuters) - Italy and Spain's borrowing costs fell on Monday as reports filtered in that the European Central Bank was buying their bonds, lifting European shares and partly overcoming jitters about a rating downgrade for U.S. debt.
"The downgrade to the U.S. is not great. These markets are going to remain unsettled for a while, we had recommended investors to raise cash in anticipation of this volatility," said Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin.

Aussie Dollar Drops Below Parity (Source: Bloomberg)
Australia’s dollar dropped below parity with the greenback for the first time in five months as concern over a slowdown in the U.S. economy and the euro- region’s debt crisis sapped demand for higher-yielding assets. The Aussie dropped for a ninth day, heading for its longest losing streak since it was freely floated in 1983, as Asian stocks extended a global slump. New Zealand’s dollar slid versus most major peers after volatility in foreign-exchange markets surged. The South Pacific currencies extended declines after data showed China’s consumer prices rose by more than economists forecast, stoking concern the government will take more measures to cool growth.
“We have maintained a more risk-aversive view,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “While the U.S. has been squabbling over the debt ceiling, its economy has slowed too, and the European sovereign crisis risks a recession in the region next year. None of that is good news for pro- cyclical currencies like the Aussie dollar and the kiwi.”

Yen, Franc Gain as Havens on U.S. Slowdown, Europe Debt-Crisis Concerns (Source: Bloomberg)
The yen and Swiss franc rose versus the majority of their counterparts as concern about a U.S. economic slowdown and the euro-region’s debt crisis spurred demand for the two currencies as a refuge. The dollar advanced against higher-yielding currencies as a global slump in stocks prompted investors to buy Treasuries, pushing two-year yields to a record low. Australia’s currency dropped below parity with the greenback the first time since March after Chinese data showed consumer prices rose more than economists had expected, stoking concern the Asian nation will take measures to cool growth. “Risk aversion is stemming from dollar selling and euro selling, which means demand will rise for the yen as an alternative and the franc,” said Junichi Ishikawa, a Tokyo- based market analyst at IG Markets Securities Ltd. “More money flowing into Treasuries boosts demand for the dollar, but people prefer the yen and franc to the greenback.”

FOREX-ECB bond plan boosts euro, dollar volatile
TOKYO/SYDNEY, Aug 8 (Reuters) - The euro jumped on Monday after the European Central Bank announced steps to ease tensions in the euro zone debt market, while the Group of Seven major industrial nations reaffirmed their vow to support financial market stability and growth.
But as both insitutions fell short of details, the dollar wallowed not far from its record low against the Swiss franc, weakened after Standard & Poor's downgrade of the U.S. credit rating, with dollar-funding pressure emerging.

FOREX-Euro rises on signs of ECB bond buying
LONDON, Aug 8 (Reuters) - The euro rose against the dollar on Monday as traders cited the European Central Bank buying Spanish and Italian government bonds to lower their yields and ease tensions in the euro zone debt market.
"(ECB buying bond buying) will have a short term effect. It won't have any lasting positive impact on the euro," said Richard Falkenhall, currency strategist at SEB in Stockholm.