20110811 1018 Global Market Related News.

Asian Stocks Drop Amid Europe Crisis, Stronger Yen (Source: Bloomberg)
Asian stocks fell, driving a regional index lower for the seventh time in eight days as concern Europe will fail to contain its debt crisis pulled down bank shares, while the yen trading near a record high against the dollar soured the earnings outlook for exporters. Canon Inc. (7751), the world’s biggest camera maker by market capitalization, dropped 2 percent in Tokyo. Toyota Motor Corp. (7203), the largest global carmaker by market value, declined 1.6 percent. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, fell 1.7 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, slid 2.5 percent as metal prices slumped in New York and London.
The MSCI Asia Pacific Index dropped 1.3 percent to 121.19 as of 9:26 a.m. in Tokyo today, as the cost of protecting the government debt of Greece, Italy, Spain and France rose. About six times as many stocks declined as advanced on the gauge, which last week entered a so-called correction after falling more than 10 percent from its May peak.

Central Bankers Race to Protect Growth in 72 Hours of Decisions (Source: Bloomberg)
Central bankers are racing to shield their economies from fiscal tightening and lopsided currency swings that threaten a new global recession. In the 72 hours after a Group of Seven conference call on Aug. 7, the Federal Reserve pledged to keep interest rates near zero through at least mid-2013, the European Central Bank intervened in bond markets and the Bank of England indicated it’s ready to add more stimulus if needed. Japan signaled renewed concern about the yen and Switzerland yesterday stepped up its fight to curb an “overvalued” franc. “Central bankers have so far been the tower of strength,” said Stefan Schneider, chief international economist at Deutsche Bank AG in Frankfurt. “Lawmakers have done everything to destroy belief in their ability to solve the problems they’re facing.”

GLOBAL MARKETS-World stocks claw back ground on Fed rates pledge
LONDON, Aug 10 (Reuters) - World shares clawed back more ground on Wednesday as investors rattled by a run of heavy losses took comfort from the Federal Reserve's pledge to keep interest rates near zero for two more years.
"Low interest rates support equity markets, but it is just a relief rally. There are too many uncertainties out there,"

Shares rebound after Fed pledge to keep rates low
LONDON, Aug 10 (Reuters) - World shares bounced back strongly from recent losses on Wednesday as investors took comfort from the Federal Reserve's pledge to keep interest rates near zero for two more years.  "Selling by short-term investors seems to have run its   course," said Kenichi Hirano, a strategist at Tachibana Securities in Japan.  Goldman Sachs said a third round of asset-buying quantitative easing from the Federal Reserve was likely following Tuesday's statement.

Emerging-Market Stocks Rise Most in Four Weeks on Fed Pledge, Oil Price (Source: Bloomberg)
Emerging markets stocks rose for the first day in seven after the U.S. Federal Reserve pledged to keep interest rates at a record low for at least two more years. The MSCI Emerging Markets Index rose 1.3 percent to 980.74 at 4:30 p.m. in New York, the biggest gain in four weeks, after earlier rising as much as 2.8 percent. Brazil’s Bovespa Index gained for a second day as oil companies followed crude higher. Chile’s Ipsa gauge climbed 2.5 percent. China’s Shanghai Composite Index climbed 0.9 percent while Taiwan’s Taiex Index jumped 3.3 percent and Indonesia’s Jakarta Composite Index advanced 3.4 percent. The Federal Reserve pledged in a statement yesterday to keep interest rates at a record low at least through mid-2013 to revive a recovery that’s “considerably slower” than anticipated, adding that policy makers are prepared to use additional tools “as appropriate.”

U.S. Wholesale Inventories Climbed in June at Slowest Pace in Seven Months (Source: Bloomberg)
Inventories at U.S. wholesalers climbed in June at the slowest pace in seven months as distributors kept stockpiles in line with sales. The 0.6 percent increase in inventories followed a revised 1.7 percent rise in May, Commerce Department figures showed today in Washington. Economists projected a 1 percent gain, according to the median forecast in a Bloomberg News survey. Sales also rose 0.6 percent in June after dropping the previous month. Wholesalers may be trying to limit the amount of unsold merchandise on hand after the U.S. economic expansion slowed in the first half of this year. To help bolster the economy, Federal Reserve policy makers yesterday pledged to keep their benchmark interest rate at a record low at least through mid- 2013.

Downgrade Doesn’t Matter as Bond Investors Show Faith in Fed After S&P Cut (Source: Bloomberg)
The $9.4 trillion U.S. government bond market is proving Federal Reserve Chairman Ben S. Bernanke matters more than Standard & Poor’s. Even though the U.S. is poised to run a budget deficit of $1.6 trillion and S&P removed the nation’s AAA rating, investors are lending the government money at record low rates. Five days after the first downgrade to AA+, the Treasury sold $24 billion of 10-year notes to yield 2.14 percent. When the U.S. was running budget surpluses from 1998 through 2001, Treasuries of similar maturity yielded an average of 5.48 percent. For all the conflict between Congress and President Barack Obama’s administration over the debt ceiling and deficits, bond investors say they are more influenced by interest rates, the economy and inflation. Because of the dollar’s preeminent place as the world’s reserve currency, the U.S. enjoys a “funding advantage,” S&P said in its Aug. 5 report.

Bernanke Indicates Fed Dissenters Won’t Impede Additional Asset Purchases (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke signaled he may expand record monetary stimulus over the most opposition of his tenure to revive the faltering recovery and reduce unemployment stuck around 9 percent. The central bank said yesterday that officials “discussed the range of policy tools” to strengthen growth and are “prepared to employ these tools as appropriate” while pledging to keep the benchmark interest rate near zero until at least mid-2013. Three policy makers dissented from the decision for the first time since Bernanke, 57, became chairman in 2006. “Bernanke will push through QE3 if the economic conditions warrant it,” said Steve Lear, who helps manage $150 billion at J.P. Morgan Asset Management. The first two rounds of so-called quantitative easing totaled $2.3 trillion yet have left the Fed with a recovery that officials yesterday judged to be “considerably slower” than anticipated.

Bernanke Borrows From Carney’s Stimulus Playbook With Interest-Rate Pledge (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke has taken a page from Bank of Canada Governor Mark Carney’s stimulus playbook by choosing to specify a date for his pledge to keep borrowing costs low. The Fed yesterday said it would hold its benchmark interest rate near zero for at least through mid 2013, replacing an earlier promise to keep it there for “an extended period.” Two years ago, Carney made a similar promise to keep rates low for 15 months, conditional on the inflation outlook. Carney’s commitment was aimed at adding stimulus to the economy at a time when short-term interest rates were already close to zero, the Bank of Canada said. The pledge influences longer-term borrowing costs because investors know that policy rates won’t rise during the time frame specified by the central bank.

Bernanke’s Interest-Rate Timeframe Draws Most Negative Votes in 18 Years (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke’s plan to hold interest rates near zero through at least mid-2013 provoked the most opposition among voting policy makers in 18 years as central bank consensus frayed. The Fed chief achieved unanimous support on the Federal Open Market Committee in 2008 when he lowered interest rates to near zero, and in 2009 when he launched $1.73 trillion in bond purchases. Last year, his plan to buy another $600 billion in assets drew one dissent. Yesterday, three policy makers dissented from the decision to apply a specific date to the Fed’s low rate pledge for the first time. Bernanke’s move shows that a Fed chairman can govern with more than two opposing votes, opening the door to bolder action if necessary, said Roberto Perli, a former economist in the Fed’s Division of Monetary Affairs, which helps craft the language of the FOMC statements.

U.S. Stocks Slump as Dow Falls to Lowest Level Since September on Europe (Source: Bloomberg)
U.S. stocks tumbled, sending the Dow Jones Industrial Average to the lowest level since September, as banks slumped on concern that Europe will fail to contain its debt crisis and that the economy is faltering. All 10 groups in the Standard & Poor’s 500 Index fell at least 2 percent. Bank of America Corp. and Citigroup Inc. dropped more than 10 percent, pacing losses in financial shares, as the costs to protect the government debt of Greece, Italy, Spain and France rose. Walt Disney Co. (DIS), the largest theme-park company, tumbled 9.1 percent on concerns that the slowing economy and consumer confidence may hurt its businesses. The S&P 500 fell 4.4 percent to 1,120.76 at 4 p.m. in New York. The benchmark gauge jumped 4.7 percent yesterday as the Federal Reserve said it would keep borrowing costs at an all- time low and was prepared to use a range of tools to bolster the economy. The Dow declined 519.83 points, or 4.6 percent, to 10,719.94.
About 15 billion shares changed hands at 4:15 p.m., almost twice the three-month average, Bloomberg data show.

U.S. productivity falls in Q2, wage growth slows
WASHINGTON, Aug 9 (Reuters) - U.S. non-farm productivity fell in the second quarter as economic activity slackened, while a moderation in the pace of wage growth suggested inflation pressures will remain contained.
Productivity slipped at a 0.3 percent annual rate, the Labor Department said on Tuesday, after falling at a 0.6 percent pace in the first quarter. Unit labor costs grew at a 2.2 percent rate, which was slower than the 4.8 percent pace in the January-March period.

US STOCKS-Futures dip after snap-back rally
NEW YORK, Aug 10 (Reuters) - U.S. stock index futures fell on Wednesday after a sharp snap-back rally in the last session as investor fears about the economy and high levels of public debt looked set to generate more volatile trading.
Stocks zigzagged on Tuesday after the U.S. Federal Reserve promised to hold interest rates low for at least two years before the S&P 500 index rallied 5 percent into the close. But the Fed's statement also underlined the struggling economy and was a reminder that markets would likely remain choppy.

China’s Trade Surplus Surges to $31.5 Billion as Exports Exceed Estimates (Source: Bloomberg)
China’s trade surplus surged to $31.5 billion, the highest level in more than two years, as exports rose to a record. Outbound shipments climbed 20.4 percent from a year earlier in July, compared with the 17 percent median forecast in a Bloomberg News survey of 25 economists. Imports jumped 22.9 percent, the customs bureau said on its website today. The surplus exceeded a median forecast of $27.4 billion. The world’s biggest exporting nation faces the threat of weakening demand as developed nations from Europe to the U.S. and Japan struggle to rein in their debt burdens. The U.S. Federal Reserve countered a global rout in stocks by pledging yesterday to keep interest rates at a record low through mid- 2013 and to use additional measures “as appropriate.”

Japanese Machinery Orders Rise for a Second Month on Rebuilding Demand (Source: Bloomberg)
Japan’s machinery orders rose for a second month in June as companies increased spending to restore businesses and production disrupted by the March 11 earthquake and tsunami. Factory orders, an indicator of capital spending in three to six months, rose 7.7 percent in June from May, the Cabinet Office said today in Tokyo. The median forecast of 27 economists surveyed by Bloomberg News was for a 1.7 percent increase. The report follows production and export data suggesting that the corporate sector has been recovering faster than expected from the March disaster. Now, the nation's recovery is at risk as stocks plunge and a yen near a postwar high threatens exporters' profits.

Japan’s Finance Chief Signals Concern About a Yen Near Intervention Level (Source: Bloomberg)
Japan’s Finance Minister Yoshihiko Noda said that one-sided moves in the yen can hurt growth as the currency strengthened against the dollar to close to the level where authorities intervened last week. “Recent one-sided movements in the currency market risk hurting the economy’s recovery from the earthquake,” Noda said in parliament in Tokyo today, reiterating remarks made on Aug. 4 when authorities sold the yen. The government may include measures to help companies combat the strong yen in its next reconstruction package, Chief Cabinet Secretary Yukio Edano said. A global stock rout that has erased more than $6 trillion off equities in the past two weeks has bolstered the yen’s appeal as a safe haven, undoing intervention that helped the currency weaken past 80 last week. Policy makers may struggle to reverse the trend with more unilateral yen sales after last week’s action prompted criticism from the European Central Bank, according to economist Naoki Iizuka.

Nikkei 225 Falls to Five-Month Low Amid Concern Europe Crisis Is Spreading (Source: Bloomberg)
Japanese stocks declined, with the benchmark Nikkei 225 (NKY) Stock Average headed for its lowest close in almost five months, as concern Europe will fail to contain its debt crisis damped the outlook for exporters’ earnings. Mazda Motor Corp. (7261), the car maker most dependent on Europe, slumped 3.8 percent. Toyota Motor Corp., the largest global carmaker by market value, declined 1.8 percent. Canon Inc., the world’s biggest camera maker by market capitalization, dropped 1.9 percent. Mitsubishi UFJ Financial Group Inc. fell 1.9 percent on speculation rising bond yields will raise the borrowing cost for lenders. The Nikkei 225 fell 1.8 percent to 8,875.24 as of 10:10 a.m. in Tokyo, poised for its lowest close since March 15. The Topix slid 1.6 percent to 764.41, with more than three stocks falling for each that rose.

Yen Strengthens on Concern Over Europe Debt Crisis, Slowing Global Growth (Source: Bloomberg)
The yen rose to its highest level in five months against the euro as concern Europe’s debt crisis is spreading boosted demand for the safest assets. The euro fell against 12 of its 16 major counterparts as relative borrowing costs climbed for France, Europe’s second- biggest economy, signaling investors are wary of lending to any nation other than Germany. Australia’s dollar slid against the greenback and yen as Asian stocks slumped and before a report forecast to show the country’s jobs growth slowed. “Investors are hesitant to take any risk because of the shock from the European sovereign crisis and concern over a slowdown in global growth,” said Junichi Ishikawa, a Tokyo- based market analyst at IG Markets Securities Ltd. “Money is flowing into safer assets like gold, bonds and the yen.”

North, South Korea Trade Artillery Salvos (Source: Bloomberg)
South Korea said North Korea fired artillery salvos near a disputed sea border that was the scene of a deadly shelling in November, a charge North Korea denied. South Korea returned fire after North Korea lobbed three shells into the waters near Yeonpyeong Island about 1 p.m. yesterday and shot back again around 7:46 p.m. when two more shells landed in the ocean, said an official from the defense ministry in Seoul who declined to be identified, citing military policy. North Korea denied firing any artillery and accused its neighbor of using construction blasting in nearby Hwanghaenam Province as a pretext for confrontation, according to a report from the state-run Korean Central News Agency.
The incident came a month after both nations said they would try to revive multilateral talks on North Korea’s nuclear- weapons program, signaling an easing of tension between the two rivals that has been an irritant to U.S.-China ties over the past year. The so-called Northern Limit Line dividing their western border in the Yellow Sea has been a source of repeated conflict since the 1950-1953 civil war ended in a cease-fire.

European Stocks Tumble to Two-Year Low as SocGen, BNP Lead Rout in Banks (Source: Bloomberg)
European stocks fell to a two-year low amid speculation the region’s debt crisis is spreading and as the Federal Reserve’s plan to hold interest rates failed to ease concern that the economic recovery is stalling. Societe Generale (GLE) SA, France’s second-biggest lender, plunged 15 percent as a measure of banks tumbled the most in two years. Kloeckner & Co. SE sank 26 percent as earnings trailed projections. EON AG plummeted the most on record, dragging Germany’s DAX Index down the most since 2008, as the nation’s largest utility said it will eliminate more than 10 percent of its workforce and cut dividends. The benchmark Stoxx Europe 600 Index slid 3.8 percent to 223.5 at the 4:30 p.m. close in London, erasing an earlier advance of 2.2 percent. The measure entered a bear market on Aug. 8 and has declined 23 percent from this year’s high on Feb. 17 on concern that Europe will fail to contain its sovereign- debt crisis and that the U.S. economic recovery is faltering.

France’s AAA Credit Affirmed by S&P, Moody’s (Source: Bloomberg)
France’s top credit grade was affirmed by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings as relative yields on the nation’s debt climb on concern that Europe’s sovereign debt crisis is intensifying. The outlook on France is stable and its AAA ranking is “warranted,” Moritz Kraemer, S&P’s managing director of European sovereign ratings, said today in a Bloomberg television interview. Francesco Meucci, a spokesman for Moody’s, said in a telephone interview the country’s Aaa grade is “stable.” Fitch spokesman Brian Bertsch said France is rated AAA with a stable outlook as per its May 31 statement. The extra yield investors demand to buy 10-year French debt rather than German bunds, has jumped to 87 basis points, even though both carry AAA grades from the major rating companies. That spread is almost triple the 2010 average of 33, and compares with 17 in the second half of the previous decade. The cost of insuring French debt rose to a record today.

France in Crosshairs as Germany Enjoys Lone Status as Haven: Euro Credit (Source: Bloomberg)
France’s borrowing costs are rising as Europe’s debt crisis makes investors wary of lending to any nation other than Germany. “There is only one sovereign in Europe, and that is Germany,” said Stuart Thomson, who helps oversee about $120 billion as a portfolio manager at Ignis Asset Management in Glasgow. “Everything else is a credit and trades like a credit, even France.” Investors currently demand about 90 basis points of extra yield to buy 10-year French debt rather than German bunds, even though both carry AAA grades from the major rating companies. That spread is almost triple the 2010 average of 33, and compares with 17 in the second half of the previous decade. The cost of insuring French debt rose to a record today.

Greek Lessons for Italy and Spain: Papaioannou and Vayanos (Source: Bloomberg)
The crisis in the euro region is spreading to Italy and Spain, triggering emergency purchases of those countries’ bonds by the European Central Bank. Further ECB support is likely to be conditional on progress by those nations in fulfilling pledges to accelerate fiscal consolidation and carry out structural reforms. But can Italy and Spain succeed in overhauling their economies, and how should institutions such as the ECB and the European Union help catalyze change? Some answers can be found by examining the pitfalls exposed by the rescue of Greece, where the problems are the most acute.

King Says BOE Can Expand Stimulus If Needed as Economic Weakness Persists (Source: Bloomberg)
Bank of England Governor Mervyn King said headwinds buffeting the U.K. economy are intensifying “by the day” and officials can expand stimulus if the outlook for growth deteriorates further. While there’s “no reason” for the Monetary Policy Committee to add stimulus for now, “in the committee’s view, the weakness in underlying activity is likely to be somewhat more persistent than previously expected,” King told reporters in London today as the bank released its quarterly inflation report. King said inflation may undershoot the bank’s 2 percent target and the U.K. has “flexibility” to adjust policies if growth is weaker than expected. His assessment follows moves by other central banks to bolster economies. The Federal Reserve plans to keep its key rate at a record low at least through mid-2013, the European Central Bank has resumed bond purchases and the Swiss central bank wants to weaken the franc.

Italian Yields Fall at $9.4 Billion T-Bill Sale After ECB Purchases Bonds (Source: Bloomberg)
Italy sold 6.5 billion of bills ($9.3 billion) today and borrowing costs fell from the previous sale after the European Central Bank began buying the country’s bonds, leading to a plunge in yields this week. Italy sold its one-year bills to yield 2.959 percent, down from 3.67 percent at last auction on July 12. Demand was 1.94 times the amount on offer, compared with 1.55 times last month. The yield on the country’s benchmark 10-year bond has dropped 100 basis points this week as the ECB began purchasing Italian and Spanish bonds. Prior to the ECB action, the countries’ yields had surged to euro-era records on concern the countries would become the next victims of the region’s debt crisis. Prime Minister Silvio Berlusconi agreed to speed up austerity and balance the country’s budget in 2013, a year earlier than planned, to secure the ECB’s support.

New Zealand Dollar Extends Gain Against U.S. Currency, Erases Earlier Loss (Source: Bloomberg)
The New Zealand dollar extended gains against the U.S. currency. The so-called kiwi traded at 81.65 U.S. cents as of 10:47 a.m. in Sydney from 81.12 yesterday in New York.

FOREX-Dollar down after Fed, Swiss franc dented by SNB
LONDON, Aug 10 (Reuters) - The dollar fell on Wednesday after the U.S. Federal Reserve's pledge to keep rates near zero for two years, while the Swiss franc staged only a limited fall after more official steps to try to stem its rapid ascent to record highs.
Traders said the Swiss National Bank's measures to boost Swiss franc supply would do little to halt exceptionally strong demand for the safe-haven currency, while confirmation of a long period of low rates would keep the dollar weak.

FOREX-Dollar weak after Fed; Swiss franc dips on SNB
LONDON, Aug 10 (Reuters) - The dollar stayed weak on Wednesday after the U.S. Federal Reserve said it would keep rates near zero for two years, while the Swiss franc inched down on the back of further official steps to try and turn back its rise.
"The market initially thought they had intervened (in spot), but they haven't," said Peter Kinsella, currency strategist at Commerzbank.