20110815 0952 Global Market Related News.

Asian Stocks Rise on U.S. Retail, Japan GDP (Source: Bloomberg)
Asian stocks rose following the longest series of weekly losses since June after U.S. retail sales increased by the most in four months and Japan’s second- quarter gross domestic product beat economist estimates. Toyota Motor Corp. (7203), the largest carmaker by market value, climbed 2.4 percent in Tokyo. BHP Billiton Ltd. (BHP), the world’s largest mining company, gained 3.4 percent amid optimism metals demand will pick up. Melbourne-based Ansell Ltd. (ANN), the world’s No. 1 maker of surgical gloves, jumped 4.3 percent after full- year net income beat analyst targets. The MSCI Asia Pacific Index rose 0.8 percent to 122.94 as of 9:49 a.m. in Tokyo, with about 10 stocks advancing for each that declined. The gauge dropped for the third straight week last week after Standard & Poor’s cut its rating on U.S. credit and as concern grew Europe’s debt crisis will spread, triggering speculation the economic recovery will weaken.

GLOBAL MARKETS-Short-selling ban spurs tentative recovery
LONDON, Aug 12 (Reuters) - European stock markets rose as a ban on short-selling financial shares prompted investors to creep back into battered banking shares, although concerns over the health of French banks kept the mood edgy.
"Something needed to be done, the rumours were silly and the market was full of emotion and fear. So this provides a break in that, so not bad," a London-based fund manager said.

U.S. Bonds Mirror Japan’s in Biggest Rally Since 2008 in Sluggish Scenario (Source: Bloomberg)
U.S. government bond yields are poised to converge with Japan’s for the first time in almost two decades, sparking the biggest returns for investors in Treasuries since 2008 while raising concern that America may be stuck in a prolonged period of below-par economic growth. “We are beginning to resemble Japan from an interest rate policy standpoint as well as potentially an economic growth standpoint,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in a telephone interview Aug. 10. Investors are “fearful of low growth and are fleeing to high-quality sovereign paper at whatever yield.”
Treasuries soared last week after Standard & Poor’s cut the U.S. credit rating from AAA, Europe’s sovereign-debt crisis deepened and stock markets gyrated, with the Dow Jones Industrial Average rising or falling an average of 3.85 percent each day. The bond rally drove two-year Treasury yields down to a record low and within three basis points of similar-maturity Japanese debt, the smallest gap since 1992, data compiled by Bloomberg show.

U.S. Committed to Getting ‘Fiscal House in Order,’ Locke Says in Beijing (Source: Bloomberg)
Gary Locke, the new U.S. ambassador to China, said today that President Barack Obama and the United States government are “committed to getting our fiscal house in order.” “We know that over the last several days more people are buying U.S. Treasuries,” Locke said in Beijing, where he arrived Aug. 12 after being sworn in as ambassador earlier this month in Washington. “It is a clear indication that investment in the U.S. is safe and secure,” Locke, formerly Obama’s commerce secretary, said in response to a question from a reporter for Chinese state television. Locke’s comments come after Standard & Poor’s decision to strip the U.S. of its AAA rating prompted a scolding from China. The country’s official Xinhua News Agency said in a commentary the U.S. must cure its “addiction” to borrowing. China held $1.16 trillion in U.S. Treasury securities at the end of May, more than any other country.

Treasury Yields Plunge to Record Lows on Fed’s Slow-Growth View (Source: Bloomberg)
Treasury yields on debt maturing in 10 years and less fell to all-time lows as the Federal Reserve said economic growth was “considerably slower” than forecast and it would keep borrowing costs on hold through mid-2013. The Treasury sold $72 billion of notes and bonds this week, with yields on three- and 10-year notes at record auction lows. The 10-year yield touched 2.0346 percent, an all-time low, amid concern the risk of recession is rising after Standard & Poor’s downgraded the U.S. credit rating to AA+ and as the European sovereign debt problems showed signs of spreading. Annual consumer inflation slowed in July, a report may show Aug. 18. “What we’re witnessing is a reassessment of the health of the economy,” said James Collins, an interest-rate strategist in the futures group at Citigroup Inc.’s Global Markets unit in Chicago. “We could take another run toward 2 percent.”

Treasuries Snap Gain on Speculation Growth Will Buoy Yield From Record Low (Source: Bloomberg)
Treasuries snapped a three-week rally on speculation U.S. economic growth isn’t slowing enough to justify keeping yields at a record low. Ten-year notes yield negative 1.34 percentage points after accounting for inflation. When 10-year notes fell to 2.03 percent Aug. 9, the least ever, the figure translated into a so- called real yield of negative 1.57 percent, a level not seen since 2008. For two-year notes, the real yield is negative 3.41 percentage points. “Treasuries are too expensive,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “The economy continues to recover.”

Inflation in U.S. Probably Began Stabilizing in July, Backing Fed Forecast (Source: Bloomberg)
The cost of living in the U.S. probably eased in July, consistent with the Federal Reserve’s forecast that inflation will stabilize, economists said before a report this week. Consumer prices excluding volatile food and fuel costs climbed 0.2 percent, the smallest gain in three months, according to the median forecast in a Bloomberg News survey of economists before Labor Department data on Aug. 18. Housing remained depressed, while a surge in utility use boosted industrial production, other figures may show. Lower costs for energy and other commodities may give companies like Sara Lee Corp. (SLE) room to hold the line on retail prices, providing some relief to consumers faced with stagnating incomes and limited job growth. Less inflation also affords Fed officials the scope to ease monetary policy further should the recovery falter.

The Real U.S. Crisis Is Not a Debt Downgrade: Simon Johnson (Source: Bloomberg)
The U.S. has a fiscal crisis, but not the one that everyone is talking about. Standard and Poor’s proved beyond a reasonable doubt that the U.S. still has the world’s preeminent reserve currency. When shocks hit -- and investors have no idea who or what might be next in line for a downgrade -- they buy U.S. government securities. Downgrades don’t usually have this effect. For example, if S&P or other rating companies downgraded France, that would set off a crisis within the euro region -- pushing up interest rates on French government debt, undermining euro-area banks, and perhaps putting pressure on the fabric of the European Union itself. With a one-notch downgrade of the U.S. government, on the other hand, S&P inadvertently managed to lower the U.S.’s borrowing costs, both at the federal level and for homeowners who refinanced their mortgages.
The U.S.’s fiscal problem is not that the market questions the country’s ability to pay its debts. The willingness to pay was clearly proved by the outcome of the debt-ceiling debate, when even a majority of Tea Party adherents in the U.S. House of Representatives voted to lift the ceiling (though it would have passed without their votes). We most definitely do not have the kind of solvency crisis experienced by some emerging markets and now, for the first time, parts of Western Europe.

U.S. Stocks Post Biggest Two-Day Advance Since 2009, Paring Weekly Decline (Source: Bloomberg)
U.S. stocks fell for a third straight week, including the biggest one-day drop since 2008, as Standard & Poor’s reduction of the nation’s credit rating and Europe’s debt crisis fueled concern the economy will falter. The S&P 500 pared its slump in the last two days of the week as government data showed jobless claims unexpectedly decreased and retail sales improved. Bank of America Corp. (BAC) plunged 12 percent, the worst performing stock in the Dow Jones Industrial Average. Walt Disney Co. (DIS) sank 5.9 percent after posting disappointing third-quarter studio revenue. For-profit educator DeVry Inc. (DV) lost 23 percent, the largest drop in the S&P 500, after it said new undergraduate enrollment fell. The S&P 500 lost 1.7 percent to 1,178.81 in the five days ended Aug. 12, capping a week of record swings. The Dow fell 175.59 points, or 1.5 percent, to 11,269.02. Both gauges have fallen for three straight weeks.

Nikkei 225 Advances as Japan GDP Shrinks Less Than Expected, Yen Weakens (Source: Bloomberg)
Japan’s Nikkei 225 (NKY) Stock Average rose the most in two weeks after gross domestic product shrank less than economists expected, signaling the country is rebounding from March’s earthquake disaster. Toyota Motor Corp., the world’s largest carmaker, climbed 2 percent. Sony Corp., Japan’s biggest exporter of consumer electronics, advanced 2.8 percent after U.S. retail sales gained the most in four months. Isetan Mitsukoshi Holdings Ltd., a department-store operator, jumped 4.1 percent after the company boosted its profit forecast. The Nikkei 225 rose 1.1 percent to 9,065.20 as of 9:30 a.m. in Tokyo, set for its biggest gain since Aug. 1. The broader Topix index advanced 1 percent to 775.93.

Japan Economy Contracted Less Than Estimated (Source: Bloomberg)
Japan’s economy contracted less than economists estimated in the second quarter, signaling the nation is rebounding from a slump after a record earthquake and tsunami even as a rising yen threatens to slow exports. Gross domestic product shrank at an annualized 1.3 percent rate in the three months ended June 30, marking three consecutive quarters of declines, the Cabinet office said today in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was for a 2.5 percent drop.
Companies from Toyota Motor Corp. to Sony Corp. have repaired facilities damaged by the March 11 disaster, spurring the largest increase in industrial output since 1953 in May from April. Japan intervened in the currency market on Aug. 4 for the first time since March to stem yen gains against the dollar that may weigh on the recovery of the world’s third largest economy.

Japan’s Noda Warns as Yen Nears Postwar High (Source: Bloomberg)
Japan’s finance minister warned he’s ready to intervene in the currency market again to stem a yen advance that risks slowing the nation’s recovery. “An unstable situation is continuing,” Yoshihiko Noda, 54, said during a talk show yesterday on public television broadcaster NHK. “As foreign exchange market matters are my prerogative, I will continue to closely watch the markets and take bold action if it becomes necessary.” The yen has risen above the level that prompted Japan to sell the currency on Aug. 4 for the first time since March. Noda, who signaled he won’t rule out a bid for the nation’s leadership when Prime Minister Naoto Kan steps down, said the drawbacks of a strong currency outweigh its benefits at a time when the nation is getting over a record earthquake in March.

Yen Declines After Noda Signals ’Bold’ Action (Source: Bloomberg)
The yen and Swiss franc weakened against most of their major counterparts amid speculation policy makers in Japan and Switzerland will take further action to stem gains in their currencies. The yen retreated from close to a record against the dollar after Japanese Finance Minister Yoshihiko Noda indicated he’s ready to intervene in markets again. The franc fell versus the euro for a third day after the SonntagsZeitung newspaper said the Swiss government and the central bank are in “intense” talks over setting a target for their currency. The Australian and New Zealand dollars climbed as gains in Asian stocks supported demand for higher-yielding assets. “The market is going to be very reluctant to be buying yen and to be buying Swiss when central bank intervention is at risk and when equity markets are buoyant,” said Kurt Magnus, executive director of currency sales at Nomura Holdings Inc. in Sydney.

Singapore to Keep Thrust of Economic Policies Amid Adjustments, Lee Says (Source: Bloomberg)
Singapore will maintain the thrust of the policies that have helped the economy, even as it will make adjustments to address specific concerns, Prime Minister Lee Hsien Loong said in a televised speech today. Investors are waiting to see what Singapore will do after the May general election, and the island will maintain policies that are important to the country and helpful to investors, he said. The nation will keep its policies pragmatic and constructive, he said.

Singapore Foreign-Worker Rules Tightened as Lee Keeps ‘Thrust of Policies’ (Source: Bloomberg)
Singapore will make adjustments to address specific public concerns such as the effects of foreign worker inflows, while maintaining the thrust of policies that have helped the economy, Prime Minister Lee Hsien Loong said. The government will expand public housing and medical benefits to include more people, and tighten the criteria for the admittance of some groups of foreign workers, Lee said in a televised speech late yesterday. The nation needs to keep its politics “pragmatic and constructive,” he said in his first major policy speech since a May election. “We can keep the thrust of our policies but adjust them to deal with specific problems,” he said in the annual National Day rally speech. “As we go forward, we will encounter new situations, new problems will come, and we will have to respond to them and adjust and make new policies.”

Swan: Australia Economy Can ‘Ride Out’ Turmoil (Source: Bloomberg)
Australia’s economy can “ride out” the turbulence in global markets because of its strong outlook and the continued growth of China, the country’s biggest trading partner, Treasurer Wayne Swan said. “Australia has very low public debt, low unemployment, a massive pipeline of investment and we expect to bring the budget back to surplus next financial year,” Swan said in an e-mailed statement yesterday. While Australia isn’t immune to what happens in the rest of the world, “the prospects for our region remain much stronger” than for Europe and the U.S., he said. The global economic outlook will remain uncertain for some time as the U.S. and Europe seek to reduce debt and make their fiscal budgets more sustainable, Swan said. There’s good reason to be “optimistic” about continued expansion in China as incomes improve, he added.

Australia, New Zealand Dollars Gain as Asia Stocks Extend Global Rally (Source: Bloomberg)
The Australian and New Zealand dollars advanced against most of their 16 counterparts as Asian stocks extended a global equities rally, boosting demand for higher-yielding assets. The South Pacific countries’ currencies rose against the yen after Japan’s Finance Minister Yoshihiko Noda signaled yesterday that he’s ready to take steps to weaken the yen. Australia’s dollar was 1.2 percent from a one-year low against its New Zealand counterpart as traders bet that the bigger nation’s central bank will cut interest rates. “Australia’s and New Zealand’s currencies remain susceptible to the global economy and stock prices,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest foreign-exchange margin company. “New Zealand has more room for interest-rate gains, while no rate increase is expected for a while in Australia.”

Italian Cabinet Approves Austerity Decree (Source: Bloomberg)
Italian Prime Minister Silvio Berlusconi’s Cabinet approved 45.5 billion euros ($64 billion) in deficit cuts to balance the budget and try to convince investors the country can tame the region’s second-biggest debt. The plan will raise the capital gains tax, increase levies on the highest earners, cut government spending and reduce funding to regional administrations. It was passed last night in Rome by decree, meaning it will take effect immediately and then must be approved by parliament within 60 days. “Our heart is bleeding as we have always maintained that we wouldn’t put our hands in the pockets of Italians, but the international scenario has deeply changed,” Berlusconi said after the meeting. “The measures go in the direction that the ECB wanted.”

Dutch Say Better to Remove Greece From Euro Than Extend Loans, Poll Shows (Source: Bloomberg)
A majority of Dutch respondents to a poll published today said it would be better to remove countries including Greece from the euro zone, rather than continuing to support them. This view was supported by 54 percent of people surveyed in a poll by researchers Maurice de Hond and No Ties BV, published on their website. As many as 60 percent of the participants said the Netherlands “should stop lending money to other euro zone countries now.” Lawmakers responsible for finance are cutting their vacations short to question Prime Minister Mark Rutte and Finance Minister Jan Kees de Jager on the size of the Dutch contribution to a second Greek bailout package on Aug. 16.

FOREX-Swiss franc recoups some losses; yen in focus
SYDNEY/SINGAPORE, Aug 12 (Reuters) - The safe-haven Swiss franc recouped some of its losses in Asia, having posted record one-day falls against the euro and dollar in the previous session after the Swiss National Bank threatened to step up its fight to curb the franc's strength.
On Friday, the franc gained 0.7 percent versus the euro to 1.0792 , after having tumbled by as much as 6 percent on Thursday. Euro/Swiss, which hit a record low of 1.0075 on Tuesday on trading platform EBS, is still down 1.4 percent on the week.