20110818 1010 Global Market Related News.

Asia Stocks Fall on High Yen, U.S. Rates Concern (Source: Bloomberg)
Asian stocks fell for the first day this week as the yen rose toward a post-World War 2 high and two Federal Reserve officials said they opposed a pledge to keep U.S. interest rates at record lows. Honda Motor Co., a Japanese carmaker that gets about 83 percent of sales overseas, lost 1.4 percent in Tokyo as the yen advanced, hurting the earnings outlook for the nation’s exporters. Sony Corp., Japan’s biggest exporter of consumer electronics, dropped 1.2 percent. BHP Billiton Ltd., Australia’s biggest oil producer, sank 1.3 percent in Sydney as crude prices dropped today. The MSCI Asia-Pacific Index fell 0.6 percent to 124.49 as of 9:48 a.m. in Tokyo. Almost four stocks dropped for each that advanced on the gauge.

GLOBAL MARKETS-Euro wobbles after summit let-down; Asia techs down
SINGAPORE, Aug 17 (Reuters) - The euro wobbled on Wednesday after French and German leaders failed to deliver a solution to the euro zone debt crisis and restore confidence after a global market rout, while Japanese shares fell, dragged down mainly by hi-tech.
"This is not panicking any more, it's just investors being disappointed relative to expectations on these two fronts, economic activity and evidence of central banks' and politicians' efforts," he said.

Obama Plans Package to Boost Economy (Source: Bloomberg)
President Barack Obama plans to ask Congress for billions of dollars in fresh spending to reduce unemployment while also proposing to take a bigger bite out of the nation’s long-term deficit. With the U.S. unemployment rate at 9.1 percent and economic growth slowing, Obama plans to propose a mix of tax cuts and infrastructure spending that goes beyond the measures he’s been promoting over the last several weeks, an administration official said, speaking on condition of anonymity because details for the speech haven’t been completed. Separately, Obama said today he will present to a special 12-member congressional committee charged with coming up with at least $1.5 trillion in deficit reduction his own proposal for making deeper cuts in the nation’s debt. It will include raising government revenue as well as cutting spending, along the lines of the scuttled “grand bargain” he tried to strike with House Speaker John Boehner in July.

Wholesale Prices in U.S. Increase More Than Estimated on Tobacco, Trucks (Source: Bloomberg)
Wholesale costs in the U.S. rose more than forecast in July, led by higher prices for tobacco, trucks and pharmaceuticals, showing declines in commodity expenses have yet to filter to other goods. The 0.2 percent advance in the producer price index followed a 0.4 percent drop in June, Labor Department figures showed today in Washington. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg News survey. The so-called core measure, which excludes volatile food and energy, climbed 0.4 percent, the most since January. The report showed the cost of crude goods dropped in July for a third consecutive month, led by declining petroleum and food prices. Slowing sales and the drop in raw materials mean companies will be less likely to raise prices, which may give Federal Reserve policy makers more room to act to spur growth after the world’s largest economy almost stalled.

Plosser Says Fed Is Likely to Need to Raise Interest Rates Before Mid-2013 (Source: Bloomberg)
Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said the Fed will probably need to raise interest rates before mid-2013 and that policy makers should have waited to see how the economy performed before pledging to hold rates at record lows for two years. “It was inappropriate policy at an inappropriate time,” Plosser, 62, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Plosser spoke in his first interview since he dissented from a Fed decision on Aug. 9 to step up stimulus for an economic recovery that’s “considerably slower” than anticipated. The economy may not need additional monetary stimulus, with inflation rising and unemployment declining since November to 9.1 percent, he said. Plosser hasn’t significantly cut his forecast for 2012 economic growth as the impact from “shocks” like the earthquake in Japan subsides, he said in an interview in New York with Bloomberg News editors and reporters.

Economy Not Double-Dipping Yet as Production-to-Consumer Spending Increase (Source: Bloomberg)
Some of the gloom that settled over the U.S. economic outlook as stocks and sentiment plunged in recent weeks may soon dissipate as households keep spending and factories keep producing. Industrial output climbed in July by the most this year, according to figures from the Federal Reserve yesterday. Reports last week showed retail sales rose by the most in four months and claims for jobless benefits dropped to the lowest level since early April. “There’s nothing in here to suggest the economy is slowing, let alone declining,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Production continues, and production continues because consumers are still making their purchases.”

Fed Shouldn’t Protect Stock Traders: Fisher (Source: Bloomberg)
Federal Reserve Bank of Dallas President Richard Fisher said the central bank shouldn’t ease monetary policy whenever there is a big drop in U.S. stock prices, an action he said some traders might view as a “Bernanke put.” “My long-standing belief is that the Federal Reserve should never enact such asymmetric policies to protect stock market traders and investors,” Fisher said today in Midland, Texas. “I believe my FOMC colleagues share this view.” Fisher’s comments offered his first explanation of his dissent from the Federal Open Market Committee decision last week to specify a date for their commitment to low borrowing costs. The Fed said the benchmark interest rate will stay in a range of zero to 0.25 percent at least through mid-2013. The new language replaces a prior promise to keep rates low for an “extended period.

Treasury Bets on Inflation Drop Before Data on Inflation, Jobless Claims (Source: Bloomberg)
Treasury market bets on inflation were one basis point away from an eight-month low before a government report that economists said will show the cost of living in the U.S. barely rose in July. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.14 percentage points. The spread narrowed to 2.13 percentage points yesterday, the least since December. The government is scheduled to sell $12 billion of five-year TIPS today. “Yields will stay low,” said Sungjin Park, who heads the $57.9 billion debt division in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor. “The economy will be slower than before. Inflation will be slower.”

Most U.S. Stocks Retreat Amid Dell’s Decline, Comments From Fed Officials (Source: Bloomberg)
Most U.S. stocks declined, wiping out an earlier advance, as Dell Inc. (DELL) forecast weaker sales and two Federal Reserve officials expressed concern about the amount of stimulus being applied to the economy. Dell fell 10 percent as slower spending on PCs and consumer technology crimped its sales forecast. Abercrombie & Fitch Co. (ANF), the teen-clothing retailer, slid 8.7 percent as executives said cost pressure will rise. Standard & Poor’s 500 Index companies that are least-tied to the economy, including phone and utility providers, rose at least 0.8 percent as a group. Eastman Kodak Co. (EK) surged 26 percent as analysts and investors told Bloomberg News its patents may make it a takeover target. About 18 stocks fell for every 17 that rose on U.S. exchanges. The S&P 500 added 0.1 percent to 1,193.89 at 4 p.m. in New York, after gaining 1.3 percent at most and dropping as much as 0.7 percent. The Dow Jones Industrial Average climbed 4.28 points, or less than 0.1 percent, to 11,410.21 today.

Bad Debt at China Banks Growing: Jain (Source: Bloomberg)
Bad loans at Chinese banks will rise to “shockingly high” levels, eroding profits and slowing growth in the world’s second-biggest economy, said Vontobel Asset Management Inc.’s Rajiv Jain, who runs some of this year’s best-performing mutual funds. China’s local governments are struggling to repay their debt and “frothy” real-estate markets may leave banks exposed to falling prices, Jain said in an Aug. 16 phone interview. While valuations on Chinese banks have dropped to the lowest levels since October 2008, Jain said the shares aren’t cheap enough to buy because the lenders’ leverage is too high and earnings are likely to disappoint investors. “We have not owned a Chinese bank, and I don’t see owning one any time soon,” said Jain, who oversees about $15 billion, including three funds that beat 99 percent of peers this year, data compiled by Bloomberg show. “If you look at the accounting, I don’t see how anyone could put a penny there.”

China Expands Yuan Role in Biggest Boost to Hong Kong’s Economy Since 2003 (Source: Bloomberg)
Chinese Vice Premier Li Keqiang unveiled the biggest package of measures supporting Hong Kong’s economy since the 2003 SARS epidemic, allowing more two-way investment in shares and sparking a rally in brokerage stocks. China will start an exchange-traded fund based on Hong Kong equities, Li, the front-runner to replace Wen Jiabao as premier in 2013, said at a forum in the city today. He also pledged a 20 billion yuan ($3.1 billion) quota for qualified companies to invest in domestic Chinese securities and said sales of yuan bonds in the city will be expanded. The plans relax restrictions on investment flows, bolstering the city’s role as a financial hub and aiding an economy that shrank in the second quarter for the first time since 2009. China Everbright Ltd. (165) rose 8.2 percent, the most in 19 months, as financial services companies surged on speculation they may benefit from the quota.

China’s ETF Plan Boosts H.K. Financials (Source: Bloomberg)
China’s Vice Premier Li Keqiang unveiled plans yesterday to allow more cross-border investments, boosting Hong Kong financial shares that are poised for the biggest losses since the 2008 credit crisis. Guotai Junan International Holdings Ltd. (1788), a securities brokerage, and China Everbright Ltd. (165), which provides investment- banking services, rose more than 8.1 percent in Hong Kong trading yesterday, leading gains in a measure of financial companies in the Hang Seng Composite Index. Bank of East Asia increased the most in a year, while Dah Sing Financial Holdings posted the largest advance since April. The proposals further relax limits on investment flows, bolstering Hong Kong’s role as a financial hub. China will start an exchange-traded fund linked to Hong Kong equities, commit a 20 billion yuan ($3.1 billion) quota for qualified companies to invest in domestic Chinese securities and expand sales of yuan bonds in the city, Li said at a forum yesterday.

Japan Exports Fall More Than Expected as Yen Gains Cloud Economic Outlook (Source: Bloomberg)
Japan’s exports fell more than expected in July as a global slowdown and a strengthening currency weigh on the outlook for the nation’s sales overseas. Exports decreased 3.3 percent in July from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 2.6 percent decline, after a 1.6 percent decrease in June. Shipments rose 0.8 percent in July from June on a seasonally adjusted basis. The world’s third-largest economy is counting on an export revival to aid its rebound from the record earthquake in March. The yen’s 6 percent advance against the dollar in the past three months may weigh on overseas sales at a time when demand from major markets such as China and the U.S. is faltering.

Japanese Stocks Drop as Yen Nears Post World War II High: Nissan Declines (Source: Bloomberg)
Japanese stocks dropped for a second day as the yen approached a post-World War II high and two Federal Reserve officials questioned the amount of stimulus being applied to the world’s biggest economy, hurting prospects for exporters’ earnings. Nissan Motor Co., which gets a third of its revenue in North America, declined 1.6 percent. Kyocera Corp., a maker of solar panels that gets 17 percent of its sales in the U.S., lost 1 percent. Minebea Co., a ball-bearing maker, dropped 2.4 percent after Goldman Sachs Group Inc. cut its share price estimates of Japanese electronic components makers. The Nikkei 225 Stock Average fell 0.5 percent to 9,013.47 as of 9:30 a.m. in Tokyo. The broader Topix index declined 0.5 percent to 772.58 with five stocks retreating for every three that rose.

Korea May Have to Abandon Woori Sale (Source: Bloomberg)
South Korea may be forced to abandon a second attempt to sell its $5.2 billion Woori Finance Holdings Co. stake after limits on local rivals, public ire and the global equity rout left it with one bid. A group led by Seoul-based MBK Partners Ltd. and Korean Federation of Community Credit Cooperatives submitted the solitary offer for the nation’s largest financial company, state-run Korea Deposit Insurance Corp. said yesterday after a bid deadline lapsed. A committee overseeing the sale will meet tomorrow to consider proceeding to the final stage. President Lee Myung Bak, who aims to privatize companies bailed out more than a decade ago, failed to attract more investors even after Woori slumped 21 percent this year. Lawmakers rejected a plan in June that would have eased rules for rival financial holding companies seeking the stake, while interest from buyout firms has drawn public opposition.

Malaysia’s Economic Expansion Slows (Source: Bloomberg)
Malaysia’s economy grew at the slowest pace since 2009 last quarter, adding to evidence of a faltering global recovery and reducing pressure on the central bank to increase interest rates. Gross domestic product rose 4 percent in the three months through June from a year earlier, after expanding a revised 4.9 percent in the previous quarter, Bank Negara Malaysia said in a statement in Kuala Lumpur yesterday. The median of 16 estimates in a Bloomberg News survey was for a 3.6 percent gain. Europe’s debt crisis and slower U.S. growth have damped the outlook for exports, putting pressure on Asian policy makers to delay further rate increases even as prices gain. Malaysia’s central bank refrained from raising borrowing costs last month, and Governor Zeti Akhtar Aziz said yesterday economic expansion may be at the lower end of its forecast for 2011.

Europe’s Stalling Economy May Keep ECB’s Interest Rate on Hold Into 2012 (Source: Bloomberg)
Europe’s unexpectedly sharp economic slowdown has increased the risk of another recession and may prevent the European Central Bank from raising interest rates again this year.  The 17-nation euro-area economy may struggle to gather momentum after growing just 0.2 percent in the second quarter, its worst performance since emerging from the last recession in 2009, said economists including Marco Valli at UniCredit Global Research and Stewart Robertson at Aviva Investors. France’s economy stagnated and in Germany, the region’s economic engine, expansion almost stalled. “I’m comfortable believing that this is a temporary slowdown, but the focus will remain on recession risks for the next few months,” said Valli, chief euro-region economist at UniCredit in Milan. “Rate hikes are off the table for now.”

European Stocks Climb; Health-Care Companies, Vestas Rise, Carlsberg Sinks (Source: Bloomberg)
European stocks climbed, with the benchmark Stoxx Europe 600 Index rising for a fourth day out of five, as some investors speculated that the 9.2 percent drop in equities this month makes their valuations attractive. Vestas Wind Systems A/S posted the best performance in the Stoxx 600 after reporting second-quarter earnings that beat analysts’ estimates. Health-care companies rallied as Sanofi climbed 2.8 percent. Carlsberg A/S, the Nordic region’s largest brewer, plunged 17 percent after reducing its full-year outlook. The Stoxx 600 increased 0.2 percent to 238.05 at the 4:30 p.m. close in London, reversing an earlier drop of as much 1.4 percent. The Stoxx 600 has still declined 18 percent from this year’s high on Feb. 17, on concern that Europe will fail to contain its sovereign-debt crisis and that the economic recovery is faltering in the U.S. The retreat has left the European benchmark trading at 9.8 times the estimated earnings of its companies, near the lowest valuation since March 2009.

Merkel-Sarkozy Debt Proposal Shuns Steps Investors Sought to Calm Markets (Source: Bloomberg)
The latest Franco-German strategy to counter the euro debt crisis stressed ideas already in the works, shunning bolder steps investors were seeking to calm markets. German Chancellor Angela Merkel and French President Nicolas Sarkozy ruled out steps such as the issuance of euro bonds or expanding the bailout fund. They backed a plan being drawn up for national balanced-budget amendments and reheated one rejected last year for a financial-transactions tax. They called for the 17 euro leaders to hold two summits a year, the same number of times they have already met in 2011. “There remains an ongoing tension between investors who want a quick fix and the policy makers who are working on the building blocks for the future,” said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Group Plc. “Everyone can recognize that the building blocks are important, but stronger leadership with a clearer road map is sorely missing in this direction.”

FOREX-Swiss franc jumps as SNB's actions fall short
LONDON, Aug 17 (Reuters) - The Swiss franc jumped sharply on Wednesday as fresh steps by the Swiss National Bank to stem the currency's gains disappointed a market positioned for more radical measures.
The SNB said it would boost liquidity by expanding sight deposits to 200 billion francs from 120 billion, reiterating it would take additional steps if needed, which market players said could mean direct intervention or setting a floor on the euro/Swissie exchange rate.