20110823 1022 Global Market Related News.

GLOBAL MARKETS - Stocks near 11-mth low on recession fears
LONDON, Aug 22 (Reuters) - World stocks fell towards a recent 11-month low while the euro and oil prices slipped as concerns about a global economic downturn prompted investors to sell risky assets.
"Markets run on two emotions -- fear and greed, and we have switched to the fear emotion in recent weeks. Recession fears are major concerns for investors and we have seen a lot of economic indicators slowing quite substantially," said Keith Bowman, equity analyst at Hargreaves Lansdown.  

Asian Stocks Climb as Exporters Rise (Source: Bloomberg)
Asian stocks rose for the first time in four days as exporters climbed on speculation that the U.S. Federal Reserve will announce additional measures to shore up the recovery in the world’s largest economy. Samsung Electronics Co., South Korea’s biggest exporter of consumer electronics, gained 2.5 percent in Seoul. Toyota Motor Corp. (7203), the carmaker that gets 28 percent of sales from North America, rose 1.2 percent in Tokyo. Canon Inc., the world’s largest camera-maker, added 1.3 percent. Newcrest Mining Ltd., Australia’s No. 1 gold producer, climbed 2.3 percent in Sydney after the price of the precious metal extended its rally to a record.
The MSCI Asia Pacific Index added 0.5 percent to 118.90 as 9:28 a.m. in Tokyo, with about three stocks rising for every two that fell. Global equities erased more than $8 trillion in market value in the past four weeks. Investors dumped stocks after reports showed the world’s biggest economy is slowing, sparking speculation that the U.S. Federal Reserve will begin a third-round of asset purchases to shore up the recovery.

Obama Seeks Buffett’s Counsel On Spurring U.S. Investment, Economic Growth (Source: Bloomberg)
President Barack Obama called billionaire Warren Buffett today as he’s preparing a speech to lay out initiatives aimed at boosting job creation and economic growth, Josh Earnest, an administration spokesman, said. Obama called the chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), who has served as an informal adviser to the president, to discuss the state of the economy and measures that could be taken to encourage investment, Earnest said. The president also talked with Ford Motor Co. Chief Executive Officer Alan Mulally about developments in the automotive and manufacturing sectors of the economy. “The president and Mr. Buffett discussed the overall outlook on the economy and the reaction to the headwinds we’ve experienced over the last couple of months,” Earnest said. “They talked a little bit about some possible measures that would spur investment and increase economic growth and they also talked about some measures that could address the long term fiscal situation in this country.”

Pickup in Industrial Output Buoyed U.S. in July, Chicago Fed’s Gauge Shows (Source: Bloomberg)
A pickup in industrial production helped keep the U.S. economy from weakening further in July, according to a Federal Reserve Bank of Chicago gauge today. The Chicago Fed national index, a weighted average of 85 economic indicators, improved to minus 0.06 in July from minus 0.38 a month earlier. The three-month average increased to minus 0.29 from June’s minus 0.54. Readings less than zero indicate “below-trend” growth in the national economy, and the gauge has been negative for four straight months. “The message it’s flashing is you’d better be more worried about weak growth and deflation than the opposite,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York.

Treasuries Price In QE3 as Barclays Says Traders Anticipate $500 Billion (Source: Bloomberg)
Record-low yields on U.S. Treasuries show traders expect Federal Reserve Chairman Ben S. Bernanke to signal as soon as this week that the central bank will begin a third round of asset purchases to boost the economy, a scenario the world’s biggest bond dealers said is unlikely. Barclays Plc said 10-year yields indicate traders have priced in $500 billion to $600 billion of Treasury purchases by the Fed. Citigroup Inc. said current rates can only be justified by more central bank bond buying or assuming the economy will shrink by 2 percent. “The market is pricing in another round of large-scale asset purchases, looking for confirmation possibly as early as the Jackson Hole symposium” in Wyoming this week, Anshul Pradhan, a fixed-income research analyst at Barclays in New York, said in an interview last week. “The probability of that is low. If the Chairman does disappoint, then there should be a reversal in the outperformance of 10-year notes.”

Goldman Cuts U.S. Full-Year Growth Forecast on Signs Recovery Has Stalled (Source: Bloomberg)
Goldman Sachs Group Inc. (GS) lowered its forecast for U.S. economic growth in 2011 on signs the recovery in the world’s largest economy lost momentum. The U.S. will expand 1.5 percent this year, down from a previous forecast of 1.7 percent, Goldman economists in New York including Jan Hatzius said in a note published on Aug. 19. Credit Suisse was also among banks lowering growth forecasts this month. Federal Reserve surveys showed manufacturing in Philadelphia and New York contracted in August, while a Thomson Reuters/University of Michigan index of consumer sentiment plunged to a three-decade low. Goldman’s change comes amid a monthlong drop in global equities and as Fed Chairman Ben S. Bernanke prepares to speak at the bank’s annual symposium in Jackson Hole, Wyoming this week.

Most U.S. Stocks Decline as Goldman Sachs Tumbles; Treasuries, Crude Drop (Source: Bloomberg)
Most U.S. stocks fell after Goldman Sachs Group Inc. (GS)’s decline in the last 15 minutes of trading wiped out the day’s second Standard & Poor’s 500 Index rally, overshadowing gains by technology shares. Goldman Sachs slumped 4.7 percent to the lowest level since March 2009 after Reuters said Chief Executive Officer Lloyd Blankfein hired a defense attorney. The company confirmed the report after the close of trading. Bank of America Corp. (BAC) retreated 7.9 percent, the most in the S&P 500, amid concern about the lender’s capital raising plans. Computer stocks in the S&P 500 added 0.7 percent, including Hewlett-Packard Co. (HPQ)’s 3.6 percent advance following last week’s 27 percent plunge.
About 10 stocks fell for every nine that rose on U.S. exchanges at 4 p.m. in New York. The S&P 500 added less than 0.1 percent to 1,123.82 today. The benchmark gauge rallied as much as 2 percent, and posted an advance of 1.1 percent about three hours before markets closed. The Dow Jones Industrial Average rose 37 points, or 0.3 percent, to 10,854.65.

Japanese Stocks Rise First Day in Five on U.S. Economic Report (Source: Bloomberg)
Japanese stocks rose for the first time in five days as a pickup in U.S. industrial production helped keep the world’s biggest economy from weakening further, boosting the earnings outlook for Asia’s exporters. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue outside of Japan, rose 0.9 percent. Canon Inc. (7751), the world’s largest camera-maker, gained 0.9 percent. Kyocera Corp., a maker of solar panels, advanced 1.2 percent. The Nikkei 225 Stock Average rose 1 percent to 8,711.24 as of 9:03 a.m. in Tokyo.
The broader Topix index gained 0.8 percent to 748.76. “Risk aversion came to a halt in the U.S. and European markets yesterday,” said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “Stocks are likely to be bought as valuations and technical indicators indicate they have been oversold.” The relative strength index for the Nikkei 225 (NKY) declined to 24.10 yesterday. Some traders use a reading below 30 as an indicator to buy and see it as a sign asset prices are poised to reverse course.

Hong Kong’s Inflation May Boost Recession Risk (Source: Bloomberg)
Hong Kong’s inflation surged to the fastest pace since 1995, encouraging workers to press for higher pay even as the economy teeters on the edge of recession. The consumer price index rose 7.9 percent from a year earlier after a 5.6 percent increase in June, the government reported on its website yesterday. Excluding distortions caused by a public housing subsidy, prices rose 5.8 percent. Hong Kong’s economy will shrink again this quarter after a contraction in the three months through June that was caused by an export slowdown, Morgan Stanley and Daiwa Capital Markets say. Wage increases may add to pressure on companies’ profit margins as businesses including McDonald’s Corp. (MCD) report that they are already grappling with increased rent and material costs.

South Korean Won Strengthens on Fed Stimulus Speculation; Bonds Decline (Source: Bloomberg)
South Korea’s won rose for a second day on speculation the Federal Reserve will introduce additional stimulus measures to sustain a U.S. recovery, possibly involving asset purchases that boost the supply of dollars. The Fed will hold its annual symposium at Jackson Hole, Wyoming on Aug. 26. The Federal Open Market Committee said it is “prepared to employ” additional tools to bolster the economy on Aug. 9, indicating further economic stimulus policies are being considered. The Kospi Index rose for the first time in four days. “Expectations that Fed Chairman Ben Bernanke will announce some kind of market-supportive policy is boosting the won,” said Kim Jin Ju, a currency dealer at Korea Exchange Bank. “South Korea’s external debt data due today may affect market sentiment.”

Thailand Stocks No Longer Cheap After Overtaking Peers, Credit Suisse Says (Source: Bloomberg)
Thai stocks are “no longer cheap” after gains eliminated the nation’s long-standing discount to its peers, Credit Suisse Group AG said. “Valuations have played a large role in Thailand’s outperformance since 2009,” Dan Fineman and Siriporn Sothikul, analysts at Credit Suisse, wrote in a report dated today. “Without the discount, the market loses a big catalyst.” The analysts said they don’t expect buying momentum to deliver more than another 5 percent outperformance. “We suspect that some of the money entering Thailand is from funds without Thailand in their benchmarks taking non-index positions. This money could prove flighty.”

European Failure to Solve Region’s Banking Crisis Returns to Haunt Markets (Source: Bloomberg)
Four years to the month since the global credit crisis began, European lenders remain dependent on central bank aid, plaguing markets and economies worldwide. Emergency steps such as unlimited loans from the European Central Bank are keeping many banks in Greece, Portugal, Italy and Spain solvent and greasing the lending of others, while low interest rates and debt-buying are containing borrowing costs. Such aid is needed as concerns about slowing economic growth and sovereign debt prompt banks to curb lending, stockpile dollars and hoard cash in safe havens. “I’m not sleeping at night,” said Charles Wyplosz, director of the Geneva-based International Center for Money and Banking Studies. “We have moved into a new phase of crisis.”

European Banks Must Pay Up to Borrow $100 Billion Amid Crisis: Euro Credit (Source: Bloomberg)
European banks with more than $100 billion of cash to raise by year-end will have to pay up because investors perceive them as the worst credits they’ve ever been. The cost of insuring the senior and junior bonds of 25 banks and insurers doubled since April, according to the Markit iTraxx Financial indexes of credit-default swaps. The Euribor- OIS spread, a gauge of banks’ reluctance to lend to each other, reached the widest since April 2009 this month, while the cost for European banks to fund in dollars matched a 2 1/2-year high. “This return of generalized banking risk marks a new phase in the unfolding European drama,” said Lisa Hintz, an analyst in New York at Capital Markets Research Group, a unit of ratings firm Moody’s Investors Service. “Investors have heightened concerns about sovereign and financial institution risk.”

Merkel Says She Will Resist Market Pressure for Common Euro-Region Bonds (Source: Bloomberg)
The U.S. Treasury Department faces legal issues that must be addressed before Libya’s $37 billion in frozen assets can be unblocked, a department official said. Last month’s U.S. recognition of Libya’s Transitional National Council as the country’s governing authority helped pave the way toward making some of the assets available to the rebels’ governing group, the official said today by e-mail. Still, there remain legal issues that must be addressed before any assets are unblocked, the official said, requesting anonymity for lack of authorization to speak on the matter publicly. The official said today that talks with the Transitional National Council are continuing, without specifying what legal issues are involved. Since February, the U.S. has frozen $37 billion in assets of Muammar Qaddafi’s regime, according to the Treasury Department official.

Italy’s Debt Burden May Balloon as Austerity Smothers Growth: Euro Credit (Source: Bloomberg)
Italy’s austerity drive, enacted in exchange for European Central Bank bond purchases driving down borrowing costs, may backfire as it chokes the economic growth needed to ease Europe’s second-biggest debt burden. Prime Minister Silvio Berlusconi’s Cabinet approved 45.5 billion euros ($66 billion) in deficit reductions in Rome on Aug. 12, the nation’s second austerity package in a month, to balance the budget in 2013 and convince investors that Italy can trim debt of about 120 percent of gross domestic product. That’s the biggest ratio in Europe after Greece, whose fiscal woes sparked the sovereign crisis last year. While the back-to-back packages aim to eliminate Italy’s budget gap, spending cuts and tax increases risk damaging the economy at a time when the global recovery is stumbling. The measures, already in effect, require parliamentary approval that starts today as Senate committees review the law before both houses vote in September.

Euro Holds Decline Versus Dollar Before Manufacturing, Confidence Reports (Source: Bloomberg)
The euro held yesterday’s decline versus the dollar before reports that economists said will show manufacturing growth slowed and investor confidence slid in Germany, Europe’s largest economy. The yen fell against most major peers as Japanese Finance Minister Yoshihiko Noda said excessive movements in the yen can hurt the nation’s recovery, raising prospects officials will act to curb gains. The greenback gained against New Zealand’s dollar before Federal Reserve Chairman Ben S. Bernanke speaks Aug. 26 in Jackson Hole, Wyoming, amid speculation he will signal additional steps to bolster the U.S. economy. “The market’s consensus is that the economic outlook in the region will deteriorate,” Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., said about the euro area. “It won’t help stock prices stabilize, and the market may lean toward risk aversion."

European Shares Advance, Rebounding From Two-Year Low; Eni Gains on Libya (Source: Bloomberg)
European stocks rebounded from a two-year low amid speculation the Federal Reserve may this week signal additional stimulus measures and as prospects for an end to the war in Libya boosted energy companies. Eni SpA (ENI) and Petrofac Ltd. (PFC) led a rally in oil companies, both rising more than 3 percent. Petropavlovsk Plc (POG) jumped 6.2 percent as Citigroup Inc. upgraded the gold producer and the precious metal advanced to an all-time high. Jyske Bank A/S dropped 7.6 percent as earnings missed estimates. The benchmark Stoxx Europe 600 Index rose 0.8 percent to 224.9 at the 4:30 p.m. close in London, having earlier lost the same amount. The gauge retreated 6.1 percent last week, extending its decline from this year’s high to 23 percent, as European and U.S. economic data that trailed forecasts added to concern the global recovery is at risk. The retreat has left the Stoxx 600 trading at about 9.3 times its companies’ estimated earnings, near the lowest since March 2009, Bloomberg data show.

Australia, Kiwi Dollars Weaken on Signs Global Economy Is Losing Momentum (Source: Bloomberg)
The Australian and New Zealand dollars declined against most of their major counterparts as signs that the global economy is losing momentum reduced demand for higher-yielding assets. The Aussie snapped a two-day gain versus the greenback before reports today forecast to show American home sales fell and European manufacturing contracted. New Zealand’s dollar lost the most among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes before a Reserve Bank report on the two-year outlook for the nation’s inflation. “Investor sentiment is more inclined to pessimism, which is weighing on the Australian and New Zealand currencies,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest foreign-exchange margin company.

All Latin America GDP Growth Forecasts Cut Except Chile by Morgan Stanley (Source: Bloomberg)
Morgan Stanley cut its forecast for Latin American economic growth this year and next, saying the region is “unlikely to be spared” from a global slowdown. The region’s economies will expand 3.6 percent next year from a previous forecast of 4.6 percent, as slower growth in Europe and the U.S. takes its toll on demand for the region’s commodities, Morgan Stanley’s chief Latin America economist, Gray Newman, said in an e-mailed report. “An extended bout of weakness in the developed world is likely to see both Chinese exports and import demand soften and with that commodity prices, which have underpinned Latin America’s era of abundance,” the report said. “Ultimately, we concluded that Latin America would unlikely be spared.”