20110824 1026 Global Market Related News.

GLOBAL MARKETS - Modest euro zone, Chinese data lift euro, stocks
LONDON, Aug 23 (Reuters) - World stocks, the euro and commodity prices rose on Tuesday, after gauges of Chinese and euro zone economic activity came in less gloomy than feared, encouraging investors to dip back into the market after a recent sharp selloff on global growth concerns.
"Many of the gains being seen here seem to be coming off the expectation that the Fed will serve up further stimulus measures, possibly as soon as the end of this week," said Cameron Peacock, market analyst at IG Markets.

Asia Stocks Rise as U.S. Home-Sales Data Adds to Fed Stimulus Speculation (Source: Bloomberg)
Asian stocks climbed for a second day after sales of new homes in the U.S. hit a five-month low, increasing speculation that the Federal Reserve will act to shore up the world’s largest economy, improving the outlook for exporters and materials companies. Honda Motor Co., the carmaker that gets 44 percent of sales from North America, added 0.3 percent in Tokyo. Billabong International Ltd. (BBG), a surfwear maker that counts the “Americas” as its biggest market, climbed 7 percent in Sydney. BHP Billiton Ltd., the world’s biggest mining company, gained 1 percent. Inpex Corp., Japan’s No. 1 energy explorer, increased 2.1 percent as crude oil future rose for a third day. The MSCI Asia Pacific Index added 0.2 percent to 121.03 as of 10:31 a.m. in Tokyo, paring gains of as much as 0.7 percent. Almost two stocks rose for each that fell in the gauge. Global equities erased about $8 trillion in market value in the past four weeks amid worsening economic data in the U.S. and Europe’s smoldering sovereign-debt crisis. The economic reports sparked speculation the Federal Reserve will begin a third-round of asset purchases to help sustain the recovery.

German, Chinese data lift stocks, euro
LONDON, Aug 23 (Reuters) - World stocks, the euro and commodity prices advanced after gauges of Chinese and German manufacturing activity were not as weak as some had feared.
"Any data that just hints that the world is not ending is going to be well received by the markets," Ian Richards, European equity strategist at RBS, said.

U.S. Stocks Rise as Economic Reports Reinforce Optimism Fed to Take Action (Source: Bloomberg)
U.S. stocks rallied, driving the Standard & Poor’s 500 Index up from the cheapest valuations since 2009, as weaker-than-estimated economic data reinforced optimism the Federal Reserve will act to spur growth. Monsanto Co. (MON), Chevron Corp. (CVX) and Microsoft Corp. (MSFT) added at least 3 percent, pacing gains in companies most-tied to the economy. The Morgan Stanley Cyclical Index rose 2.9 percent, breaking a five-day losing streak. Sprint Nextel Corp. (S) jumped 10 percent, the most since May 2010, after the Wall Street Journal said it will start selling Apple Inc.’s iPhone. Financial shares reversed losses after the Federal Deposit Insurance Corp.’s list of “problem” banks shrank for the first time since 2006. The S&P 500 rose 3.4 percent to 1,162.35 at 4 p.m. in New York, for the biggest rally since Aug. 11. All 10 industries in the benchmark gauge rose, with gains ranging between 1.8 percent and 4.6 percent. The Dow Jones Industrial Average added 322.11 points, or 3 percent, to 11,176.76.

U.S. Quake Shakes Buildings From D.C. to Boston (Source: Bloomberg)
A 5.8 magnitude earthquake, the biggest to strike Virginia in more than a century, hit about 40 miles (65 kilometers) northwest of Richmond, rocking buildings from Washington to Boston and causing office workers in New York City to rush into the street. The quake struck at 1:51 p.m. local time today, the U.S. Geological Survey said on its website, and vibrations were felt as far west as Columbus, Ohio, and as far north as Toronto. The temblor, which was 3.7 miles deep, was the strongest to hit the Virginia area since 1897, according to USGS data. There were no immediate reports of major damage, the Federal Emergency Management Agency said. “I was sitting at my computer in the second floor of my house when all of a sudden I feel the table shaking,” Brian Loebig said by telephone from Chesterfield, outside Richmond. “I was doing laundry, so I thought maybe the spin cycle had got out of whack. It would have had to have been incredibly out of whack. It was maybe two minutes. The dog was going crazy.”

New-Home Sales in U.S. Declined in July to the Lowest Level in Five Months (Source: Bloomberg)
Sales of new U.S. homes declined more than projected in July to the lowest level in five months, indicating the industry is struggling to stabilize two years into the economic recovery. Purchases fell 0.7 percent to a 298,000 annual pace after a 300,000 rate in June that was slower than previously estimated, figures from the Commerce Department showed today in Washington. The median projection in a Bloomberg News survey of economists called for a 310,000 rate in July. Builders are less inclined to start new projects as they face competition from cheaper existing homes and the prospect of foreclosures putting more unsold properties on the market. A jobless rate above 9 percent and limited employment growth indicate housing may keep weighing on the recovery even with mortgage rates at a record low.

U.S. 30-Year Bonds Lead Treasuries Higher, Snapping a Two-Day Decline (Source: Bloomberg)
Treasury bonds rose for the first time in three days before a government report that economists said will show a measure of factory orders fell in July. The longest maturities, those most sensitive to inflation, led the advance as evidence grows that the U.S. economy is slowing. The government prepared to auction $35 billion of five- year notes today and $29 billion of seven-year debt tomorrow. Moody’s Investors Service cut Japan’s rating by one step to Aa3. Thirty-year yields fell two basis points to 3.47 percent as of 10:14 a.m. in Tokyo, Bloomberg Bond Trader prices show. The 3.75 percent security maturing in August 2041 rose 13/32, or $4.06 per $1,000 face amount, to 105 5/32.

Greenspan Says Euro ‘Breaking Down’ (Source: Bloomberg)
Former Federal Reserve Chairman Alan Greenspan said fissures in Europe’s common currency may lead to slowing in the U.S. economy. “The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system,” Greenspan said today in Washington. Emergency steps such as unlimited loans from the European Central Bank are keeping many banks in Greece, Portugal, Italy and Spain solvent and easing lending by other Europe institutions. Greenspan said a contraction in Europe would hurt profitability and stock values of American companies since Europe is the target market for about 20 percent of U.S. exports and about 20 percent of foreign-affiliate earnings.

Dollar Strengthens After Japan Debt Downgrade, Before German Economic Data (Source: Bloomberg)
The dollar rose against all its major peers after Moody’s Investors Service cut Japan’s credit rating and before a report that economists said will show business confidence in Germany fell this month. The yen declined versus the greenback after a government official said Japan’s Finance Minister Yoshihiko Noda will discuss today measures to combat a strong currency after it reached a post-war record high Aug. 19. Gains in the greenback were limited on speculation Federal Reserve Chairman Ben S. Bernanke may signal further steps to spur the U.S. economy when he speaks Aug. 26 in Jackson Hole, Wyoming. “The yen is being sold in reaction to the Moody’s rating cut at a time when the market has been wary of intervention,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank. “A downgrade of the sovereign credit rating is nearly equal to a downgrade of its currency.”

Banks Pay Record Rate for Government Cash on Tightening Risk: China Credit (Source: Bloomberg)
Chinese lenders are paying record interest rates for government funds as rising yields on central bank bills fan speculation policy makers will further tighten supplies of cash. The Finance Ministry received a rate of 6.5 percent for 30 billion yuan ($4.7 billion) of six-month money offered at an auction yesterday, the highest level in central bank data going back to December 2006. The People’s Bank of China raised rates on one-year bills last week for the first time since June, boosting the yield by eight basis points to 3.58 percent, compared with the 0.07 percent yield on 12-month U.S. Treasuries.
China has limited scope to stimulate the world’s second- biggest economy even as a faltering recovery in the U.S. and Europe’s sovereign debt crisis dim the outlook for global expansion. Inflation has exceeded Premier Wen Jiabao’s target every month this year and economic growth that’s double the pace of Brazil and Russia may give the government confidence to continue raising benchmark rates that have already been boosted by a total 75 basis points in 2011.

Maehara Plans Leadership Bid as Japan Premier Kan Says He May Quit Aug. 26 (Source: Bloomberg)
Former Japanese Foreign Minister Seiji Maehara, the most popular contender for prime minister in public polls, will compete to succeed Prime Minister Naoto Kan, who said he may resign by the end of the week. “I want to take the lead in overcoming our national crisis,” Maehara said yesterday in Tokyo, declaring his intention to run in the Aug. 29 contest to head the ruling Democratic Party of Japan. Kan said he will step down on Aug. 26 if parliament passes the last two pieces of his legislative agenda, fulfilling a June pledge to quit. Maehara will be challenged by Finance Minister Yoshihiko Noda, Trade Minister Banri Kaieda and Agriculture Minister Michihiko Kano to become the DPJ’s third leader since taking power in 2009. The winner will face the country’s biggest rebuilding project since World War II, after Kan’s popularity plummeted over his handling of the March earthquake and tsunami that caused the worst nuclear crisis since Chernobyl.

Hong Kong’s ‘Scary’ 7.9% Inflation May Fuel Wages Even as Recession Looms (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 pressure on profit margins just as businesses including McDonald’s Corp. (MCD) report that they are grappling with increased rent and material costs.

Japan Credit Rating Cut to Aa3 by Moody’s (Source: Bloomberg)
Japan’s sovereign-credit rating was lowered by Moody’s Investors Service, which cited “weak” prospects for growth that will make it difficult for the government to rein in the world’s largest public debt burden. Moody’s cut the grade one step to Aa3, with a stable outlook, it said in a statement today. Rebuilding costs from the March 11 earthquake and tsunami, along with continuing efforts to contain the Fukushima nuclear crisis, may make it hard for officials to meet their borrowing target this year, it said. The first Japan downgrade by Moody’s since 2002 reflects deteriorating credit quality across developed nations from Italy to the U.S., which lost its AAA status at Standard & Poor’s this month. While the move adds to the challenges of the next Japanese prime minister, scheduled to be picked next week, the impact on bond yields may be limited by what Moody’s described as domestic investors’ preference for government debt.

Kokusai Assets Drop Amid Losing Bet Against Yen: Japan Credit (Source: Bloomberg)
Kokusai Global Sovereign Open is sticking with bets against the yen that contributed to a 60 percent drop in assets and cost the Tokyo-based money manager its spot as the world’s second-largest bond fund. The amount of money invested by the unit of Kokusai Asset Management Co. has fallen to 2.3 trillion yen ($30 billion) from a peak of 5.77 trillion yen in 2008, according to data compiled by Bloomberg. The yen rose to a record last week and Global Sovereign has handed investors an average 2.2 percent loss over five years, versus a 1.2 percent annual drop for its peers.
Global Sovereign Open made betting against the yen its chief strategy in 2007, expecting investors to borrow at Japan’s near-zero interest rates and then sell the currency in search of higher returns abroad. The investment backfired as the worst financial crisis since the 1930s spurred demand for the safety of Japanese assets even as yields dropped around the world. The yen, like the Swiss franc, have appreciated the most among 150 currencies tracked by Bloomberg.

Japanese Stocks Rise on Optimism Fed Will Act to Spur Growth; Toyota Gains (Source: Bloomberg)
Japanese stocks rose for a second day after weaker-than-expected U.S. economic data reinforced speculation Federal Reserve Chairman Ben S. Bernanke will act to support growth. Toyota Motor Corp. (7203), the world’s largest carmaker, rose 0.6 percent. Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, gained 0.5 percent. Inpex Corp. (1605), the country’s No. 1 energy explorer, advanced 2.9 percent after oil prices rose. The Nikkei 225 (NKY) Stock Average rose 0.7 percent to 8,795.29 as of 9:03 a.m. in Tokyo. The broader Topix index climbed 0.7 percent to 755.24. “The market has priced in a slowdown in the U.S. economy to a good degree, and that’s why a series of weak U.S. economic reports tend to raise expectations that Bernanke will do something rather than damping the market,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo.

S.Korea July crude imports up 13.5 pct yr/yr -KNOC
SEOUL, Aug 23 (Reuters) - South Korea's crude oil imports jumped 13.5 percent on the year in July, the second consecutive increase as refineries ramped up output to meet extra demand for oil products, as Japanese rivals struggled to recover from the March earthquake and tsunami.
Analysts said South Korea's oil product export strength will continue in the rest of the year as Formosa Petrochemical Corp's  540,000 barrels per day Taiwan refinery may take some time to fully restart after shutting end-July due to a fire.

Merkel Rejects Seeking Collateral in European Bailouts as Splits Emerge (Source: Bloomberg)
German Chancellor Angela Merkel rejected demands that Greece provide collateral for emergency loans as splits emerged in her Cabinet, reflecting euro-area divisions on the issue. Merkel told lawmakers from her Christian Democratic bloc that a call by Labor Minister Ursula von der Leyen for countries to put up gold as security for bailouts is “not the right way,” Ulrich Scharlack, a spokesman for the parliamentary group, said yesterday in Berlin after they were briefed by Merkel on the region’s debt crisis. The disagreement at the top of Europe’s biggest economy underscores risks over a second Greek aid package after the Finnish government said Aug. 16 that it secured a collateral arrangement to ensure its contribution would be repaid. Austria and the Netherlands, which both share Finland’s AAA rating, called for similar deals, as did Slovakia and Slovenia.

German Confidence Falls More Than Forecast as Debt Crisis Threatens Growth (Source: Bloomberg)
German investor confidence fell more than economists forecast to the lowest in more than 2 1/2 years in August on concern Europe’s debt crises will curb growth. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, plunged to minus 37.6 from minus 15.1 in July. That’s the lowest since December 2008 and the biggest drop since July 2006. Economists expected a decline to minus 26, according to the median of 36 estimates in a Bloomberg News survey.
A four-week rout in equities has wiped more than $8 trillion off global stock values, with Germany’s benchmark DAX index (DAX) plunging almost 25 percent, as investors fret that Europe won’t be able to contain the debt crisis and prevent it from infecting the banking sector. In addition, concerns about a renewed global slump have resurfaced as growth slows in Europe, the U.S. and Asia, damping export demand. Germany’s economy almost stalled in the second quarter, data showed last week.

Sarkozy Prepares Deficit-Reduction Blueprint for Election-Year ‘Austerity’ (Source: Bloomberg)
French President Nicolas Sarkozy is preparing deficit cuts in an election-year budget that aims to persuade investors that France will take the medicine needed to avoid the worst of the euro debt crisis. Sarkozy is scheduled to meet Prime Minister Francois Fillon and Finance Minister Francois Baroin today to outline the 2012 budget blueprint. The top lawmaker from his party, Jean-Francois Cope, said yesterday it would reflect “austerity” -- a term that has been taboo in the French political lexicon since 2007 when Fillon and former Finance Minister Christine Lagarde were reprimanded for using the word, which spurs concerns of rolling back the social-welfare system. “Sarkozy is no longer afraid to use the word ‘austerity,’” Gerard Grunberg, a professor at the Political Sciences Institute in Paris, said in a telephone interview. “Still, he’ll walk on a fine line with voters when he touches taxes and welfare. They may not be big measures in the end but he wants to show he is responsible.”

European August Consumer Confidence Falls More Than Forecast (Source: Bloomberg)
European consumer confidence weakened more than economists forecast in August as growth in the euro-region slowed amid the sovereign debt crisis. An index of household sentiment in the 17-nation euro area fell to minus 16.6 from minus 11.2 in July, the Brussels-based European Commission said in an initial estimate today. That’s the lowest since June 2010. Economists forecast a drop to minus 12.4, the median of 26 estimates in a Bloomberg News survey showed. Europe’s economy is struggling to gather strength as governments from Italy to Spain step up budget cuts to fight the debt crisis. Pledges of 365 billion euros ($525 billion) in official loans to Greece, Portugal and Ireland, and 110.5 billion euros of bond purchases by the European Central Bank failed to fix the finances of those countries or prevent speculative attacks on Spain and Italy.

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 to records, 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 was near 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.”

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.”

Euro Drops Versus Dollar Before Release of German Business Confidence Data (Source: Bloomberg)
The euro dropped versus the U.S. dollar before a report today that economists said will show business confidence in Germany fell for a second month. The 17-nation currency fell to $1.4412 at 10:06 a.m. in Tokyo from $1.4442 in New York yesterday.

European Stocks Rise for Second Day; UBS, Charter Lead Advance (Source: Bloomberg)
European stocks rose for a second day amid continuing speculation the Federal Reserve will take action to bolster the economy and as Chinese manufacturing data exceeded forecasts. UBS AG (UBSN), Switzerland’s biggest bank, advanced 2.1 percent after saying it plans to cut 3,500 jobs to trim costs. Charter International Plc (CHTR) soared 20 percent as the welding and automation-equipment maker said it’s in takeover talks with a potential rival bidder to Melrose Plc. National Bank of Greece SA (ETE) sank to a 14-year low as the nation’s bonds fell.
The benchmark Stoxx Europe 600 Index added 0.8 percent to 226.63 at the 4:30 p.m. close in London, after earlier surging as much as 2.2 percent. The gauge has still fallen 22 percent from this year’s peak on Feb. 17 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 9.4 times its companies’ estimated earnings, near the lowest since March 2009, Bloomberg data show.

U.K. Stocks Climb for a Second Day as Lloyds Rebounds; G4S Gains (Source: Bloomberg)
U.K. stocks climbed for a second day as banks rebounded from a four-day selloff amid continuing speculation the Federal Reserve will take action to bolster the U.S. economy. Lloyds Banking Group Plc (LLOY) rallied 2.7 percent as Goldman Sachs Group Inc. recommended the U.K. lender. G4S Plc (GFS) and John Wood Group Plc (WG/) climbed more than 4 percent after earnings increased. ARM Holdings Plc (ARM) advanced 4.5 percent amid takeover speculation, while Charter International Plc (CHTR) soared 20 percent after confirming bid talks with an unidentified suitor. The FTSE 100 Index (UKX) increased 0.7 percent to 5,129.42 at the 4:30 p.m. close in London, having briefly erased its gains. The gauge lost 5.3 percent last week after European and U.S. data trailed forecasts, adding to concern the global economy is at risk. The FTSE All-Share Index (ASX) climbed 0.7 percent today, while Ireland’s ISEQ Index slid 0.5 percent.

Australian Dollar Declines as Signs of Slowing Global Recovery Damp Demand (Source: Bloomberg)
Australia’s dollar fell against the U.S. currency as concern the global economic recovery is slowing damped demand for higher-yielding assets. The so-called Aussie traded at $1.0494 as of 11:08 a.m. in Sydney from $1.0526 yesterday in New York.