20110826 1012 Global Market Related News.

Asia Stocks Swing Between Gains, Losses (Source: Bloomberg)
Asian stocks swung between gains and losses ahead of a speech by U.S. Federal Reserve Chairman Ben S. Bernanke at a meeting of central bankers and before reports expected to show growth is slowing in the world’s largest economy. Honda Motor Co., a carmaker that gets more than 80 percent of its sales abroad, dropped 1 percent in Tokyo. Billabong International Ltd. (BBG), a surfwear maker whose sales come about half from the western hemisphere, slumped 3.9 percent in Sydney after U.S. initial jobless claims unexpectedly rose. Fairfax Media Ltd., a newspaper publisher in Australia and New Zealand, jumped 8.7 percent after saying it’s preparing an initial public offering of one unit.
The MSCI Asia Pacific Index added 0.3 percent to 120.07 as of 10:22 a.m. in Tokyo, after falling as much as 0.2 percent. About four stocks rose for every three that fell on the gauge, which is headed for its first weekly advance in five weeks. Investors are awaiting a speech by Bernanke today in Jackson Hole, Wyoming, for any indications of whether the central bank will signal further economic stimulus amid worsening economic data in the U.S.

World Economy Faces 50% Chance of Renewed Slump, Nobel Winner Spence Says (Source: Bloomberg)
The global economy has a 50 percent chance of slipping into recession as Europe and the U.S. struggle to grow, according to Nobel laureate Michael Spence. “I’m quite worried,” Spence said in a Bloomberg Television interview in Hong Kong yesterday. “A combined downward dip in Europe and America, which is a good chunk of the industrialized economies, I’m quite sure will take down growth in China particularly, and that will then immediately spread to the rest of the emerging economies.” He put the likelihood of such a scenario “at about 50 percent.” Spence’s remarks follow cuts in global growth forecasts by institutions from Citigroup Inc. to UBS AG as central bankers from around the world gather for a Federal Reserve symposium this weekend in Jackson Hole, Wyoming. Unlike the aftermath of the 2008 global financial crisis when China cushioned the blow with a stimulus program, this time it would only be able to buffer its domestic economy, he said.

GLOBAL MARKETS-Stocks rise, gold tumbles as investors await Bernanke
LONDON, Aug 25 (Reuters) - World stocks edged up on Thursday while gold fell sharply as investors were optimistic the Federal Reserve would signal at a gathering this week that it is committed to supporting the U.S. economy if necessary.
"Everyone is waiting to see what comes of the Wyoming meeting. I would be uncomfortable being aggressively short going into the weekend. And corporate results don't look too bad," said Andy Lynch, fund manager at Schroders.

U.S. Stock Futures Rise Amid Stimulus Speculation Ahead of Bernanke Speech (Source: Bloomberg)
U.S. stock futures rose, following the biggest loss in a week for the Standard & Poor’s 500 Index, amid speculation that U.S. Federal Reserve Chairman Ben S. Bernanke’s speech today may signal another program to boost the world’s largest economy. S&P 500 futures expiring in September rose 0.7 percent to 1,165.60 at 10:19 a.m. in Tokyo. The U.S. equity benchmark lost 1.6 percent to 1,159.27 yesterday as selling in German futures sparked a rout in global stocks. Dow Jones Industrial Average futures gained 0.6 percent to 11,199. Investors are awaiting Bernanke’s speech in Jackson Hole, Wyoming, today at 10 a.m. New York time and will be looking for indications of whether the central bank will embark on further stimulus. Data today may show the U.S. economy grew 1.1 percent in the second quarter, from a previous estimate of 1.3 percent, according to the median of 80 forecasts in a separate survey.

U.S. Consumer Confidence Stabilizes Near Record Low, Bloomberg Index Shows (Source: Bloomberg)
Consumer confidence stabilized last week at a level that’s within striking distance of an all-time low as Americans remained pessimistic about the economy. The Bloomberg Consumer Comfort Index was minus 47 in the week to Aug. 21 compared with minus 48.3 reading the previous period that halted a three-week slide. The gain was within the survey’s 3-point margin of error. The figure is close to minus 54 in January 2009, which matched the worst reading in the history of the series dating back to 1985. Confidence among those earning more than $100,000 a year fell in the past month to the lowest level since 2009, possibly due to stock market weakness and mounting concern the recovery may falter. Unemployment above 9 percent has also soured consumers’ moods, posing a risk of further erosion of household spending that accounts for 70 percent of the economy.

Fed Pledge Inflates Hong Kong’s Misery With Currency Peg: Chart of the Day (Source: Bloomberg)
A U.S. pledge to keep interest rates at record lows through mid-2013 is no boon for Hong Kong, where a “misery index” has climbed the most in the world because of inflation fueled by cheap funding. The gauge, which sums the jobless rate and the annual increase in consumer prices, jumped 570 basis points in the 12 months through July to the highest level in more than 15 years. It was the biggest gain of 56 countries tracked by Bloomberg. The CHART OF THE DAY shows the misery index alongside Federal Reserve cuts to borrowing costs, as investors focus on whether Chairman Ben S. Bernanke will today signal more stimulus in a speech at Jackson Hole, Wyoming. The bottom panel shows the dollar’s weakness against the currencies of six U.S. trading partners. An exchange-rate peg means Hong Kong’s interest rates track those of the Fed and the city’s currency falls with the dollar, boosting import costs.

U.S. Fed’s Monetary Policy May Spur Inflation, India’s Central Bank Says (Source: Bloomberg)
The Federal Reserve’s decision to keep record-low interest rates and the possibility of further steps to spur the U.S. economy may stoke commodity prices and fan inflation in India, the Asian nation’s central bank said. “Given the fiscal limitations and growing signs of weakness in the U.S., the Fed has already indicated that it will pursue its near-zero rate policy at least till mid-2013,” the Reserve Bank of India said in a report in Mumbai yesterday. “It has also hinted at another dose of quantitative easing. This policy stance may keep the commodity prices elevated.” The Reserve Bank has struggled to contain the fastest inflation among major economies even after raising rates 11 times since mid-March 2010. Emerging-market officials are waiting to see whether Fed Chairman Ben S. Bernanke will signal a third-round of asset purchases, known as quantitative easing, at a speech in Jackson Hole, Wyoming, today.

U.S. Stocks Snap Three-Day Rally Amid German Selloff, Jobs Data (Source: Bloomberg)
U.S. stocks fell, snapping a three- day rally, after jobless claims unexpectedly increased and selling in German futures sparked a rout in global equities. The S&P 500 fell 1.6 percent to 1,159.27 at 4 p.m. in New York, according to preliminary closing data. The benchmark gauge rallied 4.8 percent during the previous three days. The Dow Jones Industrial Average declined 170.89 points, or 1.5 percent, to 11,149.82 today.

Bernanke Signaling No Bond Purchases Backed by Data From Prices to Freight (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke tomorrow may disappoint stock investors betting on a commitment to step up stimulus. He has little choice, given rising consumer prices and a U.S. economy that is still growing. Gasoline costs are 33 percent higher, consumer inflation is twice as fast and inflation expectations are above levels since Bernanke signaled more easing a year ago at the annual Fed symposium in Jackson Hole, Wyoming. While the U.S. expansion has slowed, the Chicago Fed’s index of 85 economic indicators improved in July for a third month on gains in production.
Policy makers, who said Aug. 9 they’ll use additional tools “as appropriate,” probably don’t expect a recession or rapid disinflation, making a signal of bond buying premature, said Roberto Perli, managing director at International Strategy & Investment Group in Washington. Instead, Bernanke will probably detail options for further stimulus and clarify how much the Fed’s reduction in its outlook this month stems from long-term obstacles to growth, said Keith Hembre, a former Fed researcher.

Fed caution supports stocks; gold tumbles
LONDON, Aug 25 (Reuters) - World stocks edged up from this month's 11-month low while gold fell sharply as investors took an optimistic view of how strongly the Federal Reserve will commit to supporting the economy at a gathering this week.
"Judging by the recent behaviour of markets, they are expecting either a stimulus package to be announced or Bernanke to elaborate on what weapons remain in his arsenal," Ben Potter, strategist at IG Markets, said.

First-Time Jobless Claims in U.S. Increase, Propelled by Verizon Dispute (Source: Bloomberg)
Claims for U.S. unemployment benefits unexpectedly rose last week, pushed up for a second time by a labor dispute at Verizon Communications Inc. (VZ) Jobless claims climbed by 5,000 to 417,000 in the week ended Aug. 20, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. At least 8,500 applications were filed by workers at Verizon last week, compared with 12,500 the prior week, the agency said. The report signals that excluding the communications dispute, companies are slowing the pace of firings, which may ease concern that consumers will cut back on spending. At the same time, an unemployment rate at 9.1 percent is a reminder that a sustained labor-market rebound has yet to develop two years into the economic recovery.

Treasury 10-Year Notes Head for Weekly Loss Before Bernanke Speech Today (Source: Bloomberg)
Treasuries headed for their steepest weekly loss in almost two months on speculation the economy is growing enough to keep Federal Reserve Chairman Ben S. Bernanke from announcing a third round of quantitative easing in a speech today. Yields indicate traders added to inflation bets for the first week this month, damping expectations that the central bank is preparing so-called QE3. Bernanke will speak at the annual Fed symposium in Jackson Hole, Wyoming. He used the platform last year to announce the central bank would “do all that it can” to spur growth and then went on to implement a $600 billion debt-purchase plan in November. “He may not announce QE3, but he will say they have other options to stimulate the economy,” said Hiromasa Nakamura, a senior investor at Mizuho Asset Management Co. in Tokyo, which oversees the equivalent of $38.7 billion and is a unit of Japan’s second-largest bank. “Yields have already declined sharply. We will consider selling” if they fall further, he said.

S&P Prompts $1 Trillion Stockholder Losses With Downgrade Belied by Bonds (Source: Bloomberg)
Shareholders in U.S.-listed companies can thank Standard & Poor’s for making them $1 trillion poorer after the rating firm earlier this month lowered the grade on Treasury securities for the first time to AA+ from AAA. Now, some of the most experienced investors say the stock market losses make no sense. While the benchmark index for U.S. equities dropped as much as 6.7 percent, or $1.03 trillion, since the Aug. 5 downgrade, 10-year Treasuries rallied the most in 28 months and the government was able to finance its quarterly debt obligations at the lowest interest rates ever. The S&P 500 fell to 12.2 times earnings the first day after the downgrade, the lowest since March 2009, while Treasuries have returned 2 percent since.
“One of the most perverse things I’ve seen in 25 years of doing this is that S&P downgrades the United States government, and investors’ reaction is to run towards the securities that they downgrade, selling businesses without asking at what price,” Kevin Rendino, a money manager at BlackRock Inc., which oversees $3.65 trillion in New York, said in an Aug. 23 telephone interview. “Equity prices have swung well too far.”

Dollar Trades Near Week High as Easing Bets Fade Before Bernanke Speech (Source: Bloomberg)
The dollar traded 0.3 percent from a one-week high amid speculation that Federal Reserve Chairman Ben S. Bernanke may today disappoint investors betting he will signal a third round of quantitative easing to spur the economy. The euro dropped against a majority of its major peers as European regulators extended bans on short-selling in equity markets in an effort to prevent the region’s sovereign-debt crisis from worsening. The Australian dollar is set to advance this week against 13 of its 16 major peers as traders pared bets on interest-rate cuts before central bank Governor Glenn Stevens testifies at a parliamentary committee today. “The market has gone from very early in the week expecting quite a large QE3 to now still expecting some measures from Mr. Bernanke, but the expectation has moderated,” said Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. “You can probably still expect a dollar bounce if he does not provide any new measures.”

China’s Stocks Rise Most in 10 Months on Bank Earnings, Fiscal Spending (Source: Bloomberg)
China’s stocks rose the most in more than 10 months after Bank of China Ltd. (601988) reported record profit and investors speculated the Chinese government is increasing fiscal spending to bolster the world’s second-biggest economy. Bank of China, the nation’s third-largest bank, led a gauge of lenders to the second-biggest gain among industry groups after profit surged 28 percent. China Railway Group Ltd. (601390) jumped 2.5 percent and Tianjin Capital Environmental Protection Group Co. surged 10 percent after Shanghai Securities News reported China plans to spend over 2.3 trillion yuan for new subway lines and sewage treatment. PetroChina Co. and Jiangxi Copper Co. paced an advance for commodity producers on speculation the Federal Reserve will announce a third round of asset purchases.
“First-half earnings growth has been part of the reason for the market’s gains,” said Zhang Han, a strategist at Guotai Junan Securities Co. in Shanghai. “The U.S. is likely to use QE3 to pour liquidity into global capital markets.”

Japanese Stocks Swing Between Gains, Losses Ahead of Bernanke Speech (Source: Bloomberg)
Japanese stocks swung between gains and losses after a drop in the yen boosted the earnings outlook for exporters and as investors awaited a speech by Federal Reserve Chairman Ben S. Bernanke today. Honda Motor Co., a carmaker that gets more than 80 percent of its sales abroad, fell 0.5 percent. Canon Inc., which counts Europe as its biggest market, dropped 0.6 percent. Sony Corp. (6758), the country’s No. 1 exporter of consumer electronics, rose 0.6 percent after the yen weakened against the dollar and euro. The Nikkei 225 (NKY) Stock Average was little changed at 8,767.76 as of 9:38 a.m. in Tokyo after dropping as much as 0.3 percent. The broader Topix index rose 0.1 percent to 752.66. For the week, the Nikkei has risen 0.5 percent, while the Topix edged up 0.1 percent.
“Recent U.S. economic reports have shown mixed results, failing to boost confidence,” said Yutaka Yoshii, a strategist at Mito Securities Co. in Tokyo. “As the foreign exchange market shifts toward a weaker yen somewhat, sell pressure is weak for export-related stocks.”

RBA’s Stevens Says Decline in Confidence May Lower Australia’s Inflation (Source: Bloomberg)
Reserve Bank of Australia Governor Glenn Stevens said a decline in consumer confidence driven by the rout in global financial markets will help ease inflation pressures. “Inflation bears careful watching, but we can keep it under control,” Stevens said today in his opening statement to a parliamentary committee in Melbourne. “It would be reasonable to anticipate that a decline in confidence arising from the recent events internationally may well dampen demand somewhat compared with the outlook set out in the Statement on Monetary Policy published in early August.” Since Stevens kept the overnight cash rate target unchanged at 4.75 percent for an eighth straight meeting on Aug. 2, investor confidence has slumped after Standard & Poor’s cut the U.S.’s credit rating and as Europe’s debt crisis deepened. That prompted traders to bet the RBA’s next move will be to reduce the benchmark rate.

Australia Dollar Rises as Stevens’ Inflation Comments Reduce Rate-Cut Bets (Source: Bloomberg)
The Australian dollar rose to a two- week high against the yen after Reserve Bank Governor Glenn Stevens said inflation data is “still concerning,” easing speculation the central bank will cut interest rates. The so-called Aussie appreciated against all of its 16 major counterparts as traders cut bets that the RBA will reduce borrowing costs. The New Zealand dollar snapped a two-day decline against the greenback after TD Securities Inc. said the nation will continue to benefit from China’s growth through dairy exports. “Stevens’ comments suggest the central bank hasn’t abandoned its tightening bias, spurring buying of the Aussie because it’s been sold as the market priced in rate cuts,” said Teppei Ino, an analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “The strength of New Zealand’s exports is that demand for their dairy products doesn’t fall even when there is concern about a global economic slowdown.”

Biggest Trader-Economist Divergence of ’11 Signals Rate Cut: Brazil Credit (Source: Bloomberg)
Brazilian interest-rate forecasts by economists and traders are diverging by the most this year. Recent history shows traders are more accurate predictors of the country’s monetary policy. The central bank will hold the benchmark Selic rate at 12.5 percent this year, according to the median forecast of about 100 economists in a central bank survey. Yields on interest-rate futures show traders are betting policy makers will lower borrowing costs by 68 basis points, or 0.68 percentage point, this year, according to data compiled by Bloomberg. In Chile, traders also expect a rate cut this year while economists predict the bank will keep it unchanged. Economists and traders are at odds over how much Latin America’s biggest economy will slow as global growth falters. Traders correctly predicted the central bank’s rate increases in April 2011 and July 2010, the last two times that they disagreed with economists, according to data compiled by Bloomberg.

IMF May Authorize Next Greek Payment Under Bailout Plan by End-September (Source: Bloomberg)
The International Monetary Fund may authorize the next disbursement for Greece under a joint bailout with Europe at the end of next month, a spokesman for the fund said. A review of policies attached to the current 110 billion-euro ($159 billion) bailout with the European Union is currently taking place in Athens and should conclude around Sept. 5, spokesman David Hawley told reporters in Washington today. “Assuming agreements are in place, the IMF executive board could be in position to consider approval of the next disbursement towards the end” of September, Hawley said.

Sarkozy Economic-Growth Forecasts Seen as Too High, Pointing to More Cuts (Source: Bloomberg)
French President Nicolas Sarkozy’s budget cuts announced yesterday marked just a first step in meeting deficit targets. That’s because his growth forecasts remain too optimistic even after they were lowered yesterday, said economists including Bruno Cavalier, chief economist at Oddo & Cie. in Paris. Prime Minister Francois Fillon yesterday announced 12 billion euros ($17 billion) of measures in 2011 and 2012 and said the euro region’s second-largest economy will expand by 1.75 percent in each year. The deficit will be 4.5 percent of gross domestic product in 2012, when Sarkozy seeks re-election, beating the target. “I really doubt France will make 1.75 percent next year. My forecast is 1.1 percent and that means the shortfall will then be about 10 billion euros,” said Cavalier. “Once the election is over, it will be much easier to pass extra austerity measures.

Short Sellers May Spend Another Month on European Stock Market Sidelines (Source: Bloomberg)
Investors may face another month of short-selling curbs in Europe after French, Italian and Spanish financial regulators extended temporary bans introduced this month in a bid to stem market volatility. Spain and Italy extended their bans through Sept. 30, regulators in both countries said in a statement. France’s Autorite des Marches Financiers said its ban could last as long as Nov. 11. The regulators all said they might lift the bans on short selling of financial stocks when the market stabilizes. The ban didn’t prevent an 8 percent drop in European bank stocks since it was imposed on Aug. 12 after shares of lenders including Societe Generale SA hit their lowest levels since the credit crisis of 2008.