20110905 1537 Global Market Related News.

Global Investors Should Brace For ‘More Pain’ on China Outlook, CICC Says (Source: Bloomberg)
Global investors should brace “for more pain” as manufacturing growth slumps and prospects that Chinese monetary policies will loosen have faded, said China International Capital Corp., Asia’s biggest investment bank. China’s August manufacturing data was one of the lowest since the end of the global financial crisis, while factory output in South Korea, Taiwan, France, Italy, the UK and Sweden all dropped below expansion levels, Hao Hong, a Beijing-based global strategist at CICC, wrote in a report. CICC and Shenyin & Wanguo Securities Co. cut their earnings forecasts for publicly traded companies this year on speculation the central bank may not halt measures to curb credit growth and tame inflation. “Our view has been that rebounds are likely to be fleeting and feeble unless fundamentals start to improve,” Hong said. “For now, we should brace ourselves for more pain.”

Asian Stocks Decline After U.S. Employment Report Fuels Recession Concerns (Source: Bloomberg)
Asian stocks fell, with the benchmark regional index headed for its biggest decline in two weeks, as mining companies and exporters dropped after the U.S. jobs market stalled in August, fueling concern the world’s largest economy may be headed for a recession. Samsung Electronics Co., a South Korean exporter of consumer electronics that gets 22 percent of its revenue from America, sank 4.9 percent in Seoul. Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, declined 2.6 percent in Tokyo. Clothier Fast Retailing Co. sank 1.7 percent after reporting sales fell at its Uniqlo stores. BHP Billiton Ltd. (BHP), the world’s largest mining company and Australia’s No. 1 oil producer, retreated 2.1 percent after crude and metal prices slipped.
The MSCI Asia Pacific Index dropped 2.6 percent to 120.98 as of 3:20 p.m. in Tokyo, headed for its biggest drop since Aug. 19. Almost six stocks fell for each that rose on the gauge. The measure slumped 8.6 percent last month, the most since May 2010, amid concern global economic growth is slowing as Europe’s sovereign debt crisis spreads and after Standard & Poor’s cut the U.S. credit rating.

Stagnant August Payrolls in U.S. Add to Signals of Renewed Recession Risk (Source: Bloomberg)
The U.S. may be on the cusp of a recession for the first time in more than two years. Stagnant payrolls in August reported last week added to data over the past month showing the economy is faltering, including slowing manufacturing, plunging consumer confidence, falling home values and lower bond yields and stock prices. “At this stage of the typical expansion we expect above- average growth and instead we are barely seeing any growth at all,” said James Hamilton, an economics professor at the University of California, San Diego, who has advised Federal Reserve banks and studied what tips the U.S. into downturns. “We have to be more worried. Overall, the economy is in a delicate position and another shock could send us down.”

Job Growth Stagnates in U.S. in August as Unemployment Rate Holds at 9.1% (Source: Bloomberg)
Job growth in the U.S. unexpectedly stagnated in August, adding to pressure on Federal Reserve Chairman Ben S. Bernanke and President Barack Obama to rouse an economy that’s at risk of stalling two years after the last recession ended. Payrolls were unchanged, the weakest reading since September 2010, the Labor Department said yesterday in Washington. The median forecast in a Bloomberg News survey called for a gain of 68,000. The jobless rate held at 9.1 percent. “It’s a very, very difficult labor market,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We have an economy that’s just muddling through.”

Services Industry in U.S. Probably Grew at Slowest Pace Since January 2010 (Source: Bloomberg)
Service industries in the U.S. probably expanded in August at the slowest pace in more than a year, adding to concern the recovery is losing steam, economists said before a report this week. The Institute for Supply Management’s non-manufacturing index fell to 51 last month, the lowest since January 2010, from 52.7 in July, according to the median of 59 forecasts in a Bloomberg News survey ahead of the Sept. 6 release. A reading of 50 is the dividing line between expansion and contraction. A Sept. 8 report from the Commerce Department may show the trade deficit shrank from the highest level since October 2008. The recovery risks stalling without a pickup among the non- manufacturing industries that account for about 90 percent of the economy. A stagnant labor market and bleaker business and consumer sentiment may require more effort from President Barack Obama and Federal Reserve Chairman Ben S. Bernanke to spur growth.

U.S. Stocks Fall as Employment Data Fuels Recession Concerns (Source: Bloomberg)
U.S. stocks fell this week as the Standard & Poor’s 500 Index posted its biggest monthly decline in more than a year and a report showing employment stagnated in August fueled concern the economy may slip into a recession. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) lost at least 4.4 percent as the Federal Housing Finance Agency sued lenders over residential mortgage-backed securities. AT&T Inc. (T) declined 3.4 percent after the government sued to prevent its planned purchase of T-Mobile USA Inc. First Solar Inc. (FSLR) dropped 11 percent after the International Energy Agency said the price of solar power may fall. The S&P 500 fell 0.2 percent to 1,173.97 this week as a 2.5 percent slide on the last day wiped out gains from earlier in the week. The Dow Jones Industrial Average decreased 44.28 points, or 0.4 percent, to 11,240.26. Both gauges posted their biggest monthly losses since May 2010 in August.

Dollar Debt Drops Most Since Lehman as Bank Concerns Mount: China Credit (Source: Bloomberg)
Chinese companies’ dollar debt is handing investors the biggest losses in almost three years as concern bad loans will climb cools appetite for the securities amid signs the global recovery is losing steam. The notes fell 1.5 percent in August, the most since global credit markets seized up in October 2008 following the collapse of Lehman Brothers Holdings Inc., according to the HSBC Asian U.S. Dollar Bond Index. Only India’s debt performed worse among issuers from Asia’s 10 biggest economies excluding Japan and Taiwan. Bonds sold by firms in Singapore, the only regional economy to be rated AAA by the three largest ratings companies, gained 1.3 percent, while U.S. Treasuries rose 2.8 percent.
Chinese companies have sold a record $33 billion of dollar- denominated bonds this year as the yuan strengthened 3.3 percent versus the greenback and domestic interest rates were raised three times. The cost to protect the Asian nation’s sovereign debt against default jumped the most in two years in August amid fears the banking system will need to be bailed out as loans to local governments turn sour.

China’s Stocks Decline to Lowest in Year on Services Slump, U.S. Jobs Data (Source: Bloomberg)
China’s stocks fell to the lowest level in almost 14 months as a drop in a Chinese services index to a record low and a report showing no U.S. jobs growth last month boosted concerns global economic growth is stalling. Anhui Conch Cement Co., China’s biggest maker of the building material, plunged 6.2 percent after a purchasing managers’ index slid to 50.6 in August from 53.5 in July. PetroChina Co. sank to its record low, and Jiangxi Copper Co. slumped more than 2 percent after the U.S. unemployment rate stayed at 9.1 percent last month. Shenzhen Development Bank Co. (000001) led declines for lenders after the China Securities Journal said new reserve requirements for 14 listed banks may increase by about 700 billion yuan ($110 billion) over the next six months. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 42.2 points, or 1.7 percent, to 2,486.08 at 1:08 p.m., the lowest since July 19, 2010. The CSI 300 Index retreated 1.9 percent to 2,751.99.

China HSBC August Services PMI Drops to Record Low as New Business Slows (Source: Bloomberg)
A Chinese services index fell to a record low in August as new business growth moderated, adding to evidence the economy is slowing after the government raised interest rates, curbed lending and limited property purchases. A purchasing managers’ index dropped to 50.6 from 53.5 in July, according to a statement issued by HSBC Holdings Plc and Markit Economics. The reading, near the borderline of 50 that marks expansion or contraction, was the lowest since the series began in November 2005, HSBC said. The data “reflects the effect of property and credit tightening measures,” Qu Hongbin, chief China economist at HSBC in Hong Kong, said in the statement. Tightening is probably approaching an end and consumer spending is resilient, “suggesting China’s service sector is likely to see a moderation in growth and not a meltdown.”

Megabank Default Risk Falls From Record High After Downgrade: Japan Credit (Source: Bloomberg)
The cost of insuring Japan’s largest lenders’ bonds is falling more than for any domestic company after the Moody’s Investors Service downgrade of the nation’s credit rating sent bank credit-default swaps to a record. The top banks occupied five of the six biggest swap declines last week, according to a Bloomberg ranking of derivative price changes from data provider CMA. Five-year contracts covering subordinated bonds of Sumitomo Mitsui Financial Group Inc. (8316)’s main banking unit dropped 48 basis points in the five days ended Sept. 2 to 277.5 basis points. By comparison, swaps for JPMorgan Chase & Co. subordinated debt rose to 125 basis points from 118.5 last week. Debt ratings for Mitsubishi UFJ Financial Group Inc. (8306), Sumitomo Mitsui and Mizuho Corporate Bank Ltd. were cut one step by Moody’s on Aug. 24 following its downgrade of Japan to Aa3 from Aa2, reflecting reduced government support in a crisis scenario.
The banks’ debt risk fell last week on optimism a 20- month slide in Japanese loan demand will reverse in the fiscal year ending in March, analysts said.

Indian Services Grow at Slowest Pace in Two Years After Record Rate Rises (Source: Bloomberg)
India’s services industry grew at the slowest pace in more than two years in August after the central bank’s record interest-rate increases and a weakening global economy restrained consumer demand. The Purchasing Managers’ Index fell to 53.8 last month from 58.2 in July, HSBC Holdings Plc and Markit Economics said in an e-mailed statement today. That’s the lowest level since June 2009. A reading above 50 indicates an expansion. Asia’s growth has slowed as a faltering recovery in the U.S. and Europe’s debt crisis hurt the region’s exports, complicating monetary policy for central banks still grappling with price pressures. India’s manufacturing grew at the slowest pace in 29 months in August, a report showed last week, while inflation has exceeded 9 percent for eight straight months even after 11 rate increases since mid-March 2010.

BOE Needs Better Governance: Darling (Source: Bloomberg)
Bank of England Governor Mervyn King has too much individual power and a board of directors should be put in place to improve governance of the central bank, former Chancellor of the Exchequer Alistair Darling said. Darling said his efforts to tackle the financial crisis in late 2007 had been hampered by disagreements with King, who he considered not reappointing for a second term. The former chancellor was speaking yesterday on BBC 1 television’s “Andrew Marr Show” before the publication this week of his book, “Back from the Brink.” “The present government wants to make the Bank of England not just responsible for interest rates, but also for the supervision of banks, where its track record is mixed, and also it’s got this overall responsibility for trying to iron out the peaks and troughs of the economic cycle,” Darling said. “That is an awful lot of things to invest in one person.”

Spain’s Rajoy May Win Parliament Majority, Enabling Tax Cuts, Bank Reform (Source: Bloomberg)
Spanish opposition leader Mariano Rajoy may win a parliamentary majority in elections in November, a poll indicated, strengthening his hand to implement pledges of tax cuts to aid growth and financial-industry reform as Spain’s debt crisis deepens. The People’s Party may win 47.1 percent of the vote, compared with 32.3 percent for the ruling Socialists, El Mundo reported yesterday, citing a poll. That would give the party a majority of seats in the 350-member Parliament in Madrid, the newspaper said. Rajoy, who has lost two general elections since becoming PP leader in 2004, promised a “law for entrepreneurs” that would include a 5 percentage-point cut in company tax. In a Sept. 3 speech, he also promised a “true restructuring of the financial sector” and changes to labor and energy-market laws.

Dollar Rises Against Euro, Kiwi, Aussie in Early Trades on Risk Aversion (Source: Bloomberg)
The U.S. dollar advanced against the euro, the Australian and New Zealand currencies, extending gains from last week that had come amid concern Europe’s sovereign- debt crisis will worsen. The dollar climbed to $1.4167 per euro in early Asia- Pacific trading from $1.4205 at the end of last week in New York, and rose to 76.87 yen from 76.80 yen. The greenback strengthened against the New Zealand dollar to 84.44 cents from 84.81 cents and advanced to $1.0617 per Australian dollar from $1.0645. The euro fell last week versus most peers as the premium European banks pay to borrow in dollars through the swaps market increased to the most since May 2010, a sign of concern that officials in the region are struggling to contain the fiscal crisis.