20110907 0951 Global Market Related News.

GLOBAL MARKETS - Swiss strike blow against fear flows
LONDON, Sept 6 (Reuters) - Switzerland's central bank turned the tables on Tuesday on investors who have driven up the franc, sinking it nearly 9 percent to the euro, while European stocks eked out some gains after sharp losses a day earlier.
"One will think twice about speculating against this target because the SNB is with its back against the wall," said Alessandro Bee, economist at Bank Sarasin.

Asia Hurt by Europe Crisis Forced to Hold Rates (Source: Bloomberg)
Europe’s failure to end a deepening debt crisis and a faltering U.S. recovery are escalating the danger of a growth slowdown in Asia, putting pressure on central banks meeting this week to refrain from interest-rate increases. Central banks in South Korea, Malaysia, Indonesia and the Philippines will probably all keep their benchmark rates unchanged tomorrow, according to four Bloomberg News surveys of economists. World Bank President Robert Zoellick said yesterday the world is “moving into a dangerous period” as stocks extended a slump that has wiped $6.6 trillion off global equity values in the three months ended Sept. 5. Inflation may limit the scope for stimulus in Asia as expansions slow from China to Malaysia.

Asian Stocks Gain on Japanese Exporters (Source: Bloomberg)
Asian stocks gained as Japanese shares jumped after the yen weakened versus the dollar, boosting the outlook for exporters, and after Greece pledged to accelerate austerity measures to help solve Europe’s debt crisis. Toyota Motor Corp. (7203), the world’s biggest carmaker, advanced 1.9 percent in Tokyo. Samsung Electronics Co., a South Korean exporter of consumer electronics that counts Europe as its third-largest market for sales, increased 3 percent. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, advanced 3 percent after oil and copper prices rose. Hyundai Motor Co. increased 2.3 in Seoul after saying it plans to expand its European market share. “Stocks should be bought back as the yen’s appreciation is taking a pause,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “Price-to-book ratio shows stocks are cheap, and technical indicators are also showing equities are approaching a buy zone.”

Obama Said to Plan More Than $300B Jobs Package (Source: Bloomberg)
President Barack Obama plans to propose boosting job growth by injecting more than $300 billion into the economy next year mostly through tax cuts, infrastructure spending and direct aid to state and local governments. Obama would call on Congress to offset the cost of the short-term jobs measures by raising tax revenue in later years. This would be part of a long-term deficit reduction package, including spending and entitlement cuts as well as revenue increases, that he will present next week to the congressional supercommittee charged with finding ways to reduce the nation’s debt. Almost half the stimulus would come from tax cuts, which include an extension of a two percentage point reduction in the payroll tax paid by workers due to expire Dec. 31 and a new decrease in the portion of the tax paid by employers.

U.S. Economy ‘Unlikely’ to Need Additional Easing, Fed’s Kocherlakota Says (Source: Bloomberg)
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the U.S. economy didn’t need additional stimulus in August and probably won’t require more easing this month. “The data in August did not justify the additional accommodation provided” by the central bank on Aug. 9, Kocherlakota said today in a speech in Minneapolis. “It is unlikely that the data in September will warrant adding still more accommodation.” Kocherlakota signaled reluctance to back more stimulus even after the Labor Department reported last week that the economy added no jobs in August and the unemployment rate remained unchanged at 9.1 percent. His speech is similar to remarks he delivered last week in Bismarck, North Dakota.

U.S. Service Economy Unexpectedly Grows at Faster Pace in ISM August Index (Source: Bloomberg)
Service industries unexpectedly expanded at a faster pace in August, easing concern the biggest part of the U.S. economy was slumping. The Institute for Supply Management’s index of non- manufacturing businesses increased to 53.3 last month from 52.7 in July. Economists forecast the gauge would drop to 51, according to the median estimate in a Bloomberg News survey. A reading above 50 signals expansion. A pickup among the non-manufacturing industries that account for about 90 percent of the economy shows the recovery may persist amid dimming job prospects and rising pessimism about the economic outlook. Federal Reserve Chairman Ben S. Bernanke said last month that the economy will probably improve in the second half of this year.

‘Helicopter Ben’ May Deter Lending With Lower Rates Policies, Gross Says (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke risks causing a decline in longer-term lending by holding down benchmark interest rates, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in an opinion piece on the Financial Times website. If the Fed seeks to drive down longer-maturity yields, as some are anticipating, then the central bank may “destroy leverage and credit creation in the process,” Gross wrote in the piece, which was titled ‘Helicopter Ben’ Risks Destroying Credit Creation.’

Hedge Funds’ Bets on S&P 500 Futures Are Most Bearish Since September 2007 (Source: Bloomberg)
Bearish bets by investors using Standard & Poor’s 500 Index futures increased to the highest level in almost four years amid concern global economic growth is stalling. Hedge funds and other large speculators were net short 107,913 contracts in the week ended Aug. 30, wagering that the S&P 500 will decrease in value, according to data compiled by Bloomberg and the U.S. Commodity Futures Trading Commission. The position is the highest since September 2007, when bearish bets reached a record 127,474 contracts a month before the benchmark equity gauge peaked at an all-time high, Bloomberg data going back to 1997 show. “If they’re global macro funds, they may be doing this because they think risk is to the downside in the S&P 500,” Michael Purves, chief market strategist at BGC Partners LP in New York, said in a telephone interview. “The long/short hedge funds may also be shorting futures simply to hedge out single stock longs.”

Stocks in U.S. Drop on Euro Zone Debt Crisis; S&P Pares Loss in Final Hour (Source: Bloomberg)
U.S. stocks fell, giving the Standard & Poor’s 500 Index its longest slump in almost a month, amid concern that Europe’s debt crisis is worsening. Equities pared losses in the final 30 minutes of trading. The benchmark measure trimmed its drop from 2.9 percent as companies most-tied to economic growth rebounded, propelling the Morgan Stanley Cyclical Index to a 0.2 percent gain for the day. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) decreased more than 3.4 percent on concern about a global financial crisis. Exxon Mobil Corp. (XOM) and Alcoa Inc. (AA) lost at least 1.3 percent on speculation that demand for commodities will slow. The S&P 500 lost 0.7 percent to 1,165.24 at 4 p.m. in New York. The benchmark gauge has fallen 4.4 percent in three days, the longest drop since Aug. 8. The Dow Jones Industrial Average slumped 100.96 points, or 0.9 percent, to 11,139.30 today.

Bernanke Saw ‘Manageable’ Europe Debt Exposure (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke told two lawmakers in mid-July that U.S. financial companies’ exposure to Europe’s sovereign-debt crisis is “manageable.” Analyses by Fed banking supervisors suggest that “in general, institutions’ direct net exposures to Greece, Ireland and Portugal, including to the banks domiciled there, are manageable relative to their capital,” Bernanke said in identical letters to the Republican senators, Tom Coburn of Oklahoma and Bob Corker of Tennessee. The comments, dated July 14, were obtained today by Bloomberg News in Washington. The senators wrote to Bernanke on June 16, citing a report by the Bank for International Settlements showing almost $200 billion in exposure at U.S. financial firms to the debt of Greece, Ireland and Portugal. Since Bernanke’s response, the Standard & Poor’s 500 Index has tumbled more than 10 percent in part on investor concern that Europe’s debt crisis will worsen.

Japanese Stocks Rebound as Yen Declines Before G-7 Meeting; Honda Advances (Source: Bloomberg)
Japanese stocks rebounded from the lowest close since 2009 after the nation’s currency fell to a four-week low versus the dollar as the government said it will lobby Group of Seven officials to support a weaker yen. Honda Motor Co., a carmaker that gets 83 percent of its revenue abroad, rose 1.6 percent. Canon Inc. (7751), the world’s biggest camera maker, climbed 1.3 percent. Kawasaki Kisen Kaisha Ltd., Japan’s third-largest shipper by market value, rose 3.3 percent after Credit Suisse started coverage of the sector with a rating of “outperform.” The Nikkei 225 (NKY) Stock Average rose 1.6 percent to 8731.62 as of 9:07 a.m. in Tokyo after ending at 8,590.57 yesterday, its lowest close since April 28, 2009. The broader Topix index gained 1.3 percent to 750.56.

Swiss Open New Round in Currency Wars Ignited by Global Economic Slowdown (Source: Bloomberg)
Switzerland opened a new round in a global currency war as fading economic growth forces policy makers to step up efforts to spur expansion. The Swiss National Bank’s decision yesterday to cap the franc’s rate for the first time since 1978 marked a bid to protect trade hurt by the currency that last month reached a record high against the euro and the dollar. The franc plunged 8.4 percent against the euro, the most since the creation of Europe’s single currency, to 1.203 at 5:15 p.m. in London. The initiative may leave Norway and Sweden vulnerable to unwanted gains in their currencies as countries such as Brazil and Japan fight to limit appreciation amid a flight from the euro debt crisis and near-zero interest rates in the U.S. With Group of Seven finance chiefs set to hold talks this week, it also exposes the clash among policy makers counting on exports to offset slumping demand at home.

European Banks Under Assault in Markets That Remind Ackermann of Late 2008 (Source: Bloomberg)
Three years after the collapse of Lehman Brothers Holdings Inc., financial shares in Europe are under assault, the cost of insuring bank debt is at records, and bankers see worrying parallels to that time. A Bloomberg index of European financial stocks fell as much as 2.9 percent to the lowest level since March 2009, while a measure of banks’ reluctance to lend to each other was at the highest since April of that same year. The chief executive officer of Deutsche Bank AG (DBK), Josef Ackermann, said yesterday market conditions remind him of late 2008, and urged lawmakers to act to avoid a repeat of the financial crisis, which spawned the worst global recession since the Great Depression. Investors drove yields higher on the bonds of Greece, Portugal, Spain and Italy yesterday on doubts Europe’s leaders will be able to stop the sovereign debt contagion.

European Stocks Retreat to Two-Year Low After Debt-Crisis Concern Deepens (Source: Bloomberg)
European stocks declined for a third day, reaching the lowest in more than two years, as deepening concern that the region’s debt crisis will derail the recovery overshadowed better-than-estimated growth in U.S. services. UniCredit SpA (UCG) and Societe Generale SA fell more than 4 percent as a gauge of banks slid to the lowest level since March 2009. Caja de Ahorros del Mediterraneo (CAM), the Spanish savings bank taken over by the Bank of Spain, slumped 8.4 percent after posting a loss. Bayer AG (BAYN) plunged 7.5 percent after U.S. regulators asked for more data on the blood thinner Xarelto. The Stoxx Europe 600 Index slid 0.7 percent to 221.98 at the 4:30 p.m. close in London after earlier climbing as much as 1 percent. The gauge has tumbled 7.1 percent over the past three days, falling to the lowest close since July 2009.

U.K. Stocks Rise as Whitbread, Fresnillo Climb; Barclays Falls (Source: Bloomberg)
U.K. stocks advanced for the first time in three days as shares of Whitbread Plc (WTB) and Fresnillo Plc (FRES) rallied. Whitbread paced advancing shares after reporting an acceleration in sales growth. Fresnillo advanced 3.9 percent. Barclays Plc and Royal Bank of Scotland Group Plc (RBS) limited gains in the benchmark FTSE 100 Index (UKX), falling more than 2 percent. The FTSE 100 Index gained 54.26, or 1.1 percent, to 5,156.84 at the 5:30 p.m. close in London, after tumbling 5.8 percent over the previous two trading days amid concern that global growth is slowing as Europe’s debt crisis spreads. The FTSE All-Share Index (ASX) gained 0.9 percent today, while Ireland’s ISEQ Index was little changed.

Europe steadies after day of turmoil
LONDON, Sept 6 (Reuters) - European financial markets steadied, with the euro jumping against the Swiss franc, after a sharp sell-off a day earlier due to fears for the euro zone's future and that of its banking sector.
"These persistent euro zone worries are back in play once again amidst signs that austerity measures may be faltering, whilst last Friday's disappointing (U.S.) non-farm payrolls (data) continue to leave the markets with something of a hangover," said Cameron Peacock, analyst at IG Markets.

RBA’s Stevens Signals Willingness to Keep Australia Interest Rates on Hold (Source: Bloomberg)
Reserve Bank of Australia Governor Glenn Stevens signaled a willingness to keep interest rates on hold while the nation’s consumers retrench and global financial markets create instability for the “foreseeable future.” “Periods of sudden increases in anxiety within international financial markets are moments when, if at all possible, it is good to be in a position to be able to maintain steady settings,” he said in prepared remarks today in Perth. In his speech, Stevens said households watching global and local events “may continue their precautionary behavior for longer than otherwise” and help weaken demand compared with the central bank’s August forecasts. “If so, that may act to curtail the upward trend in inflationary pressures that has, up to this point, appeared to be in prospect,” he said.

Yields Drop as Europe to Damp Slowest Growth in 20 Years: Australia Credit (Source: Bloomberg)
Australian benchmark government bond yields slid to the lowest since 2009 on concern contagion from Europe’s debt crisis will undermine a national economy analysts say is growing at the slowest annual pace in 20 years. Five-year government debt yielded 3.77 percent, 11 basis points less than one-year securities, the biggest discount since September 2008, after the Reserve Bank of Australia held the developed world’s highest key interest rate unchanged at 4.75 percent yesterday. The 10-year note’s yield fell to 4.21 percent, the lowest closing level since March 20, 2009.
Australia’s growth outlook looks “somewhat weaker” in the near-term and “at trend or higher” longer term, absent a deterioration in global prospects, RBA Governor Stevens said yesterday. The economy grew 0.7 percent in the three months ended June 30 from a year earlier, according to a Bloomberg survey of economists before today’s report, the least since it shrank in 1991. Swaps traders are wagering the RBA will make the steepest reductions to its key rate among the Group of 10 currencies, according to Credit Suisse Group AG indexes.

October Rate Cut Prediction Shows U.S. Slump Spilling Over: Mexico Credit (Source: Bloomberg)
Mexico will follow Brazil and Turkey in cutting interest rates next month to help shield the economy from a slowdown in the U.S., swaps trading shows. Yields on futures contracts for October, known as TIIE, sank nine basis points in the past month to 4.73 percent, indicating traders expect central bank Governor Agustin Carstens to lower the benchmark 4.5 percent rate when the board meets Oct. 14. Those wagers signal a reversal for traders who expected as recently as Aug. 25 that Carstens’s next move would be to raise borrowing costs from a record low.
Concern the U.S. and Europe may be headed for recessions is prompting investors to anticipate developing countries will lower rates to shore up growth. Mexico’s central bank, the only among major Latin American countries to hold off on raising rates as the global economy recovered from the 2008 financial crisis, said Aug. 26 it would consider “adjusting” policy if the growth outlook worsened. Employment unexpectedly stagnated in the U.S., Mexico’s biggest trade partner, last month.

FOREX - Swiss franc dives as SNB sets target rate
LONDON, Sept 6 (Reuters) - The Swiss franc plummeted versus the euro and dollar on Tuesday after the Swiss National Bank set a minimum exchange rate target of 1.20 francs per euro to combat the strength of the Swiss franc which it says poses a risk to the economy.
"Our model suggests a minimum rate of 1.25 in euro/Swiss is needed to ward off a deflationary threat, which suggests we could see a move to 1.25-1.30 over the next month, maybe sooner," said Gavin Friend, currency strategist at National Australia Bank.