20110915 1045 Global Market Related News.

GLOBAL MARKETS-EU bond comments lifts European shares, euro
LONDON, Sept 14 (Reuters) - European shares rose and the euro pared losses on Wednesday after the head of the European Commission said it would soon present options for the introduction of euro area bonds, offering a glimmer of hope for an easing of the sovereign debt crisis.
"It (Barroso) could be a turning point and a major step forward as countries with higher debt levels will have the ability again to finance themselves," said Klaus Wiener, chief economist at Generali Investments, which manages 330 billion euros ($451 billion).  

European stocks, euro reverse losses
LONDON, Sept 14 (Reuters) - European shares turned positive and the euro pared losses  after the head of the European Commission said it would soon present options for the introduction of euro area bonds.
"A lack of leadership is really a matter of concern for the market. A lot of worries are now focussed on Germany in terms of splits there on how to deal with the region's debt crisis," said Keith Bowman, equity analyst at Hargreaves Lansdown.

Asian Stocks Rise as Germany, France Say Greece’s Future is in Euro Area (Source: Bloomberg)
Asian stocks climbed, with the regional benchmark index rebounding from its lowest in more than a year, after French President Nicolas Sarkozy and German Chancellor Angela Merkel said Greece will stay in the euro area. Commonwealth Bank of Australia (CBA), the nation’s largest lender by market value, jumped 2.5 percent in Sydney. Samsung Electronics Co., which receives 20 percent of its revenue from Europe, rose 3.3 percent in Seoul. BHP Billiton Ltd. (BHP), the world’s biggest mining company by market value, rallied 1.9 percent after copper prices gained. Chipmaker Elpida Memory Inc. (6665) surged 7.3 percent in Tokyo after saying it may shift some domestic production overseas to counter a strong yen.
“Germany and France’s commitment to continue supporting Greece’s European Union membership diminishes the likelihood that it will be allowed to default,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “If Greece avoids default, it lessens any flow-on impact through the global banking system, which in turn is positive for Asian stocks.”

U.S. Stocks Rally as French, German Leaders Express Support for Greece (Source: Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third day, as French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are convinced Greece will remain in the euro zone. All 10 groups in the S&P 500 advanced. General Electric Co. (GE), Home Depot Inc. (HD) and Monsanto Co. (MON) rose at least 2.4 percent, pacing gains in companies most-tied to economic growth. The Dow Jones Transportation Average, a proxy for the economy, added 2 percent, as FedEx Corp. (FDX) climbed 1.4 percent. Dell Inc. advanced 3.3 percent as the second-largest personal-computer maker approved an additional $5 billion for its stock repurchases.
The S&P 500 gained 1.4 percent to 1,188.68 at 4 p.m. New York time, rallying 3 percent in three days and erasing its drop on Sept. 9, which had been driven by speculation Greece could default. The index pared a gain of as much as 2.5 percent in the final minutes of trading today. The Dow Jones Industrial Average rose 140.88 points, or 1.3 percent, to 11,246.73.

U.S. Retail Sales Stall on Lack of Job Growth (Source: Bloomberg)
Retail sales in the U.S. unexpectedly stagnated in August as a lack of employment and limited income growth restrained demand, highlighting the risk the economy will stall. The unchanged reading followed a 0.3 percent gain for July that was smaller than previously estimated, Commerce Department figures showed today in Washington. Prices paid by producers were also unchanged in August, according to the Labor Department, while so-called core costs that exclude food and fuel rose less than forecast. Retailers like Best Buy Co. and Target Corp. (TGT) are saying a struggling job market that has battered consumer confidence is hurting sales. The dim outlook for household spending, which accounts for about 70 percent of the economy, will make it harder for the two-year old recovery to gain speed, giving the Federal Reserve reason to take additional steps to spur growth.

U.S. Equities Will Stall on Slow Economic Growth, Yardeni Says: Tom Keene (Source: Bloomberg)
U.S. stocks will stay at current levels in 2011 as companies struggle to beat analyst estimates amid slower economic growth, according to Edward Yardeni, chief investment strategist at Yardeni Research Inc. “For the S&P 500, I don’t expect we will cover much ground when we look at the trend over the rest of the year,” Yardeni said in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “The main reason is that earnings estimates are just too high,” he said. “For the past nine quarters, industry analysts were too low and there were lots of positive surprises. That’s going to be a little more challenging going into the upcoming earnings season.”
S&P 500 earnings are poised to reach a record $99.74 a share this year, according to the average of securities industry estimates compiled by Bloomberg, after companies beat projections for 10 straight quarters. Analysts are more optimistic about earnings since the S&P 500 peaked at a three- year high on April 29, driving their forecast up from $98.73 a share that day.

Wholesale Prices in U.S. Are Little Changed as Energy, Vehicle Costs Drop (Source: Bloomberg)
Wholesale prices in the U.S. were little changed in August as costs decreased for energy and automobiles. The producer price index was unchanged after a 0.2 percent increase in July, Labor Department figures showed today in Washington. Economists projected no change, according to the median estimate in a Bloomberg News survey. The so-called core measure, which excludes volatile food and energy, rose 0.1 percent, less than forecast. Slowing growth overseas and in the U.S. is helping restrain raw-material costs, underscoring Federal Reserve Chairman Ben S. Bernanke view that price gains are “transitory.” Cooling prices make it easier for policy makers to take additional steps when they meet next week to keep the economy expanding.

Treasury 10-Year Yields Head for Weekly Gain on Europe Optimism (Source: Bloomberg)
Treasury 10-year note yields were poised for a weekly advance as Asian equities rose after Germany and France signaled a commitment to keeping Greece in the euro area, damping demand for the safest assets. Benchmark bond yields were 11 basis points from a record low as Greek Prime Minister George Papandreou pledged to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements from governments in Athens, Berlin and Paris. The Federal Reserve is today scheduled to purchase up to $3.5 billion of Treasuries. “Equity markets have recovered with a decent bounce and bond yields have gone back up toward the 2 percent mark,” said Grant Hassell, head of fixed income at AMP Capital Investors in Wellington, New Zealand. “This will be temporary and we will see long-end Treasury yields drift back down again and equities will remain volatile. There is no easy silver bullet solution to the issues facing the globe at the moment.”

Wen Says World Must Cut Debt, Stem Euro Crisis as Pressure Grows on China (Source: Bloomberg)
Chinese Premier Wen Jiabao, facing calls to widen support for indebted European countries, signaled that developed nations should cut deficits and open markets rather than rely on China to bail out the world economy. “Countries must first put their own houses in order,” Wen said today at the World Economic Forum in the Chinese city of Dalian. “Developed countries must take responsible fiscal and monetary policies. What is most important now is to prevent the further spread of the sovereign debt crisis in Europe.” China can best contribute to the global economic recovery by ensuring steady growth at home, Wen said, calling on the European Union and U.S. to allow more Chinese investment in return. Stocks dropped in Asia as the comments damped optimism that China would help stabilize the euro region, after Italy this month followed Spain, Portugal and Greece in seeking investment from the world’s fastest-growing major economy.

Japanese Stocks Advance as Germany, France Express Support for Greece (Source: Bloomberg)
Japanese stocks rose, with the Nikkei 225 (NKY) Stock Average headed for its biggest gain in a week, after German and French leaders said they are convinced Greece will remain in the euro zone and speculation grew that China may help the region’s most-indebted nations. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest publicly traded lender, gained 1.2 percent. Sony Corp. (6758), which depends on Europe for more than 20 percent of its sales, climbed 1.7 percent after the euro appreciated against the yen, boosting the exporter’s earnings outlook. Toyota Motor Corp. (7203), the biggest carmaker by market value, advanced 1.3 percent. The Nikkei 225 rose 1.6 percent to 8,653.92 as of 9:24 a.m. in Tokyo, set for its biggest increase since Sept. 7. The broader Topix added 1.3 percent to 751.31, with about 10 shares rising for each that fell.

Korea Finance Offers Samurais as Yields Diverge From World: Japan Credit (Source: Bloomberg)
Korea Finance Corp., the state- owned financier, is poised to tap Japan’s debt market, where the relative cost to borrow is the lowest since February 2009 compared with the rest of the world. Formed in 2009, Korea Finance will offer so-called Samurai bonds today, selling 30 billion yen ($391 million) of securities, a person with direct knowledge of the matter said. Sales of yen-denominated debt by Korean borrowers have more than doubled to a record 245 billion yen this year from the same period in 2010, data compiled by Bloomberg show. Foreign borrowers are able to raise cash in Japan at yields averaging 112 basis points more than benchmarks, compared with 246 in the global corporate bond market, Bank of America Merrill Lynch indexes show. The difference of 134 basis points has expanded from 43 in April as investors assigned a higher risk to holding debentures outside Japan while the global economic recovery slows and the fiscal crisis in Europe deepens.

Indonesia Joined by India, South Korea in Intervening to Buoy Currencies (Source: Bloomberg)
Indonesia’s central bank intervened to curb losses in the rupiah, while traders said authorities in India and South Korea also sold dollars, a sign Europe’s debt crisis is undermining confidence in Asian emerging markets. Bank Indonesia “intervened in the rupiah and bond markets,” Deputy Governor Hartadi Sarwono said in an interview in Jakarta. The Reserve Bank of India sold the greenback as the rupee weakened beyond 48 per dollar for the first time since 2009, a Mumbai-based trader at a state-owned bank said, declining to be identified because he isn’t authorized to speak to the media. The Asian Development Bank cut its 2011 growth forecast for Asia excluding Japan today to 7.5 percent from 7.8 percent on signs a global economic recovery is faltering. Greece’s budget deficit widened 22 percent in the first eight months of the year, fanning speculation the country will fail to meet conditions for further bailout funds.

European Stocks Advance Amid Speculation China May Buy Euro Region Bonds (Source: Bloomberg)
European stocks rose for a second day amid speculation China may still buy the region’s government bonds even after Premier Wen Jiabao said indebted countries must not rely on bailouts. Finmeccanica SpA (FNC) soared the most in 13 years on a report that Italy’s biggest arms company may sell railway units to General Electric Co. Next Plc (NXT) rallied to a record as earnings increased. Societe Generale (GLE) SA slid 2.9 percent after Moody’s Investors Service downgraded the French bank’s credit rating. The benchmark Stoxx Europe 600 Index advanced 1.5 percent to 224.17 at the 4:30 p.m. close in London. The gauge erased an earlier loss of as much as 1 percent after Caijing magazine reported that China is still willing to buy bonds of nations hit by the debt crisis, citing Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission.

Sarkozy, Merkel ’Convinced’ Greece to Stay in Euro (Source: Bloomberg)
French President Nicolas Sarkozy and German Chancellor Angela Merkel said they are “convinced” Greece will stay in the euro area as they faced international calls to step up efforts in fighting the region’s debt crisis. The euro rose after the leaders of Europe’s two biggest economies issued a statement yesterday following a telephone conversation with Greek Prime Minister George Papandreou. Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements from governments in Athens, Berlin and Paris. The remarks were “a good thing,” said John Doyle, a strategist in Washington at currency-trading firm Tempus Consulting Inc. “They’re just words at this point, but that’s why we’re seeing the euro pop against the dollar.”

BOE’s Posen Steps Up Push for Stimulus as Bond-Purchase Debate Intensifies (Source: Bloomberg)
Bank of England policy maker Adam Posen’s signal that he may need to double his call for bond purchases will intensify the debate at the U.K. central bank for more stimulus as the economy falters. Posen said yesterday the central bank may need to buy as much as 100 billion pounds ($158 billion) in securities within three months and warned that officials’ delay in acting has made economic prospects “worse.” He has voted since October for a 50 billion-pound increase in the bond plan. Posen’s attempt to convince his colleagues on the Monetary Policy Committee that they are damaging the economy by doing nothing comes as central banks from the Federal Reserve to the Swiss National Bank seek new ways to bolster their recoveries. He has been the sole voice on the MPC voting for more so-called quantitative easing, and minutes of this month’s meeting on Sept. 21 will show if anyone else joined him.

U.K. Stocks Advance for a Second Day as Next, Kingfisher Shares Increase (Source: Bloomberg)
U.K. stocks rose for a second day as Next Plc (NXT) reported a jump in first-half earnings and investors speculated that the slump in shares during the past two months isn’t commensurate with the outlook for companies’ earnings. Next posted its steepest advance in a year after the U.K.’s second-largest clothing retailer increased its annual profit forecast. Kingfisher Plc (KGF) climbed 2.4 percent. The benchmark FTSE 100 Index (UKX) rose 52.77, or 1 percent, to 5,227.02 at the 4:30 p.m. close in London. The gauge last month slumped 7.2 percent, dragging equities to their cheapest valuation compared with estimated earnings since March 2009, according to data compiled by Bloomberg. The FTSE All-Share Index also gained 1 percent today, while Ireland’s ISEQ Index advanced 1.9 percent.

Swiss 1970s Inflation Specter Seen in Central Bank’s Unlimited Franc Sales (Source: Bloomberg)
Swiss central bank President Philipp Hildebrand’s pledge to protect the economy with unlimited currency purchases may come at a higher cost than billions of francs: faster inflation. Hildebrand’s decision risks flooding the financial system with cash and undermining the Swiss National Bank’s job of delivering price stability, said economists at Credit Suisse Group AG and Barclays Capital. While central banks around the globe are seeking to ward off a recession through additional stimulus or rate cuts, the franc’s ascent forced Swiss policy makers into measures that sparked a decade of surging inflation when last introduced in the 1970s. “You can’t have your cake and eat it,” said Claude Maurer, an economist at Credit Suisse in Zurich. “You can either pursue a ceiling on the exchange rate or you can fight price pressures. The SNB apparently sees medium-term inflation threats as the lesser of two evils.”

Spain Faces Rating Risks on ‘Downside’ as Regions Lag Targets, Fitch Says (Source: Bloomberg)
Spain faces risks “on the downside” to its credit rating as growth slows and regional governments fall behind schedule on deficit-reduction targets, Fitch Ratings Director Douglas Renwick said.  “Risks for the credit rating are clearly on the downside,” London-based Renwick said in a telephone interview yesterday. “The regional deficit performance adds to pressure on the central government to make the needed cuts.” Fitch rates Spain AA+ with a “negative” outlook, and Renwick said weaker growth, failure to meet deficit targets, or larger-than-forecast use of public funds to rescue banks could be “clear triggers for the rating.” The company cut the ratings of five Spanish regions today, including Catalonia and Andalusia, citing a surge in debt and weak growth prospects.

Borrowings by Spanish Banks From ECB Surged to $96 Billion in August (Source: Bloomberg)
Spanish banks increased their borrowings from the European Central Bank in August, a month in which the ECB began buying bonds from Spain and Italy to curb Europe’s sovereign-debt crisis. Net ECB borrowings surged to 69.9 billion euros ($95.5 billion), an 11-month-high, from 52.05 billion euros in July, the Bank of Spain said on its website today. Divisions among European governments over how to tackle the region’s debt crisis have helped drive up borrowing costs for banks from countries including Spain and Italy, narrowing their access to the wholesale debt markets they need to fund their business. Investors monitor bank use of ECB borrowings to gauge pressure on their ability to tap financing from other sources.

Swan Restricts Central Bank in Setting Salaries (Source: Bloomberg)
Australia’s central bank, which pays its governor more than Federal Reserve Chairman Ben S. Bernanke and European Central Bank PresidentJean-Claude Trichet combined, will for the first time lose its sole power to set compensation for its board and executives, Treasurer Wayne Swan said. The salaries at the Reserve Bank of Australia will be fixed within benchmarks that exist in the Remuneration Tribunal, a body that decides how much politicians and civil servants earn, Swan said. The independent authority determines, reports on or provides advice about pay, including allowances and entitlements for federal lawmakers, judicial and non-judicial offices of federal courts and tribunals.
“I’ve put in place a set of arrangements that mean that future decisions taken about those salaries will be in the context of other salaries paid to comparable people in the public sector,” Swan, 57, said in an interview in Canberra yesterday. “I have taken that action so that when the board takes its decision, it takes its decision within a framework set by government.”

N.Z. Delays Rate Rise During Global Slowdown (Source: Bloomberg)
New Zealand’s central bank left interest rates unchanged and signaled no urgency to raise them until the global recovery strengthens, weakening the local currency it called overvalued. “The exchange rate is significantly penalizing some activity in the traded sector, hurting some New Zealand firms and that’s a medium-term effect not a short-term effect,” Governor Alan Bollard told reporters in Wellington today after leaving the official cash rate at 2.5 percent. New Zealand’s currency, the best performer among 16 major counterparts tracked by Bloomberg, fell after the statement as investors reduced bets on a rate rise this year. Bollard said there is now greater risk that global economic activity slows “sharply,” and he wants to be sure that won’t occur before contemplating a rate increase.