20110920 1035 Global Market Related News.

Asian Stocks Drop as Italy’s Credit-Rating Cut Boosts Debt-Crisis Concerns (Source: Bloomberg)
Asian stocks fell, driving a regional benchmark stock index lower for a second day, after Italy’s sovereign credit ratings were cut, intensifying concern a worsening debt crisis in Europe may hurt the earnings of exporters, banks and commodity producers. BHP Billiton Ltd. (BHP), the world’s biggest mining company, dropped 1.2 percent in Sydney as crude and metal prices tumbled. Rio Tinto Group, the No. 2 miner by sales, fell 1.2 percent, extending losses yesterday. Sony Corp. slumped 3.6 percent, leading Japanese exporters’ shares lower after markets resumed trading following yesterday’s public holiday. The MSCI Asia Pacific Index dropped 0.6 percent to 117.75 as of 10:09 a.m. in Tokyo. The gauge has fallen for past two weeks. About four stocks declined for each two that advanced on the index today. The MSCI Asia Pacific excluding Japan Index lost 2.8 percent yesterday after European policy makers failed to introduce a plan to stem the region’s debt crisis.

GLOBAL MARKETS - Stocks, euro tumble as default fears mount
LONDON, Sept 19 (Reuters) - World stocks and the euro fell sharply on Monday, hit by the lack of progress from finance ministers in solving Europe's debt crisis at weekend meetings and avoiding a default by Greece.
"It's no more a link between markets and economics, but a link between markets and politics. The politicians should have seen the crisis coming and done more, but the problem is they are not proactive," said Koen De Leus, strategist at KBC Securities, in Brussels.

Stocks, euro tumble as default fears mount
LONDON, Sept 19 (Reuters) - World stocks and the euro fell sharply, hit by the lack of progress from finance ministers in solving Europe's debt crisis at weekend meetings and avoiding a default by Greece.
"It's no more a link between markets and economics, but a link between markets and politics. The politicians should have seen the crisis coming and done more, but the problem is they are not proactive," said Koen De Leus, strategist at KBC Securities, in Brussels.

Shultz Says It’s Time to ‘Clean House’ With U.S. Tax Code to Boost Economy (Source: Bloomberg)
George P. Shultz, a former head of the U.S. Treasury and onetime secretary of state, called for the elimination of tax preferences to stimulate the economy and increase government revenue. “It’s time to clean house again,” Shultz, who headed the State Department for President Ronald Reagan in the 1980s, said yesterday in an interview at Bloomberg headquarters in New York. “The 1986 tax act is sort of the unsung hero of the very good economic times we had for a long time. Of course, politics gums it all up again and preferences get put in.” The Tax Reform Act of 1986 lowered some rates and equalized the treatment of capital gains and ordinary income. Congress has since raised the top income-tax rate to 35 percent and dropped the top capital-gains rate to 15 percent. Shultz, 90, said a simplification of the code would allow Congress to lower rates on a “revenue-neutral” basis, while economic expansion would boost tax receipts.

Bernanke Joins King Tolerating Inflation (Source: Bloomberg)
Inflation flashing red may be less of a green light for higher interest rates as global growth falters. Some Federal Reserve policy makers favor keeping their benchmark rate close to zero until price increases reach a level Vincent Reinhart, a former top official, says could be 3 percent. The Bank of England has held its key rate at a record low even as U.K. inflation breached its 2 percent target for 21 months. Brazil executed a surprise cut Aug. 31 to safeguard its economy even after inflation quickened to a six-year high. Policy makers such as Fed Chairman Ben S. Bernanke and Bank of England Governor Mervyn King may be challenging central-bank orthodoxy to replenish depleted toolkits and support recoveries at risk of sliding back into recession. Tolerating higher inflation may make long-term Treasuries less attractive while supporting stocks and commodity prices, said Jim Kochan, chief fixed-income strategist at Wells Fargo Advantage Funds.

Obama Plan to Trim Deficit With $1.5 Trillion in Taxes (Source: Bloomberg)
President Barack Obama cast himself as a champion of “fairness” for the middle class in the fight to reduce the deficit with a call for $1.5 trillion in tax increases over the next decade, largely targeting the wealthy. Obama joined his call for a tax increase with a threat to veto any legislation Congress sends him that would reduce benefits from the Medicare health-insurance plan for the elderly unless wealthy Americans also face higher taxes. “This is not class warfare, it’s math,” Obama said this morning at the White House as he unveiled his recommendations to a 12-member congressional committee charged with finding ways to trim at least $1.5 trillion from the deficit. “The money’s going to have to come from someplace.”

Geithner: Europe Will Follow ‘Lessons’ of U.S. (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner predicted that Europe will adopt some of the same measures the U.S. took to battle the financial crisis that started in 2008. “I think you’re going to see them draw on the lessons of our crisis, draw on the lessons of things that worked here in the United States,” Geithner said in a Bloomberg Television interview today in Washington. “I think you’ll see that reflected in some of the choices they make.” In the aftermath of the September 2008 bankruptcy of Lehman Brothers Holdings Inc., the U.S. adopted the $700 billion Troubled Asset Relief Program and the Federal Reserve conducted stress tests of the 19 largest financial institutions to ensure their capital was adequate to withstand a more severe economic downturn. The Fed also set up the Term Asset-Backed Securities Loan Facility, or TALF, to keep consumer credit flowing.

Treasuries Rise, Sending Two-Year Yield to Record Low, as Italy Downgraded (Source: Bloomberg)
Treasury two-year yields extended their decline to a record low after Italy’s credit rating was cut by Standard & Poor’s, fueling demand for the relative safety of U.S. debt. Traders reduced inflation bets on speculation economic growth will slow in Europe and the U.S. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, narrowed to 1.84 percentage points, the least in 11 months. The average over the past five years is 2.06 percentage points. “Yields can push down further,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “European officials are failing to resolve the crisis. That will damage the world economy.”

U.S. Stocks Decline as Investors Weigh Greece (Source: Bloomberg)
U.S. stocks retreated, following the longest rally since July for the Standard & Poor’s 500 Index, amid concern Greece will fail to qualify for more financial aid needed to avoid a debt default. Stocks pared losses in the final hour of trading as Greece said discussions with European officials about the country’s bailout were productive. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) slid at least 2.8 percent, following a slump in European lenders. Alcoa Inc. (AA) sank 3.3 percent, pacing declines in commodity producers. Hewlett-Packard Co. (HPQ) dropped 2.6 percent as companies most-dependent on economic growth tumbled. The S&P 500 lost 1 percent to 1,204.09 at 4 p.m. New York time, paring a decline of 2.3 percent. It rallied five straight days last week as government officials and central bankers took steps to ease Europe’s debt crisis. The Dow Jones Industrial Average fell 108.08 points, or 0.9 percent, to 11,401.01.

China August Home Prices Rise in All Cities, Challenging Government Curbs (Source: Bloomberg)
China’s August new-home prices rose in all 70 cities monitored for the first time this year, undercutting government efforts to cool the market through higher down-payments and mortgage rates. Prices in Beijing advanced 1.9 percent from a year ago, while those in Shanghai, the nation’s financial center, increased 2.8 percent, the statistics bureau said on its website yesterday. New home prices climbed in 67 out of 70 cities in the first half this year and were up in all but two in July. China’s measures to control its property market are at a critical stage and the nation needs to focus efforts on curbing price increases in less affluent cities after limiting home purchases by each family in metropolitan areas including Beijing and Shanghai, Premier Wen Jiabao said on Sept. 1. Only two cities responded to the government’s July call for added restrictions on housing purchases, as local governments rely on land sales to pay mounting debt.

China Will Likely Limit Stimulus in Any Global Slump, Deutsche Bank Says (Source: Bloomberg)
China’s stimulus in any world economic slump is unlikely to be more than half the nation’s estimated 9.3 trillion yuan ($1.46 trillion) fiscal and monetary expansion from November 2008 through 2010, Deutsche Bank AG said. While highly speculative, a sketch of the government’s possible response is emerging from “our discussions in China,” Hong Kong-based economist Ma Jun said in a note dated Sept. 16. The government would limit any measures because of the costs associated with the previous package, including asset bubbles, inflation and non-performing loans, Ma said. China’s government is wrestling with elevated inflation and the threat of a deeper economic slowdown because of the debt crisis in Europe, the nation’s biggest export market, and weakness in the U.S. economy. Deutsche forecasts that China’s growth may cool to 7.3 percent in the first quarter of next year compared with 9.5 percent in the second quarter of 2011.

China Slowdown Looms as Inflation Limits Stimulus, ex-PBOC Official Says (Source: Bloomberg)
China’s economy is highly likely to slow next year and efforts to spur growth will be constrained by inflation and government debt burdens, said Wu Xiaoling, a former deputy central bank governor. The government shouldn’t expand monetary or fiscal stimulus because of price pressures and central and local-government debt, Wu said in comments published today by the Financial News, the central bank’s newspaper. Wu is vice director of the finance and economy committee of the National People’s Congress. The world’s biggest exporting nation faces weakening global demand because of the European debt crisis and U.S. unemployment. China’s officials are still grappling with the side-effects of 2008 and 2009 stimulus measures, including elevated inflation and the risk of bad loans for banks.

China’s Stocks Fall to 14-Month Low on Tightening Concern, IPOs (Source: Bloomberg)
China’s stocks fell to a 14-month low after Premier Wen Jiabao said the government will take measures to control inflation and investors speculated pending initial public offerings will sap demand for existing equities. Industrial & Commercial Bank of China (601398) Ltd. and Poly Real Estate Group Co. paced declines by banks and developers as a government report showing new-home prices increased in all cities boosted odds of more monetary tightening. Sinoma International Engineering Co. (600970) slid 2.4 percent on the prospect Sinohydro Group Ltd.’s planned offering, China’s biggest in almost a year, will divert funds from other construction stocks. “The upcoming big IPOs are a major reason for the market plunge, draining liquidity in the market,” said Tu Jun, a strategist at Shanghai Securities Co. “It’s not a good time for fund-raising but the government’s tight monetary policy has left companies with no other choice.”

Japanese Stocks Decline as Italy Rating Cut Fuels Europe Contagion Concern (Source: Bloomberg)
Japanese stocks fell, driving the Nikkei 225 (NKY) Stock Average down for the first time in three days, after Standard & Poor’s downgrade of Italy’s credit rating reinforced concern Europe’s debt crisis is spreading. Sony Corp. (6758), which depends on Europe for 20 percent of its sales, fell 4 percent as a slide in the euro cut its earnings outlook. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, fell 1.7 percent on concern Europe’s debt crisis will spill into the banking system. Shippers declined, with Mitsui O.S.K. Lines Ltd. losing 5.3 percent, as a measure of cargo rates fell for a third day. The Nikkei 225 fell 1.3 percent to 8,752.77 as of 10:42 a.m. in Tokyo. The broader Topix index dropped 1.4 percent to 757.43. Japan’s stock markets were closed yesterday for a public holiday when the MSCI Asia Pacific excluding Japan Index declined 2.8 percent on concern Greece is moving closer to default.

S&P Cuts Italy Rating as Government Debt Mounts (Source: Bloomberg)
Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden. The rating was lowered to A from A+, with a negative outlook, S&P said in a statement. S&P said Italy’s net general government debt is the highest among A-rated sovereigns, and the company now expects it to peak later and at a higher level than it previously anticipated. The decision sent the euro sliding for a third day against the dollar as investor concern rises that European policy makers will fail to contain the debt crisis. Greece’s government plans another call with its main creditors today as it seeks to stave off default, while U.S. Treasury Timothy F. Geithner urged the region to adopt additional tools.

Greece Talks to Continue After ‘Productive’ Call (Source: Bloomberg)
Prime Minister George Papandreou’s government will hold another call with its main creditors after a “productive” round of talks aimed at staving off default. Finance Minister Evangelos Venizelos held “substantive” discussions with European Union and International Monetary Fund officials about securing a sixth installment of rescue funds, the Athens-based finance ministry said in an e-mailed statement after a teleconference last night. A second call will be held tonight. U.S. stocks pared losses after the statement. As Papandreou fights investor doubts and domestic opposition, European leaders are squabbling over the terms of the July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union. U.S. Treasury Secretary Timothy F. Geithner said in an interview yesterday that Europe will eventually adopt some of the same measures the U.S. took after the 2008 financial crisis.

Bank of England Says Bond Purchases had ‘Economically Significant’ Impact (Source: Bloomberg)
The Bank of England said its bond- purchase plan had “economically significant” effects on Britain’s financial system, though the impact of future purchases may differ. The 200 billion pounds ($316 billion) of securities bought since March 2009 in so-called quantitative easing may have raised gross domestic product by 1.5 percent to 2 percent, and increased inflation by between 0.75 to 1.5 percentage points, the bank said in its Quarterly Bulletin in London today. “There is considerable uncertainty around these estimates and the precise impact of asset purchases or sales is likely to vary depending on the circumstances in which they are conducted,” Chief Economist Spencer Dale wrote in the forward. Continuing assessment will “inform any future decisions on either selling the assets back, or making further purchases.”

London Home Prices Surge as Investors Turn to Property Amid Market Turmoil (Source: Bloomberg)
London home sellers raised asking prices by the most in seven months in September as a lack of properties for sale and investors looking for safer assets amid financial-market turmoil bolstered values, Rightmove Plc said. Asking prices rose 2.4 percent from August, when they fell 3.4 percent, the property website said in an e-mailed report today. Separate data from Rightmove showed national home values gained 0.7 percent after a 2.1 percent decline in August. While values are being supported by record-low interest rates, waning consumer confidence and lenders’ insistence on large deposits are preventing the housing market from gaining momentum. Demand in London has been boosted by cash-rich buyers investing in property amid European financial volatility over attempts to avert a Greek default, Rightmove said.

Euro Weakens on Debt Crisis Plan Concern, Pares Its Loss After Greek Call (Source: Bloomberg)
The euro weakened to almost a seven-month low against the dollar after European officials failed last week to offer a plan to halt the region’s debt crisis as Greece struggles to avoid default. The 17-nation currency pared losses against its major counterparts after the Greek Finance Ministry said a conference call with the European Union and International Monetary Fund was productive. The dollar rose against all its major counterparts except the yen as Treasury two-year yields fell to a record before the Federal Reserve begins its two-day meeting tomorrow. Norway’s krone fell as oil prices declined. “The Greek government is trying to do what it’s being asked to do and my core case is that we get a disbursement of the quarterly tranche, but that doesn’t mean we won’t have the same issue in December,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. Nordvig spoke on a Bloomberg Television interview with Carol Massar and Matt Miller on “Street Smart.”

Greece Aid Talks Will Continue After ‘Productive’ Meeting (Source: Bloomberg)
Prime Minister George Papandreou’s government will hold another call with its main creditors tomorrow after a “productive” round of talks aimed at staving off default. Finance Minister Evangelos Venizelos held “substantive” discussions with European Union and International Monetary Fund officials about securing a sixth instalment of rescue funds, the Athens-based finance ministry said in an e-mailed statement after a teleconference tonight. A second call will be held tomorrow evening. U.S. stocks pared losses after the statement. As Papandreou fights investor doubts and domestic opposition, European leaders are squabbling over the terms of the July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union. U.S. Treasury Secretary Timothy F. Geithner said in an interview today that Europe will eventually adopt some of the same measures the U.S. took after the 2008 financial crisis.

European Stocks Drop Amid Speculation on Greek Aid Payment; Michelin Sinks (Source: Bloomberg)
European stocks slid, halting a four-day rally for the Stoxx Europe 600 Index, as investors speculated that Greece may not receive an aid payment that would help it avoid default. Deutsche Bank AG (DBK) led banks lower after Germany’s ruling party lost another regional election. Mining companies and oil producers fell as base metals and crude oil dropped, while Michelin & Cie. declined after Morgan Stanley downgraded the tiremaker. The benchmark Stoxx 600 dropped 2.3 percent to 224.96 at the 4:30 p.m. close in London, paring last week’s 2.5 percent advance. The gauge has declined 23 percent from this year’s peak on Feb. 17 as the region’s growing debt crisis added to concern that the economic recovery is at risk.

Australian Dollar Erases Earlier Drop After Reserve Bank Minutes Published (Source: Bloomberg)
The Australian dollar erased earlier declines after the Reserve Bank said it was concerned whether inflation would be contained, in minutes of the Sept. 6 policy meeting that were published today. The currency traded at $1.0231 as of 11:33 a.m. in Sydney from $1.0193 before the minutes. The so-called Aussie earlier dropped to as low as $1.0149 from $1.0222 yesterday in New York.