20110922 0929 Global Market Related News.

Asian Equities Set for Lowest Close in a Year as Fed Cites Economic Risks (Source: Bloomberg)
Asian stocks fell, sending the regional benchmark index toward its lowest close in more than a year, after the U.S. Federal Open Market Committee pledged to buy $400 billion of long-term debt and cited risks to the economy, souring the earnings outlook for exporters and banks. BHP Billiton Ltd. (BHP), the world’s largest mining company, slumped 3.2 percent in Sydney and rival Rio Tinto Group sank 4.7 percent. Toyota Motor Corp., the world’s biggest carmaker, declined 1.9 percent in Tokyo, while South Korea’s Samsung Electronics Co. dropped 2.2 percent in Seoul. Mitsubishi UFJ Financial Group Inc., Japan’s No. 1 lender by market value, lost 2.4 percent. The MSCI Asia Pacific Index slumped 1.7 percent to 115.85 as of 9:33 a.m. in Tokyo. About eight stocks fell for each that advanced on the measure, which closed little changed yesterday. The gauge dropped in the previous two weeks amid concern Europe’s debt crisis is spreading and signs of slowing U.S. growth.

Japanese Stocks Decline as Fed Stimulus Plan Disappoints Investors (Source: Bloomberg)
Japanese stocks fell after the Federal Reserve’s plan to buy more long-term bonds failed to lift investor confidence amid what the central bank called “significant downside risks” to the economic growth outlook. Toyota Motor Corp. (7203), the world’s biggest carmaker, slid 2 percent. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest lender by market value, fell 2.1 percent after Moody’s Investors Service cut the credit ratings on three major U.S. banks. The Nikkei 225 (NKY) Stock Average declined 1.2 percent to 8,635.18 as of 9:03 a.m. in Tokyo after the Federal Open Market Committee yesterday announced a plan to support the world’s biggest economy by buying $400 billion in long-term debt. The broader Topix index dropped 1.1 percent to 748.57. Japan’s stock market will be closed tomorrow for a public holiday.

Japanese, Australian Stock Futures Fall on Fed’s Bond Buying (Source: Bloomberg)
Japanese and Australian stock futures fell after the Federal Open Market Committee pledged to buy $400 billion of long-term debt and cited risks to the economic outlook, damping the earnings prospects for Asian exporters. American depositary receipts of Toyota Motor Corp. (7203), the world’s biggest carmaker that gets 28 percent of its sale in the U.S. and Canada, slid 2.1 percent from the closing share price in Tokyo. Those of Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest lender by market value, fell 3.9 percent after Moody’s Investors Service cut its ratings on three major U.S. banks. ADRs of Woodside Petroleum Ltd. (WPL), Australia’s No. 2 oil and gas producer, dropped 1.3 percent after crude prices fell. Futures on Japan’s Nikkei 225 (NKY) Stock Average expiring in December closed at 8,530 in Chicago yesterday, down from 8,680 in Osaka, Japan. They were bid in the pre-market at 8,580 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index declined 2.6 percent today.
New Zealand’s NZX 50 Index lost 0.6 percent in Wellington.

European Stocks Retreat on Greek Talks; Peugeot, Volkswagen Lead Decline (Source: Bloomberg)
European stocks retreated as officials said they plan to return to Athens next week after three days of consultations failed to produce a solution to the country’s debt crisis. PSA Peugeot Citroen and Volkswagen AG (VOW) led a decline in automakers. BHP Billiton Ltd. (BHP) and Rio Tinto Group, the world’s largest mining companies, fell with metal prices. Deutsche Lufthansa AG (LHA) lost 5 percent as Deutsche Bank AG (DBK) downgraded Europe’s second-biggest airline. Stada Arzneimittel AG (SAZ) slumped 19 percent for the biggest drop in three years. The benchmark Stoxx Europe 600 Index sank 1.7 percent to 225.33 at the 4:30 p.m. close in London. The gauge rose for the fifth day in six yesterday as Greece described its debt talks with the European Union and the International Monetary Fund as “productive” and investors speculated the Federal Reserve will provide more stimulus at today’s meeting.
The Stoxx 600 has still fallen 23 percent from this year’s peak on Feb. 17 amid concern the global economic recovery is at risk.

Emerging-Market Stocks Decline to a 14-Month Low as Fed Sees Economic Risk (Source: Bloomberg)
Emerging-market stocks fell to a 14-month low after the Federal Reserve said there are “downside risks” to the economic outlook and planned to replace much of the short-term debt in their portfolio with longer-term Treasuries. The MSCI Emerging Markets Index slipped 1.2 percent to 940.02 at 5:06 p.m. New York time, the lowest closing level since July 2010. Equities benchmarks in Brazil, Mexico, Chile, and Argentina declined. Russia’s Micex Index retreated 0.8 percent. Indonesia’s Jakarta Composite index slid for a third day as the nation’s domestic vehicle sales slowed in August. Hungary’s BUX index declined 1.3 percent. The U.S. central bank will buy $400 billion of bonds with maturities of six to 30 years while selling an equal amount of debt maturing in three years or less, the Federal Open Market Committee said today in Washington after a two-day meeting. “There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed statement said.

Fed Will Shift Holdings to Longer-Term Securities (Source: Bloomberg)
The Federal Reserve will replace $400 billion of short-term debt in its portfolio with longer- term Treasuries in an effort to further reduce borrowing costs and counter rising risks of a recession. The central bank will buy bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less, the Federal Open Market Committee said today in Washington after a two-day meeting. The action “should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said. Chairman Ben S. Bernanke expanded use of unconventional monetary tools for a second straight meeting after job gains stalled and the government lowered its estimate of second- quarter growth. Yields on 30-year Treasuries fell below 3 percent for the first time since 2009 and U.S. stocks had their biggest drop in a month on the Fed’s plan, dubbed “Operation Twist” after a similar Fed action in 1961.

Sales of U.S. Existing Homes Increased More Than Forecast (Source: Bloomberg)
Sales of previously owned U.S. homes rose more than anticipated in August as investors scooped up distressed properties with cash. The 7.7 percent increase left purchases at a five-month high 5.03 million annual rate, the National Association of Realtors said today in Washington. The August pace compares with a peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that dragged the economy into an 18-month recession. “Housing’s been down for so long, we should take whatever good news we can get,” said Brian Jones, an economist at Societe Generale in New York, whose forecast was among the highest in the Bloomberg survey. “Interest rates are low and pricing is attractive and people are responding.”

Bernanke Battling Housing Collapse Shows Fed Has Few Tools to Heal Economy (Source: Bloomberg)
U.S. mortgage rates are the lowest in at least four decades, with a 30-year fixed loan available at 4.09 percent. That didn’t help Alexis Wolf buy a townhome in Beaverton, Oregon. “Unless you have family help, you’re stuck renting,” said Wolf, 26, a real estate broker who turned to relatives for a loan because she didn’t have the credit and employment history needed to qualify for a mortgage. Wolf’s experience illustrates the predicament for Federal Reserve policy makers as they end a two-day meeting today to consider ways to boost economic growth. Low interest rates, the traditional medicine for a flagging economy, aren’t helping housing, which since 1982 has aided every recovery except the current one.

BofA, Wells Fargo Downgraded by Moody’s (Source: Bloomberg)
Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) had long-term credit ratings downgraded by Moody’s Investors Service, which said U.S. support has become less likely if lenders get into financial trouble. Citigroup Inc. (C)’s short-term rating also was cut by Moody’s, which said today “there is an increased possibility that the government might allow a large financial institution to fail, taking the view that contagion could be limited.” Citigroup’s stand-alone credit has improved, Moody’s said in a statement, leading the service to confirm the bank’s long-term rating. The downgrade questions whether the largest banks will always be “too big to fail,” a status conferred in 2008 when they received government rescues to keep the financial system from collapsing. Lawmakers have since overhauled regulations to head off a repeat of the bailouts and ordered regulators to set up a system for seizing and dismantling banks that founder.

U.S. Stocks Drop as Fed Announces Bond Purchase Plan, Sees Economic Risks (Source: Bloomberg)
U.S. stocks slumped, giving the Standard & Poor’s 500 Index its biggest decline in a month, as the Federal Reserve announced plans to buy $400 billion of long- term debt and cited risks to the economic outlook. Caterpillar Inc. and Dow Chemical Co. fell more than 5.1 percent, pacing losses among companies most-tied to the economy. Financial shares in the S&P 500 slid 4.9 percent as a group, to a two-year low, as Moody’s Investors Service cut its ratings on Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. The Dow Jones Transportation Average slid 5.3 percent as railroad shares tumbled after two coal companies cut their forecasts. The S&P 500 fell 2.9 percent to 1,166.76 at 4 p.m. New York time. The benchmark gauge for American equities has dropped 4.1 percent in three days. The Dow Jones Industrial Average lost 283.82 points, or 2.5 percent, to 11,124.84 today.

China Faces Surge in ‘Hot Money’ Inflows on Market Turmoil, PBOC Data Show (Source: Bloomberg)
Turmoil in global financial markets may be spurring a surge in flows of speculative capital into China as investors bet on the nation’s growth and prospects for gains in the yuan. Financial institutions’ yuan positions, accumulated from purchases of foreign exchange by the central bank, had a net gain of 376.94 billion yuan ($59 billion) in August, 72 percent more than in July and the biggest increase in five months, central bank data showed today. Economists watch the numbers for signs of inflows of so-called hot money. Inflows of capital may complicate central bank efforts to tame inflation and limit the risk of asset bubbles in the real- estate market. With lenders’ reserve requirements already at record levels, the People’s Bank of China may rely on selling bills to soak up cash.

Greece Accelerates Cuts to Wages, Pensions (Source: Bloomberg)
Greek Prime Minister George Papandreou’s government said it will accelerate budget cuts, targeting civil servants’ wages and pensioners to keep emergency loans flowing and avoid default. Measures announced yesterday following two rounds of talks with the European Union and the International Monetary Fund include: a 20 percent cut in pensions of more than 1,200 euros ($1,650) a month, according to a government statement; pensions paid to those younger than 55 will be shaved by 40 percent for the amount exceeding 1,000 euros and wages will be lowered for 30,000 state employees. The policies were demanded by international lenders to ensure Greece reach deficit-reduction targets in a 110 billion- euro ($151 billion) bailout and receive a payment due next month.

Papandreou Pushes for Accelerated Cuts to Ensure Next Month’s Aid Package (Source: Bloomberg)
Greek Prime Minister George Papandreou convenes his Cabinet to press for accelerating budget cuts to ensure the next tranche of an international rescue package is delivered next month to stave off default. Today’s 11:30 a.m. meeting in Athens follows two days of telephone consultations between Finance Minister Evangelos Venizelos and representatives from the European Union and International Monetary Fund, which made “good progress,” the EU said. The meetings were intended to damp concerns that Greece may miss deficit-reduction targets required to receive rescue loans. The EU statement said a “full mission” will return to Athens next week after Venizelos’s talks in coming days at the IMF annual meeting in Washington.

Euro Advances After Greece Accelerates Spending Cuts to Avoid Debt Default (Source: Bloomberg)
The euro rose after Greek Prime Minister George Papandreou’s government said it will accelerate budget cuts, targeting civil servants’ wages and pensioners to keep emergency loans flowing and avoid default. The measures announced yesterday followed two rounds of talks with the European Union and the International Monetary Fund. European leaders are squabbling over the terms of a July 21 agreement for a second Greek rescue and the prospect that they will be forced to channel more money to keep Greece in the currency union. “My current base assumption is all the stuff in Europe will eventually work itself out,” said Mike Burrowes, a strategist at Bank of New Zealand Ltd. in Wellington. “We’ll probably look for euro to initially recover back to $1.3650.

Bank of England Policy Makers See Greater Stimulus as Increasingly Likely (Source: Bloomberg)
Bank of England officials said they may need to buy more bonds to bolster a faltering recovery after holding off adding stimulus this month in a decision that was “finely balanced.” Most policy makers said it was “increasingly probable that further asset purchases to loosen monetary conditions would become warranted at some point,” the minutes of the Monetary Policy Committee’s Sept. 8 decision said. “For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting.” The nine-member MPC, led by Mervyn King, voted 8-1 to maintain the size of the bond plan at 200 billion pounds ($313 billion) and were unanimous in keeping the benchmark rate at a record low of 0.5 percent.

U.K. Government Must Bring Forward Spending to Boost Economy, Huhne Says (Source: Bloomberg)
U.K. Energy Secretary Chris Huhne said the government should speed up capital spending to help the economy, after the International Monetary Fund said ministers may need to consider delaying some of their fiscal squeeze. “We’ve got to be creative and imaginative about bringing forward more spending,” Huhne told a fringe event last night at his Liberal Democrat party’s annual conference in Birmingham, central England. He said the option of “pump-priming” the economy by increasing expenditure is “blocked off to us” because of “the scale of our budget deficit.” Deputy Prime Minister Nick Clegg, the Liberal Democrat leader, said Sept. 14 the government was going to “unblock” 40 infrastructure projects in an effort to spur growth. He said the government wanted to “put its foot on the accelerator.”

IMF Sees 300 Billion-Euro Credit Risk to Europe Banks (Source: Bloomberg)
The European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, the International Monetary Fund said, calling for capital injections to reassure investors and support lending. Political squabbling in Europe over ways to fight contagion and delays in implementing agreed measures are raising concern about the risk of government defaults, the IMF said. Banks, in turn face “funding challenges” because investors are concerned financial institutions will potentially show losses on government bonds holdings, and reliance by some on the European Central Bank for liquidity, it said. “A number of banks must raise capital to help ensure the confidence of their creditors and depositors,” the IMF wrote in its Global Financial Stability Report released today. “Without additional capital buffers, problems in accessing funding are likely to create deleveraging pressures at banks, which will force them to cut credit to the real economy.”

Harper Running Out of Economic Drivers as Carney Warns About Canada Trade (Source: Bloomberg)
Canadian Prime Minister Stephen Harper, who has overseen one of the developed world’s most robust economies during the global downturn, may be running out of drivers to sustain its growth. The world’s 10th-largest economy shrank in the second quarter as exports plunged. Bank of Canada Governor Mark Carney said yesterday trade will remain a “major source of weakness” as the U.S. faces its slowest recovery since the Great Depression. The IMF cut its growth forecast for Canada. “The risks to our economy remain largely external and are skewed to the downside,” Carney, 46, said in a speech in Saint John, New Brunswick.