Asian Stocks Drop as Concern Grows Over European Division on Debt Crisis (Source: Bloomberg)
Asian stocks dropped for the first time in three days amid growing concern that divisions among European leaders will hamper efforts to solve the region’s debt crisis, damping the earnings outlook for exporters. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics that gets 21 percent of its sales in Europe, slid 1.3 percent in Tokyo. Mazda Motor Corp., the Japanese car maker that’s most dependent on Europe, dropped 1.3 percent. BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil and gas producer, declined 2.5 percent after crude and metals prices fell. “The European situation continues to drag on markets around the world,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “It’s going to stay with us for a quite number of months to come, well into 2012.”
U.S. Stocks Retreat as Concern Grows Over Europe’s Handling of Debt Crisis (Source: Bloomberg)
U.S. stocks declined, halting a three-day rally for the Standard & Poor’s 500 Index, amid growing concern that European leaders are divided over how to handle Greece’s debt crisis. All 10 industry groups in the S&P 500 fell at least 0.6 percent, with companies most-tied to economic growth dropping the most. Dow Chemical Co. (DOW) and Alcoa Inc. (AA) slid at least 4.9 percent as commodities tumbled. Morgan Stanley and Bank of America Corp. (BAC) lost more than 4.9 percent, pacing declines among financial shares. Amazon.com Inc. (AMZN) rose 2.5 percent after the company launched its Kindle Fire tablet computer, taking aim at Apple Inc.’s bestselling iPad. The S&P 500 lost 2.1 percent to 1,151.06 at 4 p.m. New York time, after rising as much as 0.8 percent earlier and rallying 4.1 over the previous three days. The Dow Jones Industrial Average fell 179.79 points, or 1.6 percent, to 11,010.90 today, with all 30 stocks retreating.
Demand for U.S. Capital Goods Climbs Most in Three Months in Recovery Sign (Source: Bloomberg)
Orders for U.S. capital goods climbed in August by the most in three months, a sign business investment continues to support the recovery. Bookings for goods like computers and communications gear, excluding military hardware and aircraft, climbed 1.1 percent, the most since May, a Commerce Department report showed today in Washington. Demand for all durable goods dropped 0.1 percent, less than forecast. Manufacturers like General Electric Co. (GE) continue to benefit from sales to China, India and other emerging markets even as they face a slowdown in domestic spending. Gains in business investment in the U.S. indicate companies are looking beyond the plunge in stocks and concern over the European debt crisis and are seeking to expand.
Fed’s Hoenig Says Operation Twist Adding to Risk of Economic ‘Imbalances’ (Source: Bloomberg)
Federal Reserve Bank of Kansas City President Thomas Hoenig said the Fed’s plan to push down long- term interest rates may produce accidental outcomes and policy makers risk creating “imbalances” in the economy. “I have real concerns about trying to fine-tune and micro- manage the economy when monetary policy is a blunt tool,” he said today in an interview with Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. Efforts to “redefine yield curves” may “introduce new complexities and risk new unintended consequences,” he said. Hoenig steps down as the central bank’s longest-serving policy maker this week, after serving as a regional chief since 1991. The Federal Open Market Committee is debating how to jump- start the U.S. economic recovery, with three members casting dissents at each of the past two meetings and posing the most opposition in almost 19 years.
Fed’s Mortgage Buying May Push Banks Into Riskier Debt, Deutsche Bank Says (Source: Bloomberg)
The Federal Reserve’s decision to resume purchases of government-backed mortgage securities may help push banks to expand the types of bonds they buy, according to Deutsche Bank AG. (DBK). U.S. commercial banks’ holdings of home-loan bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae have swelled $104 billion this year to a record $1.21 trillion, according to Fed data. Their total amount of securities climbed $58 billion to $2.48 trillion amid sluggish bank lending. Banks are considering investments outside their traditional “wheelhouse” of agency mortgage bonds, including securities backed by commercial mortgages, subprime auto debt and company loans, Deutsche Bank analyst Steven Abrahams wrote today in a report, citing meetings he’s had with lenders in the past week. By lowering mortgage-bond yields, the Fed’s plan to reinvest proceeds from the $1 trillion of housing debt it holds into new home-loan securities may fuel buying of riskier debt with higher yields, he wrote.
China Growth Seen Less Than 5% by 2016: Poll (Source: Bloomberg)
Most global investors predict Chinese growth will slow to less than half the pace sustained since the government began dismantling Mao Zedong’s communist economy three decades ago, a Bloomberg poll indicated. Fifty-nine percent of respondents said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years, the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers showed. China, which saw its exports tumble the most since at least 1979 amid the 2008-09 global crisis, may not be able to rely on trade in any prolonged demand slump in Europe and the U.S., now battling to avoid returning to a recession. Managing the economic downshift would fall to the Communist Party’s next leaders, as President Hu Jintao and Premier Wen Jiabao begin their transition from power late next year.
Japan Stocks Fall as European Divisions Dims Earnings Outlook (Source: Bloomberg)
Japanese stocks fell, snapping a two-day rally, amid concern that divisions among European leaders will hamper efforts to solve the region’s debt crisis, damping the earnings outlook for Asian exporters. Sony Corp. (6758), a consumer electronics exporter that gets 21 percent of its sales in Europe, slid 0.9 percent. Inpex Corp. (1605), Japan’s largest energy explorer, fell 1.6 percent after the price of crude oil declined. The Nikkei 225 (NKY) Stock Average fell 0.9 percent to 8,542.54 as of 9:07 a.m. in Tokyo. The broader Topix index slid 0.5 percent to 750.34. The Nikkei is down 13 percent this quarter, heading for the biggest loss since the second quarter of 2010. It has fallen 4.6 percent this month.
Japan Stocks Fall as European Divisions Dims Earnings Outlook (Source: Bloomberg)
Japanese stocks fell, snapping a two-day rally, amid concern that divisions among European leaders will hamper efforts to solve the region’s debt crisis, damping the earnings outlook for Asian exporters. Sony Corp. (6758), a consumer electronics exporter that gets 21 percent of its sales in Europe, slid 0.9 percent. Inpex Corp. (1605), Japan’s largest energy explorer, fell 1.6 percent after the price of crude oil declined. The Nikkei 225 (NKY) Stock Average fell 0.9 percent to 8,542.54 as of 9:07 a.m. in Tokyo. The broader Topix index slid 0.5 percent to 750.34. The Nikkei is down 13 percent this quarter, heading for the biggest loss since the second quarter of 2010. It has fallen 4.6 percent this month. “It’s all about Europe,” saidKenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “The focus is whether they can establish unity, and the market’s going through ups and downs according to developments.”
Hong Kong Markets Closed as Typhoon Nesat Nears (Source: Bloomberg)
Hong Kong shut financial markets, schools and government offices, raising its highest storm signal for the year as Typhoon Nesat brought gale-force winds and rain into the city. The typhoon, which killed at least 20 people in the Philippines, was centered about 350 kilometers south-southwest of Hong Kong, and is heading toward China’s Hainan Island, the city’s observatory said. The morning trading session has been canceled, said Hong Kong Exchanges & Clearing Ltd. “It’s deadly quiet outside, like a dark wet ghost town,” said Gavin Parry, managing director of Parry International Trading Ltd. in Hong Kong, who usually walks to work. “There are few mini buses, no public buses and taxis are trolling for passengers to pay an extra HK$100 fare given the typhoon. It impacts trading operations as staffs are allowed to remain home, but we have home terminals as a back-up.”
South Korea Current-Account Surplus at Seven-Month Low on Seasonal Factor (Source: Bloomberg)
South Korea’s current-account surplus narrowed to its lowest level in seven months in August as the total amount of exports fell from previous months due to fewer working days during the summer holiday season. The surplus was $401.3 million, compared with a revised $3.77 billion in July, the Bank of Korea said in a statement in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income. The Bank of Korea expects demand from emerging economies to help the nation maintain a current-account surplus this year even as Europe’s debt woes and a faltering U.S. recovery dim the outlook for Asian exports. The surplus may help the won recover after weakening, according to economist Lee Sung Kwon.
Euro Crisis Makes Fed Lender of Only Resort as Banks Chase Dollar Funding (Source: Bloomberg)
The Federal Reserve, chastised by Congress for lending money to foreign institutions including a Libyan-owned bank, is once again the lender of last resort for banks around the world it knows little about. Three years after the collapse of Lehman Brothers Holdings Inc., money-market borrowing rates for dollars are rising, leading the Fed and European Central Bank to make the currency available to Europe’s institutions for as many as three months. U.S. prime money-market funds cut their exposure to euro-zone bank deposits and commercial paper, or short-term IOUs, to $214 billion in August from $391 billion at the end of last year, according to JPMorgan Chase & Co. data.
The failure of regulators worldwide to address European banks’ fragile dependence on short-term funding is “putting the Fed in a really awkward position,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a Washington regulatory research firm whose clients include the biggest U.S. banks. The swaps with Europe “are an extremely advantageous political football” for critics of the Fed, she said.
European Stocks Slide, Snapping Three-Day Rally; Man Group Sinks (Source: Bloomberg)
European stocks declined, snapping the biggest three-day rally in 16 months, amid concern that holders of Greek bonds will suffer larger losses than previously agreed upon. Man Group Plc (EMG) sank the most in almost three years as the world’s biggest hedge fund said assets under management will decrease. Cairn Energy Plc (CNE) slid 6.5 percent after abandoning an exploration well. Deutsche Boerse AG (DB1), the operator of the Frankfurt stock exchange, lost 4 percent as the European Union proposed a financial-transactions tax. The Stoxx Europe 600 Index slipped 1.1 percent to 227.39 at the 4:30 p.m. close in London after earlier rising as much as 0.5 percent. The gauge had surged 7 percent over the previous three days, the biggest rally since May 2010, amid speculation policy makers will increase efforts to contain the region’s sovereign-debt crisis.
U.K. Stocks Decline as Man Group, Banks Drop; BG Group Rallies in London (Source: Bloomberg)
U.K. stocks retreated for the first time in four days, paring yesterday’s biggest rally for the FTSE 100 Index (UKX) in 16 months, as investors sought further signs that policy makers are addressing Europe’s debt crisis. Man Group Plc (EMG) plunged 25 percent, the most in almost three years, after the world’s largest hedge fund said assets under management will drop by 8.5 percent. Banks also retreated, snapping a three-day rally. BG Group Plc (BG/) paced advancing shares after Goldman Sachs Group Inc. recommended the oil producer. The benchmark FTSE 100 slid 76.42, or 1.4 percent, to 5,217.63 at the 4:30 p.m. close in London, after swinging between gains and losses at least 10 times today. The gauge yesterday jumped 4 percent. The broader FTSE All-Share Index slid 1.4 percent while Ireland’s ISEQ Index fell 1 percent.
Swiss Franc’s Ceiling Is ‘Very Credible’ as Market Heeds SNB, Jordan Says (Source: Bloomberg)
The Swiss central bank’s franc ceiling of 1.20 versus the euro is “very, very credible,” Vice President Thomas Jordan said. The Swiss National Bank will use “all measures” to defend it, Jordan said at an event in Basel, Switzerland, late yesterday. He declined to comment on whether policy makers will raise the cap, saying the Zurich-based central bank is taken “seriously in the market.” The SNB on Sept. 6 imposed a franc ceiling for the first time since the 1970s and resumed purchases of foreign currencies to protect the economy. Efforts to stem franc gains in the 15 months through mid-June 2010 more than quadrupled the bank’s balance sheet and contributed to an annual loss of $21 billion as the single currency’s value plummeted.
Germany to Vote on Euro Rescue Fund, Set Stage for Next Steps (Source: Bloomberg)
German lawmakers are set to back an expansion of the euro-area rescue fund’s firepower as European officials turn to look at what next steps may be needed to stem the debt crisis. The plan before the lower house in Berlin today would allow the fund to buy bonds of distressed states and offer emergency loans to governments, raising Germany’s guarantees to 211 billion euros ($287 billion) from 123 billion euros. The main opposition Social Democrats and Greens have said they will vote with Chancellor Angela Merkel’s government, assuring passage. Lawmakers vote from about 11 a.m. Berlin time as government officials weigh further measures to bolster Greece and stem investor concern that helped end the biggest three-day rally in 16 months for European stocks yesterday. Options include seeking further writedowns on Greek sovereign bonds, adding yet more firepower to the rescue fund and a “plan B” for banks.
German Industry Chiefs Unite to Save Euro as Lawmakers Bicker Over EFSF (Source: Bloomberg)
German executives and industry leaders joined forces in the fight to save the euro as lawmakers quarreled over the stakes, drawing the battle lines for a parliamentary vote on a second Greek bailout. Germany’s lower house, the Bundestag, will give its decision today on strengthening Europe’s temporary rescue fund, the European Financial Stability Facility, in a ballot that has split Chancellor Angela Merkel’s government. Germany, Europe’s largest economy and the single biggest contributor to the aid, sends more than 40 percent of its exports to euro-region countries and has the most to gain from an intact monetary union. Lobby groups, led by the BDI Federation of German Industries and labor unions under the umbrella of the Confederation of German Trade Unions, or DGB, made a last-ditch appeal to lawmakers this week to back the changes.
Australia, New Zealand Dollars Slide Amid Debt Crisis Containment Concerns (Source: Bloomberg)
The Australian and New Zealand dollars weakened against their U.S. and Japanese counterparts as Europe’s debt crisis concerns spurred a drop in shares across the world, curbing demand for higher-yielding assets. The so-called Aussie declined against 15 of its 16 major peers ahead of a vote on a European rescue fund in the Germany’s lower house today. New Zealand’s currency slid versus the dollar and the yen for a second day after U.S. and European stocks dropped and commodity prices fell. “Developments regarding the euro-zone sovereign debt is really the major factor driving down the Aussie,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “Negative sentiments would really follow through today.”
Yen, Dollar Rise as Europe Debt Concern Boosts Safety Demand; Aussie Falls (Source: Bloomberg)
The yen and dollar climbed against most of their major peers as concern that Europe’s debt crisis will hurt global growth bolstered demand for haven currencies. The euro was poised for a third monthly decline against the dollar before Italy sells bonds and German lawmakers vote on changes to a European bailout fund. The Australian dollar slid for a second day versus the greenback as Asian stocks extended a drop in equities globally, reducing demand for higher-yielding currencies. “When things are very uncertain, at the end of the day people will still always run back to the greenback and yen,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The global economy is slowing, and we know that risks are to the downside.”
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