20111004 1013 Global Market Related News.

Asian Stocks Fall a Third Day as Concern Over Europe’s Debt Crisis Deepens (Source: Bloomberg)
Asian stocks fell, driving a regional benchmark gauge toward its lowest close in more than two years, as disagreement among policy makers over how to resolve Europe’s debt crisis dimmed the outlook for exporters and banks. Samsung Electronics Co., which gets a fifth of its sales in Europe, lost 4.8 percent in Seoul. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue abroad, slid 4.3 percent. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s No. 1 listed lender by market value, sank 3.8 percent in Tokyo. BHP Billiton Ltd. (BHP), the world’s biggest mining company, fell 0.7 percent in Sydney after oil and copper prices sank. The MSCI Asia Pacific Index fell 2.2 percent to 107.72 as of 10:05 a.m. in Tokyo, extending its biggest quarterly decline in almost three years. The measure is headed toward the lowest close since July 2009. Stocks also fell after Goldman Sachs Group Inc. cut its forecast for earnings growth in Asia excluding Japan.

Asian Economies Weaken as European Debt Crisis Crushes Investor Confidence (Source: Bloomberg)
Indian and Australian manufacturing data were the weakest since 2009 and Japanese business sentiment failed to recover from the March 11 earthquake, signaling Asian economies are slowing as investor confidence sinks. A purchasing managers’ index for India fell to 50.4 in September from 52.6 in August, HSBC Holdings Plc and Markit Economics said in an e-mailed report today. A gauge for Australia slid to the lowest since June 2009. In Tokyo, the Tankan index of large manufacturers was at 2 in September, compared with 6 before the quake. Asian stocks tumbled ahead of a meeting of European finance ministers to consider measures to counter the sovereign-debt crisis, highlighting limits on the support that the region can give to global growth. An increase in a manufacturing index for China released Oct. 1 suggests that the nation’s economy is so far weathering the global financial turmoil, although a separate HSBC survey indicated smaller companies are suffering.

VIX Record Gain Above 40 Signals Stock Market Rebounds Since 1990: Options (Source: Bloomberg)
The biggest quarterly increase ever in the Chicago Board Options Exchange Volatility Index pushed it above 40, a threshold exceeded only three percent of the time in 20 years and a level that has preceded stock rebounds. The VIX rose 160 percent to 42.96 in the third quarter as the Standard & Poor’s 500 Index fell 14 percent, the biggest retreat since 2008, according to data compiled by Bloomberg. Closes above 40 in the volatility measure have come before the equity gauge gained 3.2 percent in the next three months on average, data compiled by Bloomberg show. U.S. stocks posted unprecedented swings in the last three months on concern Europe’s debt crisis will spur the second global recession in three years. The VIX, derived from prices paid for options to protect equities from losses, averaged 30.6 during the quarter, the highest since 2009, according to data compiled by Bloomberg.

S&P Valuations Below Average Recession Level (Source: Bloomberg)
The rout that erased $2.9 trillion from U.S. equities has pushed valuations in the Standard & Poor’s 500 Index 25 percent below the average level from the last nine recessions, even as profit estimates fall. Companies in the benchmark gauge for American equities trade at 10.2 times 2012 forecast earnings, compared with the average in economic contractions since 1957 of 13.7, according to data compiled by Bloomberg. At the same time, analysts have cut projections for profits next year by 2.6 percent to $110.78 a share, the biggest eight-week drop since 2009, the data show. Bears say analysts have just started paring earnings estimates and that shares will prove expensive when gross domestic product shrinks. Bulls say stock prices have fallen so much that even should earnings fail to increase in 2012, equities are inexpensive.

Recession Risk Overtaking ’New Normal': Gross (Source: Bloomberg)
Bill Gross, the manager of the world’s biggest bond fund, said the global economy risks lapsing into recession with the pace of growth falling below the “new normal” level the firm has predicted since 2009. “Sovereign balance sheets resemble an overweight diabetic on the verge of a heart attack,” Gross wrote in a monthly investment outlook posted on Newport Beach, California-based Pacific Investment Management Co.’s website today. “If global policy makers could focus on structural as opposed to cyclical financial solutions, new normal growth as opposed to recession might be possible. Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor.”
Pimco outlined the new normal scenario at its annual Secular Forum in May 2009 that set investment guidelines for the firm for the next three to five years. The forecast predicted that following the market collapse in 2008 the U.S. economy would grow at a below-average pace for the next several years as growth in the developed markets slows, unemployment stays elevated and the “heavy hand of government” would be evident in the markets.

U.S. Manufacturing Unexpectedly Accelerates as Export Demand Spurs Output (Source: Bloomberg)
Manufacturing in the U.S. unexpectedly accelerated in September, propelled by gains in exports and production. The Institute for Supply Management’s factory index climbed to 51.6 last month from 50.6 in August, the Tempe, Arizona-based group said today. A level of 50 is the dividing line between growth and contraction. The median forecast of 82 economists surveyed by Bloomberg News projected a drop to 50.5. Growing emerging economies like China and a rebound in Japan following the March earthquake and tsunami may continue to lift demand from overseas, giving a boost to companies like Emerson Electric Co. (EMR) and Honda Motor Co. Manufacturing, which accounts for about 12 percent of the economy, may prevent the recovery from being cut short even as consumer spending cools.

Record U.S. Gasoline Cargoes Seen Driving 17% Tanker-Rate Advance: Freight (Source: Bloomberg)
Record U.S. exports of gasoline and other refined oil products are poised to eliminate a glut of ships hauling the fuels next year, driving freight rates to a three-year high. Shipments in the first nine months were 24 percent higher than a year earlier, led by cargoes to Latin America, Energy Department data show. Costs to hire medium-range tankers, holding enough gasoline to fill about 800,000 cars, will gain 17 percent to $14,000 a day next year, according to the median of seven analysts surveyed by Bloomberg. U.S. crude-oil output in the first nine months rose 1.7 percent, the highest for the period since 2003. Gasoline demand fell 3.7 percent in July to the lowest for the month in 11 years. At a time when ships hauling crude and coal are forecast to lose money for at least another two years, product tankers may break even as early as 2012. Billionaire Wilbur Ross completed his first shipping investment last month, joining a group of investors buying a fleet of 30 fuel carriers.

Treasuries Fall on Speculation Potential Slowdown Doesn’t Merit Yield Drop (Source: Bloomberg)
Treasuries fell on speculation the potential pace of U.S. economic slowdown doesn’t merit 30-year yields at the lowest level since 2009. “The bond market has been factoring in the worst-case scenario for a long time,” said Roger Bridges, who oversees the equivalent of $14.2 billion of debt as the Sydney-based head of bonds at Tyndall Investment Management Ltd., a unit of Japan’s Nikko Asset Management Co. “You may have a slowdown or you may have a slight recession. The market’s thinking about a depression. I don’t see the economic data suggesting that.” Thirty-year yields rose two basis points to 2.74 percent as of 9:57 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 3.75 percent security due in August 2041 fell 13/32, or $4.06 per $1,000 face amount, to 120 14/32.

Construction Spending in U.S. Unexpectedly Increases as Multifamily Gains (Source: Bloomberg)
Construction spending in the U.S. unexpectedly rebounded in August, propelled by the biggest jump in state and local government outlays in more than two years. The 1.4 percent gain reversed the revised 1.4 percent drop in July, Commerce Department figures showed today in Washington. The median estimate of 52 economists surveyed by Bloomberg News called for a 0.2 percent decline. The industry was up 1.4 percent from August 2010 before adjusting for seasonal variations, the first positive reading this year. Increased building of multifamily residences, like apartments and townhouses, adds to evidence that Americans are moving away from home buying in favor of renting. Even with the gain in state and local spending in August, public construction was down 5.3 percent from a year earlier, showing the pain caused by budget cuts.

Stocks Fall in U.S., Sending S&P 500 Index Below Lowest Close of the Year (Source: Bloomberg)
U.S. stocks tumbled, sending the Standard & Poor’s 500 Index to a one-year low, as concern over Greece’s debt crisis and Bank of America Corp. (BAC)’s slump outweighed a rebound in manufacturing and construction spending. Financial shares had the biggest drop in the S&P 500 as Bank of America fell 9.6 percent to the lowest level since March 2009. Alcoa Inc. (AA) lost 7 percent amid concern about slower demand for commodities. American Airlines parent AMR Corp. (AMR) slid 33 percent on concern the U.S. is nearing a return to recession and that the carrier may be forced to seek bankruptcy protection. The S&P 500 lost 2.9 percent to 1,099.23 at 4 p.m. New York time, its lowest close since Sept. 8, 2010. The Dow Jones Industrial Average declined 258.08 points, or 2.4 percent, to 10,655.30, also the lowest level in more than a year.

China Services Indexes Show Faster Growth (Source: Bloomberg)
China’s service industries expanded at a faster pace last month, rebounding from a deceleration in August, a pickup that may ease concern the world’s second- largest economy is slowing. A purchasing managers’ index for China’s non-manufacturing industries rose to 59.3 from 57.6 in August, driven by retail spending, the China Federation of Logistics and Purchasing said on its website yesterday. HSBC Holdings Plc and Markit Economics said a services-industry index gained to 53 in September from a series-record low of 50.6 the previous month. Numbers above 50 indicate expansion. “September’s HSBC Services PMI rebounded meaningfully, pointing to a possible bottoming out of the services economy towards the end of the year,” Qu Hongbin, HSBC’S chief economist for China, said in a statement. “Combined with an improvement in the manufacturing PMI, this implies that despite the global slowdown China is still well on track for a soft landing.”

China's inflation fight remains top priority
BEIJING, Sept 30 (Reuters) - China will keep monetary conditions tight in its effort to rein in stubborn inflation, the country's central bank said on Friday, adding that containing domestic price pressures remains its priority.
"We should continue to implement a prudent monetary policy and continue to treat price stabilisation as the top priority," the People's Bank of China said in a statement following its quarterly policy meeting.

Japan’s Nikkei Drops to One-Week as Europe Impasse Undermines Confidence (Source: Bloomberg)
Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average dropping toward its lowest level in a week, as discord among European policy makers fueled concern the region will fail to resolve its debt crisis. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest lender by market value, fell 3.5 percent, headed for its steepest drop in over six months. Toyota Motor Corp. (7203), the world’s No. 1 carmaker, declined 2.3 percent, leading exporters lower. Kawasaki Kisen Kaisha Ltd. (9107), Japan’s third-biggest shipping line by sales, tumbled 5.8 percent after saying it expects a loss because of slumping cargo rates.
The Nikkei 225 fell 1.8 percent to 8,389.83 as of 9:23 a.m. in Tokyo, headed for its lowest close since Sept. 26. The measure tumbled 11 percent last quarter, its worst performance since the three months ended June 2010. The Topix lost 1.9 percent to 732.88 today. 　　 “Investor sentiment remains bearish,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “There are many different views within the 17 nation euro region. Investors are taking what politicians say very negatively, and they are reducing their risk assets.”

South Korea’s Inflation Moderates From Three-Year High (Source: Bloomberg)
South Korea’s inflation slowed in September from the fastest increase in 3 years as food prices moderated, while still remaining above the central bank’s target range. Consumer prices rose 4.3 percent from a year earlier, after a 5.3 percent advance in August, Statistics Korea said today in Gwacheon, south of Seoul. That was lower than the median estimate of 4.5 percent in a Bloomberg News survey of eight economists. Prices rose 0.1 percent from August. Bank of Korea Governor Kim Choong Soo has vowed to resume “normalizing” borrowing costs once the global economic outlook improves and Europe’s debt crisis calms down. His policy board left the benchmark interest rate unchanged for a third straight month in September even as inflation exceeded the bank’s target ceiling of 4 percent every month this year.

Korean Won Sinks to 14-Month Low; Government Bonds Gain as Inflation Cools (Source: Bloomberg)
South Korea’s won sank to the lowest level since July 2010 as concern Europe will fail to contain the region’s debt crisis prompted investors to seek refuge in the dollar. Bonds gained after inflation slowed more than forecast. Greece passed austerity measures yesterday that will cut its 2012 budget deficit to 6.8 percent of gross domestic product, short of the 6.5 percent goal previously agreed to secure financial aid from the European Union, International Monetary Fund and European Central Bank. Euro-region finance chiefs will meet on Oct. 13 to decide whether the push is enough to win bailout funds needed to avoid default. The dollar strengthened against 15 of 16 major currencies today.
“The larger-than-expected Greece deficit is heightening concern that Greece may default on its debt, boosting demand for safer assets,” said Ha Jun Woo, a Seoul-based currency dealer with Daegu Bank. “The Korean government has shown its will to prevent the currency from falling below the 1,200 per dollar level in the past, so it will be a key level to watch today.”

Greece Approves $8.8 Billion in Spending Cuts Before Scrutiny by EU, IMF (Source: Bloomberg)
The Greek government said it passed a new budget backed by its international creditors, including larger deficits than previously forecast, as the country moves closer to securing an 8 billion-euro ($10.7 billion) aid payout needed to avoid default. Prime Minister George Papandreou’s Cabinet also passed 6.6 billion euros of austerity measures last night to cut the 2012 deficit to 6.8 percent of gross domestic product, missing the 6.5 percent goal previously set with the European Union, International Monetary Fund and European Central Bank, known as the troika. Finance Minister Evangelos Venizelos previously said Greece would miss the targets. The new deficit numbers “should not derail Greece’s current negotiations with the troika,” Geoffrey Yu, a currency strategist at UBS AG in London, wrote in a note to clients. “We remain of the view that Greece will ultimately receive its current bailout tranche.”

EU Signals Bigger Losses on Greek Bailout (Source: Bloomberg)
European governments dropped clues that bondholders may have to take bigger losses on Greek debt in a second aid package, as Greece’s deteriorating economic outlook forces bolder steps to quell the fiscal crisis. Finance ministers considered reshaping a July deal that foresaw investors contributing 50 billion euros ($66 billion) to a 159 billion-euro rescue. That “private sector involvement” includes debt exchanges and rollovers. “As far as PSI is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21,” Luxembourg Prime Minister Jean-Claude Juncker told reporters early today after chairing a meeting of euro finance chiefs in Luxembourg. “These are technical revisions we are discussing.”

Euro Reaches Decade Low Versus Yen Amid Signs of Slowing European Growth (Source: Bloomberg)
The euro touched the lowest level in more than a decade against the yen before reports that may indicate a slowdown in the European economy, spurring concern the region’s debt crisis is damping prospects of recovery. The 17-nation euro’s decline was limited as technical charts suggest the recent drop was excessive. The Australian dollar was near its lowest level in a year before the Reserve Bank of Australia’s meeting today, where policy makers are expected to hold interest rates, and after a global slump in equities curbed demand for higher-yielding assets. “There isn’t much progress in containing the sovereign problem and Europe will possibly slip into recession,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank. “That’s negative for the euro.”

German Stocks Decline on Debt, Extending Biggest Quarterly Drop Since 2002 (Source: Bloomberg)
German stocks fell, extending the benchmark DAX Index (DAX)’s biggest quarterly drop in nine years, as concern deepened that Europe’s debt crisis will hurt growth and choke off funding for banks. Commerzbank AG (CBK) slid 7.3 percent and Deutsche Bank AG (DBK) dropped 2.2 percent amid speculation that banks in Belgium and Austria will need more government support. Carmakers Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) declined as investors speculated that China’s economy is slowing more than expected. The DAX dropped 2.3 percent to 5,376.7 at the 5:30 p.m. close in Frankfurt, having earlier fallen as much as 3.9 percent. The gauge slumped 25 percent last quarter, its largest plunge since 2002, amid concern global growth is stumbling as policy makers struggle to contain Europe’s sovereign-debt crisis. The DAX has decreased 22 percent this year. The broader HDAX Index lost 2.3 percent today.

U.K. Stocks Slide for Fourth Day; Banks, Miners Lead Decline (Source: Bloomberg)
U.K. stocks declined for a fourth day, their longest falling streak in eight weeks, as commodity and bank shares slid due to concern that the global economy is faltering and the Greek debt crisis is deepening. BHP Billiton Ltd. (BHP) and Rio Tinto Group, the world’s biggest mining companies, retreated 1.6 percent and 2.4 percent respectively as copper slid to a 14-month low in London. Standard Chartered Plc (STAN) and Royal Bank of Scotland Group Plc (RBS) fell more than 4 percent as euro-area finance ministers meet to decide whether Greece will receive another aid tranche.
The benchmark FTSE 100 Index (UKX) retreated 52.98 points, or 1 percent, to 5,075.5 at the 4:30 p.m. close in London after earlier declining as much as 2.8 percent. The index rose 1.2 percent last week as policy makers increased their efforts to contain the euro area’s sovereign-debt crisis. The gauge lost 14 percent in the third quarter, its biggest drop since 2002, amid concern that Greece’s debt woes will spread to other countries in the region and that the economy is stalling.