Asian Stocks Fall as Alcoa Earnings, Europe Crisis Fuel Investor Concerns (Source: Bloomberg)
Asian stocks fell for the first time in five days as optimism over U.S. corporate earnings waned after Alcoa Inc. (AA) reported profit that trailed analyst estimates, and on concern Europe’s debt crisis may worsen. Alumina Ltd., an Australian resource company, sank 4.7 percent in Sydney after Alcoa’s third-quarter profit missed estimates as global demand slowed. BHP Billiton Ltd. (BHP), the world’s biggest mining company, dropped 2 percent in Sydney as oil and metal prices slid. Honda Motor Co., Japan’s second- largest automaker by revenue, slumped 4 percent in Tokyo after saying that flooding in Thailand may hurt production.
The MSCI Asia Pacific Index sank 0.6 percent to 115.01 as of 9:44 a.m. in Tokyo amid uncertainty that a revised bailout fund for the euro area will be ratified. More than two stocks fell for each that advanced on the gauge, which climbed the previous two days after German Chancellor Angela Merkel and French President Nicholas Sarkozy pledged to deliver a plan to recapitalize banks and address Greece’s debt crisis.
Asia Girds for Risks With Indonesia Rate Cut (Source: Bloomberg)
Asian policy makers are bolstering efforts to protect their economies from weakening global growth, as Indonesia unexpectedly cut interest rates and the Philippines prepares to unveil a stimulus plan this week. Bank Indonesia lowered its reference rate by a quarter of a percentage point to 6.5 percent yesterday, defying the predictions of all 15 economists surveyed by Bloomberg News. Philippine President Benigno Aquino is due to announce details of a 72.1 billion-peso ($1.7 billion) spending package today, while Singapore’s central bank is forecast by economists to say this week that it will slow or end its currency appreciation. Emerging-market nations have turned from fighting inflation to supporting growth as a struggling U.S. recovery and deepening European crisis threaten the global economy. Brazil, Turkey, Russia and Pakistan have cut borrowing costs in 2011, while Asian countries from the Philippines to South Korea have refrained from further rate increases in recent weeks.
Most U.S. Stocks Climb as Earnings Optimism Offsets Concerns Over Europe (Source: Bloomberg)
Most U.S. stocks advanced, while the Standard & Poor’s 500 Index posted its smallest move since August, as optimism about third-quarter corporate earnings overshadowed concern Europe’s debt crisis is worsening. Alcoa Inc. (AA), the biggest U.S. aluminum producer, rose 2.1 percent ahead of its results. Apple Inc. (AAPL), Bank of America Corp. (BAC) and Caterpillar Inc. (CAT) added at least 1.4 percent to pace gains among companies most-tied to the economy. Mosaic Co. (MOS) jumped 4.3 percent as Credit Suisse Group AG said valuations for fertilizer shares are attractive. AMR Corp. (AMR) rose 7.1 percent as American Airlines joined its bigger U.S. peers with deeper seating cuts.
Almost seven stocks rose for every five that fell on U.S. exchanges at 4 p.m. New York time. The S&P 500 added 0.1 percent to 1,195.54. The benchmark gauge traded within a 1 percent range between its high and low level for the day, the narrowest since July 26. The Dow Jones Industrial Average retreated 16.88 points, or 0.2 percent, to 11,416.30 today.
Senate Passes Measure on China’s Weak Yuan (Source: Bloomberg)
The U.S. Senate passed legislation punishing China for its undervalued currency as opposition from House Speaker John Boehner casts doubt on whether the measure will become law. The Senate voted 63-35 yesterday for the measure backed by Democrats such as Senators Sherrod Brown of Ohio and Charles Schumer of New York and Republicans including Lindsey Graham of South Carolina and Jeff Sessions of Alabama. China’s leaders and Washington opponents such as Boehner and the U.S. Chamber of Commerce have said the measure letting U.S. companies seek duties on Chinese goods to offset the weak yuan risks starting a trade war. Senate passage put the focus on Boehner. “By passing by a large majority, maybe they think they will be able to intimidate Boehner into a vote,” Nicholas Lardy, senior fellow at the Peterson Institute for International Economics in Washington, said in an interview.
Senate Blocks Obama’s $447B Job Creation Plan (Source: Bloomberg)
Opponents of President Barack Obama’s $447 billion jobs plan blocked the measure in the Senate, with two Democrats joining Republicans to derail his prime proposal to help turn around the struggling economy. The tally on the test vote wasn’t completed by early evening as the roll call remained open for Senator Jeanne Shaheen, a New Hampshire Democrat, who was on her way back to Washington to vote in support of the plan. More than 40 senators voted against permitting debate on the measure, effectively shelving it. The broad plan includes cuts in payroll taxes for workers and employers and provides new funding for roads, bridges and other infrastructure. Senate Minority Leader Mitch McConnell called the measure a “lousy idea” that relies on proposals similar to 2009’s $825 billion stimulus, an effort he said that failed to work.
China’s Banks Rally as State Investor Buys Shares After Valuations Slump (Source: Bloomberg)
Agricultural Bank of China Ltd. (601288) jumped a record 12.8 percent in Hong Kong, leading a rally in the nation’s financial shares after state-run Central Huijin Investment Ltd. started buying the stocks. Industrial & Commercial Bank of China (601398) Ltd., the world’s biggest lender by market value, gained 6.7 percent to close at HK$4.31 while Bank of China Ltd. (3988) climbed 7.7 percent after the arm of China’s sovereign wealth fund said it began buying shares yesterday in the four biggest banks. The cost of protecting China’s bank debt fell. Central Huijin, set up to hold the government’s stakes in the banks, boosted its holdings after valuations sank below the level reached during the global financial crisis. Huijin helped spur a 21 percent week-long rally in the Shanghai Composite Index when it bought bank shares in 2008 as part of a series of steps taken by China aimed at supporting the market.
Chanos Says Chinese Lenders ‘Deteriorating’ as Government Purchases Shares (Source: Bloomberg)
Jim Chanos, the hedge-fund manager who’s been betting that Chinese bank stocks will tumble, said a rally spurred by government purchases of the shares hasn’t changed his bearish outlook. The MSCI China Financials Index surged 6 percent today after state-run Central Huijin Investment Ltd. started buying shares in the four biggest Chinese lenders. The gauge of banks, insurers and developers had tumbled as much as 43 percent in 2011 through Oct. 4, sending its price-to-earnings ratio to a record low of 5.6 on concern that slowing economic growth will spur bad debts after a three-year credit boom. “The fact that people are even talking about the government stepping in to shore up the banks, when two months ago people thought there was nothing wrong with the Chinese banks, should tell you just how seriously this situation is deteriorating,” Chanos, founder of New York-based hedge fund Kynikos Associates, said in an interview with Bloomberg Television’s Michael McKee today.
Japanese Stocks Snap 3-Day Winning Streak as Alcoa Profit Misses Estimates (Source: Bloomberg)
Japanese stocks fell for the first time in four days as optimism about U.S. corporate earnings waned after Alcoa Inc. (AA) reported profit that missed analyst estimates and amid concern Europe’s debt crisis will worsen. Nissan Motor Co., a carmaker that gets about 80 percent of its revenue overseas, fell 1.1 percent. Honda Motor Co., Japan’s second-largest automaker by revenue, sank 2.9 percent after it said production may fall because of plant closures caused by flooding in Thailand. Mitsui & Co., a trading house that counts commodities as its biggest source of profit, slid 1.6 percent after metal prices declined. The Nikkei 225 (NKY) Stock Average fell 0.6 percent to 8,718.18 as of 9:02 a.m. in Tokyo. The broader Topix lost 0.7 percent to 750.08, with more than three times as many shares declining as advancing.
Japan’s Machinery Orders Rise, Signaling Corporate Investment May Recover (Source: Bloomberg)
Japan’s machinery orders rebounded in August on demand for electrical products, signaling that companies are willing to invest even as global economic growth slows and the yen stays near post-World War II highs. Bookings rose 11 percent in August from July, the fastest increase in a year, the Cabinet Office said in Tokyo today. The indicator of capital spending in three to six months was projected to increase 3.9 percent, according to the median forecast of 31 economists surveyed by Bloomberg News. Orders fell 8.2 percent in July from June. Today’s report contrasts with data last month that undershot economist forecasts, including exports, industrial output and retail sales. A yen appreciation that Nissan Motor Co. chief executive officer Carlos Ghosn said last week may cause a “hollowing out” of Japan’s industrial base also threatens to derail a rebound in the nation’s economy.
South Korea’s Jobless Rate Holds Near a 3-Year Low as Service Sector Hires (Source: Bloomberg)
South Korea’s unemployment rate held near a three-year low last month as the service sector, wholesalers and retailers hired more workers. The jobless rate was at 3.2 percent in September, compared with 3.1 percent in August, Statistics Korea said today in Gwacheon, south of Seoul. That matched the median estimate in a Bloomberg News survey of 10 economists. South Korea’s central bank will extend tomorrow a pause in interest-rate increases as weakness in European economies and the U.S. threatens demand for the nation’s exports, according to a Bloomberg News survey of economists. Economist Nouriel Roubini told a forum in Seoul yesterday that Europe’s response to its debt crisis risks being “too little, too late.”
Singapore Plans ‘Judicious’ Management of Dollar as Economic Growth Slows (Source: Bloomberg)
Singapore said its economy will probably expand at a slower pace in the next few years and the central bank will continue “judicious management” of its currency to curb inflation and support growth. The island’s expansion will be affected by a “more uncertain” global economy and the government will increase spending in the next five years, Finance Minister Tharman Shanmugaratnam, who is also deputy prime minister and chairman of the Monetary Authority of Singapore, said in a statement yesterday. The government issued the statement to elaborate on plans presented by President Tony Tan in parliament on Oct 10. “The headwinds from slower global growth will mean slower growth in Singapore in the next few years,” Shanmugaratnam said. “In this environment of heightened risk and volatility, MAS will continue to provide the basis for economic and financial stability in Singapore.”
Russia Nears Natural Gas Deal With China: Putin (Source: Bloomberg)
Prime Minister Vladimir Putin said Russia is nearing an agreement with China to supply natural gas to the world’s biggest energy consumer. “Those who sell always want to sell at a higher price, while those who buy want to buy at a lower price,” Putin said yesterday at the start of a meeting with Chinese Prime Minister Wen Jiabao in Beijing. “We need to reach a compromise that will satisfy both sides.” The Russian premier, who is making his first foreign trip since announcing plans to return to the presidency next year, is seeking to overcome a stalemate in talks on natural gas deliveries to China. Russia, the world’s largest energy exporter, has delayed plans to build gas pipelines to the Asian country for more than a decade because of wrangling over how much China will pay for the fuel.
Europe Must Go Beyond Recapitalization: Geithner (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner said European leaders must go beyond a planned recapitalization of banks to resolve the continent’s sovereign- debt crisis. “The most important problem is they have to make sure that the major economies of Europe that are under pressure now are able to borrow at affordable rates,” Geithner said today in an interview with Bloomberg Television. “They recognize the need to do more than they’ve done so far.” Geithner will be in Paris on Oct. 13-14 for a meeting of Group of 20 finance ministers. European officials are striving to meet an end-of-month target set by French President Nicolas Sarkozy to get to grips with the crisis, which has propelled Greece to the brink of default, shaken world markets and fueled speculation that the 17-nation currency might not survive in its current form. European leaders are due to meet on Oct. 23.
Euro Near 3-Week High Before Barroso Presents Bank Recapitalization Plan (Source: Bloomberg)
The euro was 0.4 percent from a three-week high before European Commission President Jose Barroso presents proposals on bank recapitalization after Germany and France pledged to devise a plan by early November. The 17-nation currency held a gain from yesterday against the Swiss franc as European Union and International Monetary Fund officials indicated Greece will get an 8 billion-euro ($11 billion) loan next month. Australia’s dollar snapped a decline from yesterday against the yen before a report tomorrow that economists said will show employers added positions in September. “The market is definitely putting its faith in the ability of the euro-area authorities to have something concrete in place by the end of the month and that is helping support euro,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. said in Sydney.
Bank of England Is Prepared to Add Extra Stimulus If Needed, Posen Says (Source: Bloomberg)
Bank of England policy maker Adam Posen said the central bank’s new round of stimulus is the “right place” to start and officials are ready to do more if it’s needed. “We are going to review it on an ongoing basis,” Posen said in an interview with Bloomberg Television in New York late yesterday, referring to the bank’s Oct. 6 decision to increase so-called quantitative easing. “We will readjust it if it turns out we need more.” The Bank of England raised the ceiling for asset purchases to 275 billion pounds ($429 billion) from 200 billion pounds, the biggest expansion since the first round of stimulus in March 2009. Posen said the increase should be enough “to make a material improvement in prospects versus what it otherwise would be and it’s the right place for us to start.”
Slovakia Rejects European Bailout Overhaul (Source: Bloomberg)
Slovakia’s opposition leader said lawmakers must find a way to approve Europe’s enhanced bailout fund, which was rejected yesterday amid a dispute over the future of Prime Minister Iveta Radicova. Slovakia “must sign up to the rescue fund,” Robert Fico said late yesterday, adding that his party, which didn’t back the measure yesterday, is awaiting a proposal from the ruling coalition. Radicova said the only country in the 17 nations that use the euro that has yet to approve European Financial Stability Facility, must find a solution to approve the EFSF “as soon as possible.” No time for a new vote has been set. “Eventually a yes vote will be secured,” Tim Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London, said by phone yesterday. “Does Slovakia really want to be alone among 17 euro-zone members states on this one, and when the future of Europe is at stake?”
Greek $11 Billion Loan Payment Likely in Early November as Debt Talks Loom (Source: Bloomberg)
European Union and International Monetary Fund officials indicated Greece will get an 8 billion- euro ($11 billion) loan next month under a 110 billion-euro bailout, as European leaders move to reopen talks on a new package that may mean deeper writedowns on Greek debt. The team of officials from the EU, IMF and European Central Bank said Greece has made “important progress” in fiscal consolidation, according to an e-mailed statement today upon completion of a review in Athens. The mission warned that more spending cuts would be needed in 2013 and 2014 to meet deficit targets. “Continuing funding to Greece is the least worst option available,” said Peter Dixon, an economist at Commerzbank AG in London. “We should be thankful that sanity is prevailing, for now at least.”
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