Asian Stocks Rise on European Bank Plans (Source: Bloomberg)
Asian stocks rose, snapping yesterday’s loss, after Europe reached an accord on plans to recapitalize banks and U.S. economic reports beat estimates. Toyota Motor Corp. (7203), the world’s biggest carmaker, rose 0.9 percent. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, gained 1 percent after orders for U.S. durable goods excluding transportation equipment increased. Hyundai Motor Co. (005380), South Korea’s biggest carmaker by market value that gets 58 percent of its revenue abroad, advanced 0.5 percent. Europe’s situation “is certainly clearer than we’ve had over the past few days,” said Stan Shamu, a strategist at IG Markets in Melbourne. “This does seem a little bit more positive, and we’ve also got positive economic data out of the U.S., and that did really boost sentiment.” The MSCI Asia Pacific Index gained 0.1 percent to 119.32 as of 9:22 a.m. in Tokyo. The measure dropped 0.2 percent yesterday.
Japan’s Nikkei 225 Stock Average added 0.3 percent and South Korea’s Kospi Index gained 0.6 percent. Futures on the Standard & Poor’s 500 Index rose 0.4 percent.
Durable Goods Orders Help Sustain U.S. Economy as Sales of New Homes Climb (Source: Bloomberg)
Orders for U.S. durable goods other than transportation gear rose in September by the most in six months, indicating manufacturing will help sustain an economy hobbled by 9.1 percent unemployment. Demand for goods meant to last at least three years, excluding airplanes and automobiles, climbed 1.7 percent, according to figures from the Commerce Department issued today in Washington. Another report from the department showed purchases of new homes rose more than forecast. A government tax break aimed at spurring business investment coupled with a 14 percent drop in the value of the dollar since June 2010 that is propelling American exports to record levels may keep boosting sales at manufacturers like Caterpillar Inc. A report tomorrow may show gross domestic product expanded at a 2.5 percent annual pace in the third quarter, the most in a year.
U.S. Stocks Climb on EU Bank Agreement as Economic Reports Top Forecasts (Source: Bloomberg)
U.S. stocks rose, following the biggest decline in three weeks for the Standard & Poor’s 500 Index, as Europe reached an agreement on plans to recapitalize banks and American economic reports surpassed forecasts. Financial stocks in the S&P 500 advanced 2 percent, reversing an earlier decline, as European leaders agreed on a plan to safeguard banks even as talks on bondholder losses ran aground. Alcoa Inc. and Caterpillar Inc. increased at least 1.8 percent to pace gains among companies most-tied to the economy. Boeing Co. climbed 4.5 percent as earnings topped estimates. The S&P 500 gained 1.1 percent to 1,242 at 4 p.m. New York time, after falling as much as 0.7 percent today. The index fell 2 percent yesterday. The Dow Jones Industrial Average climbed 162.42 points, or 1.4 percent, to 11,869.04.
Sales of New U.S. Homes Hits Five-Month High (Source: Bloomberg)
Purchases of new U.S. houses rose more than forecast in September as discounted prices lured buyers in some parts of the country. Sales climbed 5.7 percent to a 313,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News called for a gain to 300,000. The median price slumped 10 percent from September 2010, the biggest drop in more than two years. Another report showed demand for durable goods excluding transportation equipment climbed last month by the most since March. The increase in home sales was paced by rising demand in the West and South, while other parts of the country slumped, showing an uneven market that is weighed down by competition from a glut of distressed, previously owned houses. Last month’s sales pace was weaker than the 323,000 new homes sold in all of 2010.
“Up slightly is faint praise,” Robert Dye, chief economist at Comerica Inc. in Dallas, said before the report. “We’re still under the black cloud of high foreclosures and depressed prices. We’re still bouncing along the bottom in terms of new homes.”
Treasury Inflation Bets Rise to Two-Month High Before Third-Quarter GDP (Source: Bloomberg)
Treasury-market bets on inflation rose to the highest level in two months before a government report that analysts said will show the U.S. economy grew in the third quarter at the fastest pace this year. U.S. bonds fluctuated as European officials tried to produce a comprehensive strategy to resolve the region’s debt crisis. The Treasury is scheduled to sell $29 billion of seven- year debt today, the third of three note sales this week totaling $99 billion. “Don’t buy Treasuries now,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “The U.S. economy continues to expand.” Benchmark 10-year yields were little changed at 2.2 percent as of 10 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2.125 percent security due in August 2021 changed hands at 99 3/8.
Barclays, Mizuho Predict China Policy Easing (Source: Bloomberg)
China may cut banks’ reserve requirements before the end of this year to stoke lending to small companies and boost the economy, said Guotai Junan Securities Co., Mizuho Securities Asia Ltd. and Barclays Plc. The central bank may reduce interest rates by the second quarter of next year as inflation eases “significantly,” Wang Jin, an analyst at Shanghai-based Guotai Junan, said in a report yesterday after Premier Wen Jiabao announced the government may fine-tune its economic policies as needed. Wen’s comments fueled speculation the government is ending a two-year policy tightening campaign as economic growth slows, inflation eases and property sales slump. The benchmark Shanghai Composite Index has lost 14 percent this year, adding to a 14 percent slump in 2010, as the central bank ordered lenders to set aside reserves to tame inflation that reached a three-year high of 6.5 percent in July. The reserve-requirement ratio for large banks is at a record high of 21.5 percent.
Japanese Stocks Fluctuate as Europe Summit Leaves Questions Unanswered (Source: Bloomberg)
Japanese stocks swung between gains and losses amid investor concern that Europe’s debt summit left too many questions unanswered. Mizuho Financial Group Inc., Japan’s third-biggest lender by market value, slipped 0.9 percent after earlier rising by the same amount. Nippon Electric Glass Co. plunged, leading declines among glassmakers after U.S. rival Corning Inc. said it would cut prices. Olympus Corp. surged 9 percent after the company’s president stepped down amid a scandal over adviser payments that has wiped out more than half the company’s market value. The Nikkei 225 Stock Average gained 0.1 percent to 8,759.37 as of 10:00 a.m. in Tokyo. The broader Topix index was little changed. While European Union leaders yesterday reached an agreement on a plan to recapitalize banks, talks on bondholder losses as part of a second Greek bailout hit an impasse.
South Korea’s Economic Growth Slows as Spending Cut on Europe Debt Crisis (Source: Bloomberg)
South Korea’s economy grew at a slower pace in the third quarter as companies cut spending on concern that Europe’s debt crisis and a faltering U.S. economy will hurt business. Gross domestic product expanded 0.7 percent from the second quarter, when it gained 0.9 percent, the central bank said in Seoul today. That compares with the median 0.6 percent estimate of 12 economists surveyed by Bloomberg News. “With global economic conditions turning for the worse in the past quarter, Korea’s export-driven economy will no doubt begin to decelerate as demand slows down,” Ronald Man, a Hong Kong-based analyst at HSBC Holdings Plc, said ahead of today’s announcement. South Korea has paused for four months in raising interest rates, the longest gap since tightening began in July last year. Maintaining growth may continue to take precedence over countering inflation, with the central bank saying Oct. 13 that “downside risks” have increased because of Europe’s crisis and signs of sluggishness in developed economies.
Sarkozy Said to Plan Plea to China for EU Fund (Source: Bloomberg)
French President Nicolas Sarkozy plans to call Chinese leader Hu Jintao tomorrow to discuss China contributing to a fund European leaders may set up to bolster their debt-crisis fight, said a person familiar with the matter. The investment vehicle was one of the options being considered by European leaders at a summit tonight to expand the reach of its 440 billion-euro ($612 billion) European Financial Stability Facility. Sarkozy’s plea to his Chinese counterpart would come the day before a planned visit to Beijing by Klaus Regling, chief executive officer of the EFSF, to court investors. The EFSF, established last year to sell bonds to finance loans for distressed euro nations, has since also gained the authority to buy sovereign bonds on the secondary and primary markets, offer credit lines to governments and recapitalize banks as the Greece-triggered debt troubles have spread. The EFSF said Regling’s visit to China this week is linked to the fund’s original debt-issuance role.
Italy Pledges Asset Sales to Reduce Debt (Source: Bloomberg)
Prime Minister Silvio Berlusconi vowed to raise 5 billion euros ($8 billion) annually from asset sales, increase the retirement age and relax labor laws to convince European leaders Italy can reach its budget goals. “We are aware of the need to present a comprehensive plan of reforms,” Berlusconi said in the letter that he presented to European Union leaders at a summit in Brussels. “We are aware that our debt is too high and our growth too limited.” The asset-sales plan will be completed by Nov. 30, he said. The letter of intent fell short of the comprehensive plan European leaders had sought. Bickering within his Cabinet this week over pensions and other issues prevented the premier from complying with EU requests to deliver a blueprint to boost growth and tackle the euro-region’s second largest debt at the Brussels summit.
The pressure on Italy underscored a push by leaders to prevent the Greece-fueled debt crisis from swamping the third- biggest euro economy and piling risks onto France and Germany. Policy makers, pressed by politicians and investors around the world, are struggling to devise a plan that persuades markets they can stamp out the contagion.
Italy Key to Euro-Zone Crisis, Barclays’s Julian Callow Says: Tom Keene (Source: Bloomberg)
Italy’s ability to implement fiscal austerity and reduce its debt burden is crucial to euro-zone policy makers’ efforts to end the region’s debt crisis, according to Julian Callow, chief European economist at Barclays Plc in London. “If Italy is in difficulties and is in need of financing from the rest of the euro area, the rest of the euro area can’t really stump up enough capital to support that,” said Callow in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “Italy is the key thing to address because of its size and because of these unstable debt dynamics, with interest payments that have started to emerge.” Italy’s borrowing costs jumped today when its Treasury sold 10.5 billion euros ($14.6 billion) of bills and bonds, with the shorter-term securities priced to yield the most in three years. The country has to repay 298 billion euros of debt next year, more than France, Spain or any other euro member.
Europe Struggles for Crisis Cure Ahead of Summit (Source: Bloomberg)
European leaders “have risen to the challenge,” German Chancellor Angela Merkel said. French President Nicolas Sarkozy proclaimed their July 21 summit a “historic turning point” and Luxembourg Prime Minister Jean- Claude Juncker called it the “final package, of course,” to extinguish the debt inferno. Then they went on vacation. Before they returned to work, the deal fizzled. The euro’s stewards are back in Brussels today for an emergency summit struggling to heed the world’s calls to once and for all eradicate what U.S. Treasury Secretary Timothy F. Geithner called the “catastrophic risk” of the debt crisis. A potential Greek default threatens shockwaves that could engulf Italy and France, jolt the banking system and spell havoc for the global economy.
“Buck up, this crisis is going to be with us still for a while,” Barry Eichengreen, an economics professor at the University of California at Berkeley, said on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I fear they’re not going to take the kind of steps to resolve it.”
European Stocks Advance for Third Day in Four Before EU Debt-Crisis Summit (Source: Bloomberg)
European stocks advanced as the region’s leaders gathered in Brussels for the second summit in four days to address the debt crisis and after U.S. durable- goods orders and home sales topped forecasts. Merck KGaA jumped the most in more than two years as the drugmaker posted profit that beat analysts’ estimates. Pandora A/S soared 12 percent amid speculation the Danish jeweler won’t lower its earnings outlook this close to reporting results. Nyrstar NV slid 8.5 percent as the world’s biggest producer of refined zinc cut its mine-output forecast. The benchmark Stoxx Europe 600 Index increased 0.2 percent to 240.8 at the close of trading, having swung between gains and losses at least 20 times. The measure has rallied 12 percent from this year’s low on Sept. 22 amid speculation policy makers will reach agreement on a solution to the region’s debt woes.
Bank of Canada Cuts Economic Growth Outlook Amid Weakness in U.S., Europe (Source: Bloomberg)
The Bank of Canada cut its forecasts for economic growth through the middle of 2012 as the U.S. and European economies falter, and it said the expansion will accelerate more than estimated later next year. The bank, in its quarterly Monetary Policy Report, said the annualized pace of expansion in the world’s 10th largest economy will average 1.8 percent in the four quarters through June, compared with a previous estimate of 2.8 percent. The bank cut its projection for global growth in 2012 by 0.9 percentage point, and it said the recovery will be slower than usual as consumers, governments and businesses reduce debt. “Lower commodity prices and heightened volatility in financial markets stemming from the weaker and more uncertain global economic outlook are projected to weigh on the wealth and confidence of Canadian households,” the report said. Its projection assumes a “gradual reduction in monetary stimulus over the projection horizon, consistent with achieving the inflation target.”
Household spending and business investment will accelerate in 2013, assuming European leaders are able to contain their debt crisis, the bank said, bringing inflation back to its 2 percent target rate. The bank’s projection for the U.S. economy doesn’t include President Barack Obama’s proposed $447 billion jobs package, which includes infrastructure spending and tax cuts.
Euro Declines Against Most Major Peers as Banks Say No Deal Yet on Greece (Source: Bloomberg)
The euro declined against the majority of its 16 most-traded peers as European leaders failed to reach an agreement on a deal for bondholder losses as part of a second Greek bailout. Demand for the 17-nation currency was also dented before a report that economists said will show European confidence in the economic outlook dropped in October to the lowest level in almost two years. Losses in the euro were limited as leaders said they reached agreement on a plan to recapitalize banks. The dollar held yesterday’s advance against the yen after Japanese Finance Minister Jun Azumi said he hopes for positive news from a Bank of Japan meeting today. “Plans are emerging, but the market is still not certain if they are enough,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The euro is also under some pressure because of weakening data in Europe.”
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