20111102 0948 Global Market Related News.

Asian Stocks Decline for a Third Day as Greek Vote Threatens Debt Bailout (Source: Bloomberg)
Asian stocks fell for a third day as concern heightened that Europe’s bailout of debt-ridden Greece will unravel and a report showed U.S. manufacturing slowed, damping the earnings outlook for Asian exporters. James Hardie Industries SE (JHX), the building materials supplier that counts the U.S. as its biggest market, dropped 4.8 percent in Sydney. Nomura Holdings Inc. (8604) sank 4.4 percent after Japan’s largest brokerage said it will eliminate jobs part of a plan to cut costs following its first quarterly loss in more than two years. Samsung Heavy Industries Co., South Korea’s second- biggest shipbuilder by market value, slumped 5.5 percent in Seoul after reporting a 53 percent slump in profit. The MSCI Asia Pacific Index slipped 1.5 percent to 117.25 as of 9:35 a.m. in Tokyo. The measure gained 7.7 percent last month, the most since Sept. 2010, as Europe appeared close to a deal to contain its debt crisis, reports showed the U.S. economy grew faster and China hinted at easier monetary policy.

IMF May Create 6-Month Credit Line for Countries Facing Shocks (Source: Bloomberg)
The International Monetary Fund may create a six-month credit line for countries facing shocks, officials from Group of 20 governments and IMF said, as the European debt crisis rocks global financial markets. The amount would be capped at five times a nation’s contribution to the Washington-based IMF, known as a quota, making the credit line best suited for smaller countries, the people said. It is likely to be endorsed at a meeting of G-20 leaders this week in Cannes, France, where European nations will seek financial support from other members, said the three officials, who declined to be identified because the plan hasn’t been made public.
The instrument would be the latest in a set of IMF tools intended to increase liquidity as Europe’s crisis threatens to spread beyond Greece. It could be used as part of a broader international package to aid larger economies such as Spain, with IMF participation serving to reassure other creditors, said Bessma Momani, a political science professor at the University of Waterloo in Canada.

Volatility Indexes Surge as Greek Bailout Vote Roils Markets (Source: Bloomberg)
Volatility indexes surged, giving the benchmark European measure the biggest two-day jump since May 2010, after Greece’s decision to schedule a vote on the region’s bailout spurred concern the nation will default. The VStoxx Index (V2X), which measures the cost of Euro Stoxx 50 Index options, rose 22 percent to 42.96, extending its two-day increase to 37 percent. The Chicago Board Options Exchange Volatility Index, or VIX, soared 16 percent to 34.77 today, bringing its two-day gain to 42 percent. Gauges of market fear are jumping as speculation about Europe’s debt crisis drowns out earnings and economic news. Germany’s DAX Index rose or fell 3.4 percent on average during the past four days while the Dow Jones Industrial Average’s average intraday move has exceeded 250 points since Oct. 26.

U.S. Stocks Slump Amid Concern Bailout for Greece in Jeopardy (Source: Bloomberg)
U.S. stocks dropped, driving the Standard & Poor’s 500 Index to the biggest two-day slump in a month, on concern that a Greece referendum pledged by Prime Minister George Papandreou may threaten Europe’s bailout. All 10 groups in the S&P 500 fell as gauges of financial, energy and industrial shares lost at least 3 percent. Citigroup Inc. (C) and Morgan Stanley retreated more than 7.6 percent, following a 6.2 percent tumble in European lenders. Exchange operators slumped after U.S. lawmakers said they will propose a tax on financial transactions such as stock and bond trades. The S&P 500 decreased 2.8 percent to 1,218.28 as of 4 p.m. New York time, extending its two-day retreat to 5.2 percent, the biggest drop since Oct. 3. The Dow Jones Industrial Average declined 297.05 points, or 2.5 percent, to 11,657.96 today.

U.S. 30-Year Bonds Hold Biggest Three-Day Gain Since 2008 on Europe Crisis (Source: Bloomberg)
Treasury 30-year bonds held their biggest rally since 2008 on speculation a European plan to solve the region’s debt crisis is faltering. “The core problems still exist in Europe,” said Zeal Yin, a money manager at Taipei-based Shin Kong Life Insurance Co., Taiwan’s second-largest life insurer with the equivalent of $39.9 billion in assets. “The global economy is starting to cool. If the problems persist, record low yields are possible by year-end.” The 30-year rate was little changed at 3 percent as of 9:45 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 3.75 percent security due in August 2041 changed hands at 114 23/32. The yield has fallen 46 basis points from Oct. 28 through yesterday, the biggest three-day slide since November 2008, according to data compiled by Bloomberg.

U.S. Construction Spending Rose in September for Second Consecutive Month (Source: Bloomberg)
Construction spending in the U.S. rose in September for a second month as gains in private projects outpaced a drop in government outlays. Building outlays increased 0.2 percent after jumping 1.6 percent in August, Commerce Department figures showed today in Washington. The median estimate of economists in a Bloomberg survey called for a 0.3 percent gain. Spending on multifamily housing is helping to lift activity from decade lows as more families opt to rent rather than purchase a new home. While lower interest rates may also help drive investment in commercial projects, overall weakness in the housing market coupled with a reduction in government spending will weigh on the construction industry.

U.S. Manufacturing Probably Grew Faster in October (Source: Bloomberg)
Manufacturing in the U.S. probably expanded at a faster pace in October, driven by gains in exports and consumer spending that are keeping the recovery intact, economists said before a report today. The Institute for Supply Management’s factory index rose to 52 from 51.6 a month earlier, according to the median forecast in a Bloomberg News survey. A level of 50 is the dividing line between growth and contraction. Construction spending rose in September, another report may show. American factories may keep leading the economy as growing demand from emerging economies drives orders and production. The industry is also benefiting from increasing business investment as companies take advantage of tax depreciation allowances on equipment purchased before the end of the year.

Manufacturing in U.S. Comes Close to Stagnating as Global Demand Weakens (Source: Bloomberg)
Manufacturing in the U.S. was close to stagnating in October as cooling global demand prompted factories to pare production and reduce inventories. The Institute for Supply Management’s factory index dropped to 50.8 last month from 51.6 in September, the Tempe, Arizona- based group’s data showed today. A reading of 52 was the median forecast in a Bloomberg News survey of economists. Fifty is the dividing line between growth and contraction. Manufacturing weakened from China to the U.K., partly a reflection of Beijing’s efforts to cool its economy and Europe’s debt crisis. Signs the industry that spearheaded the U.S. recovery is stumbling highlight the risks to growth as Federal Reserve policy makers meet to determine if more monetary easing is needed to spur demand.
“There are concerns that manufacturing in Europe and China are showing signs of softening, and that could potentially feed into the U.S.,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in New York. “The markets seem to be more worried about the European sovereign-debt crisis. We’ll likely struggle to surpass third-quarter GDP growth.”

Bernanke Reviving Housing May Rely on Wider Access to Mortgage Refinancing (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke can’t go it alone when it comes to reviving the U.S. housing market. Fed policy makers, who started a two-day meeting today, are considering buying mortgage-backed securities to push down borrowing costs and help homeowners refinance their debt. That would reduce monthly payments, freeing up cash for other purchases that could spur the economy and reduce unemployment, Fed Governor Daniel Tarullo said Oct. 20. Such an effort would save homeowners $60 billion to $80 billion a year, or about 0.5 percent of gross domestic product, so long as the Obama administration succeeds in helping homeowners through a stepped-up refinancing aid plan, said Joseph Gagnon, a former Fed economist. Should the program fail, Fed asset-buying would probably provide homeowners less than half its potential savings, said Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington.

China Inflation Cooling; Wen May Loosen Policies (Source: Bloomberg)
China’s inflation is showing signs of easing further, giving Premier Wen Jiabaomore room to loosen fiscal and monetary policies as Europe’s sovereign-debt crisis threatens exports. An index of manufacturers’ input costs fell the most in 17 months in October, China’s logistics federation and the statistics bureau said yesterday. A separate survey by HSBC Holdings Plc and Markit Economics also showed a decline. China’s central bank has paused in raising interest rates and bank reserve requirements as officials assess the risk that European leaders meeting in Cannes, France, this week will fail to contain the crisis. Inflation may moderate to below 5 percent in November and December, compared with a three-year high of 6.5 percent in July, said Zhu Jianfang, the most accurate forecaster of the number in Bloomberg News surveys over the past two years.

Japan Stocks Decline on Greek Rescue Concern, Slower U.S. Manufacturing (Source: Bloomberg)
Nov. 2 (Bloomberg) --　Japanese stocks fell for a third day, the longest losing streak in a month, as concern heightened that Europe’s bailout of debt-ridden Greece will unravel and a report showed U.S. manufacturing slowed, damping the earnings outlook for Asian exporters. Honda Motor Co., a carmaker that gets 83 percent of its sales abroad, slid 2.7 percent. Mitsui O.S.K. Lines Ltd. led shippers lower after a measure of cargo rates fell yesterday for a fifth day and commodity prices slid. Nomura Holdings Inc. (8604) slumped 3.6 percent after Japan’s largest brokerage said it will consider layoffs as part of a plan to triple cost cuts to $1.2 billion after its first quarterly loss in more than two years.  The Nikkei 225 (NKY) Stock Average dropped 1.9 percent to 8,668.40 as of 9:19 a.m. in Tokyo. The broader Topix index fell 2.1 percent to 738.78.

Nomura May Cut Japan Jobs After Quarterly Loss (Source: Bloomberg)
Nomura Holdings Inc. (8604), Japan’s largest brokerage, said it will consider eliminating jobs at home as part of a plan to triple cost cuts to $1.2 billion following its first quarterly loss in more than two years. While most of the expense reductions will be in Europe, “we’ll also target Japan, focusing on the wholesale business,” Chief Financial Officer Junko Nakagawa told reporters yesterday in Tokyo. The company posted a 46.1 billion yen ($590 million) loss for the three months ended Sept. 30, wider than the 35 billion yen average estimate among analysts surveyed. Nakagawa’s remarks indicate Nomura may trim domestic payrolls to revive profit that has eroded since the purchase of Lehman Brothers Holdings Inc.’s Asian and European operations in 2008. Staffing costs will account for about 70 percent of the additional $800 million of curtailed expenses, Deputy President Takumi Shibata said on a conference call yesterday.

European Stocks Sink Most in Five Weeks on Greece Bailout Vote; Banks Drop (Source: Bloomberg)
European stocks sank the most in five weeks, as Greece’s government called a referendum on its latest bailout package, spurring concern that the country may default. Credit Suisse Group AG (CSGN) and Danske Bank A/S led a selloff in lenders, both sliding more than 6.5 percent, after posting earnings that fell short of analysts’ estimates. National Bank of Greece SA (ETE) sank 15 percent to its lowest price since 1992 in Athens. Mining companies tumbled after a gauge of Chinese manufacturing dropped to the lowest level since February 2009. The Stoxx Europe 600 Index slid 3.5 percent to 235.06 at the close in London, for the biggest plunge since Sept. 22, extending yesterday’s 2.2 percent selloff and paring last month’s biggest advance since 2009. The VStoxx Index (V2X), which measures the cost of protecting against a decline in shares on the Euro Stoxx 50 Index, jumped 22 percent to 42.96, its biggest gain since Aug. 18.

Italian Stocks Slump Most Since 2008 as Europe Debt Crisis Concern Returns (Source: Bloomberg)
Italian stocks slumped the most in three years as Greek Prime Minister George Papandreou’s call for a referendum on the European Union’s rescue agreement raised concern that efforts to avoid a default will be derailed. The benchmark FTSE MIB Index (FTSEMIB) lost 1,089.49, or 6.8 percent, to 14,928.24 at the close of trading in Milan, the largest decline since October 2008. The gauge has retreated 26 percent this year. Intesa Sanpaolo tumbled 16 percent to 1.09 euros and UniCredit SpA (UCG) sank 12 percent to 74.3 euro cents as banks paced the selloff. “The move by the Greek prime minster to hold a referendum on the EU bailout deal was a real surprise,” said Joshua Raymond, a London-based market strategist at City Index Ltd. “Given the public antipathy towards the austerity plans and the fact that the government has such a low approval rating, one questions where the public support for the package will come from and where that will leave Greece.”

Greek Referendum to Hinder IMF, EU Aid (Source: Bloomberg)
A Greek referendum on its latest bailout package will hinder the next installment of aid funds by the International Monetary Fund and the European Union, Dutch Finance Minister Jan Kees de Jager said. “This hinders the planning of the IMF and the euro zone. It creates a problem for the whole sixth tranche,” De Jager told parliament in The Hague late last night. “I can imagine that it will be very difficult for the IMF if there is uncertainty about the sustainability.” The new round of political turmoil throws into doubt Greece’s ability to access the emergency funding that’s keeping its finances afloat. The IMF’s executive board was due to meet in mid-November to decide on paying its part of the sixth bailout tranche, which is worth a total of 8 billion euros ($11 billion). The Netherlands and euro-zone countries including Germany and France seek to minimize the damage from a “very unfortunate” referendum called by Greek Prime Minister George Papandreou, Dutch Prime Minister Mark Rutte told parliament.

Draghi’s First Day as Head of ECB Blighted as Papandreou Seeks Referendum (Source: Bloomberg)
Mario Draghi’s first day as head of the European Central Bank was blighted by George Papandreou. Italian bonds slid and the risk premium between German debt and the rest of the euro area increased after the Greek prime minister announced late yesterday he will hold a referendum on the terms of his country’s bailout. Papandreou’s gambit, hours before Draghi succeeded Jean- Claude Trichet, exposed the political pitfalls in the fight to keep the euro from blowing apart and adds to the pressure on the ECB to keep buying distressed bonds. An ultimate rejection of the rescue deal by the Greek electorate would threaten a default in Athens and a plunge in Italian and Spanish debt that may require the central bank to consider an unlimited guarantee of all euro-region bonds.
“Mr. Draghi, welcome to your new job,” said Holger Schmieding, London-based chief economist at Joh. Berenberg Gossler & Co. “The Greek move makes it all the more important that Italian and euro-zone policy makers, including those from the ECB, build a reliable firewall around Greece to prevent more serious contagion to Italy.”

U.K. Third Quarter Growth Rebounds (Source: Bloomberg)
The U.K. economy grew faster than economists forecast in the third quarter as it rebounded from one-off factors before an escalation of Europe’s debt crisis that threatens to push Britain back into recession. Gross domestic product rose 0.5 percent from the second quarter, when it increased 0.1 percent, the Office for National Statistics in London said today. Economists forecast 0.3 percent, based on the median of 36 estimates in a Bloomberg News survey. A separate report showed manufacturing unexpectedly shrank the most in 28 months in October, pointing to weakness at the start of the fourth quarter.
The Bank of England expanded stimulus for the first time in two years last month and the government is working on a plan to boost lending as Europe’s debt crisis raises the risk of another U.K. recession. With the increase in third-quarter GDP partly due to a rebound from one-time factors, Bank of England Markets Director Paul Fisher has said the pace may not be sustained and there’s a chance of stagnation in the current quarter.

Referendum Will Confirm Greece in Euro: Papandreou (Source: Bloomberg)
Greek Prime Minister George Papandreou said a referendum on Europe’s rescue package will confirm the nation’s membership of the euro as he stuck to plans to hold the vote amid domestic political turmoil. “The referendum will be a clear mandate and strong message within and outside Greece on our European course and our participation in the euro,” Papandreou told his ministers in Athens early today, according to an e-mailed transcript. It will “ensure this course in the most decisive way.” Papandreou will fly to Cannes today to face European leaders surprised by his decision to put the bailout plan to a referendum and call a confidence vote in parliament. His grip on power has weakened after one lawmaker from his socialist Pasok party defected, leaving him with 152 deputies in the 300-seat chamber, while another, Vasso Papandreou, called on the Greek president to move toward forming a national unity government.

U.K. Economy May Struggle to Grow as Recession Risk Mounts (Source: Bloomberg)
Britain’s economic recovery will continue to falter in the current quarter after it struggled to build momentum in the previous three months, economists said. Gross domestic product rose 0.3 percent in third quarter compared with a 0.1 percent increase in the second quarter, according to the median of 36 forecasts in a Bloomberg News survey. The Office for National Statistics will publish the data at 9:30 a.m. in London. Manufacturing probably stagnated in October and services growth slowed, according to separate surveys of economists before reports this week. The Bank of England expanded stimulus for the first time in two years last month and the government is working on a plan to boost lending as Europe’s debt crisis raises the risk of another U.K. recession. With the increase in third-quarter GDP partly due to a rebound from one-off factors, Bank of England Markets Director Paul Fisher said the pace may not be sustained and there’s a chance of stagnation in the current quarter.

EU Leaders Hold Pre-Group of 20 Crisis Talks to Push Greece on Bailout Aid (Source: Bloomberg)
European leaders racing to prevent their week-old debt crisis strategy from unravelling convene emergency talks today to tell Greece there is no alternative to the budget cuts imposed in the bailout plan. Greek Prime Minister George Papandreou, his hold on power weakening, was summoned to Cannes on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out last week in a six-day crisis-management marathon. Papandreou triggered the latest upheaval in the two-year- long crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on the rescue pact. Global stocks, the euro and bonds of debt-strapped countries tumbled yesterday as concern of a disorderly Greek default mounted.

RBA Christmas Interest-Rate Cut Signaled by Debt Markets: Australia Credit (Source: Bloomberg)
Australia’s debt market shows investors expect Reserve Bank Governor Glenn Stevens to follow his first rate cut in 2 1/2 years by lowering borrowing costs next month to spur spending in the Christmas holiday season.  The implied yield on December interbank cash rate futures was 4.25 percent, indicating a 100 percent chance of a quarter- percentage point drop at the RBA’s Dec. 6 meeting. Australia’s bonds rallied after Stevens reduced the overnight cash-rate target to 4.5 percent yesterday. Three-year bond yields tumbled 12 basis points, or 0.12 percentage points, to 3.65 percent as of 8:43 a.m. in Sydney, which was 338 basis points more than similar Treasuries.
Stevens joined policy makers across the Asia-Pacific region in lowering interest rates as Europe’s debt crisis dims prospects for the world economy and after Australia’s core inflation rate dropped to the weakest in 14 years. The RBA retains the developed world’s highest benchmark borrowing costs as exports to China and India and a A$430 billion ($444 billion) pipeline of resource projects drive growth.

Euro Falls Against Dollar, Yen on Concern Greek Rescue Plan Will Crumble (Source: Bloomberg)
The euro declined against the dollar and yen on concern Greek Prime Minister George Papandreou’s pledge to put the European Union’s financing package to a referendum risks a disorderly default if voters reject it. The 17-nation currency extended a drop from yesterday after Papandreou told ministers his plans for a referendum would send a clear message. A vote of confidence in Parliament is also scheduled to begin today and to conclude at the end of this week. The dollar and yen rose versus most of their 16 major counterparts as Asian stocks extended a global equity slump after renewed speculation that Europe’s debt crisis is worsening boosted appetite for safer assets. “While the majority of the European nations may have the desire to resolve and try to fix things, this is not going to be a quick fix,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland, New Zealand. “The ability of the euro to weaken further is clearly there.”