Asia Stocks Rise as Berlusconi Offers to Resign (Source: Bloomberg)
Asian stocks rose, with the regional benchmark index snapping a two-day loss, as Italian Prime Minister Silvio Berlusconi’s offer to resign bolstered optimism Europe may find a way to contain its sovereign-debt crisis. Westpac Banking Corp. (WBC), Australia’s second-largest lender by market value, gained 1.2 percent in Sydney as Australian home- loan approvals rose more than estimated in September. Woodside Petroleum Ltd. (WPL), Australia’s second-biggest oil and gas producer, climbed 2 percent after crude oil futures extended a rally. Newcrest Mining Ltd., Australia’s No. 1 gold producer, added 2 percent as futures on the precious metal advanced above $1,800 an ounce for the first time in seven weeks.
“A change in premiership is going to tame political risks somewhat because criticism against Berlusconi was strong,” said Ayako Sera, a market strategist at Sumitomo Trust & Banking Co. in Tokyo, which manages the equivalent of $322 billion. “Berlusconi’s resignation gives a short-term positive for the market, while the focus switches to austerity measures.”
U.S. Stocks Rise as Berlusconi Offers to Quit When Plan Approved (Source: Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher a second day, as Prime Minister Silvio Berlusconi’s offer to resign boosted optimism Italy will appoint a new leader who can tame the debt crisis. All 10 groups in the S&P 500 advanced as financial, energy and technology companies rallied at least 1.1 percent. JPMorgan Chase & Co. (JPM), Occidental Petroleum Corp. (OXY) and Intel Corp. (INTC) added more than 1.9 percent. A gauge of homebuilders in S&P indexes jumped 3.8 percent as Toll Brothers Inc. (TOL) gained 7.4 percent after the luxury-home builder said revenue increased. The S&P 500 climbed 1.2 percent to 1,275.92 as of 4 p.m. New York time, after falling as much as 0.5 percent earlier today. The benchmark gauge of American equities has increased 1.8 percent in two days. The Dow Jones Industrial Average advanced 101.79 points, or 0.8 percent, to 12,170.18 today.
European Stocks Rise as Berlusconi Loses Absolute Majority; Vodafone Gains (Source: Bloomberg)
European stocks rose, with the Stoxx Europe 600 Index rebounding from two days of losses, as Italy’s Prime Minister Silvio Berlusconi won a parliamentary vote on the budget yet still lost his absolute majority. Vodafone Group Plc (VOD) gained 1.8 percent after increasing its full-year earnings forecast as profit beat analysts’ estimates. Repsol YPF SA (REP) climbed 6.3 percent after raising its prediction for recoverable reserves in Argentina. Banks rallied as Societe Generale SA, France’s second-biggest bank, and Lloyds Banking Group Plc (LLOY), the largest mortgage lender in the U.K., both gained more than 4 percent. The Stoxx 600 rose 0.9 percent to 240.50 at the close. The benchmark measure has rallied 12 percent since this year’s low on Sept. 22 as investors speculated that the euro area would protect the economies of Italy and Spain from the sovereign-debt crisis.
Job Openings in U.S. Rose in Sept. to Three-Year High (Source: Bloomberg)
The number of positions waiting to be filled in the U.S. rose in September to the highest level in more than three years, indicating some companies are preparing for an improving economy. Job openings increased by 225,000 to 3.35 million, the most since August 2008, a month before the collapse of Lehman Brothers Holdings Inc. intensified the financial crisis, Labor Department data showed today in Washington. Hiring advanced by 185,000 to 4.25 million, and firings also climbed. Payrolls grew by 80,000 workers in October, and gains in the prior two months were revised up, Labor Department figures showed last week. At the same time, hiring is short of the pace needed to reduce unemployment hovering around 9 percent, helping explain why Federal Reserve Chairman Ben S. Bernanke has said the recovery is “frustratingly slow.”
“It is reassuring that the economy could muster a speed-up in job openings,” said Henry Mo, a senior economist at Credit Suisse in New York. At the same time, “we have a persistent but inadequate recovery. We need faster hiring.”
Kocherlakota: Fed Should Make Public Contingency Plan (Source: Bloomberg)
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the U.S. central bank should develop and make public a contingency plan that would explain how it would react to developments in the economy. Such a contingency plan by the policy-setting Federal Open Market Committee would “provide clear guidance on how it will respond to a variety of relevant scenarios,” Kocherlakota said today in a speech in Sioux Falls, South Dakota. Kocherlakota said a contingency plan would reduce uncertainty about the Fed’s actions among consumers and companies, which he said has reduced incentives to spend and hire. It would also enhance the central bank’s credibility and transparency, he said.
His comments extend a discussion among members of the FOMC about how to better explain their forecasts and policies to the public. At a press conference last week, Fed Chairman Ben S. Bernanke said options include clarifying the central bank’s long-term inflation goal, publishing the likely path of interest rates, and tying the Fed’s pledge to hold rates low to specific levels of employment and inflation -- a strategy espoused by Chicago Fed President Charles Evans.
South Korea’s Jobless Rate Returns to 3-Year Low on Service Industry Hires (Source: Bloomberg)
South Korea’s unemployment rate fell back to a three-year low last month as jobs increased in the service industries and among retailers and wholesalers. The jobless rate was 3.1 percent in October, compared with 3.2 percent in September, Statistics Korea said today in Gwacheon, south of Seoul. The rate fell to 3.1 percent in August, the lowest since 2008. The median estimate in a Bloomberg News survey of 11 economists was for a rate of 3.3 percent. South Korea’s job market has so far withstood damage from slowing exports as service industries are hiring more workers. Concern that the European debt crisis and a global slowdown may weigh on the nation’s growth will probably prompt the Bank of Korea to keep borrowing costs unchanged Nov. 11, according to all 17 economists surveyed by Bloomberg News.
“The labor market will probably remain healthy in the fourth quarter, supporting the consumption outlook,” Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul, said before the release. “Still, the BOK policy rate will stay on hold into the first half of next year” due to the gloomy global outlook, slower economic activity and easing inflation.
Korean Won Rises on Surprise Unemployment Drop, Berlusconi’s Offer to Quit (Source: Bloomberg)
South Korea’s won rose for the first time in three days and government bonds fell after the unemployment rate unexpectedly dropped toward a record low, bolstering confidence in the economic outlook. The jobless rate declined to 3.1 percent last month from 3.2 percent in September, Statistics Korea said today. A 3 percent level in the first two months of 2008 was the lowest in data going back to 1999. Economists expected a 3.3 percent rate last month, based on the median estimate in a Bloomberg News survey. Italy’s Prime Minister Silvio Berlusconi offered to resign yesterday as soon as Parliament approves austerity measures pledged to European partners. “The Italian prime minister’s plan to quit and South Korea’s unemployment data will buoy market sentiment,” said Lee Jung Ha, a Seoul-based senior currency dealer at Korea Development Bank. “There’s not much momentum in the market and players are reacting to news headlines.”
Hong Kong’s Tsang ‘Pessimistic’ on Global Growth as City Risks Recession (Source: Bloomberg)
Hong Kong Chief Executive Donald Tsang said the city’s economy may have slipped into a recession in the third quarter as Europe’s debt crisis roiled markets. Growth may be as little as 2 percent next year after a likely expansion of 5 percent this year, Tsang said in an interview at Bloomberg LP’s head office in New York yesterday. That would compare with a 7 percent expansion last year. Hong Kong exports declined in September for the first time in almost two years, and the benchmark Hang Seng Index (HSI) plunged 21 percent in the third quarter. Third-quarter economic figures are due Nov. 11, with seven of 15 economists in a Bloomberg News survey forecasting a second straight contraction, meeting the technical definition of a recession.
“It’s very likely Hong Kong has entered into a recession, and I doubt if that will be a brief one,” said Law Ka Chung, chief economist at Bank of Communications Co. Ltd. in Hong Kong. “There are so many bombs in Europe waiting to explode and the impact on the global economy may be huge, similar to what we saw in late 2008.”
Ackman to Lose ‘a Lot of Money’ on Hong Kong Currency-Peg Bet, Tsang Says (Source: Bloomberg)
William Ackman, founder of hedge fund Pershing Square Capital Management LP, will “lose a lot of money” on his bet that Hong Kong will amend its currency peg to the dollar, city Chief Executive Donald Tsang said. Ackman, who netted more than $1 billion on a six-year short bet against the bond insurer MBIA Inc., said in September that he is buying Hong Kong dollar call options. The wagers will make money if Hong Kong changes its three-decade long linkage to the U.S. dollar and allows the currency to rise or if option prices increase before maturity. “I think he’s going to lose a lot of money on that,” Tsang, 67, said in a Bloomberg Television interview in New York yesterday. The peg is a “very important anchor underpinning Hong Kong growth and Hong Kong’s monetary stability and we are not going to change,” he said.
Policy makers have kept the currency at about HK$7.80 per dollar since 1983, linking monetary policy to the U.S. Federal Reserve’s. The city’s consumer prices rose 7.9 percent in July, the fastest pace since 1995, partly because the peg deprives the Hong Kong Monetary Authority the option to raise borrowing costs when the Fed keeps benchmark rates near zero. The yuan is up 24 percent against the dollar in the past five years, making the city’s imports from China more expensive.
Japan Stocks Rise as Berlusconi’s Resignation Lifts Mood: Nomura Rebounds (Source: Bloomberg)
Japanese stocks rose, snapping a two- day losing streak, after Italian Prime Minister Silvio Berlusconi offered to resign once austerity measures are approved, easing concern Europe’s debt crisis will damp the earnings outlook for Asian exporters. Honda Motor Co., Japan’s second-largest carmaker by market value that gets 83 percent of its sales abroad, rose 2.3 percent. Shares of Olympus Corp. (7733), a Japanese optical-equipment maker, may be active today after plunging by the daily limit to 734 yen yesterday. Nomura Holdings Inc. surged 5.7 percent, leading gains among securities firms after the brokerage plunged 15 percent yesterday. The Nikkei 225 (NKY) Stock Average rose 0.9 percent to 8,731.26 as of 9:20 a.m. in Tokyo. The broader Topix index advanced 1.1 percent to 745.47 with about four stocks rising for each that fell.
Thai Investments Put Japan Inc. in Flood’s Path (Source: Bloomberg)
Japan, Thailand’s biggest foreign investor, may also be the largest overseas economic victim of record floods forcing companies including Toyota Motor Co., Hitachi Ltd. (6501) and Canon Inc. (7751) to halt output in the country. Toyota, Asia’s biggest carmaker, scrapped its annual profit forecast yesterday, saying it needs more time to assess the financial toll from Thailand’s worst floods in almost 70 years. Canon, having shifted some camera production to the southeast Asian nation, cut its full-year profit outlook last month because of damage to output from the disaster. Japan’s most profitable exporters built up factories in Thailand in the past three decades to cut labor costs and stem the erosion of profit caused by the yen’s appreciation against the dollar. Japanese direct investment in Thailand jumped 35 percent to about 100 billion baht ($3.4 billion) in 2010, led by the auto, metals and machinery industries, according to the Thai Ministry of Industry’s Board of Investment.
Osborne Braces for More Public-Sector Job Cuts as New U.K. Recession Looms (Source: Bloomberg)
U.K. Chancellor of the Exchequer George Osborne may have to concede that many more government workers will lose their jobs than he forecast, heightening concern over an economy at risk of returning to recession. In the first three months of the fiscal year that began April 1, employment in central and local government plunged by 104,000, five times the number the Office for Budget Responsibility predicted in March for the year as a whole. The scale of the job shedding underscores the growing risks to the economic outlook at a time when unemployment is at a 15- year high and the threat of the euro area splintering is rocking financial markets. The budget watchdog, which scaled back its forecast for total public-sector job losses by 2016 to 400,000, may increase that prediction this month to closer to its initial estimate of 600,000.
European Banks Cutting Sovereign Bond Holdings Threatens to Worsen Crisis (Source: Bloomberg)
BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss, leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis. BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year. Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses. The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values. The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy, while generating larger writedowns and capital shortfalls.
Italy’s Political Crisis Ambushes Ireland After Greek Escape: Euro Credit (Source: Bloomberg)
After convincing investors and the European Central Bank that it’s not Greece, Ireland may find it harder to escape the fallout from Italian turmoil. Irish bonds have declined almost 3.6 percent since the end of September, eroding the highest returns in the world since June. Since falling to an eight-month low on Oct. 4, the yield on two-year Irish notes has jumped to about 75 basis points above its average of the past two months, according to data compiled by Bloomberg. Borrowing costs for Ireland, which announced additional austerity measures last week, have risen as Italian Prime Minister Silvio Berlusconi struggles to cut the region’s second- biggest debt load and Greek premier George Papandreou tries to form a unity government under a new leader.
Berlusconi to Resign After Austerity Passes (Source: Bloomberg)
Prime Minister Silvio Berlusconi offered to resign as soon as Parliament approves austerity measures pledged to European partners, after defections from his ruling party left him without a majority and bond yields surged to euro-era records. “Once that task has been achieved, the prime minister will tender his resignation to the president,” who will then begin consultations with all political parties, President Giorgio Napolitano said tonight in an e-mailed statement after meeting Berlusconi in Rome. The government has yet to present the final text of the amendment to the budget law with the austerity measures. The Senate was set to vote on the law next week, Senator Massimo Garavaglia told Ansa newswire tonight. The Chamber of Deputies would begin debate after the Senate’s approval. Napolitano gave no indication if the timing of the votes would be moved up.
Papademos to Be Named Greek PM: Reports (Source: Bloomberg)
Greece prepared for a new prime minister to lead an interim government of national unity as state-run NET TV and To Vima newspaper reported that former central banker Lucas Papademos will accept the post. Prime Minister George Papandreou said a Greek national unity government will be named “soon” and told his ministers to get ready to resign, spokesman Elias Mosialos said today in Athens. Both NET TV and To Vima named former European Central Bank Vice President Papademos as the next prime minister, without saying how they got the information. Papandreou and his rival, Antonis Samaras, leader of the opposition New Democracy party, agreed on the Greek unity government to win resumption of international aid. The government’s mission will be implementing a European Union summit decision on austerity measures from Oct. 26 in order to get a second Greek financing package of 130 billion euros ($179 billion) before leading the country to elections.
Napolitano Says Berlusconi to Resign After Measures Are Passed (Source: Bloomberg)
Italian President Giorgio Napolitano said Prime Minister Silvio Berlusconi has agreed to resign after the parliament approves the country’s austerity plans. Napolitano made his comments in an e-mailed statement after talks tonight with Berlusconi. The statement didn't say when the vote, which was tentatively slated for next week, will take place.
MF Global Settlement Over Losses in Doubt (Source: Bloomberg)
A $90 million settlement of an investor lawsuit against MF Global Holdings Ltd. and its former parent, Man Group Plc (EMG), over a 2008 wheat-trading loss was cast into doubt by the futures broker’s bankruptcy filing. A Manhattan federal judge is scheduled to decide on Nov. 18 whether to approve the settlement. The case is a class-action, or group, suit against MF Global, Man Group, underwriters of MF Global’s initial public offering in July 2007, and some of the firm’s officers and directors. The settlement allows investors to back out of the deal if they’re not paid the full $90 million, court records show. Lawsuits against the firm were automatically halted after MF Global filed for bankruptcy protection on Oct. 31. A bankruptcy judge must decide whether MF Global may contribute to the accord. MF Global’s portion of the settlement, which covers shareholders from July 2007 to February 2008, is $2.5 million.
“If the bankruptcy court gives us approval, we’ll go forward,” Mark Rosen, a lawyer for the investors, said in an interview today. “It’s not in our hands right now. It’s in the hands of the bankruptcy court.”
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