Asian Stocks Fall on Japan Machinery Orders, Worsening Italian Debt Crisis (Source: Bloomberg)
Asian stocks fell, with the regional benchmark index heading for its lowest close in two months, after a report showed Japan’s machinery orders dropped and as a surge in Italy’s bond yields stoked concern the debt-stricken nation may need to seek a bailout. Commonwealth Bank of Australia (CBA), the nation’s largest lender by market value, dropped 2.7 percent in Sydney on speculation bank earnings will be hurt if Europe fails to contain the sovereign-debt crisis. Fanuc Corp. (6954), a maker of industrial robots, sank 3.4 percent in Tokyo. Noble Group Ltd. (NOBL) tumbled 22 percent in Singapore as Chief Executive Officer Ricardo Leiman quit after the Hong Kong-based commodity supplier posted its first loss in 14 years.
“The big concern is that Italy will need to get its funding from other sources than the market, but because of its size, people are very worried,” said Stephen Halmarick, Sydney- based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outcome of all this is the European economy will go into recession. That’s a big negative.”
U.S. Stocks Extend Slide on Euro Concern (Source: Bloomberg)
U.S. stocks slumped, driving the Standard & Poor’s 500 Index to its biggest decline since August, amid concern that European leaders may be unable to keep the euro zone intact as Italian yields surged to a record. Morgan Stanley and Goldman Sachs Group Inc. (GS) dropped at least 8.2 percent, following losses in European lenders, after LCH Clearnet SA raised the extra charge it levies on clients for trading Italian government bonds and index-linked securities. General Motors Co. (GM) tumbled 11 percent after abandoning its target for European results. Adobe Systems Inc. (ADBE) sank 7.7 percent on plans to cut jobs as it lessens its focus on older products. The S&P 500 slid 3.7 percent to 1,229.10 as of 4 p.m. New York time, after rising 1.8 percent over the previous two days. The Dow Jones Industrial Average lost 389.24 points, or 3.2 percent, to 11,780.94. The Stoxx Europe 600 Index decreased 1.7 percent as the 10-year Italian note yield topped 7 percent.
Stocks, Commodities Sink on Concern Nations May Exit Common Euro Currency (Source: Bloomberg)
U.S. stocks sank as a surge in Italian bond yields intensified the credit crisis and concern grew that European leaders may be unable to keep the euro zone intact. The euro slid to a one-month low and Treasuries rallied. The Standard & Poor’s 500 Index lost 3.7 percent to close at 1,229.1 at 4 p.m. in New York, its worst drop in almost three months. The Stoxx Europe 600 Index slid 1.7 percent and yields on Italian government debt climbed to records. The euro fell as much as 2.3 percent to $1.3523, the weakest since Oct. 10. The yield on 10-year Treasuries sank 11 basis points to 1.97 percent. The S&P GSCI Index of commodities lost 1.3 percent as oil retreated from the highest price in three months.
German Chancellor Angela Merkel’s party may adopt a motion to allow nations to exit the euro without losing membership in the European Union, a senior lawmaker said. Earlier declines came after LCH Clearnet SA, a clearing firm that guarantees investors’ trades are completed, demanded larger deposits to back transactions of Italian bonds and Silvio Berlusconi’s offer to resign as prime minister triggered questions about who will lead Italy out of its crisis.
U.S. Wholesale Inventories Declined by 0.1% in September as Sales Climbed (Source: Bloomberg)
Inventories at U.S. wholesalers unexpectedly declined in September for the first time since 2009 as a gain in sales helped distributors keep stockpiles in line with demand. The 0.1 percent decrease in inventories compared with a 0.5 percent gain forecast in the Bloomberg News survey and followed a revised 0.1 percent August rise that was less than initially estimated, Commerce Department figures showed today in Washington. Sales climbed 0.5 percent in September. Wholesalers kept enough goods on hand to last 1.15 months at the current sales pace in September, close to the record low reached earlier this year. Stronger demand along with leaner inventories may encourage manufacturers to boost production. “Inventories were drawn down fairly rapidly in the third quarter,” Samuel Coffin, an economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “The fact that the disinvestment was as fast as it was suggest the possibility for faster production in the fourth quarter.”
Lehman to Sell Neuberger Berman Stake for $1.5B (Source: Bloomberg)
Lehman Brothers Holdings Inc. (LEHMQ) plans to sell its equity stake in Neuberger Berman to the investment- management affiliate for as much as $1.5 billion over time, according to a court filing. The transaction includes a series of redemptions of Lehman’s preferred equity in the firm and possibly a repurchase of Lehman’s common shares, Lehman said today in a filing. The preferred stock would bring about $845 million, while common- stock repurchases would bring as much as $450 million, it said. Lehman’s total from the deal includes $160 million already received in dividends and tax distributions. Parts of the deal will depend on Neuberger Berman’s getting enough financing to buy the shares, Lehman said.
Goldman Said to Sell $1.1B of Stake in ICBC (Source: Bloomberg)
Goldman Sachs Group Inc. (GS) raised $1.1 billion selling shares of Industrial & Commercial Bank of China (601398) Ltd., trimming an investment first made in 2006 after the stock posted its biggest monthly rally in two and a half years. Goldman Sachs sold 1.75 billion ICBC shares at HK$4.88 (63 cents), two people with knowledge of the matter said, asking not to be identified because the details are private. That’s 6 percent below the Beijing-based bank’s closing price in Hong Kong yesterday. ICBC, the world’s largest bank by market value, jumped 28 percent in the past month in Hong Kong trading after the Chinese government started buying shares in state-owned lenders that had been pummeled by concerns that bad loans may increase. Goldman Sachs and rivals including Bank of America Corp. (BAC) have cut stakes in Chinese lenders over the past two years, unwinding bets that made them billions of dollars of profits.
Case for China Stimulus Mounts as Inflation Cools (Source: Bloomberg)
China’s inflation cooled in October, home sales fell and industrial output grew at the slowest pace in a year, adding pressure for measures to support growth in the world’s second-biggest economy. Consumer prices rose 5.5 percent from a year earlier, the least in five months, and industrial production increased 13.2 percent, the statistics bureau said on its website yesterday. Housing transactions slid 25 percent from September, the bureau’s data showed. “Selective easing is already underway,” said Chang Jian, an economist at Barclays Capital in Hong Kong, citing government support for small businesses and low-cost housing projects. More “aggressive” loosening would depend on further declines in inflation and growth, said Chang, who formerly worked for the Hong Kong Monetary Authority and the World Bank.
Japanese Stocks Fall as Surging Italian Bond Yields Stoke Bailout Concern (Source: Bloomberg)
Nov. 10 (Bloomberg) -- Japanese stocks fell, sending the benchmark Nikkei 225 (NKY) Stock Average toward its biggest drop in almost three months, after a surge in Italy’s bond yields stoked concern that Europe’s debt crisis is spreading. Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second- biggest lender, fell 5.5 percent. Hitachi Construction Machinery Co. led machinery firms lower after orders declined more than forecast. Nomura Holdings Inc. fell after Moody’s Investors Service said it may cut its rating on Japan’s biggest brokerage. Shares of Olympus Corp. (7733), an optical-equipment maker, were poised to retreat for a third day after admitting it concealed losses. The Nikkei 225 slid 2.3 percent to 8,551.65 as of 10:05 a.m. in Tokyo, set for the biggest daily loss since Aug. 19. The broader Topix fell 2.4 percent to 731.10 with all 33 industry groups in the index declining.
Japan Machine Orders Fell More Than Forecast (Source: Bloomberg)
Japan’s machinery orders fell more than forecast in September, indicating that companies may hold off on outlays on concern a global slowdown and a strong yen will hurt business. Bookings, an indicator of future capital spending, fell 8.2 percent in September from August, the Cabinet Office said in Tokyo today. The median forecast of 29 economists surveyed by Bloomberg News was for a 7.1 percent fall. Orders rose 11 percent in August from July. A yen trading near post-World War II highs against the dollar eroded profits at Japanese exporters from Sony Corp. to Toyota Motor Corp. last quarter. Industrial production dropped a sharper-than-expected 4 percent in September, in a sign demand for Japanese products may be faltering. The decrease in bookings is “a reaction to the positive result in orders in August,” Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo, said before the report. “If October and November figures are also negative we can confirm a negative trend.”
South Korea, Malaysia May Hold Rates as Europe Crisis Imperils Asia Growth (Source: Bloomberg)
Malaysia and South Korea may leave interest rates unchanged this week to protect growth as Europe’s debt crisis imperils demand for Asian exports. Bank Negara Malaysia will keep its benchmark overnight policy rate at 3 percent tomorrow, according to 18 of 19 economists surveyed by Bloomberg News. South Korea’s central bank will maintain the seven-day repurchase rate at 3.25 percent in Seoul the same day, all 17 economists said in another survey. Deepening turmoil in Europe and elevated unemployment in the U.S. has slowed expansion in Asian nations from the Philippines to China, adding pressure on officials to support their economies. Indonesia will lower its key rate by a quarter point for a second month later today, eight of 19 economists said in another Bloomberg survey, with the rest predicting no change from 6.5 percent.
IMF’s Lagarde Warns of Risk of ‘Lost Decade’ (Source: Bloomberg)
International Monetary Fund Managing Director Christine Lagarde warned of the risk of a “lost decade” for the global economy unless nations act together to counter threats to growth. “In our increasingly interconnected world, no country or region can go it alone,” Lagarde said in a speech to a forum in Beijing today. “There are dark clouds gathering in the global economy.” China and India echoed the call for cooperation in a separate statement. Advanced economies have a “special responsibility” to restore confidence and lift growth, while China should boost consumption and allow its currency to rise, the IMF leader said. European leaders are looking to China as a potential source of funds as a sovereign-debt crisis threatens to engulf Italy, the third-biggest economy in the euro area.
Euro Falls to One-Month Low Before Italy Sells Bills Amid Surging Yields (Source: Bloomberg)
The euro fell to its lowest level in a month before investor appetite for Italy’s debt is tested by a 5 billion-euro ($6.8 billion) sale of bills after the nation’s bond yields surged to euro-era records. The 17-nation currency weakened to a two-week low against the yen after Italian bond yields yesterday climbed above 7 percent, the level at which Greece, Ireland and Portugal sought international bailouts. The nation will sell five-year securities on Nov. 14. The Australian and New Zealand currencies slumped against the dollar and yen as Asian stocks dropped, damping demand for higher-yielding assets. “The success of those auctions will be crucial to the near-term direction in euro,” said Richard Grace, the Sydney- based chief foreign-exchange strategist and head of international economics at Commonwealth Bank of Australia. “The risk is euro goes lower. The low $1.30s is certainly a risk over the next week or so.”
Italy Bond Attack Breaches Euro Defenses (Source: Bloomberg)
The euro-region’s defenses are being breached. Investors yesterday propelled Italy’s 10-year bond yield to close at a euro-era high of 7.25 percent after the promised exit of Prime Minister Silvio Berlusconi failed to convince them that his country can slash Europe’s second-largest debt burden. The biggest signal yet that the single currency’s third- largest economy is falling prey to its two-year debt crisis forces German Chancellor Angela Merkel, European Central Bank President Mario Draghi and their peers to decide just how far they’re willing to go to defend the euro.
“The market is testing the commitment of the euro zone’s stewards,” said Eric Chaney, Paris-based chief economist at insurer AXA SA and a former official in the French Finance Ministry. “Italy is the real crisis battleground.” At 1.9 trillion euros ($2.6 trillion), Italy’s debt exceeds that of Greece, Spain, Portugal and Ireland combined, though unlike those nations, it has systemic importance as the world’s third-largest bond market and eighth-biggest economy. Berlusconi’s offer to quit has still left his nation struggling to produce a government stable enough to deliver austerity after LCH Clearnet SA raised the deposit it demands for trading Italian securities.
Italy’s Senate Speeds Austerity Vote (Source: Bloomberg)
The Italian Senate was rushing to pass debt-reduction measures that will lead to the resignation of Prime MinisterSilvio Berlusconi within days and the formation of a new government in a bid to restore confidence in Europe’s second-biggest debtor. The senate is set to vote tomorrow on the package of measures that includes assets sales and an increase in the retirement age. The Chamber of Deputies should vote the following day and Berlusconi will resign “immediately,” Angelino Alfano, the secretary of Berlusconi’s People of Liberty party said on state-owned Rai television last night. Italy’s bond yields surged yesterday past the 7 percent threshold that prompted Greece, Portugal and Ireland to seek bailouts after Berlusconi’s parliamentary majority unraveled and LCH Clearnet SA said it would demand additional collateral on Italian debt. German Finance Minister Wolfgang Schaeuble told lawmakers yesterday Italy may need to consider a request for European Union aid, two people present at the meeting said.
Berlusconi Rushes to Pass Debt Measures (Source: Bloomberg)
Italy’s government presented lawmakers with the budget measures pledged to European Union allies, paving the way for parliamentary votes this week that will lead to Prime MinisterSilvio Berlusconi’s resignation. Finance MinisterGiulio Tremonti delivered the legislation, to the Senate today in Rome in the form of an amendment to the budget law. The measures are aimed at convincing investors Italy can overhaul its economy to reduce the euro-region’s second- biggest debt. The Senate will vote on the plan on Nov. 11, and the Chamber of Deputies will seek to pass it by Nov. 13. Italy’s bond yields surged past the 7 percent threshold that prompted Greece, Portugal and Ireland to seek bailouts after Berlusconi’s majority unraveled yesterday and LCH Clearnet SA said it would demand additional collateral on Italian debt. Months of bickering within Berlusconi’s Cabinet over the budget measures ended up fueling the collapse of the government and the selloff of the country’s debt.
Greek Unity Deal Is in Disarray Amid Squabbles (Source: Bloomberg)
Greek President Karolos Papoulias called a meeting with political party leaders for today, after squabbling over the next premier pushed unity government aims into disarray and undermined the bid to secure bailout funds needed to prevent a financial collapse. Prime Minister George Papandreou met with Papoulias in Athens yesterday to resign as criticism grew over delays in naming a new prime minister. Papandreou attended the meeting with Antonis Samaras, leader of the opposition New Democracy party, and opposition LAOS party leader George Karatzaferis, who then abandoned the talks. “Despite our differences we leave clashes and sterile opposition to one side,” Papandreou said in an address to the nation televised live on state-run NET TV.
Greek Prime Minister Says Agreement Reached on New Government (Source: Bloomberg)
Prime Minister George Papandreou will step down after announcing an agreement with the main opposition party on an interim Greek government charged with averting the economy’s collapse. Papandreou met with President Karolos Papoulias in Athens today to resign as criticism grew over delays in naming a new prime minister of the new government. Papandreou will later attend a meeting with Antonis Samaras, leader of the opposition New Democracy party, and opposition LAOS party leader George Karatzaferis. “The new government will be guided by a specific road map,” Papandreou said in statements to the nation, broadcast live on state-run NET TV. “That is to secure the payment of the sixth loan tranche, to ensure the implementation of the Oct. 26 package.”
King Assesses if BOE Stimulus Enough to Shield U.K. From Crisis (Source: Bloomberg)
Bank of England Governor Mervyn King and his officials will assess today if recession risks warrant an even bigger increase in stimulus after last month’s surprise expansion to ward off the danger posed by Europe’s debt crisis. The Monetary Policy Committee will use new quarterly economic forecasts to measure whether the 75 billion-pound ($120 billion) increase in bond purchases pledged last month can protect the economy from the region’s turmoil. Officials will probably keep their 275 billion-pound stimulus plan unchanged, said all 38 economists in a Bloomberg News survey. European stocks fell yesterday as Italy’s political instability intensified the region’s crisis, threatening to push Britain back into recession as its recovery struggles under the weight of the deepest fiscal squeeze since World War II. Bank of England officials including Charles Bean and Adam Posen have indicated they are open to more stimulus if needed.
Australia Unemployment Falls; 10,100 Jobs Added (Source: Bloomberg)
Australian employers added workers for a second month in October and the unemployment rate fell as energy companies ramped up hiring, helping the economy weather global market turmoil from Europe’s fiscal crisis. The number of people employed rose by 10,100 after a revised gain of 22,500 in September, the statistics bureau said in Sydney today. The increase was in line with the median estimate for 10,000 more jobs in a Bloomberg News survey of 24 economists. The unemployment rate fell to 5.2 percent from a revised 5.3 percent. The report showed a divergence in the nation’s two biggest resource states, with Queensland adding 17,900 workers and Western Australia losing 8,200. The job market nationwide may benefit from Reserve Bank of Australia Governor Glenn Stevens’s decision last week to lower the nation’s benchmark interest rate to 4.5 percent from a developed-world high of 4.75 percent.
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