Asian Stocks Fall After Fitch Says Europe Crisis Threatens U.S. Banks (Source: Bloomberg)
Asian stocks fell for a third day, with the regional benchmark heading for the lowest close in four weeks, after Fitch Ratings said a worsening European debt crisis poses a “serious risk” to U.S. banks, stoking concern about the global financial system. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, dropped 1.2 percent. Nissan Motor Co., the country’s third-largest carmaker by market value, fell 2.3 percent. BHP Billiton Ltd. (BHP), an Australian miner and oil producer, rose 0.5 percent after oil climbed above $100 a barrel. The MSCI Asia Pacific Index dropped 0.4 percent to 115.77 as of 9:12 a.m. in Tokyo. The measure headed for the lowest close since Oct. 20. “This is a bad case for Europe and growth forecasters who were optimistic are definitely cutting back,” said Matt Riordan, who helps manage close to $6.4 billion in Sydney at Paradice Investment Management Pty. “We are going into quite a difficult point where some sort of a new strategy might be required.”
Japan Stocks Fall After Fitch Says Europe Crisis Threatens U.S. Banks (Source: Bloomberg)
Japan’s Nikkei 225 (NKY) Stock Average fell toward its lowest level in 6 weeks after Fitch Ratings said a worsening European debt crisis is a “serious risk” to U.S. banks, stoking concern about the global financial system. The Nikkei 225 fell 0.3 percent to 8,437.22, headed for its lowest close since Oct. 5. The broader Topix index retreated 0.4 percent to 721.58. More than twice as many stocks declined as rose in the gauge.
European Stocks Are Unchanged as Monti Takes Office to Fight Italian Debt (Source: Bloomberg)
European stocks ended the day unchanged, after swinging between gains and losses, as Mario Monti became Italy’s new prime minister amid concern the sovereign-debt crisis is hurting the global economy. Infineon Technologies AG (IFX), Europe’s second-largest semiconductor maker, fell after saying sales will decline in 2012. Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) led a retreat in European carmakers. Vivendi SA (VIV) advanced after reporting third-quarter profit that beat analysts’ estimates. The Stoxx Europe 600 Index was unchanged at 237.04 at the close in London. The gauge earlier climbed as much as 1.2 percent and dropped as much as 0.7 percent as the European Central Bank was said to buy Italian and Spanish bonds and the Bank of England warned that failure to tackle the debt crisis could affect economic growth.
U.S. Stocks Fall as Fitch Says Europe a Risk to American Banks (Source: Bloomberg)
U.S. stocks tumbled, erasing yesterday’s gains, as Fitch Ratings said further contagion from Europe’s debt crisis will pose a risk to American banks and amid concern higher oil prices will hamper economic growth. Financial shares led Standard & Poor’s 500 Index losses as Citigroup Inc. (C) and Morgan Stanley dropped at least 4.1 percent. Dell Inc. (DELL) sank 3.2 percent as the personal computer maker told investors to expect slower sales growth for the rest of the year. Abercrombie & Fitch Co. (ANF) tumbled 14 percent as profit at the clothing retailer trailed estimates. Rambus Inc. (RMBS) plunged 61 percent after losing a jury trial against Micron Technology Inc. (MU) and Hynix Semiconductor Inc. Micron surged 23 percent. The S&P 500 slid 1.7 percent to 1,236.91 at 4 p.m. New York time. The Dow Jones Industrial Average fell 190.57 points, or 1.6 percent, to 11,905.59. Oil rose above $100 a barrel.
Global Demand for U.S. Assets Climbs as Investors Seek Safety Amid Crisis (Source: Bloomberg)
Global demand for U.S. stocks, bonds and other financial assets rose the most in 10 months in September as investors sought the safety of Treasury securities amid Europe’s sovereign-debt crisis. Net buying of long-term equities, notes and bonds totaled $68.6 billion, the highest since November 2010, compared with net buying of $58 billion in August, the Treasury Department said in Washington today. Including short-term securities such as stock swaps, foreigners purchased a net $57.4 billion in September, compared with net buying of $89.3 billion the previous month. Treasuries rose in September, extending their biggest quarterly advance since the depths of the financial crisis in 2008, on concern Europe’s sovereign-debt turmoil and a sluggish U.S. economy would undermine the global recovery. The rally repudiated Standard & Poor’s Aug. 5 downgrade of the U.S. AAA credit rating and drove yields to record lows.
Factory Production Picks Up in Sign U.S. Economy Weathering Europe Crisis (Source: Bloomberg)
Industrial production in the U.S. advanced more than forecast in October, adding to evidence the world’s largest economy is weathering disruptions in financial markets caused by the crisis in Europe. Output at factories, mines and utilities climbed 0.7 percent after a revised 0.1 percent drop in September, figures from the Federal Reserve showed today. Other reports showed the cost of living unexpectedly fell and builder sentiment improved. Combined with rising retail sales and record exports, the data signal manufacturing will help the economic recovery strengthen heading into 2012, overcoming concern surrounding a default in Europe that has caused stocks to plunge. Less inflation also opens the door for Fed policy makers to take additional action should the expansion falter.
Detroit Faces $45 Million Gap, Takeover by Michigan, Mayor Dave Bing Says (Source: Bloomberg)
Detroit faces a $45 million deficit and needs union concessions to help avoid a state takeover, Mayor Dave Bing said in a televised speech. “Our city is in a financial crisis and city government is broken,” Bing said today in the speech. “If we continue down the same path, we will lose the ability to control our own destiny.” “Without change, the city could run out of cash by April,” he said. Bing has warned for weeks of the dire fiscal condition of Detroit, the nation’s 19th largest city, having fallen from 10th in 2000, according to U.S. Census Bureau figures. The municipality of about 714,000 may be placed under a state- appointed emergency manager if unions don’t agree to concessions to lower costs, Bing said. In March the Legislature and Republican Governor Rick Snyder gave broader powers to emergency managers in cities and school districts, including the authority to nullify union contracts and to fire city employees.
California Revenue May Fall $3.7 Billion Short of Estimates, Analyst Says (Source: Bloomberg)
California revenue likely will fall $3.7 billion short of what Governor Jerry Brown and Democrats projected for the state budget, with a $13 billion gap looming in the next fiscal year, the Legislature’s fiscal analyst said. The state’s economy won’t produce the $4 billion in better- than-expected revenue Brown, 73, wrote into the budget in June, the Legislative Analyst’s Office said today in a report. Brown used the projection to help close a $26 billion deficit after Republicans blocked extensions of expiring tax increases. The new estimate makes it more likely that automatic spending cuts Brown built into the budget will be triggered. The reductions will kick in if revenue misses estimates by $1 billion or more. They could take seven days out of the school year to save $1.54 billion, end $248 million in student busing subsidies, and cut higher-education aid and in-home services for the elderly and disabled.
China’s Slower Inflation May Give Boost to ‘Beaten-Down’ Stocks, KKR Says (Source: Bloomberg)
Slowing inflation may allow China’s central bank to loosen monetary policies, boosting “beaten- down” stocks and other high-yielding assets, according to KKR & Co., a New York-based private-equity firm. “Ongoing declines in Chinese inflation is bullish for beaten-down risk assets in the region,” strategists led by Henry McVey, head of global macro and asset allocation at the firm, wrote in a research note today. “It also reduces the likelihood of a hard landing” in the world’s second-largest economy, they wrote. China’s inflation slowed to 5.5 percent in October from a three-year high of 6.5 percent in July after policy makers raised interest rates and reserve requirements, curbed lending and restricted home purchases in the past year. The Shanghai Composite Index of Chinese stocks has lost 15 percent in the past year. The index is trading at 11.6 times estimated earnings, compared with the average of 19.3 during the past decade, according to data compiled by Bloomberg.
China Policy May Change on Falling Home Prices (Source: Bloomberg)
Home prices in China’s four biggest cities have stalled since July and are set to drop after Premier Wen Jiabao this month pledged to maintain a one-and-a-half year battle to lower prices to a “reasonable” level. Housing prices in Beijing, Shanghai, Guangzhou and Shenzhen, home to a combined 66 million people, fell from a month earlier by as much as 0.3 percent in October, data will show tomorrow, according to five analysts surveyed by Bloomberg News. Analysts at firms including Barclays Capital Research and asset managers such as CBRE Global Investors are betting price declines will force a policy reversal as the tightening weighs on economic growth. A rout in prices and drop in new developments would be felt from Australia and Latin America, where raw materials exports are fueling growth, to Europe and Japan, where machinery makers rely on Chinese sales.
India’s Debt at 70% of GDP Is ‘Constraint’ to Higher Rating, Moody’s Says (Source: Bloomberg)
India’s public debt at 70 percent of its gross domestic product is preventing Asia’s third-biggest economy from securing an investment-grade rating, Moody’s Investors Service said. The nation’s fiscal deficit and “the debt burden, which is high relative to similarly rated countries,” are among the constraints, Atsi Sheth, a sovereign analyst at Moody’s, said in a telephone interview from Mumbai yesterday. “For the ratings to be improved, we will have to be comfortable that India’s government debt is at a level that can be sustained over the medium term.”
India’s finance ministry pitched for a higher rating in a meeting with Moody’s officials on Nov. 14, R. Gopalan, secretary, Department of Economic Affairs, said a day later. The government raised its planned borrowing for the six months through March 31 by 32 percent as revenue collections fall short of target. Finance Minister Pranab Mukherjee said Oct. 4 that it may be hard to meet his goal of cutting the budget deficit to a four-year low of 4.6 percent of GDP.
Portugal Says Second Review of Its Financial Aid Program Was ‘Successful’ (Source: Bloomberg)
Portuguese Finance Minister Vitor Gaspar said the second review of the country’s financial-aid program was “successful,” allowing it to receive another rescue payment tranche of 8 billion euros ($10.8 billion). “The government has been clear in its determination to meet the commitments assumed as part of the aid program,” Gaspar told a news conference in Lisbon today. The so-called troika of the European Commission, the European Central Bank and the International Monetary Fund said in a statement that Portugal’s budget plan is “off to a good start.” Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of a 78 billion-euro bailout. Portugal followed Greece and Ireland in April in seeking a bailout as its borrowing costs surged.
Papademos Turns Attention to Budget After Winning Greece Confidence Vote (Source: Bloomberg)
Greek Prime Minister Lucas Papademos turns his attention today to finalizing next year’s budget, tackling a key demand set for the country to receive international financing a day after he won a confidence vote. Finance Minister Evangelos Venizelos will present the 2012 spending plan to the new cabinet for approval before it’s submitted to parliament for discussion by lawmakers, which he said could be this week. Demonstrators at the same time will gather in Athens to commemorate a student uprising today. “The policy of fiscal consolidation is necessary after the mistakes of the past several years to create the foundations for a new type of sustainable development,” Papademos told parliament yesterday. “The road is long and requires persistent effort and implies large adjustment costs.”
Monti Faces Double Challenge of Convincing Parliament, Investors on Debt (Source: Bloomberg)
Mario Monti’s first full day as Italy’s prime minister will be dedicated to trying to persuade lawmakers in Rome and investors everywhere that he can pass the measures needed to cut the euro region’s second-biggest debt. Against a backdrop of 10-year bond yields above the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts, Monti, 68, unveils his government’s economic plans. He will present the program to the Senate in Rome at 1 p.m. before a confidence vote beginning at 8 p.m. “We expect that the priorities will be liberalizations and measures to boost competition, the reform of the labor market and a more incisive action on the pension system,” Chiara Corsa and Loredana Federico, Milan-based economists at UniCredit SpA, wrote in a note to investors. “An additional fiscal adjustment to meet the balanced budget in 2013 will be probably announced.”
Monti Sworn In as Prime Minister as He Attempts to Solve Italy Debt Crisis (Source: Bloomberg)
Mario Monti was sworn in as Italian prime minister and finance minister, taking over an unelected government charged with imposing austerity to prevent the euro area’s third-biggest economy from succumbing to the debt crisis. Monti, 68, and his Cabinet took the oath in Rome from President Giorgio Napolitano, who reached outside the political arena to offer Monti the job after the resignation of Prime Minister Silvio Berlusconi on Nov 12. Monti’s ministers include Corrado Passera, chief executive officer of Intesa Sanpaolo SpA (ISP), the new industry minister and Antonio Catricala, head of the antitrust regulator, who will serve as deputy premier. “We have received a lot of encouragement from our European partners and international authorities,” Monti said at a press conference in Rome this morning when he presented his government to Napolitano “I hope this translates into a calming of the markets, especially regarding the tensions facing our country.”
IMF Europe Unit Chief Quits One Year Into Job (Source: Bloomberg)
The head of the International Monetary Fund’s European department quit less than a year into the job and was replaced by an in-house economist as the European debt crisis worsens. Antonio Borges, a Portuguese native whose unit oversees bailouts in the euro region, left for “personal reasons,” the Washington-based IMF said today in an e-mailed statement. His successor is Reza Moghadam, who has made his career at the fund and headed the strategy department. The management change comes as the IMF, which is co- financing bailouts in Greece, Portugal and Ireland, is preparing to send a team to Italy for an unprecedented audit of the country’s efforts to cut its debt. Borges, a former vice chairman at Goldman Sachs International, last month retracted comments he made about the fund’s possible involvement in the European bond market. He couldn’t immediately be reached for comment today.
King’s Alarm Stokes BOE Stimulus Suspense as Europe’s Debt Turmoil Rages (Source: Bloomberg)
Bank of England Governor Mervyn King’s alarm over the danger posed by Europe’s debt crisis suggests officials may be ready to add more stimulus as soon as next month to shield Britain from further turmoil. King added his voice yesterday to growing global frustration with Europe’s inability to tame its crisis, saying failure to deal with it would lead to “significant adverse consequences.” The Bank of England cut its growth and inflation forecasts, a month after raising its bond-purchase target by 75 billion pounds ($118 billion) to aid the recovery. “We’re on the knife-edge of another recession,” said Richard Barwell, an economist at Royal Bank of Scotland Group Plc in London and a former Bank of England official. “They’re increasingly coming to the conclusion that there’s more weakness in the U.K. than they thought. We originally forecast another 50 billion pounds in February. They could easily bring that forward.”
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