Asian Stocks Fall for Fourth Day on Spain Yields, China Concern (Source: Bloomberg)
Asian stocks fell for a fourth day after rising Spanish bond yields stoked concern the European debt crisis is infecting major economies and as China’s new bank regulator was said to warn banks that loans to property developers may sour. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics that gets 21 percent of its sales in Europe, fell 2.3 percent. Komatsu Ltd. (6301), a machinery maker that gets 23 percent of its revenue in China, lost 2.7 percent. BHP Billiton Ltd. (BHP), the Australian mining company, slid 2.4 percent after oil and metal prices dropped. The MSCI Asia Pacific Index dropped 1.1 percent to 114.93 as of 9:23 a.m. in Tokyo, set for the lowest close since Oct. 10. The measure has fallen 2.1 percent this week, set for a third weekly decline.
Stocks in U.S. Decline as European Debt Concerns Overpower Economic Data (Source: Bloomberg)
U.S. stocks fell, sending the Standard & Poor’s 500 Index to the lowest level in a month, as concern grew that Europe’s debt crisis will worsen and lawmakers will fail to agree on plans to cut the American deficit. Commodity and technology shares had the biggest declines among 10 groups in the S&P 500, falling at least 2.1 percent. Sears Holdings Corp. (SHLD) slid 4.6 percent as the retailer reported a steeper loss. Applied Materials Inc. (AMAT), a producer of chipmaking equipment, sank 7.5 percent as forecasts trailed estimates. Jefferies Group Inc. (JEF) retreated 2 percent and dropped below $10 intraday for the first time since March 2009. The S&P 500 lost 1.7 percent to 1,216.13 at 4 p.m. in New York. Losses accelerated after it fell below 1,229.10, its closing level on Nov. 9 after sinking 3.7 percent. The gauge dropped below its 100-day average. The Dow Jones Industrial Average sank 134.86 points, or 1.1 percent, to 11,770.73.
European Stocks Decline as Lower Spanish Bond Demand Fuels Crisis Concern (Source: Bloomberg)
European stocks fell after Spain’s borrowing costs surged to a euro-era record on waning demand at a bond sale, adding to concern the region’s sovereign debt crisis is deepening. BNP Paribas SA and Societe Generale SA led a sell-off in banks, both dropping at least 3.9 percent as dollar funding costs for European lenders climbed to a three-year high. Mining companies tumbled with metal prices. The benchmark Stoxx Europe 600 Index lost 1.3 percent to 233.97 at the close in London, extending the decline from this year’s high on Feb. 17 to 20 percent as the debt crisis spreads across the region’s core.
Emerging Stocks Fall Third Day on Higher Spanish, French Yields (Source: Bloomberg)
Emerging-markets stocks fell for a third day, the longest losing streak in six weeks, after yields jumped at auctions of Spanish and French bonds, fueling concern Europe’s debt crisis was worsening. The MSCI Emerging Markets Index slid 0.8 percent to 951.97 at 5:22 p.m. in New York. Brazil’s Bovespa declined 2.7 percent, retreating from a one-week high, while Chile’s benchmark fell 1.8 percent. The Bombay Stock Exchange Sensitive Index decreased 1.9 percent. The WIG20 Index sank 1.6 percent in Warsaw and the Micex Index slumped 0.5 percent in Moscow. Spain sold 3.56 billion euros ($4.8 billion) of a new 10- year benchmark bond at an average yield of almost 7 percent, the most since the euro’s creation. The yield on French bonds due in July 2016 jumped to 2.82 percent from 2.31 percent in the previous sale of the securities on Oct. 20.
German Chancellor Angela Merkel said that neither joint euro-area bonds nor using the European Central Bank as a lender of last resort offer solutions to the debt crisis at present. The ECB reportedly bought Spanish and Italian bonds today.
Consumers’ Outlook Improves to Four-Month High (Source: Bloomberg)
Consumers’ views on the U.S. outlook improved in November, showing concern is dissipating that the world’s largest economy will tip back into a recession. The Bloomberg Consumer Comfort Index’s monthly expectations gauge climbed to minus 32, the best reading since July, from minus 45 the previous month. The weekly measure of current conditions was minus 50 for the period ended Nov. 13, climbing for a second week after sinking to an almost three-year low. Household spending, which accounts for about 70 percent of the economy, has picked up in the second half of the year even as stocks and confidence sank. The recovery may mean Americans are going shopping to relieve the pessimism brought on by a jobless rate that has been around 9 percent or more since mid 2009, according to economists like Joseph Brusuelas.
U.S. Initial Jobless Claims at Seven7-Month Low (Source: Bloomberg)
Claims for unemployment benefits dropped to the lowest level in seven months and housing starts exceeded forecasts, signaling improvement in the weakest areas of the U.S. economy. Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, Labor Department figures showed today in Washington. Starts decreased 0.3 percent to a 628,000 annual rate in October, according to the Commerce Department. The median estimate of economists surveyed by Bloomberg News called for a drop to 610,000. Building permits, a proxy for future construction, jumped 10.9 percent. Fewer firings may signal that companies are closer to hiring more workers, reducing an unemployment rate stuck around 9 percent or higher for more than two years. At the same time, record-low mortgage rates and cheaper homes are helping to support the industry at the heart of the last recession.
U.S. Banks Face Contagion Risk From Europe Debt (Source: Bloomberg)
U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations, Fitch Ratings said. “Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said yesterday in a statement. Even as U.S. banks have “manageable” exposure to stressed European markets, “further contagion poses a serious risk,” Fitch said, without explaining what it meant by contagion. The “exposures” of U.S. lenders to major European banks and the stressed nations of Greece, Ireland, Italy, Portugal and Spain, known as the GIIPS, are smaller than those to some of the continent’s larger countries, Fitch said.
Philadelphia-Area Manufacturing Grows at Slower Pace as Fed Index Declines (Source: Bloomberg)
Manufacturing in the Philadelphia region expanded less than forecast in November as orders and sales cooled. The Federal Reserve Bank of Philadelphia’s general economic index decreased to 3.6 from 8.7 last month. Economists forecast the gauge would be little changed at 9, according to the median estimate in a Bloomberg News survey. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The risk of recession in Europe and slowing growth in Asia signal fewer orders for U.S. manufacturers at the same time American companies hold the line on inventories. The figures help explain why Federal Reserve Chairman Ben S. Bernanke on Nov. 2 described the recovery as “frustratingly slow” and indicated more stimulus was “on the table” should the economy falter.
China Said to Warn Banks on Property, Loans (Source: Bloomberg)
China’s new banking regulator warned lenders that some projects backed by local governments may run out of funds, and loans to property developers are likely to sour as sales slow, a person with knowledge of the matter said. Shang Fulin, who replaced Liu Mingkang last month as chairman of the China Banking Regulatory Commission, told lenders last week to step up asset sales and debt restructuring for local government financing vehicles that are struggling to repay loans, the person said, declining to be identified because the instructions were private. Shang also said banks should cut “high-risk” loans to developers, the person said.
“He knows that he has big shoes to fill, and that Liu Mingkang’s biggest achievement was probably raising the alarm early and repeatedly about potential risks in the banking system,” said Barry Naughton, author of the 2007 book “The Chinese Economy: Transitions and Growth” and a China specialist at the University of California, San Diego. “He’s trying to show that he is aware of the problems and he can also be tough.”
Southeast Asia Growth Slowdown Looms (Source: Bloomberg)
Growth in Southeast Asian economies including Malaysia and Thailand may have peaked last quarter as the European debt crisis and Thai floods hurt the outlook for exports, adding pressure on policy makers to cut interest rates. Malaysia’s gross domestic product increased 4.8 percent in the three months through September from a year earlier, after a 4 percent expansion the previous quarter, according to the median of 25 estimates in a Bloomberg News survey. Thailand’s growth probably quickened to 4.5 percent from 2.6 percent, according to a survey of 11 economists. “Exports will likely soften in the coming months as Europe slides into a recession,” said Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch. “Both Bank Negara Malaysia and Bank of Thailand will keep their options open and ease if growth readings turn ugly in coming months.”
IMF Won’t Release Greek Funds Without Support (Source: Bloomberg)
The International Monetary Fund won’t release the next tranche of funding for Greece under a 110-billion euro ($148 billion) package with the European Union until there is broad political support for the measures attached to the loan, a spokesman said. “It’s important that the unity government now shares its commitment to the implementation of the economic program” and the decisions agreed by European leaders last month, IMF spokesman David Hawley told reporters today. “Once broad political support” for the measures “is assured, then we can proceed with completion” of the review and the release of the tranche. Greek Prime Minister Lucas Papademos, a former European Central Bank vice president, won a three-month mandate to implement budget measures and ensure a second bailout package from the IMF and euro nations that was agreed to last month. The Greek government is seeking the release of 8 billion euros under the first rescue plan by the middle of December.
Papademos Will Unveil 2012 Greek Budget as Deadline to Secure Loans Looms (Source: Bloomberg)
Greek Prime Minister Lucas Papademos will unveil the final budget for 2012 today as his interim government races against a three-month deadline to secure international loans and avert a collapse of the economy. Finance Minister Evangelos Venizelos will present the 2012 spending plan to the cabinet at 9:30 a.m. Greek time before it is submitted to lawmakers. The new government, backed by three of the five Greek parliamentary parties, is meeting a week after Papademos won a mandate to secure a second financing package for Greece agreed to with euro partners on Oct. 26. “With determination and unity we can achieve our new national goals: to overcome this crisis and return the country to a cycle of growth and increased employment,” Papademos said in an e-mailed statement yesterday.
‘Unsellable’ Real Estate Assets Threaten Survival of Smaller Spanish Banks (Source: Bloomberg)
Spanish banks, under pressure to cut property-backed debt, hold about 30 billion euros ($41 billion) of real estate that’s “unsellable,” according to a risk adviser to Banco Santander SA (SAN) and five other lenders. “I’m really worried about the small- and medium-sized banks whose business is 100 percent in Spain and based on real- estate growth,” Pablo Cantos, managing partner of Madrid-based MaC Group, said in an interview. “I foresee Spain will be left with just four large banks.” Spanish lenders hold 308 billion euros of real estate loans, about half of which are “troubled,” according to the Bank of Spain. The central bank tightened rules last year to force lenders to aside more reserves against property taken onto their books in exchange for unpaid debts, pressing them to sell assets rather than wait for the market to recover from a four- year decline.
Italy’s Monti Set for Final Confidence Vote (Source: Bloomberg)
Italian Prime Minister Mario Monti faces a final confidence vote in his new government today after vowing to attack the euro-region’s second-biggest debt and spur growth in its third-largest economy. The Chamber of Deputies will hold the confidence ballot starting at 2 p.m. in Rome after the 321-seat Senate voted in favor of the new government yesterday by a margin of 281 to 25. In the lower house, Monti is expected to have at least 560 votes out of 630. In his afternoon address to the Senate, the former European Union commissioner said Italy must regain investor confidence in the nation’s ability to reduce its 1.9 trillion-euro debt ($2.6 trillion), which amounts to 120 percent of gross domestic product, the same level as two decades ago.
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