20111123 0959 Global Market Related News.

Asian Stocks Decline After U.S. Growth Slows, Australia Passes Mining Tax (Source: Bloomberg)
Asian stocks fell after Australia’s lower house of parliament passed a mining tax bill and a report showed slower-than-expected economic growth in the U.S. MSCI Asia Pacific Excluding Japan Index fell 0.2 percent to 387.89 as of 8:10 a.m. in Hong Kong.

U.S. Stocks Fall on GDP Revision (Source: Bloomberg)
U.S. stocks fell, driving the Standard & Poor’s 500 Index to its longest slump in almost four months, as slower-than-estimated economic growth overshadowed signs the Federal Reserve may provide more stimulus. Alcoa Inc. (AA) and Bank of America Corp. (BAC) slid at least 2.1 percent to pace losses in the Dow Jones Industrial Average. The Dow Jones Transportation Average slumped 1.1 percent. Campbell Soup (CPB) Co. decreased 5.3 percent as the world’s largest soup maker’s sales trailed projections. Netflix Inc. (NFLX), the video- streaming and DVD subscription service, sank 5.4 percent after agreeing to sell $400 million in stock and convertible notes. The S&P 500 declined 0.4 percent to 1,188.04 at 4 p.m. New York time. The gauge lost 5.6 percent in five days. The Dow retreated 53.59 points, or 0.5 percent, to 11,493.72 today.

Stocks in U.S. Retreat as Growth Misses Forecast, Spanish Bond Yields Rise (Source: Bloomberg)
Stocks fell, dragging the Standard & Poor’s 500 Index to its longest slump in almost four months, as the U.S. economy grew less than estimated and Spain’s three- month borrowing costs more than doubled at an auction. Treasuries advanced and commodities climbed. The S&P 500 fell for a fifth day, losing 0.4 percent to close at 1,188.04 at 4 p.m. in New York after briefly turning higher amid signs the Federal Reserve was discussing more stimulus efforts. The Stoxx Europe 600 Index lost 0.7 percent. Spain’s two-year note yield surged to the highest since 1997, while Belgium’s 10-year yield reached a nine-year high. Ten-year Treasury yields slipped three basis point to 1.93 percent. The S&P GSCI Index of materials climbed 1 percent.
Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected by economists and down from a 2.5 percent prior estimate, Commerce Department data showed. Spain sold three-month bills at a yield of 5.11 percent, more than double the 2.292 percent yield the last time the debt was offered on Oct. 25.

European Stocks Drop as Euro Area Borrowing Costs Rise; Commerzbank Slumps (Source: Bloomberg)
European stocks declined, extending their biggest drop in three weeks, as borrowing costs rose in the euro area, outweighing rating companies’ reaffirmation of America’s credit grades. Dexia SA led banks (SX7P) lower, slumping 8.1 percent, as Belgium’s bond yields rose to their highest level since 2008. Commerzbank AG slumped 15 percent on a report the lender may need more capital. Nokia Oyj (NOK1V) dropped 8.8 percent amid concern that the company has shipped fewer smartphones than estimated. British Land Co. (BLND) led a rally in real-estate companies. The benchmark Stoxx Europe 600 Index slipped 0.7 percent to 223.27 at the close as banks and technology companies retreated. The gauge earlier advanced as much as 1 percent after Standard & Poor’s and Moody’s Investors Service reaffirmed America’s credit grades.

Emerging Stocks at 35% Discount, Lures Goldman (Source: Bloomberg)
Emerging-market stocks are trading at levels 35 percent cheaper than their 15-year average as rising profits and falling interest rates from Brazil to Indonesia buoy investor confidence. While the MSCI Emerging Markets Index’s 9.7 percent gain from this year’s low on Oct. 4 lifted its price-earnings ratio to 10.3 from 9.7, the gauge is still trading below its mean since 1996, according to data compiled by Bloomberg. The measure jumped an average 35 percent after developing-nation policy makers began cutting interest rates in 2003, 2005 and 2008.
Investors pulled $26 billion from emerging-market mutual funds in the first nine months and the stock indexes sank about twice as much as advanced nations after Indonesia, Poland and Brazil raised interest rates. Now borrowing costs are coming down as policy makers seek to spur expansions at a time when export growth and inflation are slowing. The MSCI index may rise 30 percent in a year as record earnings outweigh Europe’s debt crisis, more than 17,000 forecasts compiled by Bloomberg show.

Fed Requires Top Banks to Submit Capital Plans (Source: Bloomberg)
The Federal Reserve told the 31 largest U.S. banks to test their loan portfolios and trading books against a deep recession and a European market shock to ensure they have enough capital to withstand losses. The most severe test scenarios outlined by the Fed today include an unemployment rate of as much as 13 percent, an 8 percent drop in gross domestic product and a 21 percent plunge in home prices. The tests may bolster confidence in the nation’s banks by demonstrating they can handle a deeper downturn after a year in which global financial markets were battered by the European debt crisis and U.S. unemployment remained stuck around 9 percent. The Fed helped clear away uncertainty surrounding bank capital adequacy in May 2009, when it published so-called stress tests showing that 10 U.S. banks needed to raise at total of $75 billion, giving investors more clarity on their capital needs.

FOMC Minutes Show Additional Easing Discussed (Source: Bloomberg)
Nov. 22 (Bloomberg) --Some Federal Reserve policy makers said the central bank should consider easing policy further, according to minutes of their Nov. 1-2 meeting. “A few members indicated that they believed the economic outlook might warrant additional policy accommodation,” the Fed said in minutes released today in Washington. “However, it was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative, and most of these members agreed that they could support retention of the current policy stance at this meeting.”

Dodd-Frank Law May Hinder Crisis Response by U.S. Policy Makers (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke and fellow U.S. policy makers may find themselves hampered in restoring financial stability should the European debt crisis spread to America. The Dodd-Frank legislation passed last year prohibits the Fed from engaging in rescues of individual financial firms, such as it did with Bear Stearns Cos. and American International Group Inc. (AIG) during the 2008 financial crisis. Lawmakers also banned the Treasury Department from again using an emergency reserve program to backstop money market funds. And the Federal Deposit Insurance Corp. now has to get Congressional approval before it can guarantee senior debt issued by banks. Investors “don’t realize the extent to which Congress has tied people’s hands,” said Donald Kohn, who served as vice chairman of the Fed from 2006 to 2010 and is now senior economic strategist for Potomac Research Group in Washington, an independent research firm. “There is less room to maneuver for the authorities.”

U.S. Is Set for Fourth-Quarter Growth Pickup on Lower Inventories: Economy (Source: Bloomberg)
The economy in the U.S. expanded less than previously estimated in the third quarter, reflecting a drop in inventories that points to a pickup in growth as 2011 comes to a close. Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate, revised Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for no revision. Excluding stockpiles, so-called final sales climbed 3.6 percent, the most since last year’s fourth quarter. Gains in retail sales, manufacturing and housing this quarter, combined with lean inventories, raise the odds the world’s largest economy will pick up. At the same time, unemployment and stagnant wages mean consumer spending has been fueled by reductions in savings that cast doubt on whether increases will be sustained into 2012, just as the risks from government cutbacks and the European debt crisis intensify.

Supercommittee Failure Poses Risk to U.S. Economy Even as Rating Affirmed (Source: Bloomberg)
The implosion of the congressional supercommittee is likely to delay any major deficit-reduction agreement until after the next presidential election and may pose an immediate threat to the struggling U.S. economy. The committee’s failure to reach a deal means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year, weighing on the household spending that accounts for about 70 percent of the world’s largest economy. The panel’s inability to agree on $1.2 trillion in budget cuts stoked doubts about U.S. lawmakers’ ability to overcome partisan gridlock and deal with the nation’s fiscal future.

Payrolls Gained in 39 U.S. States in October, Led by Illinois, California (Source: Bloomberg)
Payrolls increased in 39 states in October, while the jobless rate dropped in 36, indicating the labor market is steadying across much of the U.S. Illinois led the nation with a 30,000 gain in jobs, followed by California with 25,700, figures from the Labor Department showed today in Washington. Virginia, Pennsylvania and Washington rounded out the top five states with the biggest gains. “Every region of the country seems to be in some stage of economic recovery,” said Steve Cochrane, director of regional economics at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The improvement in employment is fairly uniform. The factors holding back bigger increases are broad-based issues of business confidence, uncertainty about the U.S. deficit and difficulties in Europe.”

U.S.-South Korea Free-Trade Agreement Wins Approval of Assembly in Seoul (Source: Bloomberg)
A free-trade agreement between the U.S. and South Korea reached more than four years ago will take effect as early as Jan. 1 after lawmakers in Seoul approved the deal over objections from opposition legislators. The ruling Grand National Party used its majority in the assembly to ratify the deal today in Seoul, according to the parliament’s website. YTN Television broadcast images of opposition lawmakers shouting and said one shot tear gas in the room where the voting took place. President Barack Obama signed bills for the deal into law in the U.S. last month after Congress passed them. “This is a win-win agreement that will provide significant economic and strategic benefits to both countries,” U.S. Trade Representative Ron Kirk said today in a statement. “We look forward to working closely with the government of Korea to bring the agreement into force as soon as possible.”

IMF Revamps Credit Lines to Lure Nations (Source: Bloomberg)
The International Monetary Fund revamped its credit line program to encourage countries facing outside shocks to turn to the fund with few conditions attached, as European leaders fail to end their debt turmoil. The Washington-based IMF said today the new instrument, the Precautionary and Liquidity Line, can be tapped by countries with strong economies currently facing short-term liquidity needs. Funding available will be capped at a percentage of countries’ contributions to the fund, limiting the role the instrument can play in preventing the debt crisis from spreading in Europe. “The size is too small to be meaningful for Italy and Spain,” said Edwin M. Truman, a former U.S. assistant Treasury secretary who’s now a senior fellow with the Peterson Institute, a private, nonprofit, nonpartisan research organization in Washington. The countries’ economic policies may also prevent them from pre-qualifying for the credit line, he said.

World Bank Sees Soft Landing for China as Asia Withstands Europe: Economy (Source: Bloomberg)
The World Bank said China is heading for a soft landing of growth in excess of 8 percent next year, and with most Asian nations has fiscal scope to cushion its economy from an escalation in Europe’s debt crisis. Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and India, will see its expansion moderate to 7.8 percent in 2012 from 8.2 percent this year, the Washington-based development lender said in a semiannual report today. While China faces the risk of a “strong” impact from a real-estate correction, its gross domestic product will rise 8.4 percent next year and about that pace thereafter, the bank said. The report signals that Asia, which led the world out of the 2008-2009 recession, is poised to withstand the blows from any slump in demand for its exports or pull-back in credit by European banks.
The World Bank said countries with high investment rates, such as China, should focus on boosting consumer spending in any fiscal stimulus, such as with social security and pension provision.

U.K. Budget Deficit Narrows as Osborne Trims Government Spending: Economy (Source: Bloomberg)
Britain’s budget deficit narrowed in October as Chancellor of the Exchequer George Osborne slashed spending at government departments. Net borrowing excluding support for banks fell to 6.5 billion pounds ($10.2 billion) from 7.7 billion pounds a year earlier, the Office for National Statistics said in London today. The shortfall was in line with the median of 13 forecasts in a Bloomberg News survey. Outlays at government departments dropped 3.1 percent, limiting overall spending growth to 1.1 percent. Revenue rose 4.1 percent. Osborne and Prime Minister David Cameron have made all but eliminating a budget deficit of 9 percent of economic output by 2015 the centerpiece of their economic strategy, rebuffing opposition criticism that the cuts are hobbling growth. Only Greece, Ireland, Portugal and Iceland face a tighter fiscal squeeze among advanced economies, according to the International Monetary Fund.

Germany Sees No ‘Bazooka’ in Resolving Debt Crisis as Spanish Yields Surge (Source: Bloomberg)
Germany rejected calls from allies and investors to do more to counter market turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures. Bond yields in France, Spain and Italy climbed as the absence of progress toward enacting a month-old comprehensive crisis-fighting package and a dispute over the central bank’s role rattled investors. Spanish three-month bills were auctioned today at higher yields than in Greece and Portugal. “We don’t have any new bazooka to pull out of the bag,” Michael Meister, finance spokesman for Chancellor Angela Merkel’s Christian Democratic bloc, said in Berlin today. “We see no alternative to the policy we are following,” which sees debt cuts and keeping the European Central Bank from becoming a lender of last resort, he said in an interview.

Euro-Region November Consumer Confidence Hits Two-Year Low on Job Concern (Source: Bloomberg)
European consumer confidence dropped to the lowest in more than two years in November, as the economy edged toward a recession and companies eliminated jobs. An index of household sentiment in the 17-nation euro area fell to minus 20.4 from minus 19.9 in October, the Brussels- based European Commission said in an initial estimate today. That’s the lowest since August 2009. Economists had forecast a drop to minus 21, the median of 28 estimates in a Bloomberg survey showed. Confidence has weakened for five straight months, the longest stretch of declines since 2008. European households are growing more pessimistic as governments from Spain to Italy toughen austerity measures, hurting a euro-area economy that already is cooling. BNP Paribas SA (BNP), France’s largest bank, said on Nov. 16 that it will eliminate 1,400 jobs to reduce costs. European Central Bank President Mario Draghi reiterated on Nov. 18 that “downside risks to the economic outlook” have increased.

Euro Trades Near Month Low Before Europe Manufacturing, Services Reports (Source: Bloomberg)
The euro traded 0.7 percent from a month low against the dollar before data forecast to show European manufacturing and services contracted amid the region’s sovereign-debt crisis. The 17-nation euro was 0.8 percent from a six-week low versus the yen ahead of reports that economists predict will show purchasing managers’ indexes for manufacturing in Germany and France, Europe’s two biggest economies, also fell this month. The dollar weakened against most of its major peers as lower-than-expected growth in the U.S. boosted speculation the Federal Reserve will embark on a third round of asset purchases, or quantitative easing. “The bias for the euro is that it falls,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “Overall the euro-zone economy is looking weak and trending weaker, and we’re expecting they’re going to recession sometime maybe next year.”

France’s AAA Status in Tatters as Yields Surge (Source: Bloomberg)
Investors aren’t waiting for Standard & Poor’s or Moody’s Investors Service to strip France, Europe’s second-biggest economy, of its top credit rating. The extra yield demanded to lend to AAA rated France for 10 years was 158 basis points more than the German rate at 11:51 a.m. today. The gap was 200 basis points on Nov. 17, the widest spread since 1990, up from 28 in April. The French 10-year yield was at 3.5 percent, about midway between top-rated Holland and Belgium, which is graded one level lower at Aa1 by Moody’s. French borrowing costs are more than a percentage point above the AAA rated U.K. “France isn’t trading like a AAA,” said Bill Blain, a strategist at Newedge Group in London, who recommends buying U.K. government debt. “The market has made its judgment already.”

Hungary May Have to Bow to IMF Conditions to Access Financial Assistance (Source: Bloomberg)
Hungary’s government may have to reverse its position on ruling out International Monetary Fund conditions in exchange for financial aid, according to Barclays Plc, Goldman Sachs Group Inc. and Capital Economics. Prime Minister Viktor Orban last week abandoned his policy of shunning the Washington-based lender, seeking help after a Standard & Poor’s threat to downgrade Hungary’s debt to junk sent the forint to a record low. He may have to do another reversal and scrap emergency taxes on some industries and ease the burden of a mortgage-repayment plan on banks, said Neil Shearing, an emerging-markets analyst at Capital Economics Ltd. The government has scrapped two debt sales and reduced the size of another eight auctions in the last three months as the euro region’s debt crisis deepened. The threat of market turmoil may force Orban to back down from insisting on an IMF agreement that won’t infringe on the country’s “economic sovereignty,” Barclays Capital economist Christian Keller said.

Australia’s Lower House Passes Gillard’s Mining Tax as Greens Support Bill (Source: Bloomberg)
Australia’s lower house of parliament passed legislation for a 30 percent tax on coal and iron-ore profits as independent lawmakers and the Greens Party backed Prime Minister Julia Gillard’s plan. The Minerals Resource Rent Tax Bill faces a vote next year in the upper-house Senate, where the Greens hold the balance of power, to become law. BHP Billiton Ltd. (BHP), Rio Tinto Group and other iron-ore and coal producers face paying about A$11 billion ($10.8 billion) in extra charges in the first three years of the tax. Australia’s iron ore shipments surged to a record A$6.3 billion in September as demand from China and India for raw materials helps power the Australian economy. “The benefits of the resources boom are one step closer to flowing to all Australians,” Treasurer Wayne Swan said in an e- mailed statement. The levy will “help us lock in the benefits of the boom” for all parts of the economy, he said.

Mexico Peso Strengthens From Seven-Week Low on Faster-Than-Forecast Growth (Source: Bloomberg)
Mexico’s peso rose from a seven-week low after a report showed Latin America’s second-biggest economy grew more than analysts forecast in the third quarter. The peso gained 0.3 percent to 13.9785 per U.S. dollar at the close in Mexico City, from 14.0165 yesterday, the weakest level since Oct. 3. The currency has declined 12 percent this year, the worst performance among the six most-traded Latin American currencies tracked by Bloomberg. The peso reversed earlier declines today and rose after the national statistics agency said Mexico’s gross domestic product expanded 4.5 percent in the third quarter from a year earlier, exceeding the 3.9 percent median estimate from 17 analysts surveyed by Bloomberg. The better-than-forecast Mexican GDP “gives a certainty and a stability” to the peso, Omar Martin del Campo, head trader at Banco Ve Por Mas SA in Mexico City, said by phone. “But we’re not bullet-proof from the international situation, what’s happening in Europe and in the U.S.”

CME Group Increases MF Global Customer Guarantee Payment to $550 Million (Source: Bloomberg)
CME Group Inc. (CME), the world’s largest futures exchange, increased the amount it’s willing to guarantee to the bankruptcy trustee of MF Global Holdings Ltd. to $550 million from $250 million. “CME Group’s proposal is designed to increase the payout percentage from 60 percent to 75 percent, and to accelerate the timing of that distribution to early December,” the Chicago- based company said today in an e-mailed statement. James Giddens, the trustee appointed to liquidate the company and distribute funds to customers, has said he could return 60 percent of client money as of today. CME Group also said it was “confident” that the trustee’s increased total of missing customer money was wrong. “While the final accounting of customer segregated assets and claims will occur in the bankruptcy process, CME Group is confident that reports of significantly larger shortfalls are incorrect,” the company said.