Asian Stocks Drop as S&P Puts Euro Nations on Downgrade Watch (Source: Bloomberg)
Asian stocks (MXAPJ) fell, with a benchmark gauge headed for its first loss in seven days, after Standard & Poor’s said it may cut credit ratings on Germany, France and 13 other members of the euro amid the worsening debt crisis. Toyota Motor Corp. (7203), the world’s biggest carmaker by market value, slid 0.7 percent in Tokyo. Tosoh Corp., a maker of chemical products, slid 3.5 percent after Mizuho Securities Co. cut its rating on the stock to “neutral” from “buy.” Newcrest Mining Ltd. (NCM), an Australian gold producer, declined 2.5 percent after Deutsche Bank AG cut its rating to “hold” from “buy.” The MSCI Asia Pacific Index fell 0.2 percent to 118.01 as of 9:33 a.m. in Tokyo, set to end its longest winning streak since Oct. 13. All but two of 10 industry groups on the measure declined, with about twice as many stocks retreating as gaining.
U.S. Stocks Advance as Banks Gain on Europe’s Moves to Tame Debt Crisis (Source: Bloomberg)
U.S. stocks rose, following the best weekly rally since 2009, as optimism that Europe will tame its debt crisis helped the market weather a late-day selloff on reports that euro-area nations' credit outlooks may be cut. All 10 groups in the Standard & Poor’s 500 Index gained, with a gauge of financial shares (S5FINL) adding 2.1 percent. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) advanced at least 2.6 percent. MetLife Inc., the largest U.S. life insurer, increased 3.7 percent after saying earnings will probably rise in 2012. Gannett (GCI) Co., the owner of newspapers including USA Today, surged 10 percent as Lazard Capital Markets raised its recommendation. The S&P 500 rose 1 percent to 1,257.08 at 4 p.m. New York time, extending last week’s 7.4 percent rally. The benchmark measure briefly traded above its average price (SPX) of the past 200 days of about 1,265 today. The Dow Jones Industrial Average climbed 78.41 points, or 0.7 percent, to 12,097.83.
No Lost Decade for S&P 500 as Market Value Bias Masks Rally (Source: Bloomberg)
Even with the Standard & Poor’s 500 Index down 19 percent since the bursting of the technology bubble in 2000, it’s been no lost decade for stocks. The benchmark gauge for American common equity climbed 66 percent from March 24, 2000, through Dec. 2, after stripping out adjustments for market value, which gives equal credit to Exxon Mobil Corp. (XOM), whose shares are worth $382.5 billion, and Monster Worldwide Inc. (MWW), at $945.6 million. That’s little help for most investors, whose returns reflect the capitalization-weighted index, says Cliff Asness at AQR Capital Management LLC.
Gains in the S&P 500 Equal Weighted Index through the dot- com tumble, the Sept. 11 attacks, the real-estate collapse and the worst financial crisis since the Great Depression show the resilience of U.S. companies that are forecast to report record earnings this year even as Europe’s debt crisis threatens growth again. Declines in the S&P 500’s biggest members have left them cheaper (OEX) compared with the full index than 89 percent of the time since 2000, according to data compiled by Bloomberg.
Paulson Fund Loses 46% in 2011 Through November (Source: Bloomberg)
John Paulson, the billionaire money manager having his worst year, has lost 46 percent in 2011 through November in one of his largest hedge funds, according to an investor update obtained by Bloomberg News. Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 3.6 percent last month. The fund’s gold share class dropped 2.7 percent in November and 29 percent this year. Paulson & Co., which is based in New York and manages $28 billion, has lost money this year on investments including Citigroup Inc., Bank of America Corp. and Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. Paulson, 55, cut the so-called net exposure in his main hedge funds to 30 percent last month and reduced bullish bets across all his funds.
Japanese Stocks Decline After S&P Warns Germany, France of Downgrade (Source: Bloomberg)
Japanese stocks fell for the first time in four days after Standard & Poor’s said it may strip Europe’s biggest economies of their AAA ratings amid the region’s worsening debt crisis. Toyota Motor Corp. (7203), Asia’s biggest carmaker, slid 1.5 percent. Kyocera Corp., a maker of electronic parts that earns about a third of its sales in the U.S. and Europe, lost 1.8 percent after the yen strengthened, cutting the outlook of the exporter’s outlook. Seiko Epson Corp. (6724) sank 3.2 percent after Goldman Sachs Group Inc. lowered the rating on the electronics device maker. “The downgrade news isn’t good because that may cause problems such as a hike in interest rates and other lingering financial issues,” Naoteru Teraoka, general manager at Tokyo- based Chuo Mitsui Asset Management Co., which oversees about $20 billion. The market has to take it negatively. Psychologically, it’s not good.”
Credit Squeeze Hits Asia Trade Finance (Source: Bloomberg)
The Asian Development Bank is preparing for a surge in demand for its trade financing, with a pull-back in lending by European banks risking a greater credit squeeze for some Asian nations than seen in 2008. “The trade-finance program is filling persistent market gaps, but it will become even more important,” Steve Beck, who heads the Manila-based ADB’s unit that provides credit and guarantees for imports and exports, said in an interview. “With some major European banks retrenching from the trade-finance business, we see that the gaps are increasing,” he said, without naming the lenders. Beck sees growth in his $3 billion operation accelerating from a pace already in excess of 25 percent this year, with a credit crunch having the biggest impact on poorer emerging markets including Sri Lanka, Bangladesh and Vietnam. At stake is averting a 2008-style collapse in trade that impairs growth in the continent that led the world out of the global recession.
Economy Avoiding ‘Death Spiral’ Increases Bullish Fund Wagers: Commodities (Source: Bloomberg)
Hedge funds boosted wagers on higher commodity prices for the first time in three weeks as the outlook for the U.S. economy improved. Money managers increased combined bullish positions across 18 U.S. futures and options by 0.7 percent to 566,494 contracts in the week ended Nov. 29, Commodity Futures Trading Commission data show. Investors trimmed their bearish holdings in copper for the first time in four weeks, and pared bets on lower wheat and soybean prices. The value of world equities rose more than $2.2 trillion last week as the MSCI All-Country World Index climbed for five consecutive days, the longest rally since October. The Federal Reserve and five other central banks made it easier and cheaper for banks to obtain dollars in emergencies and China, the biggest consumer of everything from energy to copper to soybeans, lowered banks’ reserve requirements for the first time since 2008. The U.S. jobless rate fell to a two-year low in November.
U.S. Services Grow at Slowest Pace Since 2010 (Source: Bloomberg)
Service industries in the U.S. expanded in November at the slowest pace since January 2010 as employment cooled, a sign improvement in the biggest part of the economy will be uneven. The Institute for Supply Management’s non-manufacturing index unexpectedly fell to 52 last month from 52.9 in October, the Tempe, Arizona based-group said today. The median forecast in a Bloomberg News survey called for a gain to 53.9. Fifty is the dividing line between expansion and contraction. Falling home prices, slow wage growth and limited job gains may make it difficult for households to sustain the pace of spending after the holiday shopping season. For companies, Europe’s debt crisis and a lack of clarity on the U.S. budget deficit and taxes remain obstacles to investment and hiring.
Chicago’s Evans Says Its ‘Imperative’ for FOMC to Escape Liquidity Trap (Source: Bloomberg)
Federal Reserve Bank of Chicago President Charles Evans said further monetary stimulus is needed now to help the U.S. economy escape from a “liquidity trap.” “There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape,” Evans said in a speech today in Muncie, Indiana. “It is imperative to undertake action now.” Evans, 53, voted against the Federal Open Market Committee’s November decision to maintain its level of stimulus, casting the U.S. central bank’s first dissent in favor of further easing since December 2007. His vote contrasted with those by three of his colleagues, Dallas Fed President Richard Fisher, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis, who dissented against further easing in August and September.
S&P Places 15 Euro Nations on Warning for Downgrade (Source: Bloomberg)
Standard & Poor’s said Germany and France may be stripped of their AAA credit ratings as the debt crisis prompts 15 euro nations to be put on review for possible downgrade. The euro area’s six AAA rated countries are among the nations to be placed on a negative outlook, and their credit ratings may be cut depending on the result of a summit of European Union leaders on Dec. 9, S&P said today in a statement. The euro reversed its gains and U.S. Treasuries rose earlier today after the Financial Times reported that the credit-ranking firm planned to reduce six AAA outlooks. “Systemic stress in the eurozone has risen in recent weeks and reached such a level that a review of all eurozone sovereign ratings is warranted,” S&P said in a statement.
Tax Cuts Seen Undermining Social Security (Source: Bloomberg)
Some Democratic lawmakers say that, while President Barack Obama’s plan to cut payroll taxes may strengthen the U.S. economy, it may have some unintended fallout: weakening Social Security. The lawmakers and advocacy groups say they are concerned the tax cuts may undermine political support for the retirement program, which provides benefits to almost 55 million Americans and is funded by the payroll levies. “I don’t object to putting more money in people’s pockets, and there are lots of ways to do that, but not with Social Security,” said Representative Rush Holt of New Jersey, who said he will have a hard time supporting the White House plan.
Singapore Lending Surges 91% to Record $38B (Source: Bloomberg)
Syndicated lending in Singapore has almost doubled to a record this year, driven by demand from property developers and a surge in commodity trading. Loans surged 91 percent to $38.3 billion this year from the same period of 2010, beating the previous record of $30.7 billion in all of 2008, according to data compiled by Bloomberg. The total doesn’t include a S$5 billion ($3.9 billion) loan sought by Temasek Holdings Pte and Khazanah Nasional Bhd., the state-owned investment companies of Singapore and Malaysia, to fund S$11 billion of hotels, apartments, offices and shops. “Growth for the Singapore market has been boosted by a huge increase in financings for commodity sector,” said Boey Yin Chong, managing director of syndicated finance at DBS Bank Ltd. (DBS), Singapore’s biggest arranger of syndicated loans. “From a $500 million base in 2007 we’ll probably hit $9 billion plus by the end of 2011.”
South Korea Economy Expands More-Than-Estimated 0.8% on Car, Metal Exports (Source: Bloomberg)
South Korea’s economy expanded more than the central bank initially estimated in the third quarter as exports of cars and metal products increased. Gross domestic product grew 0.8 percent over the three months through September from the second quarter, compared with an October estimate of 0.7 percent, the Bank of Korea said in Seoul today. The economy expanded 3.5 percent from a year earlier, beating the bank’s October estimate of 3.4 percent. Europe’s debt crisis has weighed on Asia’s growth, with China recording the weakest manufacturing since 2009 for last month. All nine economists surveyed by Bloomberg News expect the Bank of Korea to keep interest rates unchanged for a sixth straight month on Dec. 8, the longest pause since tightening began in July 2010.
Merkel, Sarkozy Push for EU Revamp as S&P Issues Warning (Source: Bloomberg)
German Chancellor Angela Merkel and French President Nicolas Sarkozy strengthened their push for new rules to tighten euro area economic cooperation after Standard & Poor’s said it may downgrade credit ratings across the region. The leaders of Europe’s two biggest economies responded in a joint statement late yesterday that they “took note” of the move by S&P, while both countries “reinforce their conviction” that common proposals for closer fiscal union in the European Union will “strengthen coordination of budget and economic policy,” and promote stability and growth. “The actions of the last three years have shown that the euro zone governments are not prepared to act collectively in a way that convinces markets,” said Paul Donovan, deputy head of global economics at UBS AG in London. The S&P move “may perhaps heighten the desirability of coming out with a compelling solution for the French and the Germans.”
Europe Must Move Quickly to Head Off Bank Losses, Weinberg Says: Tom Keene (Source: Bloomberg)
European policy makers must quickly take more coordinated fiscal and monetary action to head off major losses by banks amid the region’s sovereign-debt crisis, according to Carl Weinberg of High Frequency Economics. Officials “have to find a way to stabilize the banking system fast,” Weinberg said today in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “It’s the only way out of this.” Leaders in Europe should move quickly to head off bank losses and to stimulate economic growth, said Weinberg, founder and chief economist of Valhalla, New York-based High Frequency.
LDK Taps Shanghai After Singapore Plunge (Source: Bloomberg)
LDK Solar Co., the Chinese solar- panel maker with bonds trading at half their face value in Singapore, is seeking to refinance by selling debt in Shanghai, where its notes trade at a premium. The 500 million-yuan ($79 million) sale of three-year notes tomorrow is part of a 3 billion-yuan program by the company to replace shorter-term liabilities. Traders are quoting Xinyu, south-central China-based LDK’s three-year debt at 5,000 yuan per 10,000 yuan bond in Singapore, yielding 49.5 percent, data compiled by Bloomberg show. The company’s 2012 yuan-denominated debt sold in China in October yields 7.08 percent.
While slowing orders from Europe and a Moody’s Investors Service report raising “red flags” about corporate governance at 61 Chinese companies have driven up offshore borrowing costs for LDK and its peers, government support for the industry has ensured demand for their Chinese debt from local banks. The yield on 6.5 percent convertible bonds of Renewable Energy Corp., an Oslo-based solar-energy materials producer, is 36 percent. St. Peters, Missouri-based MEMC Electronic Material Inc.’S 2019 bond yields 12.2 percent.
No comments:
Post a Comment