Asia Stocks Fall Ahead of European Debt Summit (Source: Bloomberg)
Asian stocks dropped after Japan’s machinery orders unexpectedly fell in October, and ahead of a European summit on the region’s sovereign debt crisis. Tokyo Electric Power Co., the operator of the power plant at the center of the biggest nuclear disaster in 25 years, sank 9.5 percent after the Mainichi newspaper reported it may be effectively nationalized. Fanuc Corp. (6954), a maker of industrial robots, slid 0.6 percent in Tokyo. LG Electronics Inc. (066570), a home appliances maker that gets more than a fifth of its revenue from Europe, fell 3.3 percent in Seoul. The MSCI Asia Pacific Index (MXAP) slid 0.4 percent to 117.66 as of 10:07 a.m. in Tokyo. All but one of 10 industry groups on the measure dropped, with more than twice as many stocks (MXAPJ) declining as advancing.
U.S. Stocks Rise Amid Optimism on Europe Efforts to Fight Crisis (Source: Bloomberg)
U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since October, amid optimism that European leaders will announce further efforts to halt the debt crisis at a summit this week. JPMorgan (JPM) Chase & Co. and Bank of America Corp. rose at least 1.9 percent to lead gains in the Dow. Financial shares increased the most among groups in the Standard & Poor’s 500 Index, rallying 1.2 percent after an earlier loss. Caterpillar Inc. (CAT) dropped 1.1 percent, pacing declines among industrial companies, while Peabody Energy Corp. fell 3.4 percent after Goldman Sachs Group Inc. cut its ratings on coal producers. The S&P 500 climbed 0.2 percent to 1,261.01 at 4 p.m. New York time, after dropping as much as 1.1 percent earlier. The benchmark gauge for American equities advanced 1.1 percent over the previous two sessions. The Dow rose 46.24 points, or 0.4 percent, to 12,196.37.
European Stocks Decline After Germany Rejects Combining Euro Bailout Funds (Source: Bloomberg)
European stocks dropped after Germany rejected combining the current and permanent euro-area rescue funds and expressed pessimism over the outcome of a European Union summit this week. Banca Monte dei Paschi di Siena SpA (BMPS), Italy’s third-biggest bank, led a drop among lenders. ING Groep NV (INGA) fell 4.7 percent after saying it plans to take a charge related to its U.S. annuity business. Airline shares slid after the International Air Transport Association forecast a decline in industry profits in 2012. The benchmark Stoxx Europe 600 Index retreated 0.2 percent to 241.44 at the close in London, after earlier gaining as much as 1.2 percent. The gauge last week posted its biggest rally since November 2008 as central banks lowered the interest rate on dollar funding and China reduced its reserve ratio for banks. The Stoxx 600 slipped 0.3 percent yesterday after Standard & Poor’s put 15 euro-area nations on review for a potential downgrade.
German Stocks Retreat as Government Rejects Running Bailout Funds Together (Source: Bloomberg)
German stocks (UKX) declined before a European Union summit this week as Chancellor Angela Merkel’s government said it will prevent the euro area from running its temporary rescue fund alongside its permanent bailout facility. Metro AG (MEO), Germany’s largest retailer, retreated for a second day after analysts downgraded the stock. Deutsche Lufthansa AG (LHA) fell 3.9 percent as the International Air Transport Association reduced its forecast for airlines’ profit. The DAX Index (DAX) dropped 0.6 percent to 5,994.73 at the close in Frankfurt, having earlier climbed as much as 1.8 percent. The benchmark measure retreated 1.3 percent yesterday as Standard & Poor’s put 15 euro-area nations on watch for potential rating downgrades. The broader HDAX Index also declined 0.6 percent today.
Japan Stocks Fall Before European Debt Summmit as Machinery Orders Drop (Source: Bloomberg)
Japanese stocks (TPX) declined after the nation’s machinery orders unexpectedly fell for a second straight month and before a European summit on the debt crisis. Fanuc Corp., Japan’s biggest maker of industrial robots, slid 1.2 percent. Tokyo Electric Power Co., owner of the crippled Fukushima Dai-Ichi nuclear power plant, plunged 14 percent after a report it may effectively be nationalized. Mitsubishi Corp., the country’s biggest commodities trader, fell 1.4 percent after oil and metals prices dropped. The Nikkei 225 Stock Average fell 0.7 percent to 8,658.12 as of 9:28 a.m. in Tokyo. The broader Topix lost 0.5 percent to 745.88, with about eight shares dropping for every five that gained.
DJIA 14,000 Depends on U.S. Saying We’re All in This Together With Europe (Source: Bloomberg)
Never before has the euro influenced U.S. stocks as much as this year, a sign that American equities aren’t going anywhere until Europe’s credit crisis is solved. The link between the Dow Jones Industrial Average and swings in the currency reached a record on Dec. 2, according to data compiled by Bloomberg. The so-called correlation coefficient showing how much two markets rise and fall in tandem hit 0.85, the highest level since the euro was founded in 1999, data on 60-day rolling averages show. A reading of 1 means assets are moving in lockstep. Speculation about whether Greece, Ireland and Portugal will avoid default is drowning out results from companies such as Akron, Ohio-based Goodyear Tire & Rubber Co. and Target Corp. in Minneapolis. While record earnings (SPX) and an improving economy should be pushing the Dow toward its October 2007 record of 14,164.53, they’re not because Europe is overshadowing the good news, said Kevin Rendino, a money manager at New York-based BlackRock Inc.
Consumer Credit in U.S. Increases to Two-Year High on Auto, Student Loans (Source: Bloomberg)
U.S. consumer borrowing rose in October to the highest level in two years, propelled by gains in non-revolving debt like auto and student loans. Credit increased by $7.65 billion to $2.46 trillion, the most since October 2009, Federal Reserve figures showed today in Washington. The advance was in line with the median forecast of economists surveyed by Bloomberg News that projected a $7 billion gain. The data indicate consumers are relying more on credit to sustain spending as income gains fail to keep up with inflation and home prices drop. At the same time, increasing employment may be making Americans more willing to take on more debt heading into the holiday shopping season.
Tax Inflow Shows Consumers in U.S. May Spend More Than Estimated: Economy (Source: Bloomberg)
Rising tax receipts show household incomes in the U.S. are growing faster than currently estimated, and by enough to sustain consumer spending, according to economists like Joe LaVorgna. Tax revenue from employee pay was up 4.8 percent in the third quarter from a year earlier after adjusting for changes in withholding rates over the past few years, said LaVorgna, who is the chief U.S. economist at Deutsche Bank Securities Inc. in New York. By contrast, the Commerce Department’s figures show wages and salaries climbed 2.9 percent over the same period. Taxes more accurately reflect the state of the job market because they are not subject to revision and workers don’t pay the Internal Revenue Service on “phantom” wages, LaVorgna said in a note to clients yesterday. The revenue numbers also mean the latest readings on savings are too low, eliminating another obstacle to a pickup in household purchases, he said.
Singapore Imposes More Property Taxes to Cool Prices, Curb Economic Risks (Source: Bloomberg)
Singapore imposed additional taxes on purchases of private residential property to curb excessive investment that may spur economic and banking-industry risks. Foreigners and corporate entities will have to pay an additional 10 percent stamp duty, the government said in a statement yesterday. The extra levy will be 3 percent for permanent residents purchasing a second home, as well as for citizens buying their third residential property. The taxes apply from today. “We have always had open markets and must keep them that way,” Finance Minister Tharman Shanmugaratnam said in the statement. “However, the reality is that investment flows into our property market are now larger than before, and unlikely to recede as long as interest rates remain low. The additional buyer’s stamp duty should help cool investment demand, and avoid the prospect of a major, destabilizing correction further down the road.”
Japan Machinery Orders Unexpectedly Slide on Strong Yen, Global Slowdown (Source: Bloomberg)
Japan’s machinery orders unexpectedly fell for a second straight month in October, signaling that a slowing global economy and the strong yen are prompting companies to postpone investment. Bookings, an indicator of capital spending, decreased 6.9 percent from a month earlier, the Cabinet Office said in Tokyo today. The median forecast of 27 economists surveyed by Bloomberg News was for a 0.5 percent gain. Orders fell 8.2 percent in September. Today’s report indicates that capital expenditure could slow next year as Japan struggles to recover from the March 11 earthquake and tsunami. Prime Minister Yoshihiko Noda ordered a fourth extra budget last week, a step unseen since postwar reconstruction, to shore up an economy threatened by the strong yen, floods in Thailand and financial turmoil in Europe.
Bank of Korea Holds Rate for Sixth Month (Source: Bloomberg)
The Bank of Korea refrained from raising borrowing costs for a sixth straight month as the deepening European debt crisis and global slowdown imperil exports and growth. Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rate unchanged at 3.25 percent, the central bank said in a statement in Seoul today. The decision was predicted by all 16 economists surveyed by Bloomberg News. South Korea joins efforts from China to Indonesia to Australia to shield Asia-Pacific economies from the European debt crisis. The Bank of Korea may lower its growth outlook for this year and next because of the global economic slowdown this week, Lee Jong Kyu, deputy director-general at the bank, said in an interview in Bali on Dec. 2.
German Factories Weather Debt Turmoil Hurting Region: Economy (Source: Bloomberg)
German industrial production rose more than economists forecast in October as factories weathered debt turmoil that hurt output in other countries across the region and threatens to push it into a recession. Production climbed 0.8 percent from September, when it dropped 2.8 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.3 percent increase, according to the median of 33 estimates in a Bloomberg News survey. Separate reports showed industrial output declined in the U.K., Italy and Norway. Europe’s two-year-old debt crisis has damped demand for German goods, increasing the chance that the economy will contract. Still, factory orders rebounded 5.2 percent in October, the ministry said yesterday, and business confidence and hiring increased in November, suggesting domestic consumption may help Germany weather the downturn.
ECB May Dig Deeper Into Crisis Toolbox as Leaders Mark ‘Date With Destiny’ (Source: Bloomberg)
The European Central Bank may delve deeper into its toolbox today to stimulate bank lending and fight off a recession as Europe’s leaders gather to lay the foundations for a fiscal union. ECB policy makers meeting in Frankfurt will cut the benchmark interest rate by a quarter percentage point to 1 percent, according to 53 of 58 economists in a Bloomberg News survey. They may also loosen collateral criteria to give banks greater access to cheap cash and offer longer-term loans, said three euro-area officials with knowledge of the deliberations. Hours later, Europe’s leaders will convene in Brussels for talks to frame the fifth “comprehensive” solution in 19 months to a debt crisis that’s left Germany and France facing the threat of losing their AAA rating from Standard & Poor’s. The ECB says that governments must address the cause of the turmoil as it focuses on getting banks lending again rather than increasing purchases of indebted nations’ bonds.
Draghi Courts Bundesbank in Bid to Avoid Trichet’s Fate on Bond Purchases (Source: Bloomberg)
Mario Draghi knows he can’t afford to repeat Jean-Claude Trichet’s mistake. A month into his term as European Central Bank president, Draghi is being careful not to alienate Bundesbank chief Jens Weidmann, a vocal opponent of the ECB’s bond purchases. As Europe’s sovereign debt turmoil enters what could be its decisive days, Draghi needs to keep Germany’s central banker onside for any expansion of the ECB’s crisis-fighting role, say economists from Barclays Capital to Societe Generale SA. “Draghi is likely to be very conscious and aware of the Bundesbank’s perspective,” said Julian Callow, chief European economist at Barclays in London. “It’s going to be a hard act for Draghi to balance strong views for dramatic action and calls from Weidmann for a more cautious approach.”
Euro-Area Rescue Fund to Start Short-Term Debt Sales by End of This Month (Source: Bloomberg)
The euro area’s rescue fund plans to begin selling short-term debt by the end of the month to meet its expanded role in tackling the region’s debt crisis. The 440 billion-euro ($589 billion) European Financial Stability Facility announced a funding program that will focus on three-, six- and 12-month bills. The first auction is expected to take place before year-end, the EFSF said in an e- mailed statement today. The Luxembourg-based EFSF gained the authority in October to buy sovereign bonds on the primary and secondary markets, offer credit lines to governments and grant aid to banks as the region’s debt troubles spread. The EFSF’s sole role until then had been to sell bonds to finance rescue loans.
Euro Nations Lose One Nation by Biggest Plurality in Global Investor Poll (Source: Bloomberg)
Most international investors predict at least one nation will eventually dump the euro and they say greater fiscal ties or a smaller currency area are the best fixes for the region’s debt crisis, according to the quarterly Bloomberg Global Poll. As Europe’s leaders craft their fifth “comprehensive” solution in 19 months, almost half the respondents in the poll conducted Dec. 5-6 say one or more countries will leave the 17- nation bloc within a year and almost a third more predict an exit by the end of 2016. Thirty-seven percent say fiscal union is the most effective remedy for the current turmoil, with 24 percent endorsing a shrinking of the euro’s membership. The poll of 1,097 investors, traders and analysts who are Bloomberg subscribers highlights the pressure on European policy makers as they meet in Brussels this week to consider tougher budget rules under a Dec. 5 threat by Standard & Poor’s to downgrade 15 euro nations. The survey also validates European Central Bank President Mario Draghi’s push for a “fiscal compact,” with just 15 percent of respondents saying so-called quantitative easing is the top measure for ending the turmoil.
ECB Officials Said to Plan Additional Measures to Stimulate Bank Lending (Source: Bloomberg)
The European Central Bank may announce a range of measures tomorrow to stimulate bank lending, said three euro-area officials with knowledge of policy makers’ deliberations. Options on the table include loosening collateral criteria so that institutions have more access to cheap ECB cash and offering them longer-term loans to grease the flow of credit to the economy, said the officials, who spoke on condition of anonymity because the discussions are private. Two said an interest rate cut is likely, with only the size of the reduction to be determined for the monthly decision tomorrow. The ECB is focusing on getting banks lending again rather than increasing its government bond purchases to fight Europe’s debt crisis. The central bank’s insistence that governments take measures to restore investor confidence appears to have paid dividends, with Italian and Spanish yields plunging after Germany and France agreed to move the 17-nation euro area toward a fiscal union, a stance they reiterated today.
Australia Unexpectedly Shed 6,300 Jobs (Source: Bloomberg)
Australian employers unexpectedly reduced their payrolls in November as heightened risks to the global economy and a strong currency prompted the biggest cut in full-time jobs since April. The local currency retreated. The number of people employed fell by 6,300 after a revised increase of 16,800 in October, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 22 economists was for a 10,000 advance. The jobless rate rose to 5.3 percent from 5.2 percent. The data show the nation’s economy, which expanded more than forecast last quarter, may be succumbing to Europe’s sovereign-debt crisis. Traders boosted bets that Reserve Bank Governor Glenn Stevens will follow this week’s interest-rate cut with more next year.
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