20120109 1027 Global Market Related News.

Asian Stocks Drop for Third Day as Bullard Says New Fed Buying Is Unlikely (Source: Bloomberg)
Asian stocks (MXAPJ) outside of Japan dropped for a third day after Federal Bank of St. Louis President James Bullard said the Fed probably won’t begin a new round of bond purchases amid “encouraging” U.S. economic data. Samsung Electronics Co., the world’s second-biggest maker of mobile phones by sales, fell 2 percent in Seoul after retail sales in Europe fell more than estimated last month. James Hardie Industries SE (JHX), a building materials supplier that gets about 68 percent of sales from the U.S., slid 1.5 percent. David Jones Ltd. led Australian retailers lower after the nation’s retail sales unexpectedly stalled. “An improving U.S. economy doesn’t necessarily mean we’re firmly in a recovery,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees about $326 billion of assets globally. “The question is how sustainable that will be. Europe remains a risk. We’ll probably see more pain before we see a resolution.”

U.S. Stocks Rise as S&P 500 Index Posts Its Second-Best Start Since 2006 (Source: Bloomberg)
U.S. stocks (SPX) rose this week, sending the Standard & Poor’s 500 Index to its second-best start of a year since 2006, as reports on manufacturing from America to China bolstered optimism about the global economy. Equities fell on the last day of the week after growth in U.S. jobs failed to lift the S&P 500 above its October high. Bank of America Corp. (BAC) and Microsoft Corp. (MSFT) jumped more than 8.3 percent to lead advances in the Dow Jones Industrial Average (INDU) during the holiday-shortened week. Netflix Inc. (NFLX) soared 25 percent after reporting online viewing that surpassed an estimate from BTIG LLC. Sears Holdings Corp. (SHLD) and AutoNation Inc. (AN) fell more than 8.1 percent to pace declines among retailers. The S&P 500 climbed 1.6 percent to 1,277.81 in the first four trading days of the year, the second-best start in the past six years after a 2.4 percent gain in 2010, according to data compiled by Bloomberg. The Dow added 1.2 percent, or 142.36 points, to 12,359.92 for the week.

European Stocks Advance for First Week of 2012 as Reports Boost Optimism (Source: Bloomberg)
European stocks (SXXP) advanced in the first week of 2012 as economic reports from around the world added to optimism that the global economy can weather the fallout from the euro area’s sovereign-debt crisis. Eurasian Natural Resources Corp. and Fiat SpA led gains in mining companies and carmakers, both climbing at least 11 percent. Banks limited gains as UniCredit SpA slumped 38 percent, its largest drop since at least 1989, after announcing that it will hold its planned rights offer at a discount. The benchmark Stoxx Europe 600 Index (SXXP) rose 1.2 percent to 247.53 in the first five trading days of 2012, for the benchmark measure’s third-consecutive week of gains. The gauge has advanced 5.9 percent (SXXP) since Dec. 16 as U.S. reports from manufacturing activity to durable-goods orders showed the economic recovery is gathering pace.

Retail Sales Probably Rose in December: U.S. Economy Preview (Source: Bloomberg)
Sales (RSTAMOM) at U.S. retailers probably rose in December as Americans bought discounted holiday items, a sign the economy picked up heading into 2012, economists said before a report this week. The projected 0.3 percent gain in purchases would follow a 0.2 percent advance in November, according to the median (RSTAMOM) forecast of 56 economists surveyed by Bloomberg News ahead of Commerce Department figures on Jan. 12. Other data may show consumer confidence rose this month. Retailers like Macy’s Inc. (M) spurred demand by cutting prices and extending hours to ensure consumers, strapped by falling home prices and stagnant wages, shopped for holiday gifts. A report last week showed unemployment fell to an almost three- year low and hiring accelerated, indicating an improving job market will give workers the means to sustain purchases.

Bullard Says New Quantitative Easing Unlikely (Source: Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard said the Fed probably won’t begin a new round of bond purchases following “encouraging” data showing the U.S. economy gained 200,000 payroll jobs in December. “Hopefully, we will keep this momentum going in 2012,” Bullard told reporters yesterday after a speech in Chicago. “The tone of the data has been very strong” and the central bank “probably could wait and see for now” before deciding whether there is a need for more accommodation, he said. Policy makers are divided over whether they should see if the economy deteriorates before taking additional steps to try cutting borrowing costs and boosting job creation. The U.S. economy is growing moderately amid “apparent slowing” in global growth, with “some improvement in overall labor market conditions,” Fed officials said last month. The unemployment rate fell to 8.5 percent from 8.7 percent in November, figures from the Labor Department showed last week.

Jobs Report in U.S. ‘Encouraging,’ New Fed Buying Unlikely, Bullard Says (Source: Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard said data showing the economy gained 200,000 payroll jobs in December is “encouraging” and the Fed probably won’t begin a new round of bond purchases. “Hopefully, we will keep this momentum going in 2012,” Bullard told reporters today after a speech in Chicago. “The tone of the data has been very strong” and the central bank “probably could wait and see for now” before deciding whether there is a need for more accommodation, he said. Policy makers are divided over whether they should see if the economy deteriorates before taking additional steps to try cutting borrowing costs and boosting job creation. The U.S. economy is growing moderately amid “apparent slowing” in global growth, with “some improvement in overall labor market conditions,” Fed officials said last month. The unemployment rate fell to 8.5 percent from 8.7 percent in November, figures from the Labor Department showed yesterday.

Fed’s Monetary Policy Is Effective Even With Rates Near Zero, Bullard Says (Source: Bloomberg)
Federal Reserve Bank of St. Louis President James Bullard said monetary policy has influenced inflation and price expectations, even with the benchmark interest rate near zero since December 2008. “Stabilization policy should be left to the monetary authority, which can operate effectively” with interest rates near zero, Bullard said today in a speech in Chicago. By contrast, the use of tax and spending changes to respond to shocks in the economy over the short run “has run its course.”
Fed officials are divided over whether the central bank should wait to see if the economy deteriorates before taking additional steps to try cutting borrowing costs and boosting job creation. The U.S. economy is growing moderately amid “apparent slowing” in global growth, with “some improvement in overall labor market conditions,” Fed officials said last month. The economy gained 200,000 payroll jobs in December and the unemployment rate fell to 8.5 percent from 8.7 percent in November, figures from the Labor Department showed yesterday.

Economy Brightening in 2012 Initial Data From U.S. Belying Grim Investors (Source: Bloomberg)
The U.S. economy is beginning 2012 on a brighter note in a sign investors may be too pessimistic. Payrolls rose 200,000 in December, double the gain in November, a Labor Department report showed yesterday. A weekly measure of consumer confidence ended 2011 at a five-month high. And manufacturers reported their business in December grew at the fastest pace in six months. The combination indicates the world’s largest economy has enough staying power to withstand a recession in Europe and a slowdown in China. “Markets are absolutely preoccupied about the risks from Europe and the U.S. housing market,” said John Herrmann, senior fixed-income strategist at State Street Global Markets in Boston, and the second most-accurate U.S. economic forecaster based on data from the last two years compiled by Bloomberg. “Yet we’re finding the economy continues to hold together fairly resiliently. We’re getting a good handoff from the fourth quarter.”

Corporate Profit Growth Hits a Two-Year Low as U.S. Feels Drag From Europe (Source: Bloomberg)
U.S. corporations ended 2011 with the slowest profit growth in two years as the mending economy that lifted Macy’s Inc. (M) was met by a European slump that vexed companies more tied to global sales, such as Cisco Systems Inc. Standard & Poor’s 500 Index companies may have earned $24.74 a share (SPX) in the fourth quarter, according to analysts’ estimates compiled by Bloomberg as of Jan. 6. The projected 6 percent gain is the smallest against a year-earlier quarter (SPWPPRCT) since September 2009, just after the U.S. recovery began. “Slowing global growth, some impairment of export activity to Europe and perhaps even the rise of the dollar collectively have begun to sort of work against the multinational story,” said Mark Luschini, chief investment strategist at Philadelphia- based Janney Montgomery Scott LLC, which manages $54 billion. While growth is still “subpar,” he said he intends to invest more in the U.S. to avoid higher international risk.

Obama Odds May Rise as Unemployment Falls (Source: Bloomberg)
President Barack Obama called yesterday’s jobs report a sign the U.S. economy is on the rebound. His prospects for re-election may depend on it. The drop in the unemployment rate (USURTOT) in December to 8.5 percent, a three-year low, showed the job market gaining momentum heading into a presidential election campaign that will be shaped by the state of the economy. The Labor Department figures cap four months of declines in the unemployment rate and six consecutive months of jobs gains of 100,000 or more. Employers expanded payrolls by 200,000 in December, exceeding a median estimate of 155,000 in a Bloomberg News survey. For all of 2011, 1.64 million positions were created, the most since 2006, after a 940,000 increase in 2010.

U.S. Stocks Funds Have Second-Worst Year as Clients Pull Out (Source: Bloomberg)
U.S. stock mutual funds that invest in domestic equities had their second-biggest redemptions last year as record market swings sent investors to the perceived safety of bond funds. Investors pulled an estimated $132 billion from mutual funds that invest in U.S. stocks, the fifth straight year of withdrawals for domestic funds, according to preliminary data from the Investment Company Institute, a Washington-based trade group whose numbers go back to 1984. Withdrawals reached $147 billion in 2008 when the Standard & Poor’s 500 Index fell 37 percent, including dividends. Withdrawals accelerated in May and June amid concern that weaker European economies would not be able to repay their debts. They peaked in July as Congress debated whether to lift the nation’s debt ceiling.
Those events, as well as lingering memories of the 2008 selloff and a subpar U.S. economic recovery, may all have contributed to investor discontent, said Russel Kinnel, director of mutual fund research at Chicago-based Morningstar Inc. interview.

China Money Supply Growth Exceed Estimates (Source: Bloomberg)
China’s December lending and money supply growth exceeded economists’ estimates, signaling monetary conditions may be easing as the nation’s central bank said it must be prepared for possible shocks from the U.S. and Europe. New loans (CNLNNEW) totaled 640.5 billion yuan ($101 billion) for the month, exceeding the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply (CNMS2YOY), rose 13.6 percent, compared with the 12.9 percent median of 18 estimates. People’s Bank of China Governor Zhou Xiaochuan said yesterday the nation must be ready to combat possible shocks from Europe’s debt crisis and an uncertain U.S. economic outlook, echoing comments by Premier Wen Jiabao. China last month cut the reserve requirement for banks for the first time since 2008 as Europe’s debt crisis eroded demand for its exports and consumer prices moderated to the slowest pace in 14 months.

Shrinking China Surplus May Help Wen on Yuan (Source: Bloomberg)
China’s trade surplus may narrow to an eight-year low in 2012 as slowing external demand undermines exports, a shift that may help the nation rebuff overseas criticism for maintaining an undervalued exchange rate. Bank of America Corp., Credit Agricole CIB and Haitong Securities Co. estimate the surplus (CNFRBAL$) this year will slip below $102 billion. For December, the excess shrank to $9.45 billion, according to the median of 18 estimates in a Bloomberg News survey, indicating an annual surplus of $147.9 billion. The latest monthly figures are due tomorrow, before the arrival in Beijing of U.S. Treasury Secretary Timothy F. Geithner, who said last year that China’s yuan hadn’t risen fast enough. With a prolonged crisis in Europe, the biggest Chinese trading partner, Premier Wen Jiabao may have little appetite to accommodate Geithner’s request, analysts said.

No Consensus on China Stocks After Plunge (Source: Bloomberg)
Even after a two-year bear market wiped 33 percent from China’s benchmark stock index (SHCOMP), there’s no consensus on the direction in equity prices this year among the nation’s biggest and most accurate brokerage firms. The Shanghai Composite Index (SHCOMP) will gain 36 percent because slowing inflation will let policy makers cut interest rates and bank reserves, according to Zhang Han, a strategist at Guotai Junan Securities Co., the only major brokerage to foresee the slump. China International Capital Corp., led by the son of a former premier, forecasts a “slight” drop since the economy isn’t slowing enough to permit “aggressive” reductions in borrowing costs, said Hao Hong, CICC’s global equity strategist.
While China avoided the global recession in 2009 and is growing more than twice as fast as the world economy, the index has been the worst among the 10 biggest markets in the past two years, according to data compiled by Bloomberg. The central bank boosted rates and reserve requirements to curb property prices and inflation that reached a three-year high in July. Premier Wen Jiabao said on Jan. 3 that business conditions may be “relatively difficult” this quarter and monetary policy will be adjusted.

Hong Kong Says 2 Dead Birds Positive For Bird Flu (Source: CME)
The Hong Kong government said that two dead birds found in the New Territories earlier this week have tested positive for a lethal strain of bird flu, the latest development in the global resurgence of the deadly virus. The two black-headed gulls, a common winter visitor in Hong Kong, were found in separate parts of Hong Kong's rural hinterland. The government reiterated its pledge to conduct inspections of poultry farms to ensure proper precautions are made against bird flu. Renewed fears over the spread of the disease in Hong Kong came as Chinese authorities confirmed that the virus strain in a Shenzhen man--whose death Saturday was the first human case of bird flu in China in 18 months--was very similar to that found before the holidays on a dead bird.
Bird flu, also known as avian influenza, remains a threat primarily to poultry, not humans, among whom it is poorly transmitted. Nonetheless, scientists warn that mutations in the H5N1 strain of the disease could allow human-to-human spread and potentially create a global pandemic. Hong Kong has occasionally detected bird flu in poultry, but there have been no major outbreaks in the city since 1997, when the virus killed six people and led to the slaughter of 1.5 million birds in the territory.