Asian Stocks Swing Between Gains, Losses (Source: Bloomberg)
Asian stocks swung between gains and losses as mounting concern that Europe is heading toward a recession countered optimism the U.S. economy is improving. Mizuho Financial Group Inc., Japan’s third-largest lender by market value, fell 1.8 percent on concern Europe’s worsening sovereign-debt crisis will hurt bank earnings. Dainippon Sumitomo Pharma Co. sank 3.1 percent in Tokyo following a rating downgrade by Barclays Capital. James Hardie Industries SE (JHX), which counts the U.S. as its biggest market, gained 2.3 percent in Sydney after the Federal Reserve said the world’s biggest economy improved last month across most of the country. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 116.16 as of 9:40 a.m. in Tokyo, having swung between gains and losses at least five times. More than two shares dropped for each that rose on the measure. The gauge advanced 0.9 percent last week as manufacturing growth from China to the U.S. bolstered confidence in the global economy.
Japanese Stocks Snap Two-Day Rally on Mounting European Recession Concern (Source: Bloomberg)
Japanese stocks fell, snapping a two-day advance, as a shrinking German economy fed concern Europe is headed toward a recession. Canon Inc. (7751), a camera maker that gets about a third of its revenue in Europe, fell 0.9 percent as the yen traded near an 11-year high against the euro. Inpex Corp. (1605), Japan’s No. 1 energy explorer, slid 0.2 percent after oil prices fell. Olympus Corp. (7733), gained 4.6 percent after a newspaper reported the scandal-hit optics manufacturer may form an alliance with companies including Sony Corp. and Panasonic Corp. The Nikkei 225 Stock Average fell 0.4 percent to 8,415.94 as of 9:21 a.m. in Tokyo. The broader Topix Index lost 0.3 percent to 731.38.
Most U.S. Stocks Advance as Financial Rally Overshadows Europe Concerns (Source: Bloomberg)
Most U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a third day, as a rally in banks helped the market recover from an early slump spurred by growing signs Europe may slip into a recession. Citigroup Inc. (C) climbed 4.2 percent as analyst Dick Bove said the shares could “easily” triple in five years. Lennar Corp. (LEN) jumped 7.2 percent, pacing gains in homebuilders, after reporting a jump in new orders. Energy shares had the biggest decline in the S&P 500 among 10 industries as Chevron Corp. (CVX) dropped 1.2 percent. Urban Outfitters Inc. (URBN) tumbled 19 percent as the company’s chief executive officer resigned. About seven stocks rose for every five that fell on U.S. exchanges at 4 p.m. New York time. The S&P 500 increased less than 0.1 percent to 1,292.48. The benchmark index gained 1.2 percent in three days. The Dow Jones Industrial Average retreated 13.02 points, or 0.1 percent, to 12,449.45 today. The Nasdaq Composite Index advanced 0.3 percent to 2,710.76.
European Stocks Decline From One-Week High; Repsol, Pirelli Lead Retreat (Source: Bloomberg)
European stocks fell from a one-week high as Fitch Ratings said the European Central Bank must do more to prevent debt crisis from spreading and a report indicated the German economy is shrinking. Repsol YPF SA (REP), Spain’s largest oil company, tumbled 5.7 percent after selling 61 million of its own shares. Pirelli & C. SpA, Europe’s third-largest tiremaker, lost 4.5 percent after Goodyear Tire & Rubber Co. said global tire demand is weak. Chr. Hansen Holding A/S (CHR) jumped 9.8 percent as Novo A/S agreed to buy a 26 percent stake in the Danish food-ingredient company. The Stoxx Europe 600 Index dropped 0.4 percent to 249.93 at the close of trading, after earlier climbing as much as 0.3 percent. The gauge has still advanced 2.2 percent this year as economic reports around the world added to optimism the global economy can withstand the euro area’s debt crisis.
Most Emerging Stocks Rise as U.S. Expansion Beats Europe Recession Concern (Source: Bloomberg)
Most emerging-market stocks advanced as an improving U.S. economic expansion outweighed concern that Europe may be headed for a recession. The MSCI Emerging Markets Index was little changed at 948.65 at the close in New York as 412 stocks rose and 358 declined. Brazil’s Bovespa stock index advanced for a fourth day after a measure of prices unexpectedly dropped. Turkish shares gained 1.2 percent. Czech, Polish and Hungarian equities declined. The Philippine Stock Exchange Index (PCOMP) rose to a record after the central bank said monetary policy may be eased this quarter. The U.S. economy expanded at “a modest to moderate pace” from late November through December, according to the U.S. central bank. Germany may be on the brink of recession after the sovereign debt crisis caused the economy to contract in the final quarter of 2011. Europe’s largest economy shrank “roughly” 0.25 percent in the fourth quarter from the third, the Federal Statistics Office in Wiesbaden said today in an unofficial estimate.
Bernanke Doubling Down on Housing Bet Asks Government to Help: Mortgages (Source: Bloomberg)
Ben S. Bernanke is signaling his willingness to double down on a three-year bet that’s failed to revive housing, showing the extent of the Federal Reserve chairman’s effort to wrest a recovery from the deepest recession. Since the Fed started buying $1.25 trillion of mortgage bonds in January 2009, the value of U.S. housing has fallen 4.1 percent, and is down 32 percent from its 2006 peak, according to an S&P/Case-Shiller index. The central bank is poised to buy about $200 billion this year, or more than 20 percent of new loans, as it reinvests debt that’s being paid off. Some Fed officials have said they may support additional purchases that Barclays Capital estimates could total as much as $750 billion.
Even as Bernanke and fellow U.S. central bankers consider expanding their efforts, they are acknowledging their inability to turn around the housing market without help from the rest of the government. Bernanke underscored the importance of residential real estate, which represents 15 percent of the economy, in a study he sent to Congress last week that said ending the slump is necessary for a broader recovery.
Rail Traffic Surge Shows Canada Economy May Beat Growth Forecasts: Freight (Source: Bloomberg)
A boom in traffic at Canadian National Railways Co. (CNR) and Canadian Pacific Railway Ltd. (CP), the country’s two largest rail companies, may mean Canada’s recovery will be buoyant even after economists and the Bank of Canada pared their outlook for growth this year. Canadian freight volumes accelerated in the fourth quarter to their fastest pace in 2011 on a year-over-year basis, while commodity carloads were up 6.8 percent in December from November on a seasonally adjusted basis, according to data from the Association of American Railroads. Data from Statistics Canada showing stronger volumes in the August-October period also suggest future economic growth.
Rising rail shipments add to evidence that sales at Canadian producers such as chemicals maker Canexus Corp. (CUS) haven’t faltered in the face of the European debt crisis and a weak U.S. recovery. Bank of Canada Governor Mark Carney said last month risks to the global economy may lead to a “prolonged period of deficient demand.” Changes in rail carloads have predicted 63 percent of changes in monthly GDP three months into the future since 2000, according to Bloomberg calculations.
China Trade Triggers $115 Billion Australia Ports, Railway Boom: Freight (Source: Bloomberg)
Australia is set for an A$112 billion ($115 billion) infrastructure boom as the nation adds ports and railways to feed China and India’s appetite for coal and iron ore. The largest exporter of the key steelmaking materials will build enough railroads to stretch from Washington D.C. to Los Angeles over the next decade, as well as a new port on the Great Barrier Reef coast that will dwarf the world’s biggest bulk harbor. The projects will near-double global coal trade and add 57 percent to the market for seaborne iron ore. “There is so much opportunity here,” said Philippe Bouquet, Australia construction head at French builder Bouygues SA. “People in Paris are very impressed. They say: ‘23 million people? How can they do so much?’”
Vietnam May Cut Rates as Inflation Eases (Source: Bloomberg)
Vietnam signaled that it may cut policy interest rates to “more suitable” levels after the first quarter and weaken the dong this year as Asia’s fastest inflation eases. “The central bank will adjust policy rates to more suitable levels, aiming to help ease the average level of market interest rates,” central bank Governor Nguyen Van Binh said at a press conference yesterday. Vietnam faces a trade deficit, risks in the banking sector and slowing economic growth as the global recovery falters. While Indonesia and Thailand have cut borrowing costs in recent weeks to shield expansion, the World Bank and International Monetary Fund said last month Vietnam may undermine progress toward economic stability if it loosens monetary policy too soon.
“Based on recent policy statements they’ve made and the fact that inflation is slowing and growth is weakening, and given the pressures they’re under, I would be 99 percent sure that he meant that the next adjustment in rates would be down,” Gareth Leather, a London-based economist at Capital Economics, said after Binh’s comments.
South Korea to Start OTC Derivatives Clearinghoue to Reduce Global Risks (Source: Bloomberg)
Korea Exchange Inc. plans to start a clearing house for over-the-counter derivatives trading in the fourth quarter as Asia’s bourses join global efforts to reduce risk in the largely unregulated market. Korea Exchange, which operates the nation’s stock market, will first mandate clearing interest-rate swaps between financial firms operating in South Korea, Kim Jingyu, the president of the exchange’s derivatives market division, said in an interview at his Seoul office on Jan. 10. The clearing house will expand to other over-the-counter products such as credit- default swaps and cross-border trades, Kim said, without giving a time frame.
Regulators worldwide are increasing scrutiny of over-the- counter derivatives after they were blamed in part for masking risk in the lead up to the 2008 credit crisis and the collapse of Lehman Brothers Holdings Inc. Governments globally are working to move the trades on to exchanges and through central clearing houses, which manage risk. The market reached $708 trillion at the end of June 2011, according to Bank for International Settlements data.
Europe’s $39 Trillion Pension Threat Grows as Regional Economies Sputter (Source: Bloomberg)
Even before the euro crisis, people were worried about Europe’s pension bomb. State-funded pension obligations in 19 of the European Union nations were about five times higher than their combined gross debt, according to a study commissioned by the European Central Bank. The countries in the report compiled by the Research Center for Generational Contracts at Freiburg University in 2009 had almost 30 trillion euros ($39.3 trillion) of projected obligations to their existing populations. Germany accounted for 7.6 trillion euros and France 6.7 trillion euros of the liabilities, authors Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige said in the report. “This is a totally unsustainable situation that quite clearly has to be reversed,” Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington, said in a telephone interview.
Europe Banks Resisting Draghi Bid to Avert Credit Crunch by Hoarding Cash (Source: Bloomberg)
Banks are hoarding the European Central Bank’s record 489 billion-euro ($625 billion) injection into the banking system, thwarting attempts by policy makers to avert a credit crunch in the region. Almost all of the money loaned to 523 euro-area lenders last month wound up back on deposit at the Frankfurt-based central bank instead of pouring into the financial system, ECB data show. Banks will use most of the three-year loans to meet their refinancing needs for this year and next, analysts at Morgan Stanley and Royal Bank of Scotland Group Plc estimate. “It’s illusory to think that the measure will translate into credit generation,” Philippe Waechter, chief economist at Natixis Asset Management in Paris, said in an interview. “It will assuage some of the anxiety banks have regarding their liquidity needs. But they’ve engaged into a massive overhaul of their strategy and shrinkage of their balance sheets, which is, coupled with the deteriorating economy, not compatible with increasing credit.”
German Economy May Have Shrunk at End 2011 (Source: Bloomberg)
The German economy probably contracted in the final quarter of 2011 as the sovereign debt crisis damped demand for exports. Europe’s largest economy shrank “roughly” 0.25 percent in the fourth quarter from the third, the Federal Statistics Office in Wiesbaden said today, adding it may revise its assessment by the time official data are published on Feb. 15. Growth slowed to 3 percent in 2011 from 3.7 percent in 2010, which was the most since German reunification two decades ago, the office said. Germany’s budget deficit amounted to 1 percent of gross domestic product last year. German growth is slowing as the weaker global economy and waning demand from debt-stricken euro-area neighbors erodes foreign sales. Germany may still avoid a recession as unemployment at a two-decade low supports consumer spending.
Germany on Brink of Recession as Euro Debt Crisis Damps Exports: Economy (Source: Bloomberg)
Germany may be on the brink of recession after the sovereign debt crisis caused the economy to contract in the final quarter of 2011. Europe’s largest economy shrank “roughly” 0.25 percent in the fourth quarter from the third, the Federal Statistics Office in Wiesbaden said today in an unofficial estimate. Economists such as Christian Schulz at Berenberg Bank expect gross domestic product to contract again in the current quarter. A recession is defined as two consecutive quarters of declining GDP. “If the euro crisis does not get worse or is finally brought under control after another wave in early 2012, the German economy can rebound nicely from the summer onwards,” said Schulz, a senior economist with Berenberg in London. “However, we see a 25 percent chance of the euro crisis remaining out of control longer, or completely spiraling out of control with a series of sovereign and bank defaults. In such a scenario, Germany would enter a major recession.”
Spanish Banks Undermine Recovery With Discriminatory Home Loans: Mortgages (Source: Bloomberg)
Spain’s banks, saddled with 329,000 foreclosed homes, are still willing to provide mortgages, as long as the borrower wants to buy one of their properties, according to a consumer-rights group. That’s no help to homeowners and developers seeking to sell. Members of the group, Organización de Consumidores y Usuarios, or OCU, applied for mortgages at 46 bank branches in Spain in August and September to buy privately-owned homes. In every case, the lender tried to persuade the prospective borrower to purchase one of its own properties instead -- either by offering to finance 100 percent of the price or by refusing to lend for another home, spokeswoman Ileana Izverniceanu said. “People end up buying from the banks because they have no alternative,” Izverniceanu said in an interview at her office in Madrid.
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