Most Asian Stocks Fall on Greek Default Concern; Automakers Lead Decline (Source: Bloomberg)
Most Asian stocks fell, paring yesterday’s gain, after Fitch Ratings said Greece is likely to default on its debt and Morgan Stanley cut target prices for some Japanese carmakers. Nintendo Co. (7974), a Japanese maker of video-game players that gets 42 percent of its sale in Europe, slid 1.3 percent. Mazda Motor Corp. (7261), a Japanese automaker, paced losses among automakers after Morgan Stanley cut the company’s target price to 170 yen from 190 yen. Toyoda Gosei Co., a Japanese maker of resin and rubber parts for automobiles, fell the most on the MSCI Asia Pacific Index after it was downgraded to “underperform” from “neutral” by Mizuho Securities. BHP Billiton Ltd. (BHP) rose 0.3 percent after the world’s largest mining company said iron-ore production rose to a record. The MSCI Asia Pacific Index dropped 0.1 percent to 117.68 as of 10:05 a.m. in Tokyo. The measure added 1.9 percent yesterday, the most since Dec. 21.
Dow Average Rises to Highest Level Since July (Source: Bloomberg)
U.S. stocks advanced, sending the Dow Jones Industrial Average to the highest level since July, after reports bolstered optimism in the American and German economies and Spain’s borrowing costs decreased at an auction. Equities pared gains as financial shares slumped, with Citigroup Inc. (C) losing 8.2 percent amid an unexpected drop in earnings. Wells Fargo & Co. (WFC), the largest U.S. bank by market value, gained 0.7 percent amid record profit. Sears Holdings Corp. (SHLD) surged 9.5 percent, the most in the Standard & Poor’s 500 Index, on speculation that the company may seek to go private. Carnival Corp. tumbled 14 percent after the Costa Concordia cruise ship ran aground off the coast of Italy on Jan. 13. The S&P 500 increased 0.4 percent to 1,293.67 at 4 p.m. New York time, paring an earlier gain of as much as 1.1 percent. The Dow rose 60.01 points, or 0.5 percent, to 12,482.07.
U.S. Market Shrinks Amid Heavy Buybacks (Source: Bloomberg)
Stocks are getting scarcer in the U.S. for the first time since the bull market began as companies cut share sales to the lowest level since 2006 and buy back equity at the fastest pace in four years. Amgen Inc. (AMGN), Hewlett-Packard Co. (HPQ) and 1,971 other U.S. companies repurchased $397 billion of stock last year, while they issued $169 billion of new equity, data compiled by Birinyi Associates Inc. and Bloomberg show. The combination reduced the Standard & Poor’s 500 Index divisor, a measure of outstanding shares, by 0.6 percent last quarter, the first drop since March 2009. Shrinking supply supports prices and shows valuations are so low that executives would rather buy back shares than spend the cash to expand, according to Columbia Management Investment Advisers LLC and USAA Investment Management Co. Bears say dwindling growth prospects will limit gains and deter investors who pulled money from stock funds for eight straight months through December, the longest stretch in at least two decades.
Emerging Stocks Rise to Two-Month High as China Data Fuels Policy Optimism (Source: Bloomberg)
Emerging-market stocks rose, driving the benchmark index to a two-month high, after China’s gross domestic product expanded more than estimated and reports showed strength in the U.S. and German economies. The MSCI Emerging Markets Index (MXEF) gained 2.2 percent to 972.35 at the close in New York, the highest since Nov. 14. The Shanghai Composite Index (SHCOMP) advanced 4.2 percent, the most since October 2009. Benchmark gauges in Russia, Poland and India rose more than 1 percent, as South Africa’s index hit a record high. The Bovespa gained for a second day in Sao Paulo. China’s economy expanded 8.9 percent in the three months ended Dec. 31 from a year earlier, the statistics bureau said. Economists in a Bloomberg survey had forecast an 8.7 percent gain. Manufacturing in the New York region expanded in January at the fastest pace in nine months, and German investor confidence increased the most on record.
Euro firm along with commodity currencies on China
LONDON, Jan 17 (Reuters) - The euro rose for the first time in three trading sessions, while commodity currencies advanced as data showing China's economy grew more than expected in the fourth quarter gave risk sentiment a shot in the arm.
"I don't think the euro's gains can last and this short squeeze that we have seen post- the Chinese data will continue," said Ankita Dudhani, G10 currency strategist at RBS.
Chinese growth hopes lift stocks, euro
LONDON, Jan 17 (Reuters) - A slightly brighter picture for global economic growth countered concerns over Europe's debt crisis, lifting shares and the euro, but German data, Greek default fears and a looming debt sale by Spain were set to test sentiment.
"The slowdown is quite modest, and the overall situation of the Chinese economy is stable," said Hua Zhongwei, analyst with Huachuang Securities in Beijing.
European Stocks Rise on China Growth Outlook; Rio Tinto Climbs (Source: Bloomberg)
European stocks climbed, with the Stoxx Europe 600 Index extending a five-month high, amid speculation that China’s slowest economic growth in more than two years will lead to easier monetary policy. Daimler AG (DAI) led carmakers higher, rallying 3.8 percent. Rio Tinto Group advanced 2.9 percent after the world’s third-largest mining company said fourth-quarter iron ore production rose to a record, driven by expansion at its mines and ports in Australia’s Pilbara region. The Stoxx 600 added 0.9 percent to 253.27 at the close, rallying to its highest level since Aug. 2. The gauge closed above its 200-day moving average yesterday for the first time since July.
S&P 500 Rally May Begin to Stall as Bears Disappear: Technical Analysis (Source: Bloomberg)
The stock-market rally has driven short interest to a nine-month low and bearish sentiment close to a six-year low, a sign that few investors may be left to propel further gains, Strategas Research Partners said. Short interest, or total number of shares sold short, fell to 168.8 billion on the New York Stock Exchange and the Nasdaq Stock Market at the end of December, as the Standard & Poor’s 500 Index capped the best quarterly return since September 2009, according to data compiled by Bloomberg. The proportion of respondents in the American Association of Individual Investors survey who expect the market to decline over the next six months reached 17.2 percent this month, down from 50 percent in August. Some analysts watch sentiment as a contrary indicator given that optimistic investors have already purchased shares, leaving less money to help drive prices higher.
The S&P 500 has jumped 18 percent from its October low as European leaders took steps to contain the region’s sovereign debt crisis and data showed the U.S. economy is improving.
Manufacturing in New York Fed Region Expands at Faster Pace Than Estimated (Source: Bloomberg)
Manufacturing in the New York region expanded in January at the fastest pace in nine months, reflecting improving orders, sales and employment. The Federal Reserve Bank of New York’s general economic index rose to 13.5, the highest level since April, from a revised 8.2 in December. That gauge exceeded the median forecast of 56 economists surveyed by Bloomberg News, which projected an increase to 11. Readings higher than zero signal expansion among companies in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut. Factories may keep driving the economic expansion as they maintain production to meet household and business demand. At the same time, the financial crisis in Europe and a weaker euro may slow purchases of American-made goods.
China’s Slowest GDP Growth in 2 1/2-Years Boosts Scope for Easing: Economy (Source: Bloomberg)
China’s economy expanded at the slowest pace in 10 quarters as Europe’s debt crisis curbed export demand and the property market weakened, sustaining pressure on Premier Wen Jiabao to ease monetary policy. Gross domestic product rose 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said in Beijing today. Growth exceeded the 8.7 percent median of 26 estimates in a Bloomberg survey, staying above the 8 percent that signals a “soft landing” for China, according to SinoPac Financial Holdings Co., which correctly predicted the GDP number. Asian stocks rose on speculation policy makers will ease lending curbs and increase fiscal spending to bolster the world’s second-biggest economy. Liang Wengen, China’s richest man and chairman of Sany Heavy Industry Co., told Wen this month that construction-machinery demand is weak and called for more infrastructure investment.
China’s Quarterly Growth Far From ‘Hard Landing,’ Goldman’s O’Neill Says (Source: Bloomberg)
Jim O’Neill, the economist who coined the term BRIC a decade ago, said China’s fourth-quarter growth rate, while the slowest in more than two years, was stronger than many analysts had forecast and was a “blow” to those predicting a “hard landing” for the nation’s economy. China’s economy grew 8.9 percent in the fourth quarter from a year earlier, the statistics bureau said yesterday in Beijing. That exceeded the 8.7 percent median estimate of 26 economists surveyed by Bloomberg News and is above the 8 percent that signals a “soft landing” for China, according to SinoPac Financial Holdings Co. O’Neill, chairman of Goldman Sachs Asset Management, said in an interview on Bloomberg Television’s “InsideTrack” with Erik Schatzker that if China grew at an annual rate of 7.5 percent this decade, as he forecast, it would contribute more to world growth in dollar terms than the U.S. and Europe combined.
Japanese Stocks Decline as Shipping Lines, Steelmakers Drop; Tepco Gains (Source: Bloomberg)
Japanese stocks edged lower after Fitch Ratings said Greece is insolvent. Shippers led declines on the Topix Index after cargo rates fell to a three-year low amid concern the debt crisis will weigh on demand. Nippon Yusen K.K. (9101), Japan’s biggest shipping line by sales, dropped 2.3 percent. JFE Holdings Inc. led declines among large steelmakers after the country’s biggest utility said it will raise power rates by almost a fifth. Tokyo Electric Power Co. advanced 1.5 percent. The Nikkei 225 Stock Average slipped 0.1 percent to 8,456.43 as of 9:32 a.m. in Tokyo. The broader Topix lost 0.3 percent to 729.73.
Singapore Exports Unexpectedly Rose on Boost from Pharmaceutical Shipments (Source: Bloomberg)
Singapore’s exports unexpectedly rose in December as pharmaceutical shipments surged, countering a drop in sales of electronics goods. Non-oil domestic exports climbed 9 percent from a year earlier, after a revised 1.4 percent increase in November, the island’s trade promotion agency said in a statement today. The median of 14 estimates in a Bloomberg News survey was for a 1.2 percent decline. The advance in overseas sales may be short-lived as Europe’s sovereign-debt crisis curbs demand for Asian goods, with purchasing managers’ indexes in export-dependent economies including Singapore and Taiwan signaling manufacturing is still contracting. Non-oil exports from Singapore may increase 3 percent to 5 percent this year, the trade promotion board said in November.
BOK Signals No Cut in South Korea Rates as Domestic Demand Counters Europe (Source: Bloomberg)
Bank of Korea Governor Kim Choong Soo said that South Korea’s interest rates are still below policy makers’ desired level and that discrepancy cannot be left for long. “We still think our monetary policy is accommodative --by that what I mean is that in the market there still exists a little excess liquidity,” Kim, 64, said in an interview at his office in Seoul today. “Our basic policy direction is to normalize our interest rates compatible with our demand pressures and pressures for inflation.” The BOK, which kept its benchmark rate at 3.25 percent unchanged four days ago, will need to proceed “cautiously” given instability in external economies, the governor said. At the same time, he predicted growth in South Korea, Asia’s fourth-largest economy, will be little changed this year compared with 2011 as domestic demand offsets an export slowdown.
Canada Retains Benchmark Rate at 1% Amid ‘More Modest’ Economic Recovery (Source: Bloomberg)
The Bank of Canada kept its main interest rate unchanged for an 11th consecutive meeting and said economic growth will be “more modest” amid a weaker outlook for the U.S. and Europe. The Ottawa-based central bank left the target for overnight loans between commercial banks at 1 percent, where it has been since September 2010, as forecast by all 26 economists surveyed by Bloomberg News. The rate pause is the longest since the central bank adopted the overnight target as its policy rate in 1994, and longer than the “conditional commitment” to hold it at 0.25 percent that lasted from April 2009 to June 2010. European governments are struggling to manage a fiscal crisis and U.S. growth will also be hampered by the need to pare debts, the Bank of Canada said today.
Inflation Slows to Six-Month Low of 4.2% as Fuel, Clothing Prices Abate (Source: Bloomberg)
U.K. inflation slowed in December to its weakest pace in six months as stores discounted clothing to boost sales and petrol prices fell, easing pressure on consumers amid concern the economy may already be back in recession. Consumer prices rose an annual 4.2 percent compared with 4.8 percent in November and a peak of 5.2 percent in September, the Office for National Statistics said today in London. It was the biggest drop in the inflation rate since April 2009, the depth of the last recession. Prices rose 0.4 percent on the month. The Bank of England forecasts inflation will slow sharply this year, providing relief to consumers as the European sovereign debt crisis and rising unemployment weigh on the recovery. Ernst & Young said yesterday a second recession may already be under way. The Bank of England will expand its 275 billion-pound ($423 billion) bond-buying program next month, economists at Citigroup Inc. and Nomura International predict.
Euro Rescue Fund Sells Bills ‘Smoothly’ After S&P Credit Rating Downgrade (Source: Bloomberg)
The European Financial Stability Facility issued six-month debt for the first time, selling 1.5 billion euros ($1.9 billion) of securities a day after the euro region’s temporary bailout fund lost its top credit rating. The EFSF sold the 182-day bills at an average yield of 0.2664 percent, it said in a statement. Investors bid for 3.1 times the amount of bills sold, little changed from the 3.2 bid- to-cover ratio at a Dec. 13 offering of three-month bills. The facility’s longer-dated bonds underperformed their euro-area peers after the Standard & Poor’s downgrade to AA+ from AAA. “The fact that the bill auction has gone so smoothly is encouraging,” said John Davies, a fixed-income strategist at WestLB AG in London. “The much bigger hurdle will be when, say, the EFSF comes to market with a five-year bond.”
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