GLOBAL MARKETS-Markets guarded as Athens strives to reach deal
TOKYO, Feb 9 (Reuters) - Shares and the euro struggled on Thursday, as sentiment grew cautious after Greek political leaders said talks would continue to resolve one remaining issue standing in the way of a deal on a bailout package, which is crucial to avoiding a debt default.
"Greek uncertainty has been a major drag, limiting the market's upside. With political leaders finally reaching an agreement, the market is likely to post a relief rally," said Oh Eun-soo, an analyst at Hyundai Securities in Seoul.
Asian Stocks Fall for First Day in Three on Greek Impasse, China Inflation (Source: Bloomberg)
Asian stocks fell for the first time in three days after Greek policy makers failed to agree on pension cuts needed to secure a second debt bailout. BHP Billiton Ltd. led material companies lower, falling 2.2 percent in Sydney. Nissan Motor Co. lost 1.4 percent in Tokyo after earnings missed analysts’ estimates. The Hang Seng China Enterprises Index fell as much 1.7 percent, before paring losses, after Chinese inflation unexpectedly accelerated. The MSCI Asia Pacific Index (MXAP) fell 0.5 percent to 125.99 at 12:35 p.m. in Tokyo after rallying 1.3 percent yesterday to a six-month high. Most major stock indexes in the region fell today including Hong Kong’s Hang Seng, which lost 0.4 percent.
Nikkei Falls From Three-Month High on China Inflation, Stalled Greek Talks (Source: Bloomberg)
Feb. 9 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average retreating from a three-month high, as China’s inflation climbed more than expected, tempering prospects for further monetary easing, and Greece’s debt talks stalled over proposed pension cuts. Komatsu Ltd. (6301), a construction machinery maker that counts China as its biggest market, slid 1.7 percent. The stock also fell after Japan’s machinery orders dropped. Kyocera Corp. (6971), an electronic equipment manufacturer that gets about a fifth of its sales in Europe, lost 0.5 percent. Mitsubishi Paper Mills Ltd. (3864) soared 12 percent after Nippon Paper Group Inc. (3893) yesterday posted improved earnings, leading the sector higher. The Nikkei 225 Stock Average fell 0.5 percent to 8,975.43 as of 12:42 p.m. in Tokyo after closing yesterday above 9,000 for the first time since Oct. 28. The broader Topix (TPX) Index lost 0.3 percent to 780.14 with more than two stocks falling for each that rose.
Stocks in U.S. Advance as Investors Monitor Bailout Discussions in Greece (Source: Bloomberg)
U.S. stocks advanced, pushing the Standard & Poor’s 500 Index to a seven-month high, as Greek Prime Minister Lucas Papademos began talks with political leaders on terms required for a bailout. Financial and technology shares gained the most in the S&P 500 among 10 groups. Bank of America Corp. rallied 3.6 percent to the highest price since Aug. 31. Hartford Financial Services Group Inc. rose 7.6 percent as billionaire investor John Paulson said the insurer needs to take “drastic” action to reverse its decline. Cisco Systems Inc. (CSCO) jumped 3.2 percent at 4:09 p.m. New York time, extending its gain in regular trading, after reporting profit and sales that beat analyst estimates. The S&P 500 added 0.2 percent to 1,349.96 at 4 p.m. New York time, after dropping as much as 0.4 percent. The Dow Jones Industrial Average increased 5.75 points, or less than 0.1 percent, to 12,883.95, the highest level since May 2008. The Nasdaq Composite Index (CCMP) rose 0.4 percent to 2,915.86, the highest since December 2000.
European Stocks Drop for a Third Day; BHP Billiton Shares Slide (Source: Bloomberg)
European (SXXP) stocks dropped for a third day as BHP Billiton Ltd. declined, offsetting gains by companies from Statoil ASA (STL) to Reckitt Benckiser Group Plc (RB/) after they posted earnings that exceeded analysts’ estimates. BHP Billiton retreated 2.3 percent. Vestas Wind Systems A/S (VWS) tumbled 14 percent, its biggest retreat in a month, as the company posted an annual loss four times wider than analysts had estimated. Statoil climbed 1.3 percent after reporting profit that more than doubled on rising oil prices. Reckitt Benckiser rallied after saying 2012 sales will increase at a faster pace than the industry. The Stoxx Europe 600 Index lost 0.2 percent to 263.01 at the close, after earlier advancing as much as 0.6 percent. The benchmark measure has still rallied 22 percent from last year’s low and 7.6 percent this year as investors speculated that Greece will accept the spending cuts needed to obtain further financial aid from the rest of the euro area.
Euro Trades 0.2% From Two-Month High as Papademos Meets With Creditors (Source: Bloomberg)
The euro was 0.2 percent from a two- month high as Greek Prime Minister Lucas Papademos met with European and International Monetary Fund officials to resolve a dispute over pension cuts. The common currency maintained a two-day advance against the yen before European finance ministers hold an emergency meeting today and the region’s central bank sets monetary policy. The pound held onto a decline from yesterday on prospects the Bank of England will expand its asset-purchase program at a meeting today. “The market thinks they’ll patch together some sort of deal,” said Tim Kelleher, head of institutional foreign- exchange sales in Auckland at ASB Institutional, a unit of Commonwealth Bank of Australia, referring to Greece. “The market still appears to be very short euros as a speculative position, so that’s one of the reasons why it’s not going down.” A short position is a bet a currency will depreciate.
Asian Currencies Drop as Greece Concern, China Inflation Temper Optimism (Source: Bloomberg)
Asian currencies declined after Greek debt negotiations stalled and faster inflation in China tempered optimism the region’s central banks will ease policies to shore up economic growth. South Korea’s won snapped a two-day rally as the central bank kept borrowing costs on hold. Malaysia’s ringgit retreated from a five-month high after Greek leaders failed to agree on some economic measures required to win more financial aid. Data showed today consumer prices in China rose 4.5 percent last month from a year earlier, after December’s 4.1 percent gain, exceeding all 33 estimates in a Bloomberg News survey. “The lack of progress in Greece disappoints investors and is bad for market sentiment,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest bank.
Fed’s Inflation Target Stirs Japan Lawmaker Ire (Source: Bloomberg)
The Federal Reserve’s decision to set a 2 percent inflation target last month had a ripple effect a continent away: Japanese lawmakers are invoking it as evidence that their own central bank comes up short. “Japan is sending a message we are OK with deflation,” Yuichiro Uozumi, a member of the No. 2 opposition party, told Bank of Japan Governor Masaaki Shirakawa at a hearing two days ago in Tokyo. The BOJ defines price stability as about 1 percent. The Fed “set a clear goal and made a firm promise for its commitment to fulfill the goal,” Kozo Yamamoto, with the top opposition group, said at a Feb. 2 hearing with Shirakawa. Underlying the criticism is a legacy of more than a decade of deflation -- declines in price levels that can damp growth by making debts harder to pay off -- and calls by minority groups of lawmakers for more stimulus in the wake of the March 11 earthquake. With the Fed signaling another round of asset purchases, political pressure on the BOJ may rise.
Jobless Decline Masks Drop in U.S. Labor Force (Source: Bloomberg)
The unemployment rate’s unexpected drop to a three-year low has overshadowed a less-positive labor- market development: fewer Americans are looking for work. Last week’s Labor Department announcement that the jobless rate fell to 8.3 percent in January sent stocks and bond yields higher. The same report showed the share of working-age people in the labor force had declined to the lowest level in 29 years. The so-called participation rate was cited by Federal Reserve Chairman Ben S. Bernanke yesterday to support his assessment that the rate of unemployment obscures vulnerabilities in the job market. Bernanke, speaking to the Senate Budget Committee, confirmed the Fed’s stance that interest rates will stay low at least through late 2014, and repeated his view that the job market is a “long way” from returning to normal.
Most China Stocks Advance After Inflation Report; Smallcaps, Staples Gain (Source: Bloomberg)
Most Chinese stocks climbed as investors bought shares of companies whose earnings benefit from rising prices and an easing cash crunch spurred gains for small companies. Liquor maker Kweichow Moutai Co. (600519) led an advance for consumer-staples producers after January inflation unexpectedly rebounded to 4.5 percent during the Chinese new year holiday on accelerating food prices. Ledman Optoelectronic Co. jumped 7.3 percent after benchmark money-market rates fell, signaling improving liquidity. China Vanke Co. paced a two-day rally for property developers. Jiangxi Copper Co. slid 1.4 percent as Greek leaders fell short of a full agreement on a rescue plan.
“The Spring Festival effect boosted January inflation and it’s a one-off rebound,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co., referring to the Chinese New Year holiday from Jan. 22 to Jan. 28. “Prices will come down in the following months. But the central bank will be reluctant to relax monetary policies since the inflation rate is still perceived as high.”
Bank of Korea Holds Rate for Eighth Month (Source: Bloomberg)
The Bank of Korea held off raising borrowing costs for an eighth straight month as the economy slowed and exports declined due to the European debt crisis. 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 unanimous decision was predicted by 18 of 19 economists surveyed by Bloomberg News. Policy makers in export-driven Asian countries have relied on monetary or fiscal stimulus to weather the European debt crisis. Australia unexpectedly held off cutting interest rates this week on signs of improvements in the U.S. and Europe. Kim has signaled that rates will have to rise at some point and said today that inflation expectations are high and the central bank is “on alert.”
South Korean Producer-Price Inflation Eases Before Interest Rate Decision (Source: Bloomberg)
South Korean producer prices rose at the slowest pace in 17 months in January, according to a report released hours before a central bank decision is due on benchmark interest rates. Prices (KOPPIYOY) climbed 3.4 percent from a year earlier after a 4.3 percent increase in December, the Bank of Korea said in a statement in Seoul today. They rose 0.7 percent from December. The central bank will keep the benchmark seven-day repurchase rate unchanged at 3.25 percent, according to 18 of 19 economists in a Bloomberg News survey. One analyst sees a cut to 3 percent. The decision is due this morning.
Papademos Meets EU Officials Over Stalled Bailout (Source: Bloomberg)
Greek Prime Minister Lucas Papademos met with European and International Monetary Fund officials to resolve a dispute over pension cuts that threatens to scuttle a 130 billion-euro ($172 billion) rescue package. Officials of the so-called troika of lenders, representing the European Commission, the European Central Bank and the IMF, ended a meeting at the premier’s offices in Athens just before 6 a.m., according to a live broadcast on Antenna TV. Papademos and the leaders of the three parties supporting the government “agreed on all the points of the program with the exception of one which requires further elaboration and discussion” with the lenders, according to an e-mailed statement from the premier’s office in Athens. “This discussion will occur immediately so that it can be completed in light of the meeting of euro area finance ministers” today.
Draghi’s 100 Days of Action Suggest ECB May Help to Avoid a Greek Default (Source: Bloomberg)
In his first 100 days as European Central Bank President, Mario Draghi has taken unprecedented action to tackle the sovereign debt crisis. Greece may push him even further into unknown territory. Draghi will today face questions on the ECB’s possible role in helping Greece reduce its debt as the threat of a disorderly default mounts. While the ECB has remained silent on its intentions, options canvassed range from selling its Greek bond holdings at the discount price it paid for them to taking a loss on the Greek assets held in investment portfolios, two euro-area officials said late last week on condition of anonymity.
At stake is whether Greece can complete a private sector deal to reduce its debt by as much as 100 billion euros ($133 billion) and secure a second bailout package that will allow it to pay its bills -- key steps toward ending the debt crisis. The ECB has been instrumental in easing the turmoil since Draghi took the reins on Nov. 1, offering banks unlimited three-year loans and reversing the two rate hikes implemented by his predecessor, Jean-Claude Trichet.
Euro Finance Chiefs Set to Meet as Greece Presses for Financial-Aid Deal (Source: Bloomberg)
Euro-area finance ministers are due to hold an emergency meeting in Brussels tomorrow as the Greek government pushes to complete talks on terms of a rescue. The policy makers, to be joined by International Monetary Fund chief Christine Lagarde, will convene at 6 p.m., according to a statement today by Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of finance chiefs from the 17- nation euro area. That gathering will follow the monthly meeting of the European Central Bank’s governing council in Frankfurt and an assembly of Greek creditors in Paris. While no information was provided about the ministers’ agenda, the scheduling suggests policy makers, who have to ratify a Greek accord, were optimistic about negotiators reaching an agreement in Athens.
Greek Premier Pushes Party Leaders on Deal (Source: Bloomberg)
Greek Prime Minister Lucas Papademos began negotiating with leaders of the political parties supporting his caretaker government as he tried to make up for lost time to secure a second aid package. Papademos met with the chiefs in Athens today after delaying the gathering for a second time in as many days as Greek officials and international creditors haggled over terms. He held an unscheduled meeting late last night with the so- called troika of the European Commission, the European Central Bank and the International Monetary Fund, to put final touches on a 130 billion-euro ($172 billion) rescue plan. Yesterday’s delay was yet another hitch in completing a package that’s been on the table since July. The Greek government, facing a 14.5 billion-euro bond payment on March 20, is struggling to arrange financing to avert a collapse of the economy, risking a new round of contagion in the euro area.
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