20120214 0941 Global Market Related News.

Asian Stocks Decline as Moody’s Cut Debt Ratings of Six European Nations (Source: Bloomberg)
Asian stocks fell, trimming yesterday’s gains, after Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal, reviving concern about the region’s debt crisis. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics that gets 21 percent of its revenue in Europe, slid 1.9 percent. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, lost 0.7 percent in Sydney after oil dropped from a five-week high. Macquarie Group Ltd. (MQG), Australia’s largest investment bank, fell 2.3 percent after it cut a tenth of its workforce in Asia last week, according to two people with knowledge of the departures. The MSCI Asia Pacific Index dropped 0.2 percent to 125.55 as of 10:05 a.m. in Tokyo after rising 0.7 percent yesterday. Seven of the 10 industry groups on the index slid.
“Moody’s is sort of lagging the other ratings houses here,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The reality is we’ve been talking about this for so long that it should hardly be a surprise to anybody. But you tend to get negative knee-jerk reactions because that’s the way the markets work.”

Japanese Stocks Decline After Moody’s Downgrades Italy, Spain, Portugal (Source: Bloomberg)
Japanese stocks declined after Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal, reigniting concern the region will struggle to contain its crisis. Sony Corp. (6758), a maker of consumer electronics that gets about 21 percent of its sales from Europe, slipped 1.7 percent. MS&AD Insurance Group Holdings Inc. dropped 2.1 percent after the non- life insurer forecast a full-year loss, citing claims to cover damage stemming from Thailand’s floods. Sumitomo Rubber Industries Ltd. gained 2.6 percent after the tiremaker beat its profit forecast. The Nikkei 225 Stock Average fell 0.1 percent to 8,991.33 as of 9:33 a.m. in Tokyo, with about five shares falling for every four that rose. The broader Topix Index was little changed at 781.79, after swinging between gains of 0.1 percent and losses of 0.2 percent.

U.S. Stocks Advance as Greek Lawmakers Approve Austerity Plan (Source: Bloomberg)
U.S. stocks rose, after the first weekly loss for the Standard & Poor’s 500 Index in 2012, as Greece approved austerity plans to secure rescue funds. Bank of America Corp., JPMorgan Chase & Co. and Caterpillar Inc. (CAT) increased at least 1.7 percent to lead gains in the Dow Jones Industrial Average. Apple Inc. (AAPL) climbed 1.9 percent to trade above $500 for the first time. Chesapeake Energy Corp. added 2.4 percent after the natural-gas driller said it’s targeting as much as $12 billion in asset sales and joint ventures this year. Advanced Micro Devices Inc. (AMD) surged 3.4 percent after being raised at Sanford C. Bernstein & Co. The S&P 500 advanced 0.7 percent to 1,351.77 at 4 p.m. New York time. The Dow increased 72.81 points, or 0.6 percent, to 12,874.04. The Nasdaq Composite Index gained 1 percent to 2,931.39, the highest level since 2000. The Russell 2000 Index of small companies climbed 1.4 percent to 824.81.

European Stocks Climb After Greek Austerity Approval: C&W Worldwide Surges (Source: Bloomberg)
European (SXXP) stocks advanced the most in more than a week after Greek lawmakers approved austerity measures needed to get the financial rescue the nation seeks. Mining shares led the rally. Cable & Wireless Worldwide Plc surged 45 percent after Vodafone Group Plc (VOD) said it’s considering an offer for the company. Commerzbank AG (CBK) and Lloyds Banking Group Plc (LLOY) each added 1.6 percent. The Stoxx Europe 600 Index gained 0.7 percent to 263.17 at the close. The benchmark measure made the “Golden Cross (SXXP),” with its 50-day moving average rising above the 200-day average for the first time since Sept. 3, 2010, a signal for further increases according to some technical analysts.

Yen, Dollar Gain as Moody’s Rating Cuts Boost Demand for Haven; Euro Drops (Source: Bloomberg)
The yen and dollar gained versus most of their major counterparts after Moody’s Investors Service cut ratings for European nations including Italy, Spain and Portugal, boosting demand for safer assets. The two haven currencies strengthened after Moody’s revised its outlook on the top Aaa grades for the U.K. and France to “negative.” The euro slid for a third day before finance ministers from the region’s 17 nations meet tomorrow to discuss a second aid package for Greece, following the country’s approval of austerity measures. The Australian and New Zealand dollars dropped as Asian stocks declined, curbing risk appetite. “Those Moody’s cuts have taken some of the steam out of investor risk appetite and we’re seeing knee-jerk losses, not only in euro, but also the risk-sensitive currencies,” said Mike Jones, a foreign-exchange strategist at Bank of New Zealand in Wellington. “At the same time, we’re seeing broad strength in the yen and U.S. dollar.”

Moody’s Cuts Europe Sovereigns Including Italy, Spain (Source: Bloomberg)
Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal and revised its outlook on the U.K.’s and France’s top Aaa ratings to “negative,” citing Europe’s debt crisis. Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook, Moody’s said. It also reduced the ratings of Slovakia, Slovenia and Malta. “The uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework” and the resources that will be made available to deal with the crisis, are among the main drivers of Moody’s action, the ratings company said. The euro slipped 0.2 percent to $1.3154, and the pound weakened 0.3 percent to $1.5723.

Treasuries Hold Gains as Europe Rating Cuts Support Demand for U.S. Haven (Source: Bloomberg)
Treasuries (YCGT0025) maintained two days of gains after Moody’s Investors Service cut credit ratings of six European countries, boosting demand for the relative safety of U.S. government debt. Ten-year yields remained below 2 percent before euro-area finance ministers meet tomorrow to discuss a second aid package for Greece, following the nation’s approval of austerity measures. The appeal of Treasuries was limited before data today forecast to show U.S. retail sales rose in January by the most in four months, fueling speculation that yields are too low given signs the economic recovery is gaining momentum. “What we’ve been seeing is a tug of war between Europe’s debt crisis and the U.S. recovery,” said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender. “Moody’s downgrades are likely to encourage some buying of Treasuries.”

Multifamily Buildings to Lead U.S. Construction Gains: Economy (Source: Bloomberg)
Construction of multifamily units will lead the U.S. building industry again this year, allowing housing to contribute to growth for the first time in seven years, according to economists Michelle Meyer and Celia Chen. Work will begin on about 260,000 apartment buildings and townhouse developments in 2012, up 45 percent from last year and the most since 2008, according to Meyer, a senior economist at Bank of America Corp. in New York. Chen, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, is even more optimistic, projecting a record 74 percent jump to 310,000. Home ownership rates, which have declined to the lowest levels since 1998, may keep dropping as the foreclosure crisis turns more Americans into renters. In addition, household formation will probably accelerate as an improving economy and growing employment embolden more people to stop sharing residences and strike out on their own.

Bernanke Labor Pessimism Seen Misplaced as U.S. Expands in 2012 (Source: Bloomberg)
In his six years as Federal Reserve Chairman, Ben S. Bernanke has sometimes proved too sanguine about the U.S. economy, declaring the impact of bad subprime mortgages on the financial markets “contained” in 2007 and being too optimistic about growth last year. Now that employment is accelerating, economists wonder if the central bank again will prove to be mistaken, this time by being pessimistic about the outlook. An improving job market, stepped-up U.S. bank lending and resurgent financial markets all could combine to boost demand. The jobless rate fell to the lowest level in three years in January, while consumer credit racked up its biggest two-month gain in a decade at the end of 2011. The stock market had its best January in 15 years, with the Standard & Poor’s 500 Index now up 6.8 percent since the start of 2012.
“The turn in the economy right now is very positive,” said Allen Sinai, president of Decision Economics Inc. in New York, who forecasts growth of 2.5 percent to 3 percent this year and a year-end jobless rate of 7.7 percent, compared with 8.3 percent last month. “We’re going to have a better year than a lot of people thought.”

Obama Futures Gaining With S&P 500 (Source: Bloomberg)
The Standard & Poor’s 500 Index’s biggest rally to start a year since 1991 is coinciding with a 15 percent increase in President Barack Obama’s re-election odds, showing growing investor confidence in the U.S. economy. The benchmark gauge for American shares has climbed as much as 7.5 percent in 2012, the most in 21 years, as unemployment fell and Federal Reserve Chairman Ben S. Bernanke vowed to keep interest rates near zero through 2014, according to data compiled by Bloomberg. The cost of a bet paying $10 should Obama win another term rose to $6 on Feb. 10 from $5.20 on Jan. 1 and below even money in November at Dublin-based bookmaker Intrade. “A better economy clearly improves the president’s re- election chances,” David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a Feb. 8 interview. “The markets are pretty good at figuring this out. If you look at the economy and you look at the string of data you can pretty much figure out what the odds are.”

Goldman Sachs Ends Hana Investment With $331 Million Stake Sale (Source: Bloomberg)
Goldman Sachs Group Inc. (086790) sold its entire 3.9 percent stake in Hana Financial Group Inc. for 372 billion won ($331 million), exiting its seven-year investment in the South Korean bank holding company. The Wall Street firm sold 9.5 million shares in Hana for 38,950 won apiece, or a 3 percent discount from yesterday’s closing price, according to the terms of the transaction obtained by Bloomberg News today. Goldman Sachs invested in Seoul-based Hana in 2005 and was the biggest shareholder before it sold 7.5 million shares in April 2011. Hana completed its biggest acquisition last week, buying Korea Exchange Bank for 4.4 trillion won from Lone Star Funds and Export Import Bank of Korea in an effort to narrow the gap behind KB Financial Group Inc. and Woori Finance Holdings Co.

Japan Swings to Contraction as Yen Undermines Exports: Economy (Source: Bloomberg)
Japan’s economy shrank an annualized 2.3 percent in the fourth quarter, more than economists estimated, as slumping exports undermine a recovery from last year’s record earthquake. The contraction compared with the median forecast for a 1.3 percent decline in a Bloomberg News survey of 26 economists. Growth was a revised 7 percent in the previous quarter, the Cabinet Office said today in Tokyo. Today’s report underscores pressure on Bank of Japan officials meeting today and tomorrow to consider more monetary easing as gains in the yen worsen losses for companies from Sony Corp. (6758) to Panasonic Corp. (6752) At the same time, the world’s third- biggest economy may get a boost this quarter from more reconstruction work, fading disruptions from floods in Thailand, and signs of improvements in the U.S.

Best-Performing Taiwan Fund Buying Higher-Yielding Europe Debt on ECB Cash (Source: Bloomberg)
Taiwan’s best-performing debt fund is buying Russian, Romanian and Turkish government bonds as the European Central Bank’s injection of funds into lenders helps ward off a cash crunch. Bryan Wang, who manages NT$6.1 billion ($207 million) of assets as a manager at Fuh Hwa Securities Investment Trust Co., said he added the securities to this year. His Emerging Markets High-Yield Fixed-Income Fund (FHEMHYA) returned 7.9 percent in 2012, the most of 115 debt funds in Taiwan tracked by Bloomberg. “If you look at the portfolios of major European banks, they have a lot of exposure in Eastern Europe,” Taipei-based Wang said in an interview yesterday. “Since the ECB is injecting funds into European banks, the money will flow into these countries, driving bond rallies.”

European Leaders ‘Confident’ Greece Meeting Bailout Demands (Source: Bloomberg)
Germany and the European Commission welcomed Greek approval of the austerity steps demanded for a financial lifeline, suggesting euro finance chiefs will pull Greece back from the brink when they meet in two days. The Greek parliament’s backing “is a crucial step forward toward the adoption of the second program,” EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels today. “I’m confident that the other conditions, including for instance the identification of the concrete measures of 325 million euros ($430 million), will be completed by the next meeting” of finance ministers. Euro-area finance chiefs will convene in Brussels on Feb. 15 for their second extraordinary meeting on Greece in a week. Frustrated after two years of missed budget targets, ministers declined to ratify the 130 billion-euro package in a special session on Feb. 9, demanding that Greek officials put their verbal commitments into law.

Greece Bailout Faces European Finance Chiefs After Parliamentary Approval (Source: Bloomberg)
European finance chiefs get the second chance in a week to pull Greece back from the brink of collapse after lawmakers in Athens approved the austerity measures demanded for a financial lifeline. Greece “will be saved in one way or another,” German Finance Minister Wolfgang Schaeuble told newspaper Welt am Sonntag yesterday, though the country must “do its homework.” Euro-area finance ministers will convene in Brussels on Feb. 15 for an extraordinary meeting called after they declined to ratify the 130 billion-euro ($172 billion) package in a special session on Feb. 9. Frustrated after two years of missed budget targets, the European authorities demanded Greek officials put their verbal commitments into law. The Greek parliament passed the legislation in the early morning hours today as rioters battled police and set fire to buildings in downtown Athens. Still, Schaeuble told German lawmakers on Feb. 10 that Greece was set to miss deficit goals, suggesting that the measures may fall short.

Spain’s Bumper January Bond Sales Widen Funding Gap to Italy: Euro Credit (Source: Bloomberg)
Spain’s bonds are poised to outperform Italy’s for a second year after the nation’s debt agency in Madrid raised more than a quarter of the funds it needs this year in the past six weeks. Spain has issued 25.4 billion euros ($34 billion) of debt so far this year, according to UBS AG estimates. Italy has sold 8 percent of its requirement while France has issued 16 percent and Germany 12 percent, the calculations show. All four nations will sell securities this week amid concern that a plan to help Greece avoid default is unraveling and may spark a fresh wave of contagion in the euro-region. “Spain’s funding this year has been massive,” said Gianluca Ziglio, an interest-rate strategist at UBS AG in London. “That is a huge amount and they’ve done it in one and a half months. The picture for Italy is the opposite and it doesn’t bode well because demand is weak.”

U.K. to Avoid Recession as ‘Stabilization’ Signs Emerge: Economy (Source: Bloomberg)
The U.K. economy will escape a recession and the recovery will gain momentum this year, avoiding the need for more quantitative easing by the Bank of England, the Confederation of British Industry said. “After a pretty stagnant winter where we flatlined, we think growth is starting again because we’ve got tentative signs of optimism,” CBI Director-General John Cridland said in an interview in London on Feb. 10. “There will be marginal growth” this quarter and “we’re not assuming in our growth forecasts that there will be a further package of QE.”
The Bank of England announced its latest round of bond purchases on Feb. 9 after the economy shrank in the fourth quarter amid turmoil from the euro-area debt crisis, bringing Britain to the edge of a recession. Cridland said sentiment had improved in recent weeks as signs of “stabilization” emerged in Europe and the global economy showed signs of resilience. Stocks advanced today and the euro strengthened after Greek lawmakers approved austerity plans to secure rescue funds.

Australian December Home Loans Jump by Most in Seven Months (Source: Bloomberg)
Australian home-loan approvals jumped in December by the most in seven months and exceeded economists’ forecasts as buyers responded to central bank interest-rate reductions. The number of loans granted to build or buy houses and apartments increased 2.3 percent to 48,453, the highest in almost two years, from a revised November increase of 1.8 percent, the statistics bureau in Sydney today. The median estimate in a Bloomberg News survey of 20 economists was for a 1.8 percent gain in approvals. Reserve Bank of Australia Governor Glenn Stevens lowered borrowing costs in November and December to 4.25 percent to buttress the housing market, support employment and boost confidence among consumers who are saving more. The RBA unexpectedly held its benchmark last week as signs mount that Europe is beginning to contain its sovereign-debt crisis and the U.S. recovery is gaining strength.