Asia Stocks Fall on Oil, Greece Concern (Source: Bloomberg)
Asian stocks dropped for a second day on concern oil near a nine-month high will crimp economic growth and as investors warned that a Greece bailout won’t solve Europe’s sovereign-debt crisis. Canon Inc., the camera makers that gets 31 percent of sales from Europe, declined 1.9 percent in Tokyo. Sony Corp. (6758), Japan’s biggest exporter of consumer electronics, slipped 1.3 percent after bellwether Dell Inc. forecast first-quarter revenue that missed analysts’ estimates. “Even though Greece got the latest bailout, there are still a lot of hurdles to face,” said Shane Oliver, Sydney- based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The main driver for strength in recent times has been monetary easing around the globe or good economic data, and last night was pretty quiet on that front.”
Japanese Equities Advance as Oil, Metals Climb; Yen Continues to Weaken (Source: Bloomberg)
Feb. 22 (Bloomberg) -- Japanese stocks rallied from yesterday’s losses as commodity prices gained while the yen slid against most of its major counterparts, boosting demand for riskier assets. The Nikkei 225 Stock Average (NKY) rose 0.1 percent to 9,472.71 as of 9:03 a.m. in Tokyo. The broader Topix Index added 0.3 percent to 818.43.
U.S. Stocks Erase Gains After S&P 500 Advances to Highest Level Since 2008 (Source: Bloomberg)
U.S. stocks erased gains, after the Standard & Poor’s 500 Index failed to hold above its highest close since 2008, as approval of Greece’s bailout was offset by economic concern with crude oil jumping to a nine-month high. The Dow Jones Transportation Average (TRAN), a proxy for economic growth, slumped 1.5 percent as United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL) dropped at least 7.2 percent. Wal-Mart (WMT) Stores Inc., the world’s biggest retailer, fell 3.9 percent as low prices hurt margins. Energy shares had the biggest gain in the S&P 500 among 10 industries as Chevron Corp. (CVX) rallied 1.6 percent. Macy’s Inc. (M), the second-biggest U.S. department-store chain, added 1.2 percent as profit beat estimates.
Eight stocks fell for every five rising on U.S. exchanges at 4 p.m. New York time. The S&P 500 gained 0.1 percent to 1,362.21, paring an earlier advance of 0.5 percent. The Dow Jones Industrial Average added 15.82 points, or 0.1 percent, to 12,965.69, after topping 13,000 (INDU) for the first time since 2008.
European Stocks Decline After Accord on Greek Bailout; U.S. Futures Gain (Source: Bloomberg)
European stocks fell from a six- month high amid speculation a Greek bailout deal won’t be sufficient to solve the nation’s debt crisis. CSM NV, the world’s biggest maker of bakery ingredients, tumbled 9.9 percent after reporting an unexpected loss. Segro (SGRO) Plc dropped 2.1 percent after writing down the value of peripheral assets. National Bank of Greece SA (ETE), the country’s largest lender, plunged 9.5 percent. The Stoxx Europe 600 Index (SXXP) lost 0.5 percent to 266.78 at the close of trading. The gauge has still rallied 24 percent since Sept. 22 amid speculation that the European sovereign-debt crisis will be contained and as U.S. economic data exceeded forecasts. The measure rose for a fourth day yesterday, climbing to the highest level since July 26.
Emerging Market Stocks Fall For First Time in Three Days on Greek Concern (Source: Bloomberg)
Emerging-market stocks dropped for the first time in three days on concern Europe will continue to struggle even after a second rescue package for Greece. The MSCI Emerging Markets Index (MXEF) lost 0.2 percent to 1,064.41 at the close in New York, retreating from a more-than six-month high reached yesterday. Mexico’s IPC Index (IPC) slid the most in a month as Genomma Lab Internacional SAB (LABB) fell to a four- month low on concern it may increase debt to make an acquisition. Russia’s Micex Index (INDEXCF) dropped the most in two months, while Turkey’s benchmark gauge declined for the first time in five days. European finance ministers approved a second bailout of 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default.
The nation’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicates.
Yen Falls in Longest Streak in Two Months; Euro Gains on Greece Bailout (Source: Bloomberg)
The yen fell for a fourth day versus the dollar, the longest losing streak in more than two months, as investors sold the Japanese currency to buy higher-yielding assets. The euro rose against the majority of its most-traded counterparts as Greece won a second international bailout and its government submitted debt-swap and austerity measures to the country’s parliament for approval. Gains in the dollar were limited as U.S. stocks rallied to the highest levels since 2008 before retreating. The yen has declined against all its major peers since Japan’s central bank increased its asset-purchase fund to 30 trillion yen last week. “As the market conditions calm down a little and we have less volatility, there is more interest in selling the yen against non-major currencies,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “What we’ve seen with dollar-yen has a lot to do with Bank of Japan easing.”
Euro off highs as Greek deal euphoria wanes
LONDON, Feb 21 (Reuters) - The euro held onto gains due to relief over Greece's securing of a rescue deal to avoid a chaotic default, but sceptical investors were looking to sell into a bounce on doubts whether it makes the country's debt burden any more manageable.
"It has been a relief rally for the euro, but there are so many caveats, so many risks to implementation," said Jeremy Stretch, head of currency strategy a CIBC World Markets.
Margins Gain at U.S. Companies as Wages Lag (Source: Bloomberg)
Companies are improving margins and generating profits as wage growth for the American worker lags behind the prices of goods and services. The year-over-year change in the so-called core consumer price index, which excludes volatile food and fuel, has outpaced hourly earnings for the last four months. In January, average hourly earnings climbed 1.5 percent from a year earlier, while core inflation was up 2.3 percent. “A lot of the outperformance of profits has been due to the fact that margins are expanding,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Firms have been able to keep prices intact even though labor costs have been declining.” While benefiting the bottom line for businesses, the decline in inflation-adjusted wages bodes ill for the sustainability of economic growth as consumers may eventually be forced to cut back, Feroli said. Businesses have also been slow to redeploy their profits into new hiring.
Obama Admin to Detail Corporate Tax Plan (Source: Bloomberg)
The Obama administration will release details tomorrow on its proposal to reduce the 35 percent corporate tax rate and eliminate tax breaks, said administration officials familiar with the plan. The Treasury Department will outline the proposal, according to the officials, who briefed reporters on condition of anonymity. They didn’t discuss details of the administration’s proposal. Treasury Secretary Timothy F. Geithner said Feb. 15 during congressional testimony that the administration would release a proposal that is “more than principles but less than fully articulated legislative language.” He said the proposal would include a lower corporate tax rate and the elimination of dozens of tax breaks. The administration will propose retaining breaks that directly support investment in the U.S., he said.
Greek Rescue Leaves Europe Default Risk Alive (Source: Bloomberg)
Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years. Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year. Even with investors and central bankers chipping in to relieve the debt burden, economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver amid a fifth year of recession, looming elections and social unrest. The upshot could be the removal of aid and renewed debate over the merits of fresh assistance before year-end as policy makers shift toward doing more to inoculate the rest of Europe.
Euro-Area Central Banks to Swap Greek Bonds (Source: Bloomberg)
Euro-area central banks will swap the Greek bonds in their investment portfolios for similar securities to avoid enforced losses during a debt restructuring, a euro-area official said. The swap will happen today and is identical to one the European Central Bank carried out last week with the Greek bonds acquired in its asset-purchase program, the official said. The new Greek bonds will be immune to collective action clauses, or CACs, ensuring central banks don’t incur any losses when a private-sector debt write-down takes place, the official said on condition of anonymity. A spokesman for the Frankfurt-based ECB declined to comment.
Announcing a second bailout for Greece earlier today, euro- area finance ministers said part of the deal is for governments to contribute the equivalent of the profits their national central banks make on Greek bonds in investment portfolios. That will reduce Greece’s debt ratio by 1.8 percentage points by 2020 and lower its financing needs by about 1.8 billion euros ($2.4 billion), they said. Ministers didn’t say whether the bonds would be swapped for equivalent assets that are exempt from CACs.
Biggest U.K. Surplus in Four Years Pressures Osborne on Stimulus: Economy (Source: Bloomberg)
Britain posted the biggest budget surplus in four years in January, increasing pressure on Chancellor of the Exchequer George Osborne to provide some stimulus for the economy in his budget next month. Revenue exceeded spending by 7.75 billion pounds ($12.3 billion), compared with a surplus of 5.2 billion pounds a year earlier, the Office for National Statistics said today in London. The median of 10 forecasts in a Bloomberg News survey was 6.3 billion pounds. January is the biggest tax-collection month of the year. Osborne is refusing to bow to pressure from opposition politicians to relax his fiscal squeeze to promote growth when he presents his annual budget on March 21. Moody’s Investors Service said last week that while the U.K.’s Aaa rating was at risk from the crisis in Europe, the government’s commitment to deficit reduction supported the top grade.
Greece Wins Second Bailout as Europe Picks Aid Over Default (Source: Bloomberg)
Debt-stricken Greece won a second bailout after European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. Finance ministers awarded 130 billion euros ($173 billion) in aid, engineered a central-bank profits transfer and coaxed investors into providing more debt relief in an exchange meant to tide Greece past a March bond repayment. Stocks fell and the euro fluctuated as investors speculated the deal won’t fix Greece’s long-term challenges. Bondholders’ response to the swap, Greece’s tolerance of more austerity and a gantlet of parliamentary approvals in northern European countries gripped by an anti-bailout mindset loom as risks to the latest salvage operation.
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