Thursday, June 7, 2012

20120607 1042 Global Market Related News.

Asian Stocks Gain as Policy Makers Signal More Stimulus (Source: Bloomberg)
Asian stocks climbed, with the benchmark regional gauge heading for its biggest three-day gain this year, as global policy makers signaled they may take steps to stimulate economic growth. Mitsubishi Corp. (8058), the No. 1 Japanese trading house, rose 2 percent and Komatsu Ltd., a mining-equipment maker, gained 2.2 percent in Tokyo as investors bought shares of companies with profits closely tied to economic growth. BHP Billiton Ltd. (BHP), the world’s largest mining company, advanced 2.2 percent in Sydney as metals prices climbed. The MSCI Asia-Pacific rose 1 percent to 112.71 as of 9:41 a.m. in Tokyo, poised for its biggest three-day gain since December 5, with more than six shares advancing for every one that fell. The Asian benchmark gauge has dropped 13 percent from its peak this year on Feb. 29. amid concern growth is slowing in China and the U.S. as Europe’s debt crisis deepens.
“Any time central bankers give us a promise that they’re going to inject some more liquidity into the markets, risk assets start to rally, and that’s precisely what’s happened,” Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, which manages about $556 billion in client assets, said in a Bloomberg TV interview. “We could have a risk rally going on for a while.”

China’s Stock Futures Rise on Bank Rules Delay, Policy Outlook (Source: Bloomberg)
China’s stock-index futures rose after the government signaled it will delay tightening bank capital rules and investors speculated monetary policy will be eased to prevent Europe’s debt crisis from harming the economy. Futures on the CSI 300 Index (SHSZ300) expiring in June, the most active contract, gained 1 percent to 2,573.80 as of 9:17 a.m. local time. Industrial & Commercial Bank of China Ltd. and China Vanke Co. may lead gains for lenders and developers after regulators postponed tighter capital rules until the beginning of next year in a move that may bolster loan growth. The Shanghai Composite Index (SHCOMP) fell 0.1 percent to 2,309.56 at yesterday’s close, with about 5.9 billion shares changing hands, 26 percent lower than the daily average this year. The CSI 300 Index lost 0.1 percent to 2,557.40. The Bloomberg China- US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, climbed 2.7 percent at the close in New York.
“It’s a decent opportunity to accumulate Chinese stocks as most of them have been soft,” Adrian Lim, a senior investment manager at Aberdeen Asset Management Plc, who helps oversee $102 billion in the Asia-Pacific region, said in an interview at Bloomberg’s headquarters in New York yesterday. “The region as a whole remains fundamentally very attractive. There’s still a very fat amount of demand.”

Japanese Stocks Advance Amid Global Stimulus Speculation (Source: Bloomberg)
Japanese stocks rose, with the Topix (TPX) Index headed for the biggest three-day advance since March 2011, amid speculation policy makers in the U.S., China and Europe will take action to spur growth amid a deepening debt crisis. Sony Corp. (6758), Japan’s No. 1 exporter of consumer electronics, rose 3.6 percent after the yen weakened, lifting overseas earnings prospects. Inpex Corp. (1662), the nation’s top energy explorer, advanced 2.8 percent as oil climbed for a fourth day. Ricoh Co. gained 4.8 percent after the office automation company was raised to “buy” at Deutsche Bank AG. The Topix gained 1.3 percent to 727.51 as of 10:03 a.m. in Tokyo, with 30 of its 33 industry groups climbing. The Nikkei 225 Stock Average (NKY) rose 1.1 percent to 8,629.76 after rising the most in seven weeks yesterday. About seven stocks gained for each that slid. Shares advanced ahead of Federal Reserve Chairman Ben S. Bernanke’s testimony later today to the U.S. Congress on the economic outlook.
“Investors have enough reasons to believe that policy makers will act,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “U.S. officials sound a bit more dovish lately, and similarly in China. China may be getting close to easing. All of those things have led to a degree of confidence.”

U.S. Stocks Cap Biggest Rally in 2012 on Stimulus Bets (Source: Bloomberg)
U.S. stocks rallied, giving benchmark indexes their biggest gains in 2012, on speculation global policy makers will take steps to stimulate economic growth. Bank of America Corp. surged 7.6 percent to pace gains among financial shares. Caterpillar Inc. (CAT) and Exxon Mobil Corp. (XOM) increased at least 3.3 percent. Home Depot Inc. (HD), the largest U.S. home-improvement retailer, climbed 3.4 percent after raising its stock repurchase plan by $500 million for fiscal 2012. Facebook Inc. (FB) added 3.6 percent, following a 32 percent decline since the biggest social-networking company went public. The Standard & Poor’s 500 Index advanced 2.3 percent to 1,315.13 at 4 p.m. New York time. The Dow Jones Industrial Average increased 286.84 points, or 2.4 percent, to 12,414.79. About 7.3 billion shares changed hands on U.S. exchanges today, or 8.3 percent above the three-month average.
“People are viewing central banks as very aware of the weakness of the global economy and looking for ways to deal with that,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition to that, we’ve had a major selloff, valuations are low and that certainly helps to lift the market on a day like today.”

European Stocks Gain After ECB Keeps Rate at Record Low (Source: Bloomberg)
European stocks surged the most in six months after the European Central Bank held its benchmark interest rate at a record low and said it’s ready to act if necessary as the growth outlook dims. Diageo Plc, the maker of Johnnie Walker, J&B and Buchanan’s Scotch whiskys, climbed 4.3 percent after saying it will invest 1 billion pounds ($1.54 billion) in production. Petropavlovsk Plc (POG) gained 9.7 percent after UBS (UBSN) AG recommended increasing holdings of the stock. UBS and Credit Suisse Group AG (CSGN), Switzerland’s largest lenders, also advanced. The Stoxx Europe 600 Index (SXXP) added 2.3 percent to 239.95 at the close of trade, the biggest gain since Nov. 30. The gauge has declined 12 percent from its 2012 high on March 16 amid growing concern that Greece will be forced to leave the euro currency union.
“While not cutting rates or setting up a new bazooka, the ECB keeps the door open for further measures if warranted, confirming what investors consider the most likely scenario,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “The bank is keeping its gunpowder dry for now and sustains the pressure on euro-zone politicians.”

Facebook is Top Short-Seller Target Among Large Stocks (Source: Bloomberg)
No large U.S. company is attracting more attention from short sellers than Facebook Inc. (FB), amid bets the world’s biggest social-networking company will keep falling after losing $27 billion since its initial public offering. Short interest on the Menlo Park, California-based company reached 5.9 percent of shares outstanding, according to data compiled by Bloomberg and Data Explorers Ltd., a New York-based research firm. None of the Standard & Poor’s 500 Index companies with at least $50 billion in market capitalization has short interest higher than 3 percent, the data show. Facebook, which has a market value of about $63.8 billion, isn’t in the S&P 500. Shares of Facebook have slumped 29 percent since they began trading on May 18 amid concern that the IPO was overvalued and the company will struggle to increase profit from its 901 million users.
At the time of its debut, underwriters led by Morgan Stanley set a price that valued Facebook at 107 times reported earnings in the past 12 months, more than eve ry S&P 500 stock except two. “Facebook is one of those companies whose future potential is unknown and unknowable,” said Robert Stimpson, a money manager at Akron, Ohio-based Oak Associates Ltd., which oversees about $900 million and doesn’t own Facebook. “The stock is expensive. The short interest might also reflect a bet that there is more bad news to come and Facebook will be punished.”

Treasuries Rise After Yellen Says Fed Has Scope to Act (Source: Bloomberg)
Treasuries rose, snapping a three-day decline, as Federal Reserve Vice Chairman Janet Yellen said a “vulnerable” U.S. economy gives the central bank scope to do more to spur growth. The 10-year yield slid one basis point, or 0.01 percentage point, to 1.65 percent as of 9:30 a.m. in Tokyo, according to Bloomberg Bond Trader data. The 1.75 percent note maturing in May 2022 advanced 3/32, or 94 cents per $1,000 face amount, to 100 31/32. Fed Chairman Ben S. Bernanke is scheduled to testify on the outlook for the economy in Congress today. The policy-setting Federal Open Market Committee meets June 19 to June 20. The economy “remains vulnerable to setbacks,” Yellen said in the text of remarks given in Boston yesterday. “I am convinced that scope remains for the FOMC to provide further policy accommodation.” Yellen said the Fed could boost the economy “either through its forward guidance or through additional balance-sheet actions.”
The U.S. central bank may also undertake another round of asset purchases or continue its Operation Twist program, set to expire this month, to lengthen the maturities of bonds on its balance sheet, Yellen said.

Dollar Is Near Week-Low Before Bernanke Speaks on Economy (Source: Bloomberg)
The dollar was within 0.1 percent of a more than one-week low against the euro on bets Federal Reserve Chairman Ben S. Bernanke today may signal more stimulus is needed to spur a recovery in the world’s largest economy. The yen declined versus most of its 16 major counterparts as Asian stocks extended a global rally, damping demand for lower-yielding currencies. The euro remained higher after its biggest gain in three months against the greenback yesterday amid speculation the European Central Bank will act to rein in the region’s debt crisis after leaving benchmark interest rates at a record low. “The U.S. dollar is certainly susceptible to indications that the Fed is looking at QE3, considering that long positions have been built up to near-record levels,” Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd, said referring to a third round of debt purchases known as quantitative easing. “It’s the rhetoric that really matters for markets.”
The dollar traded at $1.2572 per euro as of 9:12 a.m. in Tokyo from $1.2582 at the close in New York yesterday, when it sank 1 percent and touched $1.2586, the weakest since May 28. The U.S. currency added 0.2 percent to 79.32 yen. The 17-nation euro rose 0.1 percent to 99.73 yen.

Aussie Weakens Against All Major Peers Before Jobs Report (Source: Bloomberg)
Australia’s dollar weakened against all of its 16 major counterparts before a government report forecast to show an increase in the country’s unemployment rate. New Zealand’s dollar, known as the kiwi, remained higher after gaining yesterday by the most this year, as Asian stocks extended a global rally, bolstering investor appetite for riskier assets. Demand for the South Pacific nations’ currencies was supported amid speculation Federal Reserve Chairman Ben S. Bernanke will reiterate Vice Chairman Janet L. Yellen’s view that the U.S. economy may warrant more monetary stimulus. “The pullback that’s seen today can be a bit of profit- taking ahead of the Australian employment report,” said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd.
Australia’s dollar lost 0.3 percent to 98.93 U.S. cents as of 11:20 a.m. in Sydney after advancing 1.9 percent yesterday. New Zealand’s currency fetched 76.88 U.S. cents after rising 1.9 percent to 77.08. Yesterday’s gains in both currencies were the biggest since Nov. 30.

FOREX-Russia capital outflow at $5.8 bln in May -
ST PETERSBURG, June 6 (Reuters) - Capital flight from Russia reached $5.8 billion in May, Central Bank Chairman Sergei Ignatyev said, citing preliminary data.
"It would be wrong to sell (the stake) at current prices," Ignatyev told journalists during a briefing at a sidelines of a banking conference in the Russian northern city of St. Petersburg.

Fed’s Yellen Says More Easing May Be Warranted (Source: Bloomberg)
Federal Reserve Vice Chairman Janet Yellen said slowing job growth and deteriorating financial- market conditions show the U.S. economy “remains vulnerable to setbacks” and may warrant additional monetary stimulus. “I am convinced that scope remains for the FOMC to provide further policy accommodation,” Yellen said in the text of remarks given in Boston today. “It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.” The policy-setting Federal Open Market Committee meets June 19-20 to consider whether to add to its record easing after the economy created the fewest jobs in a year in May. Two regional Fed bank presidents who vote on policy this year, San Francisco’s John Williams and Atlanta’s Dennis Lockhart, said today the central bank should be prepared to take action if the economy deteriorates further.
Yellen’s speech “is a prelude to the Fed clearly considering additional easing,” said Diane Swonk, chief economist in Chicago at Mesirow Financial Inc., which oversees about $61.7 billion in assets. “The Fed is keeping its powder dry, but is at least signaling that it’s willing to act.”

U.S. Seen Weathering Blows From Europe to Budget: Economy (Source: Bloomberg)
The weakest employment gain in a year, slumping stocks and the European crisis won’t stop the U.S. economy from maintaining its expansion this year and next, according to a Bloomberg News survey. Gross domestic product will increase by 2.2 percent in 2012 and by 2.4 percent in 2013, the median of 70 economists surveyed from June 1 to June 5 shows. The estimates are down 0.1 percentage point from those issued last month. “We have to bet the economy will continue to be the way it’s going, which is slow growth,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. Among the biggest positives is that consumer spending, which accounts for about 70 percent of the economy, will hold up, the survey showed, as households make progress in repairing finances and rising bank profits help increase access to credit. The rate of economic growth will still not be enough to reduce unemployment, which is projected to end the year at 8 percent.
“It won’t be a recession, but what we have is not OK,” Silvia said. “We don’t have the kind of growth we expect at this stage of the business cycle.”

China Delays Tighter Bank Capital Rules to 2013 (Source: Bloomberg)
China plans to start tightening bank capital rules at the beginning of next year, further delaying the requirements to ensure lending support to a slowing economy. The China Banking Regulatory Commission had said in August the standards would begin Jan. 1 this year. New draft rules seek to set “reasonable” schedules for banks to meet capital targets in a way that helps “maintain appropriate credit growth,” the government said on its website yesterday, without giving a deadline for full compliance with the standards. “Chinese banks are under a lot of pressure,” Chen Xingyu, an analyst at Phillip Securities in Shanghai, said by phone. The delay is “not a surprise,” as the government is “helping banks ease the pressure to raise capital again,” Chen said.
China’s economy, the world’s second largest, expanded 8.1 percent in the first three months of this year, the slowest pace in 11 quarters. The nation’s biggest banks may fall short of loan targets for the first time in at least seven years, three bank officials with knowledge of the matter said last month. Systemically important banks must have a capital-adequacy ratio of 11.5 percent while others need to maintain a level of 10.5 percent, the government said.

Japan Confronts Flight to Quality With Brutal Yen (Source: Bloomberg)
Investors seek the yen as a haven from turmoil sparked by a debt crisis, sending it to a postwar high against the dollar and threatening to deepen Japan’s economic stagnation. The year: 1995. It’s deja-vu for Japanese policy makers, who 17 years ago countered the surge in the yen with record intervention in the foreign-exchange market, driving it down by about 30 percent within five months. Like then, the currency is again trading at postwar highs, undermining Japan’s recovery from last year’s earthquake and tsunami as investors seek refuge from Europe. The one difference is intervention may not be effective, as U.S. opposition contrasts with the American and European cooperation in yen sales that helped make the 1995 operations a success. Also making the task tougher is a strengthening in Japan’s status as the world’s largest net creditor, bolstering the yen’s allure in times of global financial stress as investors gird for a potential Greek exit from the euro.
“It’s very, very difficult for the authorities in Japan to dilute the currency as a safe-haven instrument,” said Paul Mackel, head of Asia-Pacific currency research at HSBC Holdings Plc in Hong Kong. “The periodic moves to create shock and awe have only worked very temporarily.”

South Korea GDP Expands 0.9%, Unchanged From Initial Estimate (Source: Bloomberg)
South Korea’s economy expanded at the same pace as the central bank initially estimated in the first quarter as corporate investment and government spending rose amid Europe’s debt crisis. Gross domestic product grew 0.9 percent over the three months through March from the previous quarter, unchanged from an April estimate, the Bank of Korea said in Seoul today. The economy expanded 2.8 percent from a year earlier, also matching the bank’s April estimate. South Korea is bracing for falling demand for its automobiles and electronics as Europe’s debt crisis threatens to accelerate a global slowdown. The Bank of Korea is expected to keep interest rates unchanged for a 12th month tomorrow as Greece prepares for elections later this month and Spain calls for outside funds to prop up its banks.
“What’s happening in Greece and Spain threatens an economic recovery here,” Kim Nam Hyun, a Seoul-based fixed income analyst at Eugene Investment & Futures, said before today’s release. “All BOK board members will vote for no rate change this week, opting to wait and see how the euro-zone debt crisis unfolds.”

Singh Vows to Add Roads, Ports and Plants to Revive India Growth (Source: Bloomberg)
Indian Prime Minister Manmohan Singh pledged to revive growth in Asia’s third-largest economy as he outlined port, rail and road projects and a push to expand power generation capacity. “In these difficult times we must do everything possible to revive business and investor sentiment,” Singh said in a statement in New Delhi yesterday. “We must work to create an atmosphere which is conducive to investment and to removing any bottlenecks that may be hurting the growth process. We as a government are committed to taking the necessary measures to reverse the present situation.” The government is under increased pressure to support an economy expanding at the weakest pace in almost a decade as policy gridlock deters investment and Europe’s debt crisis hampers exports. Gross domestic product rose 5.3 percent last quarter from a year earlier, compared with India’s goals of 9 percent annual expansion and investment of $1 trillion in infrastructure from 2012 to 2017.
The government yesterday outlined port projects worth an equivalent of $6.3 billion for the financial year through March 2013, an investment target of $3.6 billion for Mumbai’s elevated rail corridor and plans to add airports. It also set a goal of building 9,500 kilometers (5,904 miles) of roads in the 12-month period, up 18.7 percent from last year, and adding about 18,000 megawatts of power generation capacity.

Finnish Leader Says U.S. Worried About Europe Banks (Source: Bloomberg)
U.S. Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben S. Bernanke are concerned about the European banking industry, Finnish Prime Minister Jyrki Katainen said after meeting the two U.S. officials. “They were very worried about what was going on,” Katainen said in a Bloomberg News telephone interview yesterday. Katainen said he discussed with Geithner and Bernanke the options for recapitalizing banks in trouble. European Union leaders, including European Central Bank President Mario Draghi and European Commission President Jose Barroso, have called for a banking union with more coordination of regulation, as lawmakers seek to bolster confidence damaged by debt turmoil. EU President Herman Van Rompuy plans to report on proposed “building blocks” for deeper integration in the 17-nation euro area at the next summit of EU leaders on June 28- 29 in Brussels.
“One of the issues which we talked most was how to deal with the banking sector in Spain or in some other European countries because we should avoid a new banking crisis,” Katainen said. “This is an issue which we are considering right now.”

Draghi Stresses Limits of ECB Tools as Pressures Mount (Source: Bloomberg)
The European Central Bank may be running out of options it can stomach. With the euro area assailed by spreading recession, financial-market instability and political impasse over the direction the single currency should take, ECB President Mario Draghi yesterday stressed the limitations of his current policy tools, from standard interest-rate cuts to bond-buying and liquidity injections. Moves such as quantitative easing or capping bond yields to calm markets remain taboo for the ECB, which says its main job is to ensure stable prices. “It’s clear that they are very low on, if not completely out of, ammunition,” said Nick Kounis, head of macro research at ABN Amro in Amsterdam. “There are options that would have a more significant effect, but they’re outside of the ECB’s comfort zone. There’s an element of helplessness.”
Having already cut its benchmark rate to a record low of 1 percent, injected more than 1 trillion euros ($1.2 trillion) of three-year loans into the banking system and bought 212 billion euros of government bonds, the ECB is reluctant to do more heavy lifting as governments procrastinate over the reforms it deems necessary to put the monetary union on a sustainable footing. Draghi questioned the effectiveness of cutting rates further and flooding financial market with even more liquidity.

Draghi Says ECB is Ready to Act as Growth Outlook Worsens (Source: Bloomberg)
European Central Bank President Mario Draghi said policy makers discussed cutting interest rates to a record low today, fueling expectations they will act as soon as next month as the worsening debt crisis curbs economic growth. “We monitor all developments closely and we stand ready to act,” Draghi told reporters in Frankfurt after the ECB left its benchmark rate at 1 percent. Downside risks to the economic outlook have increased and “a few” of the ECB’s Governing Council members called for rate cut at today’s meeting, he said. The ECB is under pressure to lower rates and introduce more liquidity support for banks as governments struggle to fix a crisis that’s engulfing Spain and could force Greece out of the euro. While the ECB extended into next year its policy of lending banks as much money as they want for periods of up to three months, Draghi indicated another round of three-year loans is not imminent, keeping the pressure on governments to step up their response to the crisis.
“I don’t think it would be right for the ECB to fill other institutions’ lack of action,” he said.

Summers Says ECB, Governments Must Restore Confidence (Source: Bloomberg)
Former U.S. Treasury Secretary Lawrence Summers said that the European Central Bank and the region’s governments must do more to restore confidence amid the euro-area sovereign debt crisis. “The situation is very difficult,” Summers said in an interview on Bloomberg Television today. “They are discovering ways in which they did not expect that the single currency is brittle. The risks, it seems to me, are all on the side of lack of confidence and self-fulfilling fear.” European Central Bank President Mario Draghi said officials are ready to add more stimulus to the euro region’s economy if necessary, while damping expectations that another round of three-year funding for banks is imminent. The ECB is under pressure to lower rates and introduce more liquidity support for banks as governments struggle to fix a crisis that’s engulfing Spain and could force Greece out of the euro.
“A central bank wants to bend over backwards to be reassuring, to reassure people that liquidity is there and that’s the perspective that needs to inform the central bank,” he said. “The overwhelming imperative of the situation is to instill more confidence than there is today, and I certainly hope that’s going to inform the policy makers of Europe.”

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