20121008 0943 Global Market Related News.

Asian Stocks Drop Before European Finance Ministers Meet (Bloomberg)
Asian stocks dropped, with a regional index that excludes Japan heading for its first decline in three days, ahead of a meeting by European finance ministers today aimed at easing the region’s debt crisis. LG Display Co. (034220), the world’s second-largest maker of liquid- crystal displays that gets about 18 percent of sales from Europe, slipped 1.9 percent in Seoul. Woodside Petroleum Ltd., Australia’s second-biggest oil producer, fell 0.9 percent as crude dropped for a second day. QR National Ltd., Australia’s No. 1 haulage company, jumped 4.6 percent after announcing a share buyback. The MSCI Asia Pacific Excluding Japan Index (MXAPJ) fell 0.3 percent to 443.50 as of 8:34 a.m. in Hong Kong before trading in the city begins. Japanese markets are closed today, while China will resume trading following a week-long holiday. European finance ministers will meet in Luxembourg today, while German Chancellor Angela Merkel visits Greece tomorrow for the first time since the sovereign-debt crisis erupted.
“Europe isn’t quite finished discussing its policy response to the crisis,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “There would be some posturing by countries like Spain and Italy to extract the best bailout terms. That would generate some negative and positive headlines. Markets have had a good run and we’ll probably see some consolidation.”

U.S. Stocks Erase Gains as Optimism Over Jobs Data Fades (Bloomberg)
U.S. stocks erased gains, after an early rally among benchmark indexes, as optimism about an unexpected drop in the American unemployment rate faded and Apple Inc. shares slumped. Apple tumbled 2.1 percent, helping to reverse an early advance among technology shares. Bank of America Corp. (BAC) dropped 1 percent after surging as much as 2.6 percent. Zynga Inc. (ZNGA) slid 12 percent after cutting its forecast for full-year bookings. Avon Products Inc. climbed 7.2 percent as the door-to-door cosmetics seller said Andrea Jung will step down as executive chairman. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,460.93 at 4 p.m. in New York, after climbing as much as 0.7 percent. The index rose 1.4 percent this week. The Dow Jones Industrial Average added 34.79 points, or 0.3 percent, to 13,610.15, the highest level since December 2007. Volume for exchange-listed stocks in the U.S. was 5.7 billion shares, or 4.6 percent below the three-month average.
“Today’s trading is a pattern we’ve seen before this week, with a strong start and then we give up gains later in the day,” Frederic Dickson, who helps oversee about $32 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a phone interview. “There’s still a lot of the dark cloud of the European financial situation hanging over the market, which sets the tone for the short-term intraday trading.” The unemployment rate unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, as employers took on more part-time workers. The economy added 114,000 workers, in-line with economists’ estimates, and August’s growth was revised higher by 46,000 jobs to 142,000.

European Stocks Post Weekly Advance on U.S. Jobless Rate (Bloomberg)
European stocks posted their biggest weekly gain in a month as the U.S. unemployment rate dropped to the lowest level since January 2009 and stress tests bolstered confidence in the Spanish banking system. Banco Espirito Santo SA, Portugal’s largest publicly traded bank by market value, jumped the most in more than three years. EasyJet Plc (EZJ) surged 6.7 percent in London trading as Europe’s second-biggest discount airline said full-year earnings topped its forecasts. Bayerische Motoren Werke AG and Daimler AG led a rally in automakers. The Stoxx Europe 600 Index (SXXP) rose 2.1 percent to 274.11 this past week, the largest increase since the period ended Sept. 7. The benchmark measure has advanced 12 percent in 2012 as European Central Bank policy makers approved a plan to buy the bonds of the most-indebted euro-area members and the Federal Reserve unveiled a third round of stimulus measures.
“Equities are going up, house prices are going up and now unemployment is going down,” said Jacob de Tusch-Lec, a London- based money manager who helps oversee about $20 billion at Artemis Investment Management LLP. “You have all these three things happening at the same time and that is a very potent picture. The wealth effect is alive.” A report on Sept. 25 showed U.S. home prices climbed more than forecast in July. The S&P/Case-Shiller index of property values in 20 cities increased 1.2 percent from a year earlier, the biggest 12-month advance since August 2010.

U.K. Stocks Rise as U.S. Unemployment Rate Declines (Bloomberg)
U.K. stocks climbed, with the FTSE 100 Index advancing for the first week in three, after unemployment in the U.S. unexpectedly declined last month. Burberry (BRBY) Group Plc jumped 2.8 percent after Morgan Stanley recommended investors buy the retailer’s shares. John Wood Group Plc (WG/) climbed by the same amount after the company said it is confident of meeting full-year projections. BAE Systems Plc (BA/) fell amid a report its merger with European Aeronautic, Defence & Space Co. may fall through. The FTSE 100 rose 43.24 points, or 0.7 percent, to 5,871.02 at the close in London, extending its advance this week to 2.3 percent. The gauge swung between gains and losses yesterday as central-bank policy makers kept borrowing costs at record lows. The FTSE All-Share Index also increased 0.8 percent today, while Ireland’s ISEQ Index added 1.1 percent.
“Good employment figures from the U.S. were always going to lift equity markets,” said Angus Campbell, head of market analysis at Capital Spreads in London. The unemployment figure “could almost certainly be enough to keep Barack Obama in office following next month’s U.S. elections. The markets are likely to be happy with such a result.” U.S. jobless rate unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, from 8.1 percent as employers took on more part-time workers, a report showed.

Aussie Dollar Touches 3-Month Low as Rate Cut Bets Climb (Bloomberg)
Australia’s dollar touched the lowest level in almost three months before a report this week that may show unemployment increased and amid prospects the Reserve Bank will reduce its key rate next month. The so-called Aussie weakened versus most of its 16 major counterparts after Treasurer Wayne Swan said yesterday that reduced interest rates will help Australia weather deteriorating conditions in the world economy. New Zealand’s dollar, nicknamed the kiwi, remained lower after its biggest weekly drop in more than four months, as Asian shares declined. If Australian employment data due Oct. 11 is weak, that “will just get the market even more excited about RBA rate cuts,” said Joseph Capurso, a Sydney-based strategist at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “Aussie cross selling has been going on for quite a while and that’s been dragging the Aussie lower.”
Australia’s dollar fell 0.2 percent to $1.0165 at 11:12 a.m. in Sydney after earlier touching $1.0150, the lowest since July 13. It declined 0.2 percent to 79.99 yen. New Zealand’s currency was little changed at 81.82 U.S. cents after falling 1.5 percent in the week through Oct. 5, the most since the period ended May 18. It bought 64.39 yen from 64.37. Australia’s 10-year yield rose three basis points to 3.08 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, added one basis point to 2.65 percent. The MSCI Asia Pacific excluding Japan Index dropped 0.3 percent. Japan’s markets are shut for a holiday. Australia’s jobless rate probably climbed to 5.3 percent last month from 5.1 percent in August, according to the median estimate of economists surveyed by Bloomberg News. Payrolls probably climbed by 5,000 in September from the previous month, when they fell by 8,800, the survey showed.
Interest-rate swaps data compiled by Bloomberg show traders see an 89 percent chance the RBA will lower its overnight cash rate target by 25 basis points to 3 percent on Nov. 6. That compares with 82 percent odds on Oct. 5.

Euro Weakens Against Most Peers Before German Production Data (Bloomberg)
The euro weakened against most of its 16 major counterparts before German data today that may show industrial production and exports fell, adding to evidence the region’s debt crisis is damping growth. The 17-nation currency broke a seven-day stretch of gains versus the yen as a technical indicator signaled the euro’s advance was too rapid. European finance ministers will meet in Luxembourg today, while German Chancellor Angela Merkel visits Greece tomorrow for the first time since the crisis erupted. “The headlines from Europe are probably going to get worse over the course of next three to four months,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company. Europe’s economic fundamentals are “lackluster,” and its currency may head towards $1.20, he said.
The euro lost 0.2 percent to $1.3014 as of 7:09 a.m. in Singapore from the close in New York on Oct. 5. It fell 0.1 percent to 102.48 yen after reaching 102.80 on Oct. 5, the highest since Sept. 19. The greenback was little changed at 78.70 yen. Japanese markets are shut today for a national holiday, and the U.S. is observing Columbus Day. The euro’s 14-day relative strength index versus the yen rose to 68 at the end of last week, the highest since Sept. 19 and near the 70 level that some traders see as a sign an asset’s price has risen too fast and is poised to reverse. Industrial production in Germany probably decreased 0.6 percent in August from July, according to the median estimate of economists surveyed by Bloomberg News, which would be the biggest decline since April. A separate report may show the nation’s exports slid 0.6 percent in August, economists forecast.

U.S. Jobless Rate Declines to 7.8%; 114,000 Jobs Added (Bloomberg)
The unemployment rate in the U.S. unexpectedly fell to 7.8 percent in September, giving President Barack Obama’s re-election campaign a boost a month before the election. The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The jobless rate dropped from 8.1 percent to the lowest level since Obama took office in January 2009, and hourly earnings climbed more than forecast. “We’re seeing some firming in the labor market,” said Dean Maki, New York-based chief U.S. economist at Barclays Plc. “It’s still not booming or extraordinarily robust, but it is a labor market that we expect to continue to be firm enough to push the unemployment rate lower.”
Today’s report, the penultimate before the election, gives Obama a chance to point to an improving economy after he stumbled in this week’s debate against Republican challenger Mitt Romney. Better job prospects will give workers the wherewithal to boost spending, helping cushion the economy from a global slowdown. Stocks reversed early gains as Spanish Prime Minister Mariano Rajoy damped speculation the nation was nearing a decision to seek a bailout to secure its finances. The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,460.93 at the close of trading in New York after rising as much as 0.7 percent. The yield on the benchmark 10-year Treasury note climbed to 1.74 percent from 1.67 percent late yesterday.

More Americans Working Part-Time; Unemployment Declines (Bloomberg)
Britt Zaragoza is among a growing number of part-time workers in a U.S. economy that is simultaneously experiencing slowing growth and declining unemployment. The 48-year-old single mother found employment as a receptionist at a Columbus, Ohio, law firm in August after searching for two years. Not working a full day gives her the flexibility to take care of her 10-year-old son and pursue a career in catering. “I knew sooner or later something would come up and thank God it did,” she said. “It was the perfect hours that I was looking for so I jumped on it real quick.” Joblessness unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, from 8.1 percent, according to Labor Department data issued today in Washington. Falling unemployment, as job gains exceed labor-force growth, means more people are earning paychecks, which in turn may boost the consumer spending that accounts for about 70 percent of the economy.
“You’d rather have full-time than part-time employment for sure, but a job is a job,” said Ray Stone, managing director of Stone & McCarthy Research Associates in Princeton, New Jersey. Still, “if it’s part-time for economic reasons it takes some of the benefit away.” Some 582,000 more Americans, the most since February 2009, were working part-time last month because of slack business conditions or because those jobs were the only work they could find, according to Labor Department estimates.

Romney Undercuts Jobs Numbers, Calls Unemployment ‘Inexcusable’ (Bloomberg)
Republican presidential nominee Mitt Romney moved to undercut the latest U.S. jobs report showing unemployment at its lowest rate since President Barack Obama assumed office, saying the true number is much worse. Romney’s comments to more than 6,000 people in Apopka, Florida, came the day after new Labor Department data showed an unexpected drop in the unemployment rate to 7.8 percent in September, the lowest since Obama took office in January 2009. “If we calculated, by the way, our unemployment rate in a way that was consistent with the way it was calculated when he came into office, it would be a different number,” Romney said tonight. “You see, if the number of people -- if the percentage of the American population who were in the workforce were the same today as the day he was elected, our unemployment rate would be above 11 percent. This is inexcusable.”
Romney appeared to be referring to the workforce- participation rate, which was 63.6 percent last month, compared with 65.7 percent in January 2009. That figure isn’t incorporated into the monthly unemployment number released by the government, and wasn’t before Obama took office. The penultimate jobs report before the Nov. 6 election took on outsized significance in the presidential race, in which Obama’s economic record and Romney’s claim to have the business experience to do better at creating jobs are central themes.

Cheapest Chinese Stocks Since 1997 Not Enough to Signal Rally (Bloomberg)
The last time China’s stocks were this cheap in 2008, the benchmark index rose 83 percent in a year. Now is different as policy makers struggle to reverse the worst economic slowdown in more than a decade, the most-accurate strategists say. While the Shanghai Composite Index trades at 11.4 times the earnings of China’s biggest companies, the lowest level since at least 1997, economists predict the world’s second-largest economy will grow at its slowest annual pace in 13 years. Investors (SHCOMP) anticipate the government will lack focus on the slowdown as the Communist Party prepares for a once-in-a-decade leadership transition.
Haitong Securities Co. strategist Chen Ruiming, who correctly predicted on Aug. 1 the index would fall below the 2,000 level, says the measure is poised to drop a further 14 percent to 1,800 this year. China’s stocks will end down for a third year, according to Bank of Communications Co.’s Hao Hong, the only forecaster among 13 strategists surveyed by Bloomberg at the start of the year to predict declines for equities in 2012. Falling interest rates and increasing copper prices -- which foreshadowed the rally in 2009 -- aren’t predictive this time around, said David Cui, chief China strategist at Bank of America Corp. He sees more losses for the index after saying in Feb. 22 that it would slump to 2,100 by year-end.
“These signals are only indicative of a market turnaround if and when there are signs of a genuine turnaround in economic growth and the prospect of sustained improvement in corporate earnings,” Shanghai-based Cui wrote in e-mailed comments on Sept. 25. “Right now, things appear to be still heading downhill and the market cannot figure out where the bottom is.”

Europe Seeks to Contain Spanish Troubles as Finance Chiefs Meet (Bloomberg)
European officials will move to prevent Spain from dragging the single currency into a new round of convulsions this week as a series of high-level meetings aim to ease the three-year-old European debt crisis. European finance ministers meet in Luxembourg today to discuss Spain’s overhaul effort and closer banking cooperation, while on Oct. 10, Spanish Prime Minister Mariano Rajoy travels for talks with French President Francois Hollande in Paris. Germany’s Chancellor Angela Merkel tomorrow makes her first visit to Greece since the crisis began in 2009. “It feels as if we are in for a month or so of Spanish trouble,” Erik Nielsen, London-based chief global economist at UniCredit SpA (UCG), wrote in a note yesterday. Nielsen cited the risk that Spain will wait too long to request financial assistance and that a rescue package will be badly designed.
A month after European Central Bank President Mario Draghi unveiled a plan to gain the upper hand through central-bank bond purchases, handing the burden of crisis resolution over to European governments, leaders have yet to agree on a blueprint for rescue conditions and centralized bank supervision. Finance ministers from the 17-member euro area will discuss issues including Spain at 5 p.m. in Luxembourg; ministers from all 27 nations in the European Union will meet the next day. EU leaders gather for a summit in Brussels the following week on Oct. 18-19.

Cameron Says U.K. Rich Will Pay More Tax Without Mansion Levy (Bloomberg)
U.K. Prime Minister David Cameron said his government will announce additional measures to increase taxes on the rich, while ruling out a so-called mansion tax wanted by his Liberal Democrat coalition partners. “We are going to take further action to make sure that the richest people in our country pay their fair share towards deficit reduction,” Cameron told BBC television’s “Andrew Marr Show” yesterday as his Conservative Party began its annual conference in Birmingham, central England. He said people who save and buy large houses shouldn’t be hit “every year with a massive great tax. That’s not going to happen.” The Conservatives have lost voter support since a cut in the top income-tax rate in the March budget allowed them to be painted by their opponents as the party of the rich. Cameron’s refusal to accept a levy on the most expensive properties risks increasing tensions with the Liberal Democrats, who say they will only support further cuts to welfare if he introduces new taxes on the wealthy.
The prime minister pointed to moves to stop tax evasion, remove tax reliefs and increase stamp duty on purchases of the most expensive homes as examples of measures his government has already implemented. Cameron said the rich “are paying a greater percentage on their total income than they ever did” under the previous Labour government. He defended reducing the top rate of income tax to 45 percent from 50 percent on the grounds that the higher levy was “completely uncompetitive.”

Pound Drops Against Euro on U.K. Growth Concern; Gilts Decline (Bloomberg)
The pound fell for the first time in three weeks against the euro as evidence the U.K. economy is struggling to grow damped demand for the nation’s assets. The pound was little changed against the dollar after dropping to the lowest in more than three weeks. An Oct. 3 report showed a gauge of U.K. services rose at a slower pace than economists forecast last month, while the nation’s manufacturing industry shrank for a fifth month in September, according to separate data on Oct. 1. Government bonds fell after the U.S. employment rate unexpectedly slid to the lowest level in almost four years. “Euro-pound has definitely broken lower out of its range,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London. “The U.K. economy is not great. The pound doesn’t seem to have many friends right now.”
The pound was at 80.61 pence per euro at 5 p.m. London time yesterday, down 1.3 percent since Sept. 28. It fell to 80.67 pence yesterday, the weakest since Sept. 18. Sterling traded little changed at $1.6194, after touching 1.6067 on Oct. 3, the least since Sept. 12. The Bank of England kept its benchmark interest rate unchanged at a record-low 0.5 percent at a monthly policy meeting on Oct. 4, in line with the estimate of all 50 analysts surveyed by Bloomberg News. The central bank also maintained its bond-purchase target of 375 billion pounds.

Spanish Notes Rise on Bailout Speculation; Portugal Debt (Bloomberg)
Spain’s two-year notes advanced for the first time in four weeks amid speculation the nation was preparing to seek a sovereign bailout that will trigger European Central Bank purchases of its debt. Spain’s 10-year yields fell the most in almost a month yesterday after the European Central Bank’s President Mario Draghi reiterated on Oct. 4 the institution is ready to start buying the bonds of indebted countries as soon as the necessary conditions are fulfilled. German bunds fell for the first time in three weeks as the ECB kept its key rate at a record-low 0.75 percent. Portugal’s 10-year bonds rose for five days, the longest streak of gains since the period ended Aug. 21, after the nation completed a debt swap. “Markets are focused on the idea that we will see Spain ask for a bailout and this is helping the country’s bonds,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “Asking for aid would clear the way for the ECB to buy the bonds.”
Spanish two-year note yields dropped 38 basis points, or 0.38 percentage point, to 3.05 percent at 5 p.m London time yesterday. The 4.75 percent security due July 2014, climbed 0.65, or 6.50 euros per 1,000-euro ($1,305) face amount, to 102.925. Ten-year Spanish rates declined 25 basis points to 5.69 percent, and touched 5.68 percent yesterday, the least since Sept. 25. The ECB’s plan to buy bonds, called Outright Monetary Transactions, has already lowered borrowing costs for sovereigns across Europe, Draghi said on Oct. 4 at a press conference after the central bank announced its rate decision.

ECB’s Coeure Says Euro Economy Will Grow Again in 2013: Delo (Bloomberg)
European Central Bank Executive Board member Benoit Coeure said the euro-area economy will return to growth next year, Slovenia’s Delo newspaper reported, citing an interview. “Economic growth will come back in the course of 2013,” Coeure was quoted as saying. “At first it will be slow. It will then accelerate gradually, thanks to reforms.” He said the ECB is ready to start its new bond-purchase program “once all the prerequisites are in place,” and the ECB can support economic growth and financial stability as long as that’s consistent with its price-stability mandate. The idea of a common euro-area budget “is interesting and should be examined,” Coeure said, adding it is “not a short- term prospect.”

Draghi says ECB primed to buy bonds when ready (Reuters)
European Central Bank President Mario Draghi said on Thursday the ECB was primed to buy troubled euro zone bonds when conditions were right and that this had already calmed financial market tension.