20121025 1047 Global Market Related News.

Asia FX By Cornelius Luca - Wed 24 Oct 2012 15:31:16 CT (Source:CME/www.lucafxta.com)
The appetite for risk improved cautiously and selectively on Wednesday after imploding for two the past three days amid lackluster corporate earnings. The foreign currencies ended divergently after falling since Thursday, as the boost from a better Chinese PMI was countered by weak Eurozone data. The US stock markets ended lower after the S&P500 seems to have confirmed a triple top formation on Tuesday. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is still slightly bullish. The LGR short-term model is short on yen, sterling and Canadian dollar, and long euro, franc and Australian dollar. Good luck!

Overnight
US: Markit manufacturing PMI edged up to 51.3 in October from 51.1 in September
US: New home sales rose to 389,000 in September from 368,000 in August.
US: The Fed left interest rates unchanged and re-affirmed its commitment to support the US economy is needed.

Today's economic calendar
Japan: Corporate service price  for September
China: Leading Economic Index for September

Asian Stocks Rise After U.S. Home Sales Data; KDDI Jumps (Bloomberg)
Asian stocks rose, with the regional benchmark index heading for its first advance in five days, as sales of new homes in the U.S. climbed to a two-year high, helping to support what the Federal Reserve described as modest growth in the world’s biggest economy. SK Hynix Inc. (000660), the world’s second-largest maker of computer memory chips, climbed 1.9 percent in Seoul. KDDI Corp. jumped 4.8 percent after Japan’s No. 2 mobile-phone company and Sumitomo Corp. offered as much as 216 billion yen ($2.7 billion) for the remaining shares of their cable television joint venture. Sharp Corp. sank 4.8 percent in Tokyo after the Nikkei newspaper reported the maker of Aquos televisions may post a 400 billion yen first-half loss.
The MSCI Asia Pacific Index (MXAP) gained 0.3 percent to 122.43 as of 10:22 a.m. in Tokyo, erasing losses of 0.1 percent. About two shares rose for each that fell. The gauge rose 12 percent from this year’s low on June 4 through yesterday as stimulus measures in the U.S., Japan and China boosted sentiment amid a global economic slowdown and Europe’s debt crisis. “The economy is recovering in the U.S., allowing investors to have a certain amount of confidence,” said Mitsushige Akino, who helps oversees about $626 million in assets at Ichiyoshi Investment Management Co. in Tokyo. “To a certain extent, weaker corporate earnings have already been priced in, so earnings shouldn’t drive down the overall market any further, but individual shares will react.”
The Nikkei 225 Stock Average added 0.5 percent, while Australia’s S&P/ASX 200 Index rose 0.1 percent. Taiwan’s Taiex Index gained 0.3 percent and South Korea’s Kospi Index advanced 0.1 percent. Markets in China and Hong Kong have yet to open.

Japan Stocks Swing From Gains, Losses on Fed Comments (Bloomberg)
Japanese stocks swung between gains and losses after the U.S. Federal Reserve said the economy is growing modestly, and the nation’s new home sales climbed to a two-year high. Funai Electric Co., a maker of audio-visual equipment that relies on North America for half its revenue, gained 2.2 percent. Mitsubishi Motors Corp. rose 2.9 percent after the carmaker raised its profit forecast. Nippon Electric Glass Co. led declines on the Nikkei 225 Stock Average (NKY) after first-half net income tumbled and industry bellwether Corning Inc. said it may cut jobs to improve earnings. The Nikkei 225 Stock Average rose 0.3 percent to 8,976.39 as of 9:47 a.m. in Tokyo after falling as much as 0.1 percent. The broader Topix (TPX) Index added 0.3 percent to 745.38.
“The economy is recovering in the U.S., allowing investors to have a certain amount of confidence,” said Mitsushige Akino, who helps oversee about $626 million in assets at Ichiyoshi Investment Management Co. in Tokyo. “Weaker corporate earnings have already been priced in, so earnings shouldn’t drive the overall market down any further but individual shares will react.” The Topix has risen 3.4 percent through yesterday from Sept. 6 after the European Central Bank started a global wave of easing to boost growth, with the Fed and the Bank of Japan following suit. Shares on the stock gauge traded at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index.

U.S. Stocks Fall to Seven-Week Low as Fed Offsets Economy (Bloomberg)
U.S. stocks declined, sending the Standard & Poor’s 500 Index to a seven-week low, as the Federal Reserve’s call for moderate growth offset signs of improvement in Chinese factory output and America’s housing market. Netflix Inc. (NFLX) plunged 12 percent after the world’s largest online video service cut its forecast for domestic growth. Altera Corp. (ALTR) slumped 8.4 percent as the maker of programmable chips used in phone systems predicted sales that fell short of estimates. D.R. Horton Inc. (DHI) and Toll Brothers Inc. (TOL) added at least 1.5 percent to pace gains in homebuilders. Facebook Inc. (FB), the world’s biggest social networking site, surged 19 percent after reporting sales that topped analysts’ projections.
The S&P 500 declined 0.3 percent to 1,408.75 at 4 p.m. New York time, dropping 1.8 percent in two days. The Dow Jones Industrial Average lost 25.19 points, or 0.2 percent, to 13,077.34. Volume for exchange-listed stocks in the U.S. was 6.1 billion shares, or about in line with the three-month average. “It’s been a pretty lackluster market,” Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview. “There’s nothing new or encouraging in terms of the Fed’s outlook regarding the economy. In addition to that, top line growth of companies has been disappointing.”
Equities erased gains as the Fed said the economy is still growing modestly and unemployment remains elevated as it maintains $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion. An earlier advance was driven by a survey signaling a smaller contraction in China’s manufacturing. Purchases of new homes in the U.S. rose to the highest level in more than two years.

Recap Stock Index Market Report (CME)
The December S&P 500 trended higher during the early morning hours, supported by favorable economic data and better than expected earnings from Boeing. The morning bounce began with positive data flow out of China, with a read on manufacturing showing a larger than anticipated jump. This morning's round of US corporate earnings seemed to offer added support, with standout leadership coming from Boeing, Facebook and Dow Chemical. Meanwhile, US equity markets failed to gain much upside after a stronger than expected New Home Sales report and a muted reaction following the FOMC meeting decision. The major US indices registered their low of the session ahead of the closing bell.

European Stocks Climb on SAP Revenue Forecast (Bloomberg)
European stocks advanced, after yesterday tumbling the most in four weeks, as technology companies rallied, outweighing worsening economic data from the euro area. SAP AG (SAP) gained 4.2 percent after the world’s biggest maker of business-management software raised its full-year revenue target as license sales beat estimates. STMicroelectronics NV (STM) climbed 4.2 percent on plans to cut costs. Volvo AB and Nordea Bank AB (NDA) retreated more than 1.5 percent after the companies reported third-quarter earnings that missed projections. The Stoxx Europe 600 Index (SXXP) rose 0.4 percent to 269.52 at the close in London, after earlier falling as much as 0.4 percent. The equity benchmark dropped 1.7 percent yesterday as company earnings disappointed investors. The gauge has rallied 15 percent from this year’s low on June 4 as the European Central Bank approved an unlimited bond-buying plan for the most-indebted members of the currency zone.
“People were expecting a pretty undynamic earnings season given the macro drop, so there are few surprises on that front,” Philip Saunders, a portfolio manager at Investec Asset Management, said on Bloomberg Television in London. “Clearly some leading stocks have disappointed, but beneath the surface, there is is some good news as well.” Stocks slid earlier as separate reports showed euro-area services and manufacturing output have contracted more than economists had forecast, while German business confidence unexpectedly declined.

Treasuries Stay Lower Before Durable Goods Orders (Bloomberg)
Treasuries stayed lower following a loss yesterday before a report economists said will show durable goods orders rose and a $29 billion seven-year auction. U.S. government securities due in 10 years and longer have handed investors a 5 percent loss in the past three months, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Only South African and Greek bonds have done worse, based on changes in debt levels and currency rates, the indexes show. Benchmark 10-year notes yielded 1.79 percent as of 9:32 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent note due in August 2022 was 98 17/32. The record low was 1.38 percent on July 25. “I just don’t think there’s any value in Treasuries,” said Roger Bridges, who oversees the equivalent of $15.5 billion of debt as head of fixed income at Tyndall Investment Management Ltd. in Sydney. “Growth isn’t as bad as people were expecting.”
Orders for U.S. durable goods probably rose 7.5 percent in September following a 13.2 percent slump in August that was the biggest since January 2009, according to the forecast of 77 economists surveyed by Bloomberg. The Commerce Department report is scheduled for 8:30 a.m. New York time. Ten-year yields will be 1.77 percent at year-end and 2.06 percent by June 30, according to a Bloomberg survey of economists, with the most recent projections given the heaviest weightings. Treasuries fell yesterday as the Federal Reserve said it would maintain stimulus measures with the economy growing at a “moderate” pace. The central bank, in its last meeting before the Nov. 6 presidential election, retained its program of $40 billion in monthly purchases of mortgage-backed debt aimed at spurring the three-year expansion and said “inflation recently picked up somewhat.”
Today’s auction is the last of three note sales this week. The U.S. sold $35 billion of five-year debt yesterday and the same amount of two-year securities on Oct. 23.

Euro Stays Lower Before German, French Confidence Data (Bloomberg)
The euro remained lower against its major counterparts amid signs the region’s debt crisis is hampering growth in its biggest economies. The 17-nation euro traded below $1.30 for a third day before data forecast to show German consumer confidence will fail to improve in November and French household sentiment fell for a fourth month. New Zealand’s dollar held onto a gain following the Reserve Bank’s decision to keep interest rates unchanged. Demand for the dollar was limited after the Federal Reserve said it plans to continue bond buying in a third round of quantitative easing, which tends to debase the U.S. currency. “The recession that you’ve got in the peripheries is certainly now spilling over into the core,” Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender, said of Europe’s economies. “France is in a recession, Germany, if not in a recession, then is very close to it, so that’s certainly not a good sign, and the euro dipped a bit.”
The euro dropped 0.1 percent to $1.2968 at 9:21 a.m. in Tokyo after declining 0.7 percent over the previous two days. It touched $1.2921 yesterday, the weakest level since Oct. 15. The shared currency was little changed at 103.53 yen. The dollar bought 79.84 yen from 79.81. GfK SE (GFK), a market-research company in Nuremberg, Germany, will probably say tomorrow that its consumer-sentiment index will remain at 5.9 for a fourth-straight month in November, according to the median estimate of economists in a Bloomberg News survey. A report from the Ifo institute yesterday showed German business confidence unexpectedly fell to the lowest in more than 2 1/2 years.

N.Z. Dollar Touches One-Month Versus Yen After RBNZ (Bloomberg)
New Zealand’s dollar rose to a near six-month high versus the yen after the central bank left interest rates unchanged and said market sentiment has improved. The so-called kiwi climbed for a second day against the U.S. dollar after newly installed Reserve Bank of New Zealand Governor Graeme Wheeler said inflation is expected to accelerate. Australia’s dollar rose for a second day versus the yen as swaps traders cut bets that the South Pacific nation’s central bank will reduce borrowing costs next month. “Wheeler disappointed those in the market who had been expecting an easing signal,” said Imre Speizer, a market strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s No. 2 lender. “The market was fully priced for a January rate cut, and that pricing will be at least partially unwound.”
The New Zealand dollar climbed 0.4 percent to 65.74 yen as of 12:10 p.m. in Sydney, the most since April 30. It added 0.2 percent to 82.24 U.S. cents. Australia’s dollar rose to 82.81 yen, the highest since Sept. 19, up 0.2 percent from yesterday’s close. The Aussie climbed 0.1 percent to $1.0362. The MSCI Asia Pacific Index (MXAP) of shares advanced 0.3 percent, snapping a four-day decline and boosting the allure of higher- yielding currencies. The RBNZ expects annual inflation to head back to the middle of its 1 percent to 3 percent target range from 0.8 percent in the third quarter, Wheeler said in a statement. Improved market sentiment suggests that risks to the global outlook are “more balanced,” he said. Australia’s statistics bureau said yesterday the so-called core inflation rate rose 2.4 percent in the three months ended Sept. 30, surpassing the 2.2 percent increase estimated by economists.
Overnight-index swaps data compiled by Bloomberg show traders see a 63 percent chance Australia’s central bank will lower its key rate to 3 percent at its Nov. 6 meeting, compared with a 97 percent likelihood signaled on Oct. 22.

Fed Says Growth ‘Moderate’ While Maintaining Bond Buying (Bloomberg)
The Federal Reserve said the economy is still growing modestly and unemployment remains elevated as it maintains $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion. “Growth in employment has been slow,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington. “Household spending has advanced a bit more quickly.” Fed Chairman Ben S. Bernanke is leading a third round of unprecedented bond-buying as he seeks to speed job creation for 12.1 million unemployed Americans. The FOMC, in its last scheduled meeting before the presidential election, repeated today that it would press on with the asset purchases until the labor market improves “substantially.” “Strains in global financial markets continue to pose significant downside risks,” the statement said. “Inflation recently picked up somewhat, reflecting higher energy prices.” It said longer-term inflation expectations have remained stable.
Treasuries were little changed after the statement, with the 10-year note yield rising one basis point, or 0.01 percentage point, to 1.77 percent as of 2:53 p.m. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,412.85 in New York after rising as much as 0.5 percent.

Bernanke Seen Attacking Jobless Rate With QE Through 2013 (Bloomberg)
Federal Reserve Chairman Ben S. Bernanke says he’ll stoke the economy until the job market recovers “substantially.” That promise may force him to keep buying bonds until the final months of his term ending in January 2014, according economists in a Bloomberg survey. Sixty-eight percent of 60 economists said the Fed chairman’s third round of quantitative easing will last until late next year or beyond. Just 51 percent of them said the strategy will help boost employment, with a median estimate of 116,000 jobs over the course of next year. “The recovery in the labor market is probably going to be more sluggish than the Fed recognizes” said Michael Hanson, senior U.S. economist at Bank of America Corp. in New York and a former Fed economist. He said policy makers have “painted themselves in a bit of a corner, waiting to see a significant improvement in the labor market.”
Bernanke said in August that new bond buying, while spurring growth and generating jobs, may erode confidence the Fed will exit smoothly from record accommodation, including the first two rounds of bond purchases totaling $2.3 trillion. Most surveyed economists believe Bernanke has gone too far with quantitative easing, with 55 percent saying policy is too easy, compared with 48 percent who said so in a Sept. 7-10 survey. Bernanke and his colleagues on the Federal Open Market Committee resumed a two-day meeting in Washington today and plan to release a statement at about 2:15 p.m. on policy, including their current plan to buy $40 billion in mortgage-backed securities each month for an indefinite period.

Home Sales Rising to Two-Year High Spur U.S. Growth: Economy (Bloomberg)
Americans bought new homes in September at the fastest pace in two years, another sign the industry whose decline was at the heart of the recession is bouncing back. Sales climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, following a revised 368,000 rate in August, figures from the Commerce Department showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg called for an increase to 385,000. Population growth and mortgage rates pushed to record lows by Federal Reserve purchases of housing debt are generating sales for builders like Toll Brothers Inc. (TOL) and spurring the three-year economic recovery. Housing starts in September jumped 15 percent to the fastest pace since July 2008, a report last week showed.
“All the things that were really holding back housing are finally starting to lift,” said Guy Berger, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who projected sales would climb to 390,000. “It really is tough to find any bad signs here. Inventories are very, very lean. Assuming the economy remains on track, housing should continue to improve for the rest of the year and into 2013.” Stocks fell, erasing earlier gains, after the Fed said employment growth is slow and strains in financial markets continue to pose risks to the economy. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,408.75 at the close in New York. Treasury securities declined, sending the yield on the benchmark 10-year note up to 1.79 percent from 1.76 percent late yesterday.

India Rate-Cut Odds Climb as Policy Revamp Stems Rupee Plunge (Bloomberg)
India’s central bank will consider reducing interest rates for the first time since April after government efforts to pare the budget deficit stemmed a slide in the rupee, boosting scope to stimulate the economy. Governor Duvvuri Subbarao will cut the repurchase rate to 7.75 percent from 8 percent, 10 of 26 analysts said in a Bloomberg News survey ahead of an Oct. 30 decision. Two predicted a reduction to 7.5 percent and the rest no change. A majority of respondents in another poll forecast Subbarao will lower banks’ reserve ratios to spur lending. Finance Minister Palaniappan Chidambaram said Oct. 12 that India needs cheaper credit, following a revamp of economic policy that included fuel-subsidy curbs and helped make the rupee one of Asia’s best-performing currencies in the past three months. While Subbarao has signaled that a narrower budget gap may provide more room to join nations from Brazil to Thailand in extending rate cuts, he also faces inflation of almost 8 percent.
“There is blatant pressure from the government to ease and it’ll be hard for the central bank to ignore it,” said Rajeev Malik, a Singapore-based senior economist at CLSA Asia-Pacific Markets. “Our case for cutting rates rests on the RBI making a reciprocal gesture to the government following its initiatives in the last one month. But more needs to be done on the fiscal deficit.” The Reserve Bank of India unexpectedly reduced the amount of deposits lenders must set aside as reserves last month to boost growth, even as it kept interest rates unchanged as expected by the majority of economists in a Bloomberg survey.

Brazil Seen Leading Latin American Economic Resurgence (CME)
Central Bank May be Forced to Reverse Course
Economic growth in Brazil and other Latin American countries, on pace for the weakest performance in three years, is expected to improve in 2013 thanks to stronger domestic consumption and China's ongoing demand for commodities, according to the Economist Intelligence Unit. Real Gross Domestic Product will increase an estimated 3.8% in Latin America next year from 3.1% this year, the group's analysts said in a recent report. The expected improvement will be driven in large part by Brazil, where GDP growth may jump to 4.2% from 1.5% in 2012. "South American economies will continue to be supported by China's demand for soft and hard commodities exports, even if the period of sustained increases in both prices and volumes has come to an end," the group wrote. Also, historically low interest rates in the U.S. and other major economies "will continue to benefit those Latin American economies that are well integrated into global financial markets."
The Ibovespa index, Brazil's stock-market benchmark, is up nearly 10% since the middle of 2012 as the country's central bank rate cuts bolstered economic prospects. CME Group's U.S. dollar-denominated Ibovespa futures, launched October 22, offer investors access to the expanding Brazil market through a single trade and provide risk mitigation through CME Clearing. The new Ibovespa contract complements CME Group's existing slate of equity index products, including U.S.-based S&P 500, Dow Jones and NASDAQ-100 contracts. For more information, join CME Group at an Ibovespa breakfast briefing November 1 at the annual Futures Industry Association Expo in Chicago.

N.Z. Holds Benchmark Rate at 2.5% as Wheeler Term Begins (Bloomberg)
New Zealand’s new central bank chief extended a period of record-low borrowing costs as a stronger housing market offset a fragile global economy, boosting the currency as traders pared bets on interest-rate cuts. “For now it remains appropriate for the official cash rate to be held at 2.5 percent,” Reserve Bank Governor Graeme Wheeler said in a statement today after a meeting in Wellington. The decision was the first for the former World Bank official who took over from Alan Bollard in late September. Slowing global growth is hurting demand for New Zealand’s exports, which make up about 30 percent of country’s gross domestic product. Sluggish domestic demand and the strongest Group of 10 currency this year have pushed inflation below the central bank’s 1 percent to 3 percent target range.
“The high New Zealand dollar is undermining export earnings and encouraging substitution toward imported goods and services,” Wheeler said. “GDP continues to expand at a modest pace. Housing market activity is increasing as expected and repairs and reconstruction in Canterbury are boosting the construction sector.” Today’s decision was forecast by all 17 economists in a Bloomberg News survey. New Zealand’s dollar rose as traders reduced wagers on a rate cut. It bought 81.97 U.S. cents at 10:33 a.m. in Wellington compared with 81.51 cents immediately before the statement.

ECB Said to Push Spain’s Bankia to Swap Junior Debt for Shares (Bloomberg)
European authorities are pushing Bankia (BKIA) group to impose losses on junior debtholders as part of Spain’s bank bailout by swapping their securities for stock in the nationalized lender, two people with knowledge of the matter said. The European Central Bank and European Commission want investors including preference shareholders to accept newly issued shares in exchange for their existing securities to help reduce the cost to the taxpayer of Spain’s 100 billion-euro ($130 billion) bank rescue, said the people, who declined to be named because the matter isn’t public. Bankia opposes the proposal, they said. Forcing losses on the investors is politically sensitive because many are retail clients, and Economy Minister Luis de Guindos has said in Parliament in Madrid that banks should never have sold preferred shares to individual investors.
Under EU rules, junior bondholders must share the burden of rescuing lenders to reduce the cost to taxpayers and the exercise typically involves exchanging the notes for cash or new securities at a discounted value. De Guindos, who has changed legislation to limit future sales of preference shares to retail clients, has said the government is seeking a solution for the investors. European Union Competition Commissioner Joaquin Almunia said in June that Spain could use budget revenue to compensate them. Spokesmen for the ECB and the Spanish Economy Ministry declined to comment yesterday. Antoine Colombani, an EU spokesman, said the terms of Bankia’s restructuring are being discussed with Spanish authorities. A spokesman for Bankia also declined to comment.

Draghi Defends Bond Purchases With Warning of Deflation (Bloomberg)
European Central Bank President Mario Draghi defended his plan to buy government bonds in the German parliament today with a warning about deflation risks. The ECB’s so-called Outright Monetary Transactions “will not lead to inflation,” Draghi told lawmakers in Berlin in a closed-door session, according to a text provided by the ECB. “In our assessment, the greater risk to price stability is currently falling prices in some euro-area countries,” he said. “In this sense, OMTs are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it.” Draghi is seeking to win support in Europe’s largest economy for his plan to purchase government bonds to stem the debt crisis and safeguard the euro. Some German policy makers including Bundesbank President Jens Weidmann have said the proposal is tantamount to printing money to finance governments, which is prohibited by the ECB’s statutes.
“OMTs will not lead to disguised financing of governments,” Draghi said. “All this is fully consistent with the Treaty’s prohibition on monetary financing. Moreover, they will focus on shorter maturities and leave room for market discipline.”

Euro-Area Recession Deepens as Manufacturing Shrinks: Economy (Bloomberg)
Euro-area services and manufacturing output contracted more than economists forecast in October and German business confidence dropped to the lowest in more than 2 1/2 years as Europe’s recession deepened. A composite index based on a survey of euro-area purchasing managers in services and manufacturing fell to 45.8, the lowest in more than three years, from 46.1 in September, London-based Markit Economics said today. Economists had forecast a reading of 46.5, according to a Bloomberg News survey. A separate factory index in China rose. In Germany, the Ifo institute’s business climate index unexpectedly dropped to 100.0 from 101.4 in September. The European Central Bank and the International Monetary Fund have both lowered their forecasts for the euro-area economy as governments cut spending to plug budget gaps, eroding consumer and export demand. Even so, the region’s debt burden rose to a record in the second quarter, reaching 90 percent of gross domestic product, another report showed today.
“The euro-zone recession is still getting worse,” said Holger Schmieding, chief economist at Berenberg Bank in London. “In a disappointing set of data, the fact that the Ifo expectations index did not decline further offers the only ray of hope. In this sense, the survey results today do not dispel the hope that the euro economy could turn the corner early next year.”

Rajoy Sees Case for Slowing EU-Driven Austerity (Bloomberg)
Spanish Prime Minister Mariano Rajoy said there is a case for easing budget-deficit targets set by the European Union as the recession undermines tax revenue. “I think what a lot of other people think,” Rajoy told the Spanish senate yesterday. “Things could be done more calmly, taking into account especially that we are in a recession, but in any case I can’t give up on Spain’s commitments.” Rajoy’s comments undercut Budget Minister Cristobal Montoro’s insistence that Spain can stick to the path of budget consolidation demanded by the EU even after the Bank of Spain said the euro area’s fourth-largest economy contracted for a fifth quarter between July and October. “In 2012, we definitively will comply with our target,” Montoro said as he presented the 2013 budget to the Parliament in Madrid. The EU has set Spain a deficit goal of 6.3 percent of gross domestic product this year, after overspending amounted to 9.4 percent last year, the same as Greece’s and the second- highest shortfall behind Ireland.

German business sentiment posts surprise 6th drop in a row (Reuters)
German business sentiment dropped sharply in October to its lowest in more than 2-1/2 years, the sixth consecutive fall dispelling any lingering doubt that Europe's largest economy is now mired in the euro zone debt crisis.