20121130 1022 Global Markets Related News.

Asia FX By Cornelius Luca (Source:CME/www.lucafxta.com)
The appetite for risk improved overall for a second day on Tuesday on hopes that the US politicians will manage to avoid the "fiscal cliff" by Christmas. Politicians have taken to their battle to the public in order to put themselves in a better light if somehow success is achieved. The market will continue to overreact to both good and bad rumors. The European currencies extended gains after ending up from their lows on Wednesday. The Aussie was clobbered by fears for a rate cut. The US stock indexes closed slightly higher. Gold, oil and silver ended up as well. The short-term outlook for the foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short on all European currencies. Good luck!

Overnight
US: The NAR's pending home sales index jumped 5.2% to 104.8 in October after edging up by 0.4% to an upwardly revised 99.6 in September.
US:  Jobless claims decreased 23,000 to 393,000 from the previous week's revised figure of 416,000 (from the 410,000 originally reported).
US:  The GDP for the third quarter was revised upward to an annual rate of 2.7% from the 2.0% growth previously reported.
Canada: Current account deficit widened to $18.91 billion during the third quarter from $16.02 billion in the second quarter.
Canada: The Industrial Product Price index has contracted 0.1% in October after rising 0.5% in September.

Today's economic calendar
Japan: Nomura/ JMMA Manufacturing Purchasing Manager Index for October
Japan: National Consumer Price Index for October
Japan: Tokyo Consumer Price Index for November
Japan: Overall Household Spending  for October
Japan: Unemployment Rate for October
Japan: Industrial Production  for October
Japan: Annualized housing starts for October
Japan: Construction orders for October
Japan: Housing starts for October
UK: Gfk Consumer confidence for November
Australia: Private sector credit for October

Asian Stocks Rise on U.S. Budget Talks, Japan Production (Bloomberg)
Asian stocks rose, with the benchmark regional gauge heading for its second weekly advance, amid investor optimism that U.S. lawmakers will reach a resolution in federal budget negotiations and as Japanese industrial production unexpectedly increased. Rio Tinto Group (RIO) advanced 3.2 percent in Sydney as JPMorgan Chase & Co. analysts said plans by the world’s second-largest mining company to cut costs by $5 billion through the end of 2014 may boost shareholder returns. Mitsubishi Heavy Industries Ltd. rose 1.9 percent after agreeing to merge its energy- equipment businesses with Hitachi Ltd. Gold producer Northern Star Resources Ltd. (NST) slumped 10 percent in Sydney after directors cut stakes in the company. The MSCI Asia Pacific (MXAP) Index gained 0.2 percent to 124.44 as of 10:06 a.m. in Tokyo, before markets opened in China and Hong Kong. About two shares advanced for each that fell. The gauge has increased 1.3 percent this week.
“The market can go higher even if U.S. lawmakers drag out budget discussions all the way to the last minute,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “They will not let the U.S. economy shrink. There’s a lot of room for negotiation and compromise.” Japan’s Nikkei 225 Stock Average rose 0.2 percent. Australia’s S&P/ASX 200 Index (AS51) advanced 0.6 percent and South Korea’s Kospi Index was little changed.

Japan Stocks Swing From Gains, Losses on Economic Data (Bloomberg)
Japanese stocks swung between gains and losses as the nation’s cabinet approved 880 billion yen ($10.7 billion) of stimulus ahead of next month’s elections and the nation’s industrial production unexpectedly rose, while consumer prices declined. Komatsu Ltd. (6301), Japan’s largest construction machinery maker, rose 0.6 percent. Mitsubishi Heavy Industries Ltd. and Hitachi Ltd. gained after agreeing to merge energy-equipment businesses. Tokai Holdings Corp. slumped 11 percent on plans to raise 5 billion yen in a share sale. The Nikkei 225 Stock Average (NKY) added 0.3 percent to 9,425.21 at 10:09 a.m. in Tokyo after falling as much as 0.6 percent. The gauge has risen 0.2 percent this week and 5.6 percent this month, the biggest monthly gain since February, on speculation next month’s election will lead to more monetary easing. The broader Topix Index slid 0.2 percent to 781.01.
“We’ve seen weakness in data related to spending and other areas as demand has been uneven,” said Akihiro Tsunoda, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which manages about 5 trillion yen ($61 billion) in assets. “I don’t think politicians will say anything negative prior to the race, which will give the market support.”

U.S. Stocks Climb Amid Optimism Over Budget Negotiations (Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second day, amid investor optimism that lawmakers will reach a resolution in federal budget negotiations. All 10 groups in the S&P 500 rose as commodity producers rallied. Apple Inc. (AAPL) and Advanced Micro Devices Inc. (AMD) led an advance in technology stocks. Kroger Co. (KR) jumped 4.8 percent after boosting its profit projection for the year. Walt Disney Co., the world’s largest entertainment company, added 1.1 percent after raising its dividend. Tiffany & Co. (TIF) tumbled 6.2 percent after cutting its profit forecast. Kohl’s Corp. (KSS) plunged 12 percent after reporting disappointing sales for November. The S&P 500 increased 0.4 percent to 1,415.95, the highest level since Nov. 6, at 4 p.m. in New York. The Dow Jones Industrial Average rose 36.71 points, or 0.3 percent, to 13,021.82. About 6.2 billion shares traded hands on U.S. exchanges today, in line with the three-month average, according to data compiled by Bloomberg.
“There’s going to be increasingly divisive negotiations that might shake the market’s confidence a bit,” Jeffrey Kleintop, chief market strategist at LPL Financial Corp. in Boston, which oversees $350 billion, said in a telephone interview. “We might see a lot of volatility.” Equities briefly erased gains after Speaker of the House John Boehner said to reporters in Washington today that “no substantive progress” has been made in budget talks. Senate Majority Leader Harry Reid said Democrats were all on the same page on budget talks and Senator Chuck Schumer said there has been progress, helping the market recover after Boehner’s comments.

Recap Stock Index Market Report (CME)
The December S&P 500 trended higher throughout the session and broke out above its 50 day moving average in the process. Early support for market came from optimism over US budget negotiations, positive European economic data earlier this morning and better than expected October Pending Home Sales figures lent support. Technology shares were the upside leaders early in the session, helped by gains in Apple, Advanced Micro Devices and Research in Motion. However, stocks took a negative turn toward unchanged levels in response to comments from US House Speaker John Boehner indicating that no substantive progress had been made on budget negotiations. Some traders noted fresh buying interest on the mid-day dip, and that helped the index finish near the upper end of the day's range.

European Stocks Climb Amid Optimism on U.S. Budget Talks (Bloomberg)
European stocks rallied to their highest in 17 months as optimism grew that U.S. President Barack Obama will reach an agreement with Congress on a new budget. Rio Tinto Group gained 5.1 percent after the world’s second-largest mining company said it will reduce costs by $5 billion during 2013. Invensys Plc surged 8.9 percent as RBC Capital wrote that the company may be acquired after selling its rail unit to Siemens AG. Electricite de France SA slid 1 percent as the country’s highest court ruled that the utility has overcharged households. The Stoxx Europe 600 Index advanced 1.2 percent to 276.31 at the close in London, its highest level since June 1, 2011. The equity benchmark erased a decline of as much as 0.6 percent yesterday as Republican House Speaker John Boehner expressed optimism that Congress will reach a deal to prevent the so- called fiscal cliff coming into force.
“The President is on strong ground, having defeated his Republican challenger, and the House Speaker is sounding conciliatory too,” said Manish Singh, who helps manage $2 billion as head of investment at Crossbridge Capital LLP in London. “A deal is a certainty. News on the fiscal cliff has been incrementally positive, so investors are increasingly optimistic too.”

Emerging Stocks Rise Most in 11 Weeks on Commodity Rally (Bloomberg)
Emerging-market stocks advanced the most in 11 weeks as commodities rallied after U.S. politicians expressed confidence they will reach a budget deal and Goldman Sachs Group Inc. upgraded Indian shares. OAO MegaFon (MFON), Russia’s second-largest mobile-phone provider, climbed above its initial offer price on the second day of London trading. Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA rallied. Gold Fields Ltd. (GFI), the world’s fourth- biggest gold producer, gained the most in a year on plans to spin off some South African operations. Franshion Properties China Ltd. (817) rose the most on the benchmark gauge for emerging- market stocks as ICBC International said the developer met its sales target. The MSCI Emerging Markets Index gained 1.3 percent to 1,003.79 in New York, the highest since Nov. 7. The BSE India Sensitive Index (SENSEX) jumped 1.7 percent to the highest close since April 2011 as Goldman Sachs upgraded the country’s shares to overweight.
The world economy is at its healthiest in 18 months, with the U.S. looking likely to avoid tax increases and spending cuts, the latest Bloomberg Global Poll of investors showed. Commodities climbed for the first time this week. “Global risk appetite and investor sentiment has been improving,” Neil Shearing, chief emerging markets economist at Capital Economics Ltd., said by phone from London. “We’ve had pretty good data from the U.S. on top of hopes for action to avoid the fiscal cliff, and commodities are up, so that’s all supportive.”

Yen Remains Lower Versus Euro After Japan CPI Report (Bloomberg)
The yen remained lower versus the euro after data showed Japan’s consumer prices were unchanged last month, fanning speculation the central bank will increase fund provision to spur inflation. Shinzo Abe, leader of Japan’s opposition Liberal Democratic Party, yesterday reiterated his call for the Bank of Japan (8301) to pump unlimited cash into the financial system until inflation reaches 2 percent. The dollar was 0.3 percent from a one-month low against the euro as Democrats and Republicans wrangled over the spending cuts and tax increases of the so-called fiscal cliff looming in the U.S. in January. “Abe’s remarks are pulling down the yen,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Markets are completely driven by what Republicans and Democrats say over the fiscal cliff.”
The yen traded at 106.55 per euro as of 9:52 a.m. in Tokyo after losing 0.3 percent to 106.58 at the close in New York. It was at 82.11 per dollar from 82.12. The dollar was little changed at $1.2977 per euro after touching $1.3014 yesterday, the weakest since Oct. 31. Japan’s consumer prices excluding fresh food were unchanged in October from a year earlier after a 0.1 percent decline in September, the statistics bureau said in Tokyo today. The BOJ has an annual inflation target of 1 percent. Abe’s LDP had an approval rating of 23 percent, compared with 13 percent for the ruling Democratic Party of Japan, the Nikkei newspaper reported yesterday, citing a Nov. 26-28 opinion poll. The nation will hold elections on Dec. 16 for the lower house of parliament.

Aussie Set for Weekly Drops Versus Majors Before RBA Meeting (Bloomberg)
Australia’s dollar was set for weekly declines against most of its major peers amid speculation the central bank will lower interest rates next week to shield the economy from a slowdown in mining. The so-called Aussie was 0.2 percent from a three-week low versus its New Zealand counterpart as traders added to bets the Reserve Bank of Australia will lower interest rates to 3 percent after a government report yesterday showed a lower mining investment projection for 2012-2013. Australian bonds rose, with the 10-year yield touching the lowest in 10 days. Demand for the New Zealand dollar was limited after data showed building permits unexpectedly fell.
“It wouldn’t be overly surprising if the RBA cuts rates next week given yesterday’s capital expenditure data, which was downgraded,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. (CBA) “We don’t think an actual cut next week will put too much downward pressure on Aussie -- a lot of the cuts are already factored into the market.” The Australian dollar slid 0.1 percent to $1.0428 as of 11:01 a.m. in Sydney from yesterday. The currency is poised for a 0.3 percent decline this week, paring its monthly gain to 0.5 percent. The Aussie traded at NZ$1.2673 from NZ$1.2682 yesterday, when it touched NZ$1.2660, the lowest since Nov. 7. New Zealand’s currency bought 82.26 U.S. cents from 82.27 yesterday. It has lost 0.1 percent since the end of last week and is little changed on the month.
Australian government bonds rose, with the 10-year yield falling seven basis points, or 0.07 percentage point, to 3.15 percent. It earlier touched 3.13 percent, the lowest since Nov. 20.

Treasuries Set to Beat Corporate Bonds in November (Bloomberg)
U.S. government bonds were poised to beat corporate debt this month for the first time since May as the pending fiscal cliff and Europe’s debt crisis drove demand for safety. Treasuries returned 0.5 percent in November as of yesterday, according to Bank of America Merrill Lynch data. Bonds in an index of investment-grade and high-yield debt were little changed, the figures show. Consumer spending probably cooled in October, economists said before a report today. “There’s a flight to quality,” said Hiromasa Nakamura, a senior investor for Tokyo-based Mizuho Asset Management Co., which oversees the equivalent of $40 billion and is part of Japan’s third-biggest bank. “The government may increase taxes on higher-end households. That’s negative for the stock market and the economy.”
Benchmark 10-year yields were unchanged at 1.62 percent as of 9:56 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 was 100 2/32. The rate slid 7 basis points, or 0.07 percentage point, this month in the first decline since July. Treasury Secretary Timothy Geithner offered Republican House Speaker John Boehner a proposal to avert the end-of-the- year fiscal cliff that would include $1.6 trillion in tax increases and $400 billion in unspecified entitlement program cuts, a Republican aide said yesterday. Household purchases were unchanged in October, after increasing 0.8 percent in September, based on the median estimate from 79 economists surveyed by Bloomberg News before the Commerce Department report at 8:30 a.m. New York time today.

World Economy in Best Shape for 18 Months, Poll Shows (Bloomberg)
The world economy is in its best shape in 18 months as China’s prospects improve and the U.S. looks likely to avoid the so-called fiscal cliff, according to the latest Bloomberg Global Poll of investors. Two-thirds of the 862 surveyed described the global economy as either stable or improving. That’s up from just over half who said that in September and is the most since May 2011. The U.S. came out on top for the eighth straight quarter when investors were asked which markets will offer the best opportunities over the next year. China ranked second, reversing a decline to fourth in the September poll of investors, analysts and traders who are Bloomberg subscribers. The European Union, beset by a debt crisis, was seen offering the worst returns.
“The global economy is improving, recovering and healing, thanks to the U.S. and the emerging markets,” said Andrea Guzzi, a poll respondent and vice president of IST Investmentstiftung fuer Personalvorsorge, which manages money for Swiss pension funds. “More people are becoming wealthy, less and less are poor.” Stocks were seen as the asset of choice, with more than one in three of those surveyed on Nov. 27 forecasting equities would have the best returns in the coming year. Real estate came in second: Just less than one in five investors singled it out favorably, the best showing since the quarterly poll began in July 2009. Bonds were seen as offering the worst returns.

Jobless Claims in U.S. Decrease as Sandy Effect Dissipates (Bloomberg)
Fewer Americans filed first-time claims for unemployment insurance payments last week as the labor market disruptions wrought by superstorm Sandy ebbed. Applications for jobless benefits decreased by 23,000 to 393,000 in the week ended Nov. 24, Labor Department figures showed today. Economists forecast 390,000 claims, according to the median estimate in a Bloomberg survey. The drop in claims indicates the job market in the mid- Atlantic region, which employs about 14 percent of U.S. workers, may be stabilizing after Sandy put some area residents out of work at the start of the month. Apart from the storm-related damage, job creation will probably be limited as companies navigate the global economic slowdown and U.S. fiscal outlook.
Claims are “going to be distorted for a period of time by the after-effects of the storm,” said James Shugg, a senior economist at Westpac Banking Corp. in London, who forecast applications would drop to 395,000. “We’ve been surprised by the strength of hiring, but we’re anticipating a sharply lower number for the payrolls in the next month because there’s not going to be a strong enough economic growth base.” Estimates for first-time claims ranged from 350,000 to 430,000 in the Bloomberg survey of 49 economists. The previous week’s figure was revised to 416,000 from a previously reported 410,000.

Consumer Spending in U.S. Grows Less Than Forecast (Bloomberg)
Consumer spending in the U.S. grew less than forecast in the third quarter, underscoring why Federal Reserve policy makers are zeroing in on fighting unemployment to spur the world’s largest economy. Household purchases climbed at a 1.4 percent rate, the smallest gain in more than a year and down from a previously reported 2 percent advance, revised figures from the Commerce Department showed today in Washington. Gains in inventories and a smaller trade deficit more than offset the slowdown to propel gross domestic product to a 2.7 percent rate, exceeding the 2 percent pace previously reported. “The economy is moving forward at a moderate pace,” said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “The pace of consumer spending was disappointing, but it seems less worrisome given that some other sectors of the economy are doing better, like housing.”
Fed policy makers such as William Dudley say joblessness remains too high as central bankers consider whether they need to step up record stimulus heading into the so-called fiscal cliff of tax increases and spending cuts that may take effect next year if lawmakers fail to reach a compromise. At the same time, another report today reinforced signs of a rebound in housing that is helping underpin consumer confidence. Economists projected consumer spending, which accounts for about 70 percent of the economy, expanded at a 1.9 percent pace last quarter, according to the median forecast in a Bloomberg survey. The revised reading was lower than any of the 18 estimates, which ranged from 1.7 percent to 2.7 percent. Purchases advanced at a 1.5 percent pace in the second quarter.

Consumer Comfort in U.S. Picks Up as Buying Climate Improves (Bloomberg)
Consumer confidence climbed to a seven-month high last week as more Americans said it was a good time to make purchases, pointing to a brighter holiday shopping season. The Bloomberg Consumer Comfort Index rose to minus 33 in the period ended Nov. 25, the highest level since April, from minus 33.9 the previous week. It marked the highest level for a Thanksgiving week, when shoppers begin their year-end holiday gift buying, since before the recession began five years ago. Expanded store hours combined with deals, discounts and online offers last week may have helped propel the share of Americans saying it’s a good time to spend to a seven-month high. Improving labor and housing markets will probably lift spirits further, benefiting retailers such as Target Corp. and Macy’s Inc. between now and the final shopping days before Christmas, the most important period of the year for retailers.
“Consumers started the holiday-shopping season their cheeriest since 2007, a hopeful sign for retailers in their make-or-break time of year,” said Gary Langer, president of Langer Research Associates in New York, which compiles the index for Bloomberg. A report from the Commerce Department showed the economy in the third quarter expanded more than previously estimated as a narrower trade deficit and gains in inventory overshadowed a smaller increase in consumer spending. Gross domestic product rose at a 2.7 percent annual rate, up from a 2 percent previous estimate, the agency said. Household purchases climbed at a 1.4 percent rate, the slowest in more than a year.

Pending Sales of Existing U.S. Homes Rose 5.2% in October (Bloomberg)
Americans signed more contracts in October to purchase previously owned homes, another sign the recovery in the housing market is being sustained. The index of pending home resales climbed 5.2 percent, exceeding the highest estimate in a Bloomberg survey of economists, to 104.8 after a revised 0.4 percent gain in September, figures from the National Association of Realtors showed today in Washington. The median forecast in the Bloomberg survey called for a 1 percent gain. The lowest mortgage rates on record, stable prices and waning foreclosures are helping underpin sales three years after the last recession ended. Federal Reserve policy makers have targeted the industry with purchases of mortgage-backed securities as they seek to bolster the labor market and the expansion.
“As folks start to feel a little more comfortable about their home price, they’re going to put it on the market and you’re going to start to see this trend continue” of higher sales, Anika Khan, a Charlotte, North Carolina-based senior economist at Wells Fargo & Co., said before the report. “We still see the overall residential market continuing to add to growth in the coming quarters.” Estimates in the Bloomberg survey ranged from a 1 percent drop to a 4 percent gain. The prior month’s figure was originally reported as a 0.3 percent advance. Compared with a year earlier, the index increased an unadjusted 18 percent after an 8.7 percent gain in the 12 months ended in September. After seasonal adjustment, pending purchases climbed 13.2 percent from a year ago. Stocks held gains after the figures and amid optimism lawmakers will reach a budget deal. The Standard & Poor’s 500 Index climbed 0.5 percent to 1,416.47 at 10:08 a.m. in New York.

Cliff-Skeptics in Both Parties Deepen Fiscal Challenges (Bloomberg)
President Barack Obama says going over the fiscal cliff by missing the deadline for a deficit reduction deal by year’s end would be a “rude shock” for Americans. Republican House Speaker John Boehner says it would be a “fiasco.” Yet a small and potentially influential group of lawmakers in both parties is emerging as fiscal-cliff skeptics, willing -- and some even arguing -- to take the dive. Their attitude may make striking a compromise a messy and drawn-out process. Allowing the more than $600 billion mix of tax increases and automatic spending cuts to begin in January if no deal is reached isn’t their first choice, these lawmakers said, yet it’s a better alternative than a compromise that violates their principles. Senator Patty Murray of Washington, the fourth-ranking Democrat in the leadership, said her side is willing to push the debate into 2013 if Republicans refuse to raise taxes on high earners as part of the deal.
“No one wants to go off any cliff or hill or slope; there is a responsible way to resolve this,” Murray said yesterday on MSNBC. “But if we take a bad deal and say that all of the nation’s fiscal problems are to be balanced on the back of middle-class families and the wealthy don’t participate, that’s a bad deal that we cannot and should not live with.”

China Economic Optimism Returns in Poll as Xi Beats Hu (Bloomberg)
Confidence in China’s economy is at the highest in more than a year amid optimism that the new leadership headed by Xi Jinping will be better for the financial climate, according to a Bloomberg investor poll. Respondents who see the Chinese economy improving or remaining stable surged to 72 percent this week from September’s 38 percent in the quarterly global poll of investors, analysts and traders who are Bloomberg subscribers. Fifty-three percent said they’re more optimistic about the effect of Xi’s policies on investors, up from 42 percent who were asked in September about President Hu Jintao. The renewed faith in the world’s second-largest economy reflects data from factory production to retail sales showing growth picking up this quarter after a seven-quarter slowdown. Almost half of respondents anticipate Xi’s government will pursue policies that boost expansion or keep it stable.
“China’s growth trajectory will accelerate moderately on a six- to 12-month horizon based on the new leadership immediately finalizing and implementing projects toward urbanization, rural development and services,” said respondent Brad Bechtel, head of sales at Stamford, Connecticut-based Faros Trading LLC. “Going into 2013 a lot of the concerns regarding China growth falling off a cliff will subside.”

Hong Kong Bourse Wins Approval for $2.2 Billion LME Deal (Bloomberg)
The London Metal Exchange’s $2.2 billion takeover by Hong Kong Exchanges & Clearing Ltd. won approval from the Financial Services Authority, a British regulator. The acquisition still needs approval of the High Court of England and Wales, with a hearing set Dec. 5, Hong Kong Exchanges said in a statement on its website yesterday. The transaction will take effect on or around Dec. 6, the LME said in a separate statement. The LME backed Hong Kong Exchanges’ offer on June 15 over bids from CME Group Inc., Intercontinental Exchange Inc. and NYSE Euronext. LME shareholders approved the takeover a month later. The LME handles more than 80 percent of metals trading, and Hong Kong Exchanges may help the exchange gain access to China, the biggest metals buyer. “This is what we’ve been waiting on,” Thomas Monaco, an analyst at Mizuho Securities Asia Ltd. in Hong Kong, said in a telephone interview. “It’s a little later than we would have thought, probably about a month or so.”
Hong Kong Exchanges plans to sell about $995 million of shares (388) at HK$118 each, a 5.4 percent discount to yesterday’s closing price of HK$124.80, according to a statement from the bourse today. The share sale will help fund the LME takeover, it said. Deutsche Bank AG, HSBC Holdings Plc and UBS AG will manage the sales, it said. The exchange also sold $500 million in convertible bonds in September for the deal. They have an initial conversion price of HK$160 a share.

Japan’s Industrial Production Unexpectedly Gains in October (Bloomberg)
Japan’s output unexpectedly rose the most since December, signaling a contraction in the world’s third-largest economy may be short lived. Industrial production in October increased 1.8 percent from the previous month, when it dropped 4.1 percent, the Trade Ministry said in Tokyo today. The median estimate of 23 economists surveyed by Bloomberg News was for a 2 percent fall. Japan’s economy is at risk of a recession as a contraction in Europe and a diplomatic dispute with China hurt exports and the expiry of car-purchase subsidies weakens consumer demand at home. Government reports showing signs of recovery in the U.S. and China, the world’s two biggest economies, may alleviate an economic slump in Japan.
“Japan’s economy will probably return to growth in the first quarter of 2013, after possibly having two consecutive quarters of contraction” through December, Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo, said before the report. “The U.S. economy is looking solid and China’s economy may have a clear rebound this quarter, boding well for Japanese exports.” The Japanese yen has weakened more than 4 percent against the dollar in the past three months, the most among Asia’s 11 most-traded currencies, according to data compiled by Bloomberg. The currency was trading at 82.12 at 9:12 a.m. in Tokyo after touching a seven-month low of 82.84 last week.

Japan’s Consumer Prices Unchanged as Abe Calls for More Easing (Bloomberg)
Japan’s consumer prices were unchanged in October after five months of declines, limiting the case for more monetary easing being made by Shinzo Abe, the front-runner to become the nation’s next prime minister. Consumer prices excluding fresh food didn’t change from a year earlier, the statistics bureau said in Tokyo today. The median of 23 estimates was for a 0.1 percent drop. The nation’s jobless rate stayed at 4.2 percent for a third month, according to a separate report. Today’s data show the Bank of Japan (8301)’s 1 percent inflation goal remains distant, and will keep pressure on Governor Masaaki Shirakawa to add stimulus at next month’s policy meeting. Abe, head of the Liberal Democratic Party that polls suggest will win the election, called again yesterday for unlimited easing and a price-gains target of 2 percent.
“It’s hard to imagine consumer prices will rise steadily when the economy is at risk of falling into a recession,” said Yoshimasa Maruyama, chief economist at Itochu Corp. (8001) in Tokyo. “The BOJ will come under pressure to ease more.”

Dung Sees Vietnam Inflation at Decade Low With Investment Rising (Bloomberg)
Vietnam’s Prime Minister Nguyen Tan Dung pledged to bring inflation down to a decade low as the nation seeks to boost foreign investment and cope with the aftermath of a credit boom that’s hobbled the banking industry. “Inflation in 2012 will be about 7 percent and next year we will have even better control of it, at about 6 percent,” Dung, 63, said in an interview in Hanoi on Nov. 28. He said overseas investment will rise “sharply” in the next two years as officials overhaul state enterprises and recapitalize banks. Slower gains in consumer prices would reduce the risk of labor strikes undermining Vietnam’s campaign to position itself as an alternative manufacturing base to China. Concern that growth has peaked after a quarter-century of market opening, and that policy makers are struggling to manage a legacy of non- performing loans, contributed to a 21 percent slide in investment pledges from abroad so far this year.
“It would help Vietnam’s image significantly” to contain inflation, said Peter Ryder, the Hanoi-based chief executive of fund manager and property developer Indochina Capital. “Clearly the fact that inflation hit 20-plus percent in two of the last four years has made people question the government’s management of the economy.” Dung’s administration has made inroads into quelling what was Asia’s fastest inflation in 2011, at 18 percent in December from the previous year. Consumer prices rose 7.1 percent in November. The last year costs rose less than 6 percent was in 2003, according to data compiled by Bloomberg.

Brazil Signals Key Rate to Stay at Minimum for Record Period (Bloomberg)
Brazil signaled it plans to keep its benchmark rate at a record low for a period that economists predict will be the longest in history to prop up an economy heading toward its worst two-year performance in a decade. Policy makers last night kept the Selic rate at 7.25 percent, ending the second-longest streak of reductions in an effort to prevent inflation from accelerating. The unanimous decision, which was forecast by all 75 economists surveyed by Bloomberg, took into account the “the balance of risks for inflation,” the board said in its statement, which was almost identical to last month’s announcement. Central bankers led by President Alexandre Tombini reiterated their intent to keep rates steady for a “prolonged period” as they try to keep inflation within their 2.5-to-6.5 percent target range without derailing the economy’s recovery. Economists surveyed by the central bank forecast that the Selic will remain unchanged through 2013.
“Interest rates are at a level that allow for the economy to rebound at a pace moderate enough to contain inflation below the upper range of the target,” Marcelo Salomon, co-head for Latin America economics at Barclays Plc, said in a phone interview from New York. “The idea is to leave interest rates at a minimum for as long as possible.” Swap rates on the contract maturing in January 2014 rose three basis points, or 0.03 percentage point, to 7.32 percent at 9:04 a.m. local time. The real strengthened 0.2 percent to 2.0896 per U.S. dollar.

Euro-Area Economic Sentiment Unexpectedly Up in November (Bloomberg)
Economic confidence in the euro area unexpectedly rose in November even as the single-currency bloc was mired in its second recession in four years and leaders worked to contain the debt crisis. An index of executive and consumer sentiment in the 17- nation euro area increased to 85.7 from a revised 84.3 in October, the European Commission in Brussels said today. Economists had forecast no change from an initial October reading of 84.5, the median of 33 economists’ estimates in a Bloomberg News survey showed. Euro-area finance ministers earlier this week eased the terms on emergency aid for Greece, declaring that after three years of false starts that Europe has found the formula for nursing the debt-stricken country back to health.
“Today’s numbers are good news and could mean a turnaround,” Marco Valli, chief euro-zone economist at UniCredit Global Research in Milan, said by telephone. “While the final quarter of this year still will be clearly negative, the unexpected rise indicates that the economy could stabilize at the beginning of 2013.”

EU Nations Clash on Thresholds for Direct ECB Oversight (Bloomberg)
The European Union is quarreling over thresholds on how big euro-area lenders must be in order to be designated for direct oversight by the European Central Bank, according to draft proposals. Nations are at odds over three different size thresholds, according to the document drawn up by Cyprus, which holds the EU’s rotating presidency. Some countries are seeking to set the bar as low as banks with more than 2.5 billion euros ($3.2 billion) in assets, while others are calling for divisions at 20 billion euros or 60 billion euros, according to the text, dated Nov. 27 and obtained by Bloomberg News. States are also split over having direct ECB supervision triggered by a ratio between a bank’s assets and the gross domestic product of its home country, according to the proposals, intended to forge a deal on the supervision plan. Suggested thresholds in the text put the tipping points at assets of more than 20 percent, 50 percent or 75 percent of GDP.
Governments are racing to meet an end of 2012 deadline to set up a single supervisor at the Frankfurt-based ECB. EU finance ministers will meet next week to seek compromises on the bank-oversight plan, which the bloc’s leaders have labeled as an essential step to break the bank-sovereign link that has worsened Europe’s debt crisis. The draft document didn’t reveal what nations held what positions in the talks.

German Unemployment Rose for an Eighth Month in November (Bloomberg)
German unemployment climbed for an eighth straight month in November as Europe’s debt crisis curbed company investment and economic growth. The number of people without a job increased a seasonally adjusted 5,000 to 2.94 million, the Federal Labor Agency in Nuremberg said today. Economists forecast a gain of 16,000, the median of 37 estimates in a Bloomberg News survey shows. The adjusted jobless rate held at 6.9 percent. Separately, a gauge of economic confidence in the euro area unexpectedly rose. With the 17-nation currency bloc in recession and growth slowing in emerging markets, German firms are postponing investment and hiring decisions. The unemployment rate rose for the first time in three years in September. While Europe’s largest economy expanded 0.2 percent in the third quarter, latest reports suggest growth may grind to a halt in the fourth as export demand wanes.
“It is doubtful whether private consumption can really take over the baton as the main growth driver for the German economy,” said Carsten Brzeski, an economist at ING Group in Brussels. “German unemployment looks set to increase further. This increase, however, should only be very mild, mainly located in the export industry.” The euro advanced to $1.2983 at 11:15 a.m. in Frankfurt for a 0.2 percent gain today. European stocks rose to their highest level in three weeks amid optimism that U.S. President Barack Obama will reach an agreement with Congress over a new budget. The Stoxx Europe 600 Index (SXXP) climbed 0.8 percent to 275.39.