20121220 1012 Global Markets Related News.

Asia FX By Cornelius Luca - Wed 19 Dec 2012 17:03:21 CT (CME/www.lucafxta.com)
The appetite for risk disappeared late in the US session after the "fiscal cliff" politics turned south. Speaker John Boehner said the House of Representatives will pass a budget proposal that President Barack Obama had already threatened to veto. The European currencies surrendered gains and the commodity currencies added to their losses. The yen remains under pressure at a 20-month low. The US stock markets sank. Gold and silver closed down as well. The short-term outlook for most major currencies is sideways with downside risk. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is long on all European and commodity currencies and short yen. Good luck!

Overnight
US: Housing starts fell 3.0% to an annual rate of 861,000 in November from the revised October estimate of 888,000. Building permits rose 3.6% to an annual rate of 899,000 in November from the revised October rate of 868,000.
Canada: Wholesale sales rose 0.9% in October after falling -1.5% in September.

Today's economic calendar
Japan: The BoJ will leave interest rates unchanged
Australia: The RBA Bulletin for the fourth quarter
China: Leading economic index for November

Asian Stocks Swing Between Gains, Losses on U.S. Budget Talks (Bloomberg)
Asian stocks swung between gains and losses amid signs U.S. budget negotiations are faltering and as investors await the outcome of a Bank of Japan policy meeting. Japanese shares fell as the yen rose, weighing on exporters.
Samsung Electronics Co. (005930), which gets a fifth of its revenue in America, dropped 1.1 percent in Seoul. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, advanced 1.2 percent. Capcom Co. slumped 12 percent in Tokyo after the gamemaker cut its profit forecast and delayed the release of a new game. Mitsubishi Motors Corp. (7211) dropped 6.6 percent after saying it will recall 1.21 million vehicles in Japan.
The MSCI Asia Pacific Index slipped 0.1 percent to 129.23 at 10:17 a.m. in Tokyo after rising 0.1 percent. Markets in Hong Kong and China are yet to open. The measure closed yesterday at the highest level since August 2011.
“Cracks appeared in the fiscal-cliff negotiations,” said Stan Shamu, Melbourne-based markets strategist at IG Markets Ltd. “The Republicans failed to come up with a reasonable compromise to President Obama’s proposal. Market participants decided to exercise caution despite U.S. leaders still insisting they are hoping to have something done by Christmas.”
Asia’s benchmark equities index has risen 13 percent this year as central banks from the U.S., Europe, Japan and China took action to spur economic growth. The gauge traded at 14.7 times average estimated earnings, compared with 13.8 for the Standard & Poor’s 500 Index and 12.8 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Nikkei 225 Declines as Yen Climbs Amid U.S. Budget Talks (Bloomberg)
Japan’s Nikkei 225 Stock Average (NKY) fell from its highest level since March as the yen strengthened amid concern U.S. budget talks are stalling. The Bank of Japan is scheduled to conclude a policy meeting today.
Canon Inc. (7751), which gets 27 percent of its revenue from the Americas, lost 1.6 percent. Capcom Co. plunged 12 percent after the gamemaker cut its forecast on weakening sales and delays for a key title. Mitsubishi Motors Corp. sank 6.6 percent after Japan’s transport ministry issued a warning to the automaker for being “passive” after a fourth round of recalls.
The Nikkei 225 lost 0.8 percent to 10,079.31 as of 10:00 a.m. in Tokyo today after reaching its highest level since March 28 yesterday. Volume on the gauge was 74 percent higher than the 30-day average. The Topix Index fell 0.3 percent to 837.11 with about three stocks falling for each that gained.
“Cracks appeared in the fiscal-cliff negotiations,” said Stan Shamu, Melbourne-based markets strategist at IG Markets Ltd. “The Republicans failed to come up with a reasonable compromise to President Obama’s proposal. Market participants decided to exercise caution despite U.S. leaders still insisting they are hoping to have something done by Christmas.”
Standard & Poor’s 500 Index futures were little changed today. The gauge slid 0.8 percent yesterday as deteriorating federal budget negotiations fueled concern that $600 billion in automatic tax increases and spending cuts will be triggered if a compromise is not reached by the end of the year.

U.S. Stocks Fall on Housing Data, Budget Negotiations (Bloomberg)
U.S. stocks fell, pulling the Standard & Poor’s 500 Index (VIX) down from a two-month high, as deteriorating federal budget negotiations fueled concern that automatic tax increases and spending cuts will be triggered.
Alcoa Inc. (AA) fell 3 percent as Moody’s Investors Service placed the aluminum producer’s credit rating under review for a downgrade. Consumer-staples, health-care and phone stocks lost more than 1 percent for the worst performance among 10 S&P 500 groups. General Motors Co. (GM) jumped 6.6 percent on plans to purchase 200 million shares from the government. Knight Capital Group Inc. rose 5.4 percent on plans to be bought by Getco LLC.
The S&P 500 lost 0.8 percent to 1,435.81 today. The Dow Jones Industrial Average slipped 98.99 points, or 0.7 percent, to 13,251.97. The Chicago Board Options Exchange Volatility Index, known as the VIX, jumped 12 percent to 17.36 for the biggest gain since Oct. 23.
“The underlying situation for U.S. equities isn’t bad, but a lot hinges on the fiscal cliff negotiations,” George Feiger, chief executive officer of Contango Capital Advisors Inc., the San Francisco-based wealth management arm of Zions Bancorporation, said in a phone interview. He manages about $3.6 billion at Contango and Western National Trust Co. “If we get through the fiscal cliff with a reasonable result, then the odds are quite substantial that things are going to be better than many people expect by the middle of 2013,” he said. “All of this can be postponed for a year if they screw up on the negotiations and we slide into a recession.”

European Stocks Rise on German Business Confidence Report (Bloomberg)
European (SXXP) stocks climbed to their highest level in 19 months as German business confidence rose more than forecast and optimism mounted that U.S. policy makers will reach an agreement on next year’s budget.
HSBC Holdings Plc (HSBA) advanced 2 percent as European banking shares contributed the most to the benchmark Stoxx Europe 600 Index’s advance. Stada Arzneimittel AG (SAZ) jumped 5.4 percent. Merck KGaA (MRK) lost 2.1 percent after an experimental drug missed the main goal in a trial with lung-cancer patients.
The Stoxx 600 climbed 0.4 percent to 281.63 at the close of trading. The equity benchmark advanced to its highest level since May 2011 after Standard & Poor’s upgraded Greece’s debt. The gauge has rallied 15 percent this year as the European Central Bank announced an unlimited bond-buying plan and the Federal Reserve began a third round of asset purchases.
“The market is still focused on the fiscal-cliff talks in the U.S., in which investors seem to expect an agreement relatively soon,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva. “News such as the upgrade of Greece’s credit rating is positive, albeit not a big surprise, helping to continue a year-end rally. Sentiment at the beginning of 2013 will be cautious as we face some political risk.”
National benchmark indexes rose in every western-European market except Finland. France’s CAC 40 and the U.K.’s FTSE climbed 0.4 percent. Germany’s DAX gained 0.2 percent. Greece’s ASE rallied 4.8 percent.

Treasuries Remain Higher on Cliff Concern as Stocks Snap Gains (Bloomberg)
Treasuries remained higher following a gain yesterday amid speculation U.S. leaders are struggling to reach an agreement on the so-called fiscal cliff that could send the world’s largest economy into recession.
President Barack Obama is trying to pressure congressional Republicans to accept a tax-rate increase for top earners as part of his proposal to avert more than $600 billion in automatic spending cuts and tax increases that start taking effect next month. Asian shares snapped a two-day advance, bolstering demand for safer assets.
“It’s inevitable, after all this, that higher taxes will be imposed on the wealthy, which is a negative for consumer spending,” said Hiromasa Nakamura, a senior investor for Tokyo- based Mizuho Asset Management Co., which oversees the equivalent of $39 billion and is part of Japan’s third-biggest financial group. Ten-year yields may fall to 1 percent by the end of next year, he forecast. The record low is 1.38 percent set on July 25.
The yield on the benchmark 10-year note fell one basis point to 1.79 percent as of 9:24 a.m. in Tokyo after declining two basis points yesterday. The price of the 1.625 percent security maturing in November 2022 gained 1/8, or $1.25 per $1,000 face amount, to 98 17/32.
Japan’s 10-year government bond yield slid one basis point to 0.77 percent in Tokyo, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker.
The MSCI Asia Pacific Index (MXAP) of shares was little changed after advancing 1.6 percent in the previous two days.
Obama administration officials told leaders of business and financial services groups that negotiations with House Speaker John Boehner have deteriorated in the past 24 hours, a person familiar with the meeting said.

Yen Gains Versus Major Peers on Fiscal Cliff Concern, Before BOJ (Bloomberg)
The yen gained against most major counterparts as concern that U.S. lawmakers are failing to make progress in budget talks boosted demand for refuge assets.
The dollar rallied from an eight-month low versus the euro after the the White House was reported to have said that negotiations with House Speaker John Boehner regressed yesterday, as both sides seek to avoid the so-called fiscal cliff of $600 billion in tax increases and spending cuts. The Bank of Japan ends a two-day meeting today, at which it is expected to expand monetary stimulus.
“The dollar-yen and euro-yen are falling as people are wary about the BOJ’s decision and there’s news about the fiscal cliff,” said Masato Yanagiya, head of currency and money trading in New York at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “Markets were ahead of themselves in terms of expectations for a cliff agreement.”
The yen strengthened 0.2 percent to 111.47 per euro at 9:36 a.m. in Tokyo from the close yesterday, when it touched 112.50, the weakest since August 2011. The Japanese currency rose 0.1 percent to 84.33 per dollar. The euro slid 0.1 percent to $1.3219 per dollar, after it reached $1.3308 yesterday, the highest since April 3.
Officials in President Barack Obama’s administration told leaders of business and financial services groups that negotiations with Boehner deteriorated in the last 24 hours, a person familiar with the meeting said.

Aussie Holds Losses on U.S. Cliff Concern; Kiwi Touches Week Low (Bloomberg)
Australia’s dollar maintained a three-day loss and the nation’s bonds rose amid concern U.S. lawmakers are deadlocked on a deal to avert the so-called fiscal cliff, reducing demand for riskier assets.
New Zealand’s dollar, nicknamed the kiwi, touched a one- week low versus the greenback after data showed the nation’s gross domestic product grew less than forecast in the third quarter. The Reserve Bank of Australia’s currency sales to other the clients that can include foreign central banks totaled A$117 million ($123 million) in November, data showed today.
“Another 24 hours goes by and we still don’t have any concrete development on the fiscal cliff with the end of the year not far away,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney. “That’s one good argument for a lower Aussie.”
Australia’s currency slid 0.1 percent to $1.0472 as of 12:17 p.m. in Sydney after falling 0.8 percent in the previous three days. The so-called Aussie dropped 0.2 percent to 88.28 yen.
The kiwi touched 83.31 U.S. cents, the lowest since Dec. 10, before trading at 83.46, up 0.1 percent from yesterday. It slid 0.1 percent to 70.36 yen.
Australian government bonds rose, with yields on 10-year debt falling three basis points, or 0.03 percentage point, to 3.36 percent. New Zealand’s two-year swap rate, a fixed payment made to receive a flowing rate, was little changed at 2.71 percent.
The MSCI Asia Pacific Index of shares slid 0.2 percent today, after the Standard & Poor’s 500 Index (SPX) dropped 0.8 percent in the U.S.

Malaysia’s ringgit dropped by the most in almost two weeks as signs U.S. federal budget talks are faltering reduced demand for emerging-market assets. (Bloomberg)
President Barack Obama will veto House Speaker John Boehner’s budget proposal because it would burden the middle class, White House Communications Director Dan Pfeiffer said. Democrats and Republicans are trying to come up with a deal to avert more than $600 billion in automatic spending cuts and tax increases. Japan, Malaysia’s third-largest export market, said yesterday overseas sales fell for a sixth month in November.
“There are still a lot of uncertainties in the market on the fiscal cliff,” said Andy Ji, a Singapore-based foreign- exchange strategist at Commonwealth Bank of Australia. “We may see more dollar strength.”
The ringgit declined 0.2 percent, the most since Dec. 7, to 3.0610 per dollar as of 9:06 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency has advanced 3.7 percent this year.
One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell seven basis points, or 0.07 percentage point, to 4.47 percent. It has fallen 4.03 percentage points this year.
Inflation held at 1.3 percent in November, the same as in the previous two months and the least since February 2010, according to a government report yesterday. The median estimate of analysts surveyed by Bloomberg was 1.4 percent.
Government bonds were little changed yesterday. The yield on the 3.492 percent notes due March 2020 was steady at 3.48 percent, according to Bursa Malaysia.

Building Permits Increase as U.S. Housing Rebounds: Economy (Bloomberg)
The number of building applications issued in November rose to a four-year high, a sign the U.S. housing-market recovery will extend into 2013.
Permits, a proxy for future construction, climbed 3.6 percent to an 899,000 annual rate, the most since July 2008 and exceeding the 875,000 median forecast of 58 economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. While housing starts fell 3 percent to an 861,000 pace, the average rate from September through November was the strongest since the three months ended August 2008.
Record-low mortgage rates and an improving job market are giving Americans the confidence and wherewithal to buy a house, boosting builders such as Toll Brothers Inc. (TOL), which are now able to raise prices. Gains in housing will help shore up economic growth this quarter as businesses curb spending on concern lawmakers will fail to avert the tax increases and spending cuts slated to take effect in 2013.
“We’re headed higher and next year is going to be the best year for housing starts that we’ve seen since 2007,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who projected starts would drop to an 865,000 pace. “Housing is coming back.”
Stocks fell as deteriorating federal budget negotiations fueled concern that automatic tax increases and spending cuts will be triggered next year. The Standard & Poor’s 500 Index dropped 0.8 percent to 1,435.81 at the close in New York.

Obama Says Republicans Posturing in Rejecting Budget Deal (Bloomberg)
President Barack Obama said he offered congressional Republicans a “fair deal” during budget talks and accused them of “posturing” in negotiations.
The president, at a White House news conference, vowed to continue to reach out to House Speaker John Boehner and said there is no reason to breach the end-of-the-year deadline and allow automatic spending cuts and tax increases to take effect.
“I have gone at least half way” in negotiations for a accord to avoid the so-called fiscal cliff and Republicans need to “take the deal” he’s offered, Obama said. “The fact that they haven’t taken it yet is puzzling.”
Obama also said he still wants to get an agreement by Christmas. He said the proposals he and Boehner have advanced are “pretty close.”

FedEx Maintains Full-Year Forecast Amid Economic Concerns (Bloomberg)
FedEx Corp. (FDX), operator of the world’s largest cargo airline, maintained its full-year profit forecast amid increasing concern that U.S. economic growth may slow.
The shares rose, as broader market indexes declined, after Memphis, Tennessee-based FedEx re-affirmed its fiscal 2013 earnings outlook of $6.20 to $6.60 a share, excluding costs associated with a voluntary buyout program.
FedEx, an economic bellwether because it moves goods as varied as pharmaceuticals, financial documents and electronics, beat fiscal second-quarter sales estimates while struggling with falling profit at its express division. That drop is caused in part by customers’ long-term shift to cheaper shipping options.
“It was a pretty impressive quarter, especially given the economy,” said Logan Purk, an Edward Jones & Co. analyst in St. Louis, who recommends buying the shares. “Something else the market likes is that in this sluggish environment they came out and maintained their guidance” for full-year profit.
FedEx increased 0.9 percent to $93.20 at the close in New York, while United Parcel Service Inc. (UPS), the world’s largest package-delivery company, gained 0.7 percent to $75.61. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average both fell as federal budget talks deteriorated, stoking concern that the lack of an agreement will hurt the economy.

South Korean Won Forwards Weaken After Park Elected; Bonds Gain (Bloomberg)
Won forwards fell for the first time in a week after the ruling party’s Park Geun Hye was elected South Korea’s first female president, damping speculation of a major shift in the nation’s exporter-friendly policies. Government bonds advanced.
Park defeated main opposition nominee Moon Jae In by 51.6 percent to 48 percent in yesterday’s election, according to the National Election Commission. Park has called for tighter regulation of family-owned conglomerates such as Samsung Group, but stopped short of Moon’s call for banning existing and new cross-shareholdings. U.S. shares fell yesterday on concern lawmakers are struggling to reach agreement on budget changes.
“The ruling New Frontier Party is more corporate friendly than the opposition, which means less tolerance for a stronger won,” said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc. “There is caution against government intervention considering what we saw on Dec. 18, and also the U.S. budget deal is a continuous concern.”
One-month non-deliverable forwards on the won weakened 0.1 percent to 1,074.76 per dollar as of 10:04 a.m. in Seoul, according to data compiled by Bloomberg. The won traded at 1,072.78 per dollar from a close of 1,073.23 on Dec. 18, when it touched a 15-month high of 1,070.73. Local markets were closed yesterday for the election.
One-month implied volatility, a measure of expected moves in exchange rates used to price options, was little changed today at 4.75 percent. That is down from 13.55 percent at the start of this year. The won has strengthened 7.4 percent this year, the best performance among Asia’s 11 most-used currencies.

Park Win Lifts Korean ETF as Export Outlook Brightens on China (Bloomberg)
An exchange-traded fund of South Korean stocks rose in New York as Park Geun Hye was elected president of the Asian nation amid signs China, the nation’s biggest trading partner, is emerging from a slowdown.
The iShares MSCI South Korea Index Fund, an exchange traded fund incorporated in the U.S., added 0.1 percent to $62.38, while the Bank of New York Mellon Corp. (BK) index of Korean American depositary receipts closed little changed at 187.70, after gaining as much as 0.5 percent during the U.S. day.
Park, 60, of the ruling New Frontier Party, led main opposition nominee Moon Jae In, 51.6 percent to 48 percent with 91.4 percent of the vote counted, the National Election Commission said on its website as of 12:25 a.m. in Seoul. Moon, 59, conceded defeat. The election results come as the World Bank said in a report issued yesterday that the economy of China, the biggest buyer of South Korean goods, may “have bottomed out” after a seven-quarter slowdown.
“This government won’t be anti-business, there’s no such tone,” Michael Ding, lead manager of the China Region Fund at U.S. Global Investors Inc. in San Antonio, Texas, which oversees $2.2 billion including investments in South Korean stocks, said by phone yesterday. “The market is also up because of the recovery of Chinese economy. There’s a lot of tailwinds in South Korea’s favor.”
Park will take office Feb. 25, when President Lee Myung Bak’s single five-year term ends. She has pledged stronger support for small- and medium-sized businesses, to help them compete with dominant exporters such as Samsung Electronics Co. and Hyundai Motor Co.

N.Z.’s Economic Growth Slows More Than Forecast; Kiwi Falls (Bloomberg)
New Zealand’s economic growth slowed more than economists forecast last quarter amid a drop in manufacturing and farm output, sending the currency toward its steepest weekly decline since May.
Gross domestic product rose 0.2 percent in the three months ended Sept. 30 from the previous quarter, when it expanded a revised 0.3 percent, Statistics New Zealand said in a report released today in Wellington. Growth matched the central bank’s 0.2 percent forecast and was half the 0.4 percent median estimate in a Bloomberg News survey of 13 economists.
The New Zealand dollar fell as traders bet central bank Governor Graeme Wheeler will extend a period of record-low interest rates. Still, sluggish growth may be temporary amid signs of a pick-up in reconstruction in Christchurch and a rise in consumer confidence in the fourth quarter that may revive domestic demand in 2013.
“The economy shifted down a gear,” Mark Smith, senior economist at ANZ Bank New Zealand Ltd. in Wellington, said in an e-mailed note. “With 2013 approaching, the real issue is identifying the drivers of growth outside construction against a fickle global and labor market backdrop.”
New Zealand’s dollar dropped against the U.S. currency after the data. It bought 83.35 U.S. cents as of 11:35 a.m. in Wellington from 83.61 cents immediately before the result. The so-called kiwi has fallen 1.5 percent since Dec. 14.

Spain’s $185 Billion Restructuring Test for Rajoy Cleanup (Bloomberg)
A rush by recession-hit Spanish businesses and consumers to refinance their loans will test Prime Minister Mariano Rajoy’s pledge of a “definitive” cleanup of the nation’s crisis-hit banks.
Spain’s banks have restructured about 140 billion euros ($185 billion) of loans outside the country’s crippled real estate industry, according to Oliver Wyman, a consulting firm that did a stress test of Spanish lenders. Bad loans surged to a record 11.2 percent of total lending, the Bank of Spain said yesterday.
“We are working with factories, restaurants, any kind of business,” Agusti Bou, who works on restructuring credit at Jausas, a Barcelona-based law firm, said in a phone interview. “There’s going to be a growing default problem because the huge issue in Spain is not the public debt, it’s the private.”
Spain has ordered banks to recognize 84 billion euros of losses to purge their balance sheets of real estate as Rajoy recapitalizes at least four failed lenders with about 40 billion euros of European bailout funds. The strategy focuses on soured property assets and may neglect impending losses on loans to firms and homeowners as the economy shrinks, analysts say.
While small and medium-sized businesses have restructured as much as 21 percent of the 230 billion euros they owe, according to Oliver Wyman, total non-performing loans in the country grew by 7.8 billion euros to 190 billion euros in October, the Bank of Spain said. The nation’s bad-loan ratio will jump to 14.5 percent of all lending, assuming that 30 percent of refinanced credit turns sour within a year, said Daragh Quinn, a banking analyst at Nomura Holdings Inc. (8604) in Madrid.

Greeks Can’t Find Euros to Buy Heating Oil in Winter Economy (Bloomberg)
In the Greek mountain town of Kastoria, less than an hour from the Albanian border, Kostas Tsitskos, 88, can’t afford fuel to heat his home against the winter’s cold. So he and his son live in a single bedroom, warmed by a small electric heater.
“One room is enough,” said Tsitskos, who lives on a 734 euro-a-month ($971) pension and doesn’t have the 1,000 euros a month he needs to buy heating oil.
Greece is facing a heating-oil crisis. With an economy that has contracted for five years and an unemployment rate at a record 25 percent, residents in northern Greece can’t heat their homes. Kastoria hasn’t received funds from the central government to warm schools and the mayor said he will close all 53 of them rather than let children freeze, a step already taken in a nearby town. Truckloads of wood are arriving from Bulgaria as families search for alternative fuels.
“This is the coldest place in Greece,” said Emmanouil Hatzisimeonidis, Kastoria’s mayor, in an interview in his office. “It’s winter from October to April. This year we are very lucky. Last year, it was snowing for four months.”
When temperatures fall below freezing, Tsitskos spends most of his time in his bedroom and rarely leaves the house, he said. For meals, he and his son move the electrical heater to the kitchen. Other older residents in the town spend their days at a senior center and cafes to save on heating costs, returning home only to sleep, he said.