Asian Stocks Drop as Panasonic Plunges on Loss Forecast (Bloomberg)
Asian stocks fell as Panasonic Corp. led declines among Japanese makers of electronics after forecasting a loss that was 30 times bigger than analysts estimated, overshadowing the first expansion in China’s manufacturing output in three months. Panasonic plunged by 17 percent in Tokyo. Sharp Corp. (6753) and Sony Corp. dropped at least 2.3 percent ahead of earnings reports today. Arrium Ltd. tumbled 11 percent in Sydney after a consortium led by Noble Group Ltd. dropped a takeover attempt. The MSCI Asia Pacific Index (MXAP) fell 0.4 percent to 121.48 as of 10:12 a.m. in Tokyo, with about three shares falling for each that rose. The benchmark index slid 0.4 percent last month as more than half the gauge’s companies reported earnings that missed analyst estimates.
Japan’s Nikkei 225 Stock Average (NKY) slipped 0.2 percent, while South Korea’s Kospi Index dropped 0.9 percent. Taiwan’s Taiex Index decreased 1.1 percent. Australia’s S&P/ASX 200 declined 0.7 percent after the nation’s manufacturing output contracted for an eighth month. China’s manufacturing output expanded in October for the first time in three months, in line with economist estimates. Markets in China and Hong Kong have yet to open. Futures on the Standard & Poor’s 500 Index slid 0.3 percent today. Most U.S. stocks rose yesterday as equity markets reopened after Hurricane Sandy caused the longest weather- related shutdown since 1888. Stocks on the MSCI Asia Pacific Index traded yesterday at an average of 12.9 times estimated earnings, compared with 13.5 for the S&P 500 Index and 12.1 for the Stoxx Europe 600 Index.
Japan Stocks Swing From Gains, Losses on China, Panasonic (Bloomberg)
Japanese stocks swung between gains and losses ahead of the release of China manufacturing data and as electronics makers slid after Panasonic Corp. projected a full-year loss that was about 30 times bigger than expected. Panasonic was poised to drop after saying it will lose 765 billion yen ($9.6 billion) due to restructuring and falling demand. Unitika Ltd. fell 5 percent after the fiber manufacturer cut its earnings forecast. Nippon Meat Packers Inc. jumped 8.7 percent after saying it will spend as much as 15 billion yen buying back shares. The Nikkei 225 Stock Average (NKY) was little changed at 8,926.60 as of 9:19 a.m. in Tokyo after falling as much as 0.3 percent. Volume on the gauge was 7.4 percent above the 30-day average. The broader Topix (TPX) Index fell less than 0.1 percent to 742.14.
The Topix rose 3.2 percent through yesterday from Sept. 6 after the European Central Bank started a global wave of monetary policy easing to boost growth, with the U.S. Federal Reserve 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.
European Stocks Decline as ArcelorMittal, BG Group Fall (Bloomberg)
European stocks fell, paring the Stoxx Europe 600 Index’s fifth straight monthly gain, as ArcelorMittal and BG Group Plc (BG/) reported disappointing results and euro-area governments pressured Greece to increase spending cuts in return for aid. ArcelorMittal dropped 6.4 percent after the world’s biggest steelmaker posted its smallest quarterly profit in almost three years. BG Group Plc sank a record 14 percent as its energy company’s production forecast disappointed investors. Air France-KLM (AF) Group and Deutsche Lufthansa AG (LHA) both rose at least 7 percent after Europe’s largest airlines reported earnings that beat estimates. The Stoxx 600 lost 0.5 percent to 270.30 at the close of trading after earlier rallying as much as 0.5 percent. The index erased gains after euro-area finance ministers called on Greece to instigate deeper budget cuts during a conference call. The gauge rose 0.7 percent in October, completing its longest monthly winning streak in six years.
“Given the lack of progress we have seen with summits, once again, there has been a lot of words and not much action,” Chris Beauchamp, a market analyst at IG in London, said in a telephone interview. “We are seeing disillusionment with European markets. Lufthansa has kept markets from slipping down too much.” Trading volumes across Europe were lower for the past two days amid the longest weather-related shutdown of U.S. equity markets in more than a century. The number of shares changing hands in companies listed on the Stoxx 600 (SXXP) today was 2.7 percent less than the 30-day average, according to data compiled by Bloomberg. Volume had been down by more than 35 percent the previous two days.
Most U.S. Stocks Rise as Markets Reopen After Hurricane (Bloomberg)
Most U.S. stocks rose, with the Standard & Poor’s 500 Index reversing an earlier loss, as equity markets in the world’s largest economy reopened after Hurricane Sandy caused the longest weather-related shutdown since 1888. Home Depot Inc. (HD) and Lowe’s Cos. added at least 2.2 percent amid speculation the home-improvement retailers would be helped by spending related to the storm. General Motors Co. rallied 9.5 percent after reporting third-quarter profit that surpassed analysts’ estimates. Apple Inc. (AAPL) dropped 1.4 percent after Chief Executive Officer Tim Cook embarked on a sweeping management overhaul at the world’s most valuable company.
The S&P 500 rose less than 0.1 percent from Friday’s close to 1,412.16 at 4 p.m. in New York, after falling as much as 0.4 percent. The gauge declined 2 percent in October after four straight months of gains. The Dow Jones Industrial Average lost 10.75 points, or 0.1 percent, to 13,096.46 today. Almost three stocks rose for every two that fell on U.S. exchanges, as volume was about 6.31 billion shares, or 5.7 percent above the three- month average. “Today, traders are more heightened to a flash crash more than any day prior,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a phone interview. His firm oversees $8 billion in assets. “Nobody cares about if the market goes up or down. You just want to make sure the market is functioning properly.”
American equity markets were closed Oct. 29 and yesterday, the first consecutive shutdowns because of weather in more than a century. The decision to open U.S. markets was announced in statements by NYSE Euronext, Nasdaq OMX Group Inc. and Bats Global Markets Inc.
Recap Stock Index Market Report (CME)
The December S&P 500 broke out above recent congestion during the initial morning, supported by gains in global equities and an improvement in risk-taking attitudes. Stocks pared their losses into this morning's US economic data on Chicago PMI, which came in weaker than expected. An added downside force for US equities this morning was weakness in the shares of Apple after its shares had a chance to react to recent management changes. Shares of Apple were down more than 2% in late-morning trade, and that weighed on tech-related shares. Meanwhile, positive earnings from General Motors this morning and a strong showing in Home Depot were seen limiting the downside. The market will get the latest earnings from Allstate and Visa after the close.
Emerging Stocks Cut Monthly Drop as Korea Boosts Outlook (Bloomberg)
Emerging-market stocks advanced for a second day, paring the biggest monthly decline since May, as commodities gained and improving data from South Korea to the U.S. bolstered the global economic outlook. Industrial & Commercial Bank of China (601398) Ltd., the world’s largest bank by market value, jumped the most in three weeks, and LS Industrial Systems Co. (010120), a Korean maker of power transmission and distribution equipment, surged the most in 11 months after reporting earnings that beat analysts’ estimates. OAO Novatek, Russia’s second-largest natural gas producer, snapped a six-day slump as oil rose. Brazilian retailer Lojas Renner SA rallied after third-quarter net income beat estimates.
The benchmark gauge for developing-nation equities added 0.2 percent to 995.33 at the close of trading in New York, cutting its drop in October to 0.7 percent, the most since the index lost 12 percent in May. South Korean factory output rose for the first time in four months in September, boosted by stronger sales of cars and electronics. A report yesterday showed home prices rose by the most in two years in the U.S., where equity markets resumed after a two-day shutdown during Hurriance Sandy. “Economic indicators from South Korea and the U.S. combined with higher-than-expected earnings are helping keep equities afloat,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. The biggest Atlantic storm in history, which caused at least 50 U.S. deaths, “will spur reconstruction that would encourage consumer spending and demand that may find its way into the emerging markets.”
Yen Remains Weaker Versus Peers After China PMI Improves (Bloomberg)
The yen remained lower against all of its 16 major peers following a drop yesterday after Chinese data showed manufacturing improved in the world’s second-largest economy. The euro rose for a third day versus Japan’s currency as European governments pressed Greece to make deeper spending cuts to keep aid flowing and after the Swiss central bank released data on its foreign-exchange reserves. Implied volatility among Group-of-Seven currencies slid to a five-year low. “We’re starting to see signs of China’s economy picking up,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “Improved sentiment toward China will lead to a risk-on environment, spurring selling of the yen and dollar.”
The yen fell 0.2 percent to 103.55 per euro as of 10:09 a.m. in Tokyo after losing 0.4 percent in the past two days. The Japanese currency slipped 0.1 percent to 79.88 per dollar following a 0.2 percent slide. The 17-nation euro was little changed at $1.2964. The JPMorgan G7 Volatility Index sank to 7.46 percent yesterday, the lowest since October 2007. Decreased volatility typically makes investments more attractive in currencies with higher lending rates. Official figures today showed that a Chinese manufacturing gauge based on a survey of purchasing managers climbed to 50.2 in October from 49.8 in September. That matched the median estimate of economists surveyed by Bloomberg News.
Treasuries Fall as Market Opens After Sandy, Home Prices (Bloomberg)
Treasuries fell, snapping a three-day gain, before Chinese data economists said will show manufacturing improved in the world’s second-largest economy. U.S. 10-year rates rose two basis points, or 0.02 percentage point, to 1.71 percent as of 9:57 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent note due in August 2022 declined 1/8, or $1.25 per $1,000 face amount, to 99 1/4. Official figures may show that a Chinese manufacturing gauge based on a survey of purchasing managers climbed to 50.2 in October from 49.8 in September, according to the median estimate of economists surveyed by Bloomberg News. A separate measure by HSBC Holdings Plc and Markit Economics probably rose to 49.1 in October from 47.9 from the prior month, economists said in a separate poll before today’s reports. That would confirm a preliminary reading released Oct. 24. For both indexes, 50 is the dividing line between contraction and expansion.
U.S. to Issue Jobs Report on Nov. 2, Spokesman Says (Bloomberg)
The U.S. Department of Labor will issue its monthly employment report for October, the last to be published before the presidential election, as scheduled on Nov. 2, a spokesman said today. The report “will be released as scheduled on Friday,” the spokesman, Gary Steinberg, said from Washington. The statement clears up uncertainty surrounding the publication of the report after Hurricane Sandy closed government offices for two days this week. Yesterday, another spokesman, Carl Fillichio, said the employees at the Bureau of Labor Statistics are “working hard to ensure the timely release of employment data.” The jobs report may help sway voters trying to decide between giving President Barack Obama another four years in office or to change course with Republican challenger Mitt Romney. The Obama administration has pointed to 24 straight months of job growth as evidence the economy is improving, while the Romney campaign has said progress is too slow.
Payrolls probably rose by 125,000 workers in October, and the jobless rate increased to 7.9 percent from a three-year low of 7.8 percent reached in September, according to the median forecast of economists surveyed by Bloomberg. Jack Welch, the former chief executive officer of General Electric Co., suggested the Obama administration had manipulated the jobs data for political advantage after the September unemployment rate unexpectedly dropped to the lowest level since the president took office in January 2009. Alan Krueger, chairman of the White House Council of Economic Advisers, called Welch’s comments “irresponsible.” Prior to September, joblessness had exceeded 8 percent for 43 straight months, the longest such stretch since at least 1948. Ronald Reagan is the only president to have been re-elected since World War II with unemployment above 6 percent. On Election Day 1984, the rate was at 7.2 percent, having dropped almost three percentage points in the previous 18 months.
Fed Sees Rising Demand for Auto and Mortgage Loans (Bloomberg)
Banks in the U.S. reported stronger demand for auto loans and commercial and residential mortgages during the third quarter, according to a Federal Reserve survey. The central bank described the share of banks reporting increased demand as “significant.” Demand for most other loan types was “about unchanged,” the Fed said today in Washington in its quarterly survey of senior loan officers. The report provides further evidence that sales of cars and homes, bolstered by record-low interest rates from the central bank, are helping to fuel the U.S. economic recovery. The gains are helping to shield the world’s largest economy from a decline in exports and cooling business investment. Cars and light trucks sold at a 14.9 million annual pace in September, the most since March 2008, according to Ward’s Automotive Group. New homes sold at a 389,000 annual pace in September, the most in more than two years, according to a Commerce Department report last week.
The Federal Open Market Committee reviewed the bank survey on Oct. 23-24 during a meeting in Washington in which it decided to continue purchasing $40 billion a month in mortgage-backed securities until the labor market improves “substantially.” Central bankers will know more about the job market on Nov. 2, when the Labor Department issues employment data for October, the last monthly report before the Nov. 6 presidential election. The median estimate of economists in a Bloomberg survey calls for 125,000 jobs to be added in October and for the unemployment rate to rise to 7.9 percent from 7.8 percent. The Standard & Poor’s 500 Index rose 0.1 percent at 1,413.76 at 3:19 p.m. in New York. The yield on 10-year Treasury notes fell 0.04 percentage points to 1.68 percent.
Wage Costs Rise More Slowly as U.S. Employers Hold Line (Bloomberg)
Employment costs rose at a slower pace in the third quarter compared with the prior three months, indicating workers have limited scope to bargain for higher wages as the U.S. economy struggles to pick up. The employment cost index increased 0.4 percent following a 0.5 percent gain in the prior quarter, the Labor Department said today. Business activity unexpectedly contracted for a second month in October, another report showed. A global economic slowdown and the prospect of more than $600 billion in automatic tax increases and government spending cuts -- the so-called fiscal cliff -- is encouraging some employers to hold the line on worker pay and other costs, according to economist Ryan Sweet. Limited wage growth makes it harder for households to step up purchases, which account for about 70 percent of the economy.
“There’s a lot of concerns for businesses,” said Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly forecast October employment costs. “Not until we get beyond the fiscal cliff will we start to see manufacturing find its rhythm again.” Most stocks rose as the market resumed trading for the first time this week after Hurricane Sandy. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,412.16 at the close in New York. In a sign of more weakness in the global economy, a report from the European Union’s statistics office showed joblessness in the euro area climbed to a record in September. Unemployment in the 17-nation region rose to 11.6 percent from 11.5 percent in August.
Storm Keeping Millions From Work May Slow Economic Growth (Bloomberg)
Atlantic superstorm Sandy may cut U.S. economic growth as it keeps millions of employees away from work and shuts businesses from restaurants to refineries in one of the nation’s most populated and productive regions. The storm may cut output in the world’s largest economy by $25 billion in the fourth quarter, according to Gregory Daco, a U.S. economist at IHS Global Insight. He said that could reduce the fourth quarter pace of growth to a range of 1 percent to 1.5 percent, from the firm’s earlier estimate of 1.6 percent. Sandy lashed a region with 60 million people -- about as many as Italy -- that accounts for about a quarter of the $13.6 trillion U.S. economy, estimated Eric Lascelles, the Toronto- based chief economist at RBC Global Asset Management Inc. It forced the temporary closings of U.S. financial markets, halted air and rail service and idled workers for the federal and state governments from Virginia to Massachusetts.
“If people aren’t going to Broadway shows and restaurants and hotels, all those businesses that rely on people spending money are going to take a hit for sure,” said Stephen Bronars, a senior economist at Welch Consulting in Washington and an adjunct professor at Georgetown University. “People are still going to go out and buy a car or other durable goods they need, they’re just not going to do it this week. There will be winners and losers.”
China Manufacturing Expands for First Time in Three Months (Bloomberg)
China’s manufacturing expanded for the first time in three months in October, adding to signs growth in the world’s second-biggest economy is rebounding after a seven-quarter slowdown. The Purchasing Managers’ Index rose to 50.2 in October from 49.8 in September, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That matched the median forecast in a Bloomberg News survey of 30 economists. A reading above 50 indicates expansion. Today’s report bolsters hopes for a pickup in expansion this quarter after industrial production, exports and retail sales accelerated in September. The data may also reduce pressure on outgoing Premier Wen Jiabao to roll out more stimulus measures during a once-a-decade power handover that begins with a Communist Party congress next week.
“The growth stabilization is on track on the back of improving domestic and external demand, more accommodative monetary and financing conditions,” Chang Jian, a Hong Kong- based economist at Barclays Plc who formerly worked for the World Bank, said before the release. “Industrial activity and growth momentum are likely to pick up further this quarter.” Chances of a cut in interest rates or reserve requirements are diminishing, and the government is likely to maintain the current level of monetary and fiscal support to sustain the growth recovery, Chang said.
South Korea’s Exports Rise for First Time in Four Months (Bloomberg)
South Korea’s exports unexpectedly rose for the first time in four months as resilience from the country’s largest companies helped offset the effects of a global slowdown. Overseas shipments rose 1.2 percent in October from a year earlier, after a revised 2 percent decline in September, the Ministry of Knowledge Economy said in a statement today. The median estimate in a Bloomberg News survey of 16 economists was for a 0.7 percent decline. Consumer prices rose 2.1 percent last month from a year ago. South Korea’s industrial production also rose for the first time in four months in September, adding to evidence that a slowdown in Asia’s fourth-largest economy has hit bottom. Still, data has been mixed, with manufacturers’ confidence for November falling for a second-straight month and the Bank of Korea saying in a report to parliament yesterday that growth momentum is weakening.
“Things have started to move up in Korea, even if not at full steam yet,” Ronald Man, a Hong Kong-based analyst at HSBC Holdings Plc, said before the release. “This momentum would need to be sustained for economic growth to pick up.” South Korea’s won was little changed at the 9 a.m. opening in Seoul, after reaching a 13-month high yesterday, according to data compiled by Bloomberg. The Kospi (KOSPI) stock index fell 0.4 percent.
Greece’s Botched Rescue Is Frustrating to Behold, Lipsky Says (Bloomberg)
Efforts to rescue Greece have failed to provide the basic structural reforms needed to help bring competitiveness to its economy, said John Lipsky, the International Monetary Fund’s former first deputy managing director. “It has been frustrating because some of these have been clear from the outset in so many ways,” Lipsky said in an interview in Copenhagen yesterday. “I feel this process could have been handled so much better.” Europe is pressuring Greece to step up efforts to rein in its deficit and deregulate the economy. The austerity measures are exacerbating the nation’s economic pain and won’t lay the foundation for a lasting recovery, Lipsky said. Greece is complying with the terms set by euro-zone leaders in the hope of getting a 31 billion-euro ($40 billion) aid payment this month to help recapitalize its ailing banks.
“It has been so frustrating to see how little the discussion has centered around what are in fact the underlying issues, the truly seminal issues, for Greece, which have been its progressive loss of competitiveness in the euro zone,” Lipsky said. “If that can’t be remedied, there will be no successful solution for the Greek economy, one way or another.” Greece, which faces a sixth year of recession, needs to remove trade barriers and become more export-oriented to have any hope of returning to growth, according to Lipsky.
Greece Urged by Europe to Overcome Last Hurdles to Aid (Bloomberg)
Euro-area governments pressed Greece to make deeper spending cuts to keep aid flowing, in the latest test of wills during the three-year battle to prevent the single currency’s breakup. With Greece pleading for a 31 billion-euro ($40 billion) aid payout in November and facing a sixth year of recession in 2013, euro finance ministers said unfreezing loans for the country required more efforts in Athens to rein in the budget deficit and deregulate the economy. “We called on the Greek authorities to solve remaining issues so as to swiftly finalize the negotiations,” Luxembourg Prime Minister Jean-Claude Juncker said in an e-mailed statement today after leading a two-and-a-half-hour conference call with the finance chiefs. He said a scheduled Nov. 12 meeting of the ministers in Brussels would “seek to conclude on the program.”
Greece remains in intensive care after being rescued in 2010 in return for a prescription of budget cuts that Greeks increasingly resist. Failure to resuscitate Greece could threaten Europe’s effort to stem the crisis, which has also led Ireland, Portugal, Spain and Cyprus to seek emergency aid. Greece, the epicenter of Europe’s debt crisis since revealing a bloated spending gap in late 2009, has faced regular demands to get a firmer grip on the budget or risk being forced out of the euro.
