Asian Stocks Climb as U.S. Voting Continues (Bloomberg)
Asian stocks climbed, with consumer shares pushing the regional benchmark higher for a second day, as investors awaited results of the U.S. presidential election. News Corp. (NWS), the media company run by billionaire Rupert Murdoch, gained 3.3 percent in Sydney after reporting profit that topped analysts’ estimates. Social-gaming site operator DeNA Co. climbed 3.2 percent in Tokyo as earnings beat estimates. Taiyo Yuden Co., the Japanese electronic-component maker, slumped 5.6 percent after cutting its profit forecast. Nissan Motor Co. surged 4 percent, the largest gain on the Asian gauge, on speculation Chinese customers are returning to the automaker’s dealerships. The MSCI Asia Pacific (MXAP) Index rose 0.2 percent to 122.68 as of 9:16 a.m. in Tokyo, before markets in China and Hong Kong opened. The gauge gained 12 percent through yesterday from this year’s low on June 4 as central banks added stimulus amid a slowdown in global economic growth and the European debt crisis.
“Investors will be solely focused on news-wires and the U.S. vote count,” said Matthew Sherwood, Perpetual Investment’s head of investment markets research in Sydney. Perpetual manages about $25 billion. “Let’s just hope for a conclusive vote today.” Japan’s Nikkei 225 Stock Average gained 0.4 percent and South Korea’s Kospi slid 0.1 percent. Australia’s S&P/ASX 200 Index advanced 0.2 percent.
Japan Stocks Climb on Commodities Before U.S. Election (Bloomberg)
Japanese stocks rose, halting a two- day drop, as higher oil and metal prices lifted resources companies and as investors awaited results from the U.S. presidential election. Inpex Corp., Japan’s top oil explorer by market value, gained 1.8 percent after boosting its full-year forecast and as crude prices rose the most in a month. Sumitomo Metal Mining Co. rose 3.9 percent. Softbank Corp. rose 1.7 percent after the mobile carrier’s target price was raised at Credit Suisse Group AG. The Nikkei 225 Stock Average (NKY) rose 0.5 percent to 9,015.37 as of 9:22 a.m. in Tokyo, with volume 3.7 percent below the 30- day intraday average. The broader Topix (TPX) Index advanced 0.4 percent to 747.87, with more than two shares gaining for each that fell.
“The presidential election will give us clarity on the direction of U.S. policy,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “The U.S. economy is recovering mildly and China’s economy is expected to bottom out, boosting commodity prices.” Futures on the Standard & Poor’s 500 Index slid 0.3 percent today. The gauge rose 0.8 percent yesterday. U.S. voters are at the polls to decide between giving President Barack Obama another four years to lead the world’s largest economy or replacing him with Republican challenger Mitt Romney. The next president will need to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts that take effect in 2013 unless Congress can reach a budget compromise.
Recap Stock Index Market Report (CME)
The December S&P 500 trended higher throughout the US trading session, registering a higher high in the process. Early support came from gains in European shares and favorable shift in risk-taking sentiment. Some traders noted that the uncertainty over the next US president was coming to conclusion, and that was seen as a modest positive. Upside leadership was seen in the Dow Jones Index, helped by better than 2% gains in the shares of United Technologies, Boeing and Hewlett-Packard. Most of the major S&P sector indices were in positive territory, led by gains in energy and industrial-related shares. The market will get the latest quarterly results from News Corp after the closing bell.
U.S. Stock Futures Fall as Investors Await Vote Results (Bloomberg)
U.S. stock futures fell, following a two-day advance for the Standard & Poor’s 500 Index, as Americans awaited presidential election results. S&P 500 futures expiring in December dropped 0.4 percent to 1,419.80 at 9:49 a.m. Tokyo time. Dow Jones Industrial Average futures lost 45 points, or 0.3 percent, to 13,156. “We’ll have some degree of clarity after the polls,” said Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, which oversees $152 billion. “While the elections will determine who will be doing the negotiating, we’ll still have issues such as the fiscal cliff to deal with. The market is in a wait-and-see mode.” U.S. voters are deciding between giving President Barack Obama another four years or replacing him with Republican challenger Mitt Romney. The races in the battleground states of Virginia, Ohio and North Carolina were too close to call in the early returns, while each candidate scored victories in other states in the first wave of poll closings. The next president will need to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts that take effect in 2013 unless Congress can reach a budget compromise. The options market is implying about a 2 percent move up or down in the S&P 500 over the next four trading days, according to Susquehanna Financial Group LLLP’s head of derivatives strategy Trevor Mottl. That’s equivalent to an even-odds range of 1,389 to 1,445 for the close on Nov. 9 based on options prices as of Nov. 5, he wrote in a note to clients.
U.S. Stocks Rise Ahead of Presidential Election Results (Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second straight day, as American voters went to the polls to pick a president. Hewlett-Packard Co. (HPQ) and United Technologies Corp. (UTX) added at least 2.6 percent to pace gains among the biggest companies. Computer Sciences Corp., the manager of networks for NASA, surged 17 percent as a cost-cutting program helped boost its profit forecast. Express Scripts (ESRX) Holding Co., the largest U.S. pharmacy benefits manager, plunged 12 percent after saying analysts’ profit estimates for 2013 were “overly aggressive.” The S&P 500 rose 0.8 percent to 1,428.39 at 4 p.m. in New York. The Dow Jones Industrial Average added 133.24 points, or 1 percent, to 13,245.68. Volume for exchange-listed stocks in the U.S. was 5.9 billion shares, or about in line with the three- month average, according to data compiled by Bloomberg.
“We’re moving closer to a definition on the election front,” said Mark Luschini, who helps manage $54 billion as chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC. “It’s offering investors reason to say: we move from the unknown category regardless of the outcome.” U.S. voters decide today between giving President Barack Obama another four years in office or replacing him with Republican challenger Mitt Romney. The next president will need to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts that take effect in 2013 unless Congress can reach a budget compromise.
European Stocks Climb as Americans Vote; ARM, Adecco Gain (Bloomberg)
European stocks advanced for the third time in four days as Americans went to the polls to elect their president. ARM Holdings Plc increased 2.1 percent as Apple Inc. (AAPL) was said to explore how to use the chip designs from its mobile devices in Mac personal computers. Adecco SA (ADEN) climbed 3.2 percent after the world’s biggest supplier of temporary workers reported earnings that exceeded estimates. Volkswagen AG (VOW) dropped 4.1 percent as the carmaker sold 2.5 billion euros ($3.2 billion) of bonds that convert into shares. The Stoxx Europe 600 Index (SXXP) increased 0.6 percent to 274.74 at the close of trading, as more than two shares rose for every one that declined. The equity benchmark has surged 17 percent from its low on June 4, as the European Central Bank and the Federal Reserve announced further rounds of asset buying.
“Europeans would like to see Barack Obama elected because they know where he stands,” said Robert Halver, head of capital markets research at Baader Bank AG in Frankfurt. “Whichever president is elected will have to face the fiscal-cliff debate.” The so-called fiscal cliff refers to the $607 billion in federal spending cuts and tax increases scheduled to take effect in January unless the U.S. Congress acts.
China’s Stocks Drop Most in Week; China Eastern, Moutai Decline (Bloomberg)
Chinese stocks fell, dragging down the benchmark index by the most in a week, before the start of the country’s leadership congress and U.S. presidential elections. China Eastern Airlines Corp. , the nation’s second-biggest domestic carrier, slid 3.1 percent after Credit Suisse Group AG downgraded the stock to underperform. Liquor maker Kweichow Moutai Co. (600519) paced declines for consumer staples producers on speculation recent gains were excessive relative to earnings prospects. Aluminum Corp. of China Ltd. and China Coal Energy Co. led losses for metal and energy producers on concern Europe will struggle to contain its sovereign debt problems. The Shanghai Composite Index (SHCOMP) slid 0.4 percent to 2,105.99 at the close, the biggest decline since Oct. 26. The CSI 300 Index (SHSZ300) dropped 0.4 percent to 2,292.21. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong slipped 0.2 percent.
“Investors are cautious ahead of the congressional meeting and U.S. voting,” Hao Hong, managing director of research at Bank of Communications, said in e-mailed comments from Beijing. “Typically, the Chinese market tends to underperform before the meeting.” President Hu Jintao is due to hand over the Communist Party leadership to Vice President Xi Jinping at a congress that begins Nov. 8. Trading volumes in the Shanghai Composite exceeded the 30- day average for this time of day by 7.1 percent, data compiled by Bloomberg show. Thirty-day volatility in the gauge was at 16.4 today, lower than this year’s average of 17.2. The Shanghai index trades at 10 times estimated profit after falling 4.3 percent this year, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006.
Emerging Stock Swings at 2006 Low as Consumer Shares Rise (Bloomberg)
Consumer companies and energy producers led an advance in the MSCI Emerging Markets Index (MXEF) as price swings dropped to the lowest level since 2006. Brazilian stocks jumped to a two-week high. Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s biggest gas distributor, had the steepest gain on the emerging- markets gauge as Moscow-based OAO Gazprom agreed to cut the price of the fuel. BYD Co. (1211), the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., climbed to a six-month high after China Development Bank Corp. agreed to provide financing for some buyers of its vehicles. Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA rose the most since Sept. 13, following commodities higher. The MSCI Emerging Markets Index added 0.5 percent to 1006.27 at the close of trading in New York.
The gauge’s 30-day historical volatility slid to 8.48, the lowest level since January 2006, as U.S. voters decide today between giving President Barack Obama another four-year term or replacing him with Republican Mitt Romney. The Standard & Poor’s GSCI index of 24 raw materials rose 2.3 percent, the most in a month. “The fact that we get some answers is reassuring,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. “It may be just an euphoric reaction to knowing that at least we’re not going to have to deal with campaigning. If investors can move away from the concerns that have weighed on prices, there is the potential for equity markets to move higher.”
Bain Says Private-Equity Deals to Rebound: Southeast Asia (Bloomberg)
Southeast Asia’s private-equity investments will pick up as early as next year, reversing a half-decade slump as the region’s improving economic outlook attracts funds, said Sebastien Lamy, a partner at Bain & Co. Private-equity deals in the region this year are expected to match 2011’s $5.3 billion or post a decline, before staging a rebound over the next two years, Lamy said, citing Bain research. The investments dropped from a peak of $12.3 billion in 2007, according to data from the corporate consulting firm. Transactions will grow as the biggest developing economies in Southeast Asia, which has a combined population of about 600 million, accelerate even as the expansion in China and India slows. Investors almost doubled funds allocated to the two nations in the three years through 2011, while funds spent in Southeast Asia stagnated, McKinsey & Co. said in a May report.
“The overall economic outlook for Southeast Asia remains solid and we are seeing strong interest by investors,” Lamy, a partner at Bain in Singapore, said in an interview yesterday. “Deal-making in the region will pick up in 2013 or 2014.” The region is drawing more global players. KKR & Co. (KKR), the private equity firm run by Henry Kravis and George Roberts, said Oct. 25 it opened an office in Singapore and plans to expand its business lending to Asian companies amid a shortage of funding in the region. The New York-based company is seeking to make more loans including mezzanine financing and investments in high-yield bonds over the next five years, said Joseph Bae, managing partner of KKR Asia Ltd.
Job Openings in U.S. Decreased by 100,000 in September (Bloomberg)
Job openings in the U.S. dropped to a five-month low in September, signaling uneven progress in the labor market may extend through year-end. The number of positions waiting to be filled declined by 100,000 to 3.56 million from the prior month, the Labor Department said today in a statement. Openings have cooled since reaching a peak this year of 3.74 million in March. A slowing global economy and the risk Congress won’t avert $607 billion in automatic federal tax increases and spending cuts next year represent obstacles for American companies as they assess hiring plans. Today’s figures show the October jump in private payrolls, the biggest in eight months, may be difficult to sustain without faster economic growth. “We’re looking at a very subdued pace of employment,” said Michelle Girard, senior U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “The economy is growing, but growing too slowly. Firms want more clarity on the outlook before they’re actually going to step up their hiring pace.”
Stocks gained for a second day as Americans headed to the polls to decide between giving President Barack Obama another four years or replacing him with Republican challenger Mitt Romney. The Standard & Poor’s 500 Index climbed 0.8 percent to 1,428.39 at the close of trading in New York. Talking to customers, “what we’re hearing is that they’re not hiring, they’re not investing right now,” Greg Lehmkuhl, president of Con-way Freight Inc., said during a Nov. 1 call with analysts. “They’re waiting for some more stability in the political and fiscal policies. Hopefully after the election and with the dealing of the fiscal cliff our customers will feel more confident in investing in their businesses.”
Housing-Market Recovery in U.S. Not ‘Resounding,’ Shiller Says (Bloomberg)
The U.S. housing recovery is a fragile one and should be spurred by reducing the role of government in the mortgage-finance system, said Robert Shiller, a professor at Yale University and co-creator of the S&P/Case- Shiller index of property values. “There are positive signs, the problem is that it’s not a really strong positive sign yet,” Shiller said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu today. It is “not a resounding recovery,” he said. Americans bought new homes in September at the fastest pace in two years, indicating that 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 on Oct. 24.
“We have to get back to a private-sector mortgage market, without government dominance,” Shiller said. “We have to think about alternative mortgages that don’t invite the same sort of crisis where we have 10 million homeowners under water. We don’t want to put Americans in such leveraged positions.” Republicans in Congress have called for an end to the Fannie Mae (FNMA) and Freddie Mac, the mortgage finance companies put under government conservatorship in 2008. Treasury Secretary Timothy F. Geithner has said he will propose a housing-finance overhaul that may include dismantling the firms. While Geithner said at the beginning of this year that the administration would release a wind-down plan by the spring, no plan has been released. Separately, Shiller said that with unemployment at 7.9 percent, the U.S. economy needs further fiscal stimulus to create jobs. He said increases in spending should be offset by higher taxes on the wealthy proposed by President Barack Obama to avoid enlarging the national debt.
“It would be tax increases Obama set on the wealthy, and at the same time, expenditure increases -- that’s a balanced- budget stimulus,” he said. “It doesn’t raise the national debt, but it stimulates the economy. We need something like that.”
Obama Battles Romney to Buck History as Polling Closes (Bloomberg)
President Barack Obama seeks to overcome stubborn U.S. joblessness as he vies for a second term while Republican challenger Mitt Romney is counting on upsets in battleground states to win the White House as polls closed in closely contested Virginia, Ohio and North Carolina. The race in each of those three battlegrounds was too close to call in the early returns, while each candidate scored victories in other states in the first wave of poll closings. The Associated Press projected a Romney win in Kentucky and West Virginia and that Obama carried Vermont -- results widely expected. Television networks projected Romney would win South Carolina and Indiana, the latter a state Obama won in 2008 though the Republican was favored there this year.
Virginia and Ohio are the most closely watched of the states that have ended balloting. Obama in 2008 became the first Democrat to win Virginia since 1964, and pre-election polling showed the race this year a tossup as Romney works to turn the state back into the Republican column. No Republican has won the presidency without a victory in Ohio. Pre-election polling nationally and in several battleground states -- the ones analysts from both parties say will most likely determine who wins the presidency -- has tilted slightly in Obama’s favor in the campaign’s final days. Re-election for Obama would make him just the second president since World War II to win another term with an unemployment rate above 6 percent.
Obama Mirror Image of Hoover With Lessons From 1930s (Bloomberg)
President Barack Obama is betting he learned enough lessons from Herbert Hoover to revive an economy still slowed in the wake of financial crisis. Hoover, president from 1929 to 1933, raised taxes, signed the Smoot-Hawley import tariffs that hurt global trade and failed to stem a run on banks -- all of which contributed to the Great Depression. Obama, who seeks a second term in today’s election, helped to recapitalize the U.S. banking system, rescued automakers and approved $831 billion in fiscal stimulus. Obama’s activism reflects a much larger federal-government role 80 years later, as well as the development of macroeconomics, giving officials more tools now to combat a slump, said Mark Gertler, a professor of economics at New York University.
Unlimited Lending May Help Weaken the Yen, BOJ Official Says (Bloomberg)
The Bank of Japan’s new unlimited lending program may further weaken the yen by reviving the carry trade after the currency sank to a six-month low last week, a senior central bank official said. A weaker yen “isn’t our main objective but it’s a common understanding that an accommodative policy eventually leads to the depreciating of one’s own currency,” Executive Director Hideo Hayakawa, 58, the official in charge of overseeing the financial system, said in an interview in Tokyo yesterday. The central bank unveiled a program of low-interest loans last week in a bid to boost demand for credit and spur growth as the nation’s economic recovery flags. The yen touched 80.68 per dollar on Nov. 2, its lowest since April, three days after the BOJ announced the program and an 11 trillion yen ($137 billion) expansion of an asset-purchase fund. The currency was at 80.23 as of 11:24 a.m. in Tokyo.
The program, which offers loans to banks at the BOJ’s overnight call rate, currently 0.1 percent, is part of the central bank’s efforts to prop up an economy hit by the global slowdown and a strong yen as the government presses for “visible results” on ending deflation. Amid weak credit demand and low rates at home, the facility may help push down the yen by boosting capital outflows as banks look to lend money to customers abroad, a trend Hayakawa said will probably continue for at least the next few years. The loans may also drive investors to sell the yen to buy higher- yielding currencies.
Top-Performing Won Threatens to Hurt Korea Export Rebound (Bloomberg)
South Korea’s won, the best performer among Asia’s most-traded currencies since June, is threatening to curtail exports just as the economy shows signs of a rebound in growth. The won may appreciate a further 9.1 percent from yesterday’s close to 1,000 per dollar by the end of 2013, according to Bank of America Merrill Lynch and BNP Paribas SA forecasts. Kia Motors Corp. (000270), the nation’s second-largest carmaker, said Oct. 26 that currency gains may hurt profitability. The exchange rate, Europe’s debt crisis and a slowdown in China may prevent the economy from meeting the government’s 2013 growth estimate of 4 percent, according to the National Assembly Budget Office. While the central bank is forecast to keep rates unchanged on Nov. 9, policy makers may come under increasing pressure to cut rates in coming months should inflows of capital drive the currency higher.
“The interest-rate gap between developed countries and South Korea is spurring bond market inflows and triggering won appreciation,” said Stephen Lee, a Seoul-based economist for Samsung Securities Co., who sees the benchmark rate cut to 2.25 percent from 2.75 percent within the first half of next year. “The Bank of Korea will have to lower rates to lessen this pressure.”
Russian October Inflation Rate Unexpectedly Falls to 6.5% (Bloomberg)
Russia’s price growth unexpectedly eased in October, slowing for the first time in six months and giving policy makers room to sidestep interest-rate increases. The inflation rate fell to 6.5 percent in October from a year earlier, compared with 6.6 percent in September, the Federal Statistics Service in Moscow said today in an e-mailed statement. Prices grew 0.5 percent in the month. Economists projected a 6.7 percent annual rate and a 0.6 percent advance in the month, according to the median estimates of two Bloomberg surveys. Russia, the biggest emerging economy to raise interest rates this year, is trying to keep a lid on consumer prices after droughts in the U.S. and locally drove up food costs. The government’s top priority is fighting inflation, even at the expense of short-term growth, President Vladimir Putin said last month at an investment conference in Moscow.
“Food inflation eased off a little in October, so it seems that has been partly driving the slowdown in the headline rate,” said Neil Shearing, chief emerging-markets economist at Capital Economics Ltd. in London, who correctly predicted the rate. While inflation may near 7 percent by year-end, policy makers are likely to hold rates “for the foreseeable future” as the economy slows, he said. The ruble is the third-worst performer among more than 20 emerging-market currencies tracked by Bloomberg over the last six months, losing 5.4 percent against the dollar. It was little changed at 31.4800 per dollar as of 4:36 p.m. in Moscow. Non- deliverable forwards, which provide a guide to expectations of currency movements, showed the ruble at 31.9575 per dollar in three months.
Australian House Prices Advance on Strength in Mining States (Bloomberg)
Australian home prices rose for a second straight quarter, the first back-to-back increase since 2010, led by gains in the capitals of states at the center of the nation’s mining boom. An index measuring the weighted average of house prices in eight major cities advanced 0.3 percent in the third quarter from the previous three months, when it rose a revised 0.6 percent, the Australian Bureau of Statistics said in Sydney today. The median estimate of 15 economists surveyed by Bloomberg News was a 1 percent rise. The data reflects 1.25 percentage points of interest rate cuts by the RBA from November to June, which have helped boost consumer confidence, home lending and building approvals. Governor Glenn Stevens resumed reductions in borrowing costs last month, as he seeks to strengthen areas outside the resources industry -- where investment is expected to peak at a lower level than previously expected next year -- and traders are pricing in a 50-50 chance of a rate cut today.
“Although it was below expectations, the data does provide further evidence of a stabilization in house prices,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “The outlook for housing is promising, given that the lower borrowing costs are having an impact and the Reserve Bank of Australia has hinted that it wants housing to improve and that’s suggesting that it will adjust monetary policy to do so.” Prices rose 1.8 percent in Perth, 0.4 percent in Brisbane and 0.3 percent in Sydney in the third quarter from the prior three months, the report showed. They declined 1.1 percent in Canberra and dropped 0.6 percent in Adelaide, it showed. The local currency was little changed after the data, trading at $1.0370 at 12:34 p.m. in Sydney.
Ports Risk $4 Trillion Indonesia Bounty Luring Unilever: Freight (Bloomberg)
A road winds through plantations from the site of Unilever (UNA)’s planned $150 million factory to the coast in western Indonesia -- ending at a port too small to load the chemicals the company seeks to ship from the remote region. “We’re committed to the investment,” said Sancoyo Antarikso, a Jakarta-based director of the Indonesian unit of Unilever, the world’s second-largest consumer goods maker. “But we need government support to build infrastructure.” President Susilo Bambang Yudhoyono plans to fix that by pouring $12 billion into ports by 2025, supporting special economic zones in the nation of more than 17,000 islands. It’s part of his goal to expand Indonesia’s economy almost fivefold to at least $4 trillion in the period. Unilever’s plant making ingredients for soaps and shampoos will lie in one such zone, Sei Mangkei, 830 miles (1,335 kilometers) northwest of Jakarta.
“Development of ports is essential,” said Henry Sandee, a senior trade specialist at the World Bank in Jakarta. “Trade between islands can take place at low costs only when ports function well.” The need to boost spending on harbors, roads and railways stands to benefit construction businesses such as PT Pembangunan Perumahan (PTPP), PT Wijaya Karya (WIKA) and PT Adhi Karya (ADHI), according to PT Bahana Securities. Each of the stocks may advance more than 20 percent in the next 12 months, said Harry Su, head of research.
U.K. Manufacturing Increased Less Than Forecast in September (Bloomberg)
U.K. manufacturing output gained less than economists forecast in September as machinery and chemical production declined, adding to evidence that the economy’s rebound is losing momentum. Factory output rose 0.1 percent from August, the Office for National Statistics said today in London. The median forecast of 30 economists in a Bloomberg News survey was for an increase of 0.4 percent. Total industrial output plunged 1.7 percent as oil and gas output dropped by a record due to maintenance of sites. While the U.K. emerged from recession in the three months through September with the strongest growth since 2007, recent reports have shown signs of weakness at the start of the fourth quarter. The data clouds the outlook as the Bank of England Monetary Policy Committee starts a two-day meeting tomorrow to decide whether to expand quantitative easing after completing its latest bond-purchase round last week.
“The economic recovery is quickly losing momentum,” Samuel Tombs, an economist at Capital Economics Ltd. in London, said in a research note. “While the MPC may pause QE at its meeting later this week, if the economic data remain weak then it may not be long before the committee is forced to provide the economy with further stimulus.” The ONS revised its estimate for third-quarter industrial production to an increase of 0.9 percent from the 1.1 percent estimated in its gross domestic product report published last month. Still, it said the impact of the revision on the GDP data is “minimal.”
Samaras Faces Down Parliament Dissenter as Greeks Srike (Bloomberg)
Greek Prime Minister Antonis Samaras faces a test of his fragile coalition government today as he seeks parliamentary approval of austerity measures to unlock bailout funds amid the third general strike in six weeks. The 238 pages of austerity measures, ranging from raising the retirement age two years to 67 to eliminating Christmas and holiday payments for pensioners, will be debated in the 300-seat Parliament from 10 a.m. with a roll-call vote expected after 8 p.m. Athens time. Approval of the legislation is the first of the parliamentary votes required by Nov. 12 to unlock a 31 billion-euro ($40 billion) portion of international aid. “We now find ourselves at the final critical crossroads and must take the right decision,” Finance Minister Yannis Stournaras told the committee yesterday. “The goal is clear and there is only one road toward it.”
Samaras must stem defections from his three-party coalition to convince European Union leaders including German Chancellor Angela Merkel that his government is serious about staying in the euro and implementing reforms. The government has lost as many as four supporters since being formed in June, with the latest defection coming from the ranks of Socialist Pasok, which provides Samaras with the votes he needs for his majority in Parliament.
Rajoy Says Spain Must Know Rescue Would Bring Down Yields (Bloomberg)
Prime Minister Mariano Rajoy said Spain needs to know how much its borrowing costs would fall if it sought a European bailout, as he continues to push the European Central Bank to improve its bond-buying offer. “The issue is not only conditions, but how much the spread will narrow, because if it means the risk premium stays around 400 basis points and doesn’t fall to 200, well, obviously that’s not the same thing,” Rajoy told Cope radio today in Madrid. The premium is now 424 basis points. Rajoy said last week that sometimes the “hardest decision is not to take any decision. He has been considering an aid request for three months. Spain, which has yet to receive any of the 100 billion-euro ($128 billion) June bank bailout, wants to avoid having any sovereign rescue bid stymied by the ECB or European government. ‘‘We have to guarantee the support of all the countries of the European Union,’’ he said. The government hasn’t made any decision and the ‘‘possibility is there’’ to make a request.
Spain’s 10-year bond yields fell to 5.70 percent at 11:20 a.m. today in Madrid from 5.75 percent yesterday. That’s down from 7.2 percent on Aug. 2, when the ECB first offered to intervene in the bond markets of nations that agree to the conditions of the loan programs led by euro-region governments. Greece headed for a cliffhanger vote on austerity measures needed to keep the bailout on track as a 48-hour general strike began and European officials squabbled over the timing of a deal to unlock rescue funds. European Union Economic and Monetary Affairs Commissioner Olli Rehn, speaking at a meeting of Group of 20 finance chiefs in Mexico City, said yesterday that a deal must be made at a meeting of EU finance ministers in Brussels on Nov. 12. A European G-20 official, speaking before Rehn and on condition of anonymity, cast doubt on the prospects for that deadline, saying officials may fall short.
Greece is under pressure to make more efforts to rein in its budget deficit and deregulate the economy. While German Chancellor Angela Merkel last month travelled to Greece to signal her willingness to keep Greece in the euro, the country is still struggling to hit its debt reduction targets amid a combination of Greek political resistance to more cuts and economic collapse.
German Factory Orders Slump the Most in a Year: Economy (Bloomberg)
German factory orders fell the most in a year in September as Europe’s sovereign debt crisis and slowing economic growth prompted companies to reduce investment. Orders, adjusted for seasonal swings and inflation, slumped 3.3 percent from August, when they dropped a revised 0.8 percent, the Economy Ministry in Berlin said today. That’s the second straight drop and the biggest since September 2011. Economists forecast a 0.4 percent decline, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, orders sank 4.7 percent when adjusted for work days. Germany’s economy, Europe’s largest, is showing signs of weakness as governments and consumers across the region reduce spending, damping export demand. Business confidence fell to the lowest in more than 2 1/2 years in September and the unemployment rate rose from a two-decade low. At the same time, Germany is weathering the debt crisis better than its euro-area counterparts thanks to exports to emerging markets and domestic demand. Today’s data “are a catastrophe and very bad news,” said Thomas Harjes, senior European economist at Barclays Plc in Frankfurt. “We have a huge problem in the rest of the euro area that now seems to be reaching Germany and its labor market. For the coming quarters, the economic outlook is quite gloomy.” The euro dropped after the report and traded at $1.2783 at 12:16 p.m. in Frankfurt. European stocks advanced for the third time in four days ahead of the U.S. presidential election. U.S. index futures and Asian shares also rose.
U.K. Home Prices Seen Falling for a Second Straight Year (Bloomberg)
U.K. home prices will fall 2 percent next year, the second straight decline, as values in every region of the country decrease for the first time since the financial crisis began in 2008, Knight Frank LLP said. The biggest drops will be in Wales and Scotland, while London properties will depreciate the least, the property broker said in a statement today. Knight Frank forecast a 1 percent increase in 2014 residential properties prices and a 2 percent gain a year later. “There’s been a complete reversal of the optimism that we saw in the summer,” Grainne Gilmore, head of U.K. residential research at the London-based firm, said in an interview. “There are weak economic conditions, there is nervousness among potential buyers, there’s difficulty getting mortgages for first-time buyers and people moving up the housing chain.”
Britain’s uncertain economic prospects and fragile consumer confidence have dented demand for homes and banks are reluctant to lend. A real estate market recovery is unlikely without sustained economic growth, Hometrack Ltd., a London-based property research group, said last week. The U.K. emerged from a recession in the three months through September with the strongest growth since 2007. Even so, recent reports have shown signs of weakness. Manufacturing output gained less than economists forecast in September, adding to evidence that the economy’s rebound is faltering.
