Asian Stocks Decline as China Leadership Congress Begins (Bloomberg)
Asian stocks fell as investors turned their attention to the U.S. budget debate and as China’s Communist Party began its meeting to decide its fifth generation of leaders since taking power in 1949. BHP Billiton Ltd. (BHP), the world’s biggest mining company, dropped 0.7 percent in Sydney as commodity prices retreated. Fanuc Corp. (6954), the largest maker of controls that run machine tools, fell 1.5 percent as Japanese machine orders fell more than expected. Canon Inc. (7751), a camera manufacturer that depends on Europe for almost a third of its sales, sank 2.1 percent after the European Commission cut its growth forecast for the euro zone. The MSCI Asia Pacific (MXAP) Index lost 0.5 percent to 122.73 as of 9:56 a.m. in Tokyo, before markets opened in China and Hong Kong. All 10 industry groups retreated. The gauge gained 13 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.
“The euphoria from President Barack Obama’s re-election has swiftly waned,” said Stan Shamu, a market strategist at IG Markets, Melbourne-based provider of trading services in stocks, commodities and currencies. Investors “decided to focus on some of the key issues the president will be facing, the fiscal cliff and the debt ceiling.”
Japan Stocks Fall on U.S. Budget Battle, China Congress (Bloomberg)
Japanese stocks declined, with the Nikkei 225 (NKY) Stock Average heading for a four-day drop, as investors turned their attention to the U.S. budget showdown after President Barack Obama’s re-election, and as China’s Communist Party convened a congress to pick new leadership. Honda Motor Co. (7267), a carmaker that counts North America as its biggest market, sank 2 percent. Machinery-maker Komatsu Ltd. fell 1.7 percent after Japan’s machinery orders fell more than expected. Canon Inc., a camera maker that gets almost a third of its sales in, sank 2.8 percent after the European Commission cut its growth forecast for the monetary union. “The result of the U.S. election was within expectations, but now the fiscal cliff is the problem the country faces,” said Mitsushige Akino, Tokyo-based chief fund officer at Ichiyoshi Asset Management Co., which oversees about 30 billion yen ($375 million). “Such uncertainty weighs on the markets.”
The Nikkei 225 fell 1.1 percent to 8,876.93 as of 9:22 a.m. in Tokyo, with volume 5.2 percent above the 30-day average. The broader Topix (TPX) Index lost 1 percent to 738.59, with all but one of its 33 industry groups falling. The Topix rose 3.7 percent through yesterday from Sept. 6 after the European Central Bank started a global wave of stimulus to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the equity gauge traded at 0.9 times book value, compared with 2.1 for the S&P 500 and 1.5 for the Europe Stoxx 600 Index.
Dow Tumbles Most in One Year After Presidential Elections (Bloomberg)
U.S. stocks slumped, giving the Dow Jones Industrial Average its biggest decline in a year, as investors’ focus turned to the budget debate and Europe’s debt crisis following President Barack Obama’s re-election. All 10 groups in the Standard & Poor’s 500 Index fell as financial shares had the biggest losses. Bank of America Corp. and JPMorgan Chase & Co. slumped at least 5.6 percent. Peabody Energy Corp. and Alpha Natural Resources Inc. slid more than 9.6 percent on bets Obama’s re-election will mean more regulation for the coal industry. Apple Inc. retreated 3.8 percent, extending a plunge from its September high to 21 percent. The S&P 500 fell 2.4 percent to 1,394.53 at 4 p.m. in New York. The Dow lost 312.95 points, or 2.4 percent, to 12,932.73. Volume for exchange-listed stocks in the U.S. was 7.9 billion shares, or 32 percent above the three-month average.
“It’s going to be very messy,” said James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management. He spoke in a telephone interview. “The wrestling around the fiscal cliff is going to leave a lot of bruises along the way. While I think we’ll get there, the path is not clear.” Obama defeated RepublicanMitt Romney, boosting speculation policy makers will add to stimulus in the world’s largest economy. While Obama received at least 303 electoral votes to Romney’s 206, Republicans kept a majority in the House of Representatives. Democrats retained control of the Senate.
Best Rally in Decade May Slow as Obama Faces Congress (Bloomberg)
Stock and bond investors enjoying the biggest advance in more than a decade under Barack Obama may see the momentum fade as the rallies age and the president confronts Congress over spending cuts and taxes. Obama will continue to support the Federal Reserve’s interest-rate policy, according to Brian Jacobsen at Wells Fargo Advantage Funds and Bruce Bittles of RW Baird & Co., which oversee a combined $294 billion. At the same time, his re- election endangers tax breaks enacted a decade ago on dividends and capital gains. The advance in the Dow Jones Industrial Average (INDU) that began just after Obama took office is five months away from matching the mean length of bull markets since World War II, data compiled by Bloomberg show. While Obama’s victory in 2008 spurred the biggest plunge ever for the Dow on the day after an election, gains for American assets over the past four years are among the best in the developed world.
Fed Chairman Ben S. Bernanke’s actions to revive the economy after the worst recession in seven decades helped send the Dow up 67 percent and U.S. bonds to a total return of 27 percent, data compiled by Bloomberg show. “There are different sections of any bull market and we’re probably entering the continuation phase versus the initial expansion,” Larry Gilbert, who helps oversee $25 billion as managing director at Chicago-based HighTower Advisors, said in a phone interview. “The market returns depend in part on how the next president deals with the structural economic issues in this country. We’re very cautious.”
Recap Stock Index Market Report (CME)
The December S&P 500 traded sharply lower during the US morning hours, pressured by uncertainty surrounding the fiscal cliff, prospects for dividend and capital gain tax increases and fresh evidence of slowing economic growth in Germany. The December S&P 500 traded down nearly 3% into the mid session and to its lowest level since August 8th. Some traders also noted concern in the broader market over a Greek austerity vote due later in the session. All of the major S&P sectors were in negative territory, led by declines in financial and energy-related shares. Some traders indicated that the financial sector was under added strain from potential impact of upcoming Dodd-Frank regulations.
Europe Stocks Drop on Economy Concern, U.S. Fiscal Cliff (Bloomberg)
European stocks fell the most in two weeks as the European Commission cut its growth forecast for the region and concern over an impending fiscal crisis in the U.S. increased after the re-election of President Barack Obama. Randgold Resources Ltd. (RRS) slumped the most in six months after predicting that its annual output will be at the bottom of its target. Holcim Ltd. (HOLN), the world’s largest cement maker, slid 2.4 percent as earnings missed analysts’ estimates. BNP Paribas SA jumped 1.1 percent after third-quarter net income more than doubled. Hochtief AG (HOT) advanced 3.1 percent after reiterating full-year profit targets. The Stoxx Europe 600 Index (SXXP) declined 1.4 percent to 271.04 at the close of trading, erasing an earlier gain of as much as 0.7 percent. The benchmark gauge has still rallied 16 percent from this year’s low on June 4 as central banks around the world reduced borrowing costs and expanded stimulus programs.
“Worries about the state of the European economy are weighing on sentiment,” said Markus Wallner, an equity strategist at Commerzbank AG in Frankfurt. “With regards to the U.S. election, investors may be relieved it’s over, but the fiscal cliff at the end of the year still is the main unsolved problem.” Brussels-based European Commission today projected the 17- nation euro economy will expand 0.1 percent in 2013, down from a May forecast of 1 percent. It cut the estimate for Germany, Europe’s largest economy, to 0.8 percent from 1.7 percent.
Emerging ETF Sinks to 2-Week Low as Brazil Equities Fall (Bloomberg)
The exchange-traded fund tracking developing-nation shares sank the most in two weeks as equity indexes from Hungary to Brazil fell along with U.S. stocks and oil. BYD Co. (1211), the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., surged 11 percent. The iShares MSCI Emerging Markets Index ETF tumbled 1.6 percent as investors assessed U.S. President Barack Obama’s challenge to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts after winning re- election and the Greek debt crisis on emerging markets. BYD led gains in industrial and technology companies in the MSCI Emerging Markets Index (INDEXCF), which was little changed.
“We’re seeing the very tough reality check after the party,” Chris Weafer, chief strategist at Sberbank Investment Research, the investment banking arm of Russia’s largest lender, said in an interview at Bloomberg’s headquarters in New York. “With the election over people are looking to the tough schedule ahead for the U.S. coupled with uncertainty surrounding Greece and the euro zone.” The MSCI Emerging Markets Index added 0.1 percent to 1,007.45 at the close in New York, paring an earlier advance of as much as 0.8 percent. Benchmark indexes in Hungary, Russia, Brazil Colombia and Mexico fell more than 1 percent. Brazilian oil producer OGX Petroleo e Gas Participacoes SA, slid the most since Oct. 26 as crude sank the most this year.
Treasuries Rise as Obama Wins Presidential Election (Bloomberg)
Treasuries held gains from yesterday on concern the so-called fiscal cliff of spending cuts and tax increases will curb growth in the world’s biggest economy. U.S. government securities returned 0.6 percent in the month ended yesterday, according to Bank of America Merrill Lynch indexes, reflecting demand for the relative safety of sovereign debt. The MSCI All-Country World Index (MXWD) of stocks handed investors a 2.9 percent loss. The Treasury is scheduled to sell $16 billion of 30-year bonds today. U.S. 10-year notes yielded 1.68 percent as of 9:55 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 1.625 percent security due in November 2022 changed hands at 99 15/32. Yields declined 10 basis points, or 0.10 percentage point, yesterday as President Barack Obama won a second term.
“We’re back in the lines of political games,” said Roger Bridges, who oversees the equivalent of $15.6 billion of debt as head of fixed income at Tyndall Investment Management Ltd. in Sydney. “There’s enough momentum in the economy to get rates up to 2 percent. The question is, if we’re going to continue with this policy uncertainty, then they will send the economy downward and bonds will rally.” Obama’s re-election bolstered expectations that Federal Reserve Chairman Ben S. Bernanke will keep supporting the economy via bond purchases. Ten-year notes have “a bid based upon the Bernanke expectation for easy money as far as the eye can see,” Pacific Investment Management Co.’s Bill Gross, who runs the world’s biggest bond fund, said yesterday on Bloomberg Television’s “Street Smart” with Trish Regan.’’ As for the fiscal cliff, “finding that middle ground will be very difficult,” he said.
The fiscal cliff comprises $600 billion of tax increases and spending cuts scheduled to take effect automatically next year unless Congress acts.
Aussie Touches 7-Week High Versus Kiwi on Job Gains (Bloomberg)
Australia’s dollar touched a seven- week high against its New Zealand peer as gains in the nation’s employment exceeded estimates, while the jobless rate in the smaller South Pacific country surged to a 13-year high. The so-called Aussie strengthened versus all of its 16 major counterparts as investors reduced expectations the Reserve Bank of Australia will cut borrowing costs next month. The New Zealand dollar, known as the kiwi, failed to rally against the greenback after its biggest one-day loss in three months. Demand for both currencies was also limited as U.S. President Barack Obama, a Democrat, faces budget negotiations with congressional Republicans. Today’s data from Australia “was stronger than expected,” said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada. “It’s no surprise to see the Aussie outperforming across the board. Expectations of a December rate cut from the RBA have been pared back further.”
The Australian dollar added 0.2 percent to NZ$1.2739 as of 12:12 p.m. in Sydney after it earlier touched NZ$1.2742, the strongest since Sept. 17. It gained 0.2 percent to $1.0427. New Zealand’s currency was unchanged from 81.84 U.S. cents yesterday, when it slid 1 percent, the biggest drop since July 23. The number of people employed in Australia increased by 10,700 last month after rising a revised 15,500 in September, the statistics bureau said today. That compares with economist forecasts in a Bloomberg News survey of a gain of 500. The unemployment rate was unchanged at 5.4 percent. Statistics New Zealand said today the nation’s jobless rate increased to 7.3 percent in the three months ended September from 6.8 percent in the second quarter. That’s the most since 1999.
In the U.S., President Obama’s re-election is set to be followed by budget discussions with Congress to avert the so- called fiscal cliff, which refers to more than $600 billion in tax increases and spending cuts set to be implemented in 2013 that may push the U.S. back into recession.
Dollar, Yen Gain Amid U.S. Fiscal Cliff, Europe Concern (Bloomberg)
The dollar and yen remained stronger against most major peers as investors sought safety amid concern re-elected President Barack Obama and the U.S. Congress will struggle to avert the so-called fiscal cliff. The greenback remained weaker against the Japanese currency after Obama’s victory over Republican challenger Mitt Romney boosted expectations the Federal Reserve will maintain monetary stimulus. The euro traded near a two month-low ahead of a European Central Bank meeting today after President Mario Draghi said Europe’s debt crisis is affecting Germany. A report today is forecast to show exports in Europe’s largest economy declined in September. “The biggest focus of the market as we head into year-end will be the fiscal cliff in the U.S.,” said Noriaki Murao, New York-based managing director of the marketing group at the Bank of Tokyo-Mitsubishi UFJ Ltd., referring to the $607 billion in tax increases and spending cuts set to be implemented in 2013 unless Congress acts.
“Investors are buying safe currencies such as the dollar and yen.” The dollar fetched $1.2754 per euro as of 9:19 a.m. in Tokyo from $1.2771 yesterday, when it touched $1.2737, the strongest since Sept. 7. The U.S. currency slid 0.1 percent to 79.90 yen after declining 0.4 percent yesterday. The euro lost 0.3 percent to 101.90 yen.
U.S. Consumer Credit Rose More Than Forecast in September (Bloomberg)
Consumer credit in the U.S. increased in September for a second month, led by a pickup in borrowing for education and automobiles. The $11.4 billion gain followed a revised $18.4 billion jump in August, Federal Reserve figures showed today in Washington. The median forecast of 34 economists surveyed by Bloomberg called for a $10.2 billion increase in September. Improving labor and housing markets may be giving households enough confidence to take on more debt as they finance purchases that account for about 70 percent of the economy. Auto sales in September that were the strongest in more than four years showed some Americans took advantage of cheaper borrowing costs.
“It’s pretty clear that consumer confidence has risen,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “I think what’s really driving that improvement in consumer confidence is that average Americans are seeing the value of their homes now recover somewhat or rebound somewhat after four or five years of steady declines.” Estimates in the Bloomberg survey for consumer credit ranged from gains of $7 billion to $19.5 billion after a previously reported August gain of $18.1 billion. The consumer credit report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.
Upbeat Consumers to Sustain U.S. as Companies Hesitate (Bloomberg)
Consumers in the U.S. are stepping in where companies fear to tread. Americans are more upbeat while business sentiment stagnates, a sign their spending will provide a bridge for the economic expansion until the so-called fiscal cliff is resolved and entices companies to resume investment. “In the tug-of-war between more confident consumers and more cautious businesses, it looks like the consumer is winning,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York. “It puts a floor under growth. With consumer spending rising at even a moderate pace, the expansion will carry on.”
The re-election of President Barack Obama yesterday helps remove one element of uncertainty about the nation’s direction as the focus shifts to how lawmakers approach the fiscal cliff - - $607 billion in federal tax increases and spending cuts slated for next year. For consumers, rising home prices, an improving job market and healthier finances are trumping those concerns, making it more likely household demand will be sustained. Household optimism is the highest in more than four years, reports from the Conference Board and Thomson Reuters/University of Michigan show, while a Bloomberg gauge of confidence in the economy is the strongest since early 2008. Corporate sentiment has stalled, according to Institute for Supply Management measures that underscore a cautionary tone from company officials on earnings calls.
Fed QE3 May Top $1 Trillion Amid Political Impasse (Bloomberg)
With the balance of political power in Washington maintained by yesterday’s presidential election, the Federal Reserve remains the sole source of policy support for a U.S. economy plagued by 7.9 percent unemployment. “If you’re going to get stimulus, it’s got to come from the Fed,” said Paul Edelstein, the director of financial economics at IHS Global Insight in Lexington, Massachusetts. “They’re the only game in town.” A fiscal boost to the economy is probably off the table as President Barack Obama negotiates tax increases and spending cuts with leaders of a Democratic-controlled Senate and a House of Representatives led by Republicans, Edelstein said. That may leave only the Fed in the position of trying to boost the economy, and its third round of quantitative easing may extend through next year and climb past $1 trillion, said economists at JPMorgan Chase & Co. and Pierpont Securities LLC.
Treasuries rose, pushing 10-year yields down the most in five months, as Obama’s re-election bolstered speculation the central bank will maintain a bond-buying program that San Francisco Fed President John Williams this week said may exceed $600 billion. Republican candidate Mitt Romney had criticized the Fed’s policies and said he’d replace Chairman Ben S. Bernanke, whose second term expires in January 2014. The 10-year yield fell 10 basis points, or 0.1 percentage point, to 1.65 percent at 5:20 p.m. in New York, according to Bloomberg Bond Trader prices.
Obama Faces Pressure to Lead on ‘Fiscal Cliff’ After Win (Bloomberg)
President Barack Obama’s victory positions him to claim a mandate for pushing a proposal through Congress that would let tax cuts expire for top earners and avert $1.2 trillion in automatic spending reductions. Obama now must decide how to contend with opposition from congressional Republicans who demand a tax-cut extension for all income levels. Obama defeated Republican Mitt Romney to win a second term that will begin with the same balance of power in Congress: Democrats controlling the Senate and Republicans holding the majority in the House. Republicans were counting on a Romney victory or a Senate takeover to improve their negotiating posture. Emboldened by the election results, Obama “will offer a brand-new plan of his own,” Steve Bell, senior director of the Economic Policy Project at the Bipartisan Policy Center, said in an interview.
Bell said one option the Obama administration is considering is pushing anew for a “balanced” plan to cut as much as $100 billion in spending as a deficit-reduction down payment while letting the George W. Bush-era tax cuts expire for top earners. “In the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit; reforming our tax code; fixing our immigration system; freeing ourselves from foreign oil,” Obama said in his victory speech early today.
Greenspan Says Election Won’t Help Resolve Fiscal Cliff (Bloomberg)
Former Federal Reserve chairman Alan Greenspan said the U.S. election yesterday perpetuated the political status quo and hasn’t increased the probability of resolving the nation’s fiscal challenges. “I’m concerned that the election per se has really not changed the balance very much of what’s going on” in the debate over how to reduce the U.S. deficit, Greenspan said today in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “We’ve got to resolve this issue.” “Unless and until we come to grips with this issue, we are not going to be able to look to the future with a considerable state of equilibrium and hope,” said Greenspan, who led the U.S. central bank from 1987 to 2006. The three-year U.S. expansion faces headwinds from a slowing global economy and the risk Congress won’t avert $607 billion in federal tax increases and spending cuts beginning at the start of next year.
Congress lined up the spending cuts in 2011 as part of an agreement to raise the federal debt ceiling and cut future deficits. Failing to resolve the issue would probably push the world’s largest economy back into recession, the nonpartisan Congressional Budget Office said in August. President Barack Obama, a Democrat, defeated Republican Mitt Romney to win a second term that will begin with the same balance of power in Congress as before the elections, with Democrats controlling the Senate and Republicans holding the majority in the House.
Home Prices Rise in 81% of U.S. Cities as Markets Recover (Bloomberg)
Prices for single-family homes rose in 81 percent of U.S. cities as the property market extends a recovery from the worst crash since the 1930s. The median sales price increased in the third quarter from a year earlier in 120 of 149 metropolitan areas measured, the National Association of Realtors said in a report today. In the second quarter, 110 areas had gains. Values are climbing after a six-year slump as buyers compete for a shrinking supply of properties listed for sale. U.S. home prices jumped 5 percent in September from a year earlier, the biggest 12-month increase since July 2006, CoreLogic Inc., an Irvine, California-based real estate data provider, said yesterday. “The housing recovery still faces a number of potential headwinds,” Paul Diggle, property economist for Capital Economics Ltd. in London, said in a note to clients after CoreLogic’s report was released. “But our central case is that tight supply conditions will mean that house prices will continue to rise steadily next year.”
At the end of the third quarter, 2.32 million existing homes were available for sale, 20 percent fewer than a year earlier, according to the Chicago-based Realtors group.
New York Flights Halt, N.J. Towns Evacuate as Storm Nears (Bloomberg)
Shore towns in New Jersey and on New York’s Long Island ordered new evacuations as thousands of blacked-out residents braced for the cold while snow began to blanket the region still recovering from Hurricane Sandy. Residents in Toms River, Brick, Berkeley Township, Highlands and Middletown, New Jersey, were told to leave threatened areas, according to website postings. On Long Island, Nassau County Executive Edward Mangano ordered evacuations from flood or storm-surge zones. Islip officials ordered people off Fire Island and out of waterfront neighborhoods. Airlines serving the metropolitan region canceled hundreds of flights.
Winds gusted to 60 miles (97 kilometers) an hour, driving rain, sleet and snow to New York City streets by midday. The nor’easter may swirl up the coast toward New England, bringing a storm surge of as much as 4 feet (1.2 meters) to the New Jersey and Long Island shores, said Lauren Nash, a National Weather Service meteorologist in Upton, New York. The storm knocked out power to at least 22,000, the U.S. Energy Department said. “High winds and heavy rain could cause delays in restoring power, or, with falling trees and branches, bring additional outages,” said Sara Banda, a Consolidated Edison Inc. (ED) spokeswoman. The electric utility serves the city and suburban Westchester County to the north.
China’s Economic Growth at Stake as Communist Party Meets (Bloomberg)
China’s Communist Party gathers today in Beijing to choose its fifth generation of leaders since taking power in 1949, a decision that will shape the nation’s economic and financial policies for the next decade. Vice President Xi Jinping is forecast to replace Hu Jintao as general secretary of the 82 million-member party. Vice Premier Li Keqiang is seen taking Premier Wen Jiabao’s spot on the top Politburo Standing Committee, setting him up to assume Wen’s job next March. The backgrounds of Xi, Li and the other successful candidates for the Standing Committee -- likely all men -- will give investors clues to their appetite for policy shifts that the World Bank says China must embrace to become a high-income economy. The reform agenda ranges from breaking up state-owned monopolies to deregulating lending rates and correcting under- pricing of natural resources.
“There’s no luxury to delay these reforms,” said Ding Shuang, senior economist for China at Citigroup Inc. in Hong Kong, who previously worked at China’s central bank. “The past 10 years, the economy has benefited from changes made in previous periods. Now, those dividends are used up,” he said, referring to the country’s 2001 entry to the World Trade Organization and market reforms in the 1980s and 1990s. The 2,268 delegates to the 18th congress, drawn from the central government, military, state-owned companies and China’s provinces, will approve changes to the party’s constitution and pick the next central committee, a group of about 200 people from whose ranks comes the Politburo, now with 24 people, and its standing committee, now with nine men. The standing committee wields supreme power in China.
Japan Machinery Orders Fall More Than Forecast on Exports (Bloomberg)
Japan’s machinery orders fell more than expected in September as slowing global demand hurts exports, while the nation’s current account surplus narrowed to its lowest level for the month since at least 1985. Orders, an indicator of capital spending in three to six months, declined 4.3 percent from the previous month, the Cabinet Office said today in Tokyo. The median of 29 estimates in a Bloomberg News survey was for a 2.1 percent drop. The excess in the broadest measure of Japan’s trade was 503.6 billion yen ($6.3 billion), compared with a median estimate of 761.8 billion yen, a Finance Ministry report showed. Data due next week will probably show the world’s third- largest economy shrank the most since last year’s earthquake. A political impasse over deficit enabling legislation is impeding the government’s scope to aid growth, placing the onus on the central bank to add stimulus.
“We are in the middle of a technical recession” of two consecutive quarters of contraction, Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo and a former Bank of Japan official, said before the report. “It’s hard for the government to do anything to get us out of recession, so the BOJ may need to do more.” Gross domestic product probably shrank an annualized 3.4 percent in the three months through September, the first decline in five quarters, according to the median estimate of economists surveyed by Bloomberg News. The Cabinet Office will release the report Nov. 12.
Robots-to-Cosmetics Profit Slump Adds to Japan Economy Woes (Bloomberg)
Slumping profits at Japanese manufacturers from robots to cosmetics threaten to weigh on investment and wages, adding to the likelihood of recession after the economy probably contracted last quarter. Gross domestic product shrank an annualized 3.4 percent in the three months through September, according to the median estimate of 17 economists surveyed by Bloomberg News. That would be the steepest decline since the earthquake-affected first quarter of 2011. The data is due Nov. 12. Machine orders fell a more-than-estimated 4.3 percent in September, a separate report showed today.
The economy’s decline mirrors an aggregate 34 percent drop in net income at the 171 companies listed on the Nikkei (NKY) 225 Stock Average to report July-September earnings so far, according to data compiled by Bloomberg. Sharp Corp. (6753) and Panasonic Corp. (6752) expect to lose a combined 1.2 trillion yen ($15 billion) this fiscal year, while industrial robot maker Fanuc Corp. (6954) missed its forecast and cosmetics company Shiseido Co. (4911) plans to cut costs. “Worsening profits will make it harder for companies to be aggressive about investment and hurt consumption through smaller bonuses this winter and next summer,” said Masamichi Adachi, a senior economist at JPMorgan Securities Japan Co. in Tokyo and a former central bank official. “In terms of the economic cycle, Japan is in a really bad position.”
Australian Employers Added More Workers Than Forecast in October (Bloomberg)
Australian employers boosted payrolls more than economists forecast in October and the unemployment rate unexpectedly held as the nation weathered a global slowdown. The local currency advanced. The number of people employed rose by 10,700 after a 15,500 gain in September, the statistics bureau said in Sydney today. That compares with the median estimate for an increase of 500 jobs last month in a Bloomberg News survey of 26 economists. The jobless rate was unchanged at 5.4 percent. The data highlight the resilience of the world’s 12th- largest economy, which expanded at an annual pace of about 4 percent in the first half of the year, driven by resource investment. Reserve Bank of Australia Governor Glenn Stevens cut interest rates by a quarter percentage point last month, bringing to 1.5 points the reduction since Nov. 1 last year, before holding this week as the global economy stabilizes and inflation picks up.
“The broad picture remains one where job gains are largely balancing job losses,” Diana Mousina, an economist in Sydney at Commonwealth Bank of Australia (CBA), said in a research report before the release. The number of full-time jobs advanced by 18,700 in October, and part-time employment fell by 8,000, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 65.1 percent in October from 65.2 percent a month earlier, it showed.
N.Z. Jobless Rate Surges to 13-Year High, Currency Plunges (Bloomberg)
New Zealand’s unemployment rate unexpectedly rose last quarter to a 13-year high, adding to evidence of a faltering recovery and sending the best-performing Group of 10 currency this year plunging. The jobless rate jumped to 7.3 percent from 6.8 percent in the second quarter, Statistics New Zealand said in a report today in Wellington. That’s the highest since the first quarter of 1999 and was more than the 6.7 percent median estimate in a Bloomberg survey of economists. Employment fell by 0.4 percent, or 8,000 jobs, from the second quarter, when it dropped 0.1 percent. Economists expected job growth of 0.3 percent. The nation’s dollar tumbled to near a two-week low as investors increased bets the Reserve Bank of New Zealand will lower interest rates next month to revive demand. With the world’s major economies struggling to accelerate, the New Zealand currency’s 5.4 percent gain against its U.S. peer this year is forcing companies including Rakon Ltd. (RAK) to fire workers.
“The RBNZ has room to move and today’s report may provide the motivation,” Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney, said in a research note. “The industries that were weakest were those that are most exposed to the New Zealand dollar, including manufacturing.” The local currency bought 81.88 U.S. cents at 12:33 p.m. in Wellington from 82.62 cents immediately before the release. The so-called kiwi earlier touched 81.76 cents, the weakest level since Oct. 26.
Samaras Wins Greek Austerity Bill in Race to Secure Aid (Bloomberg)
Greek Prime Minister Antonis Samaras mustered the support of enough lawmakers to secure approval of austerity measures needed to unlock bailout funds, after more than 50,000 protesters ringed Parliament. The bill on pension, wage and benefit cuts was approved with 153 votes in favor in the 300-seat Parliament early today, according to acting Parliament speaker Athanasios Nakos. A total of 128 voted against the bill, with 18 voting “present.” One lawmaker was absent. The voting was televised on state-run Vouli TV. The vote took its toll on Samaras’s government, with Samaras expelling one lawmaker from his New Democracy party for failing to support the bill. Samaras’s main coalition partner, Pasok, which provides Samaras with the majority he needs to rule, expelled six lawmakers after the vote for their failure to support the legislation.
“Greece today took a great, decisive and positive step,” Samaras said in a statement after the tally. “This vote was a condition that will create jobs for our children, for all of Greece to see better days. The next step is the budget, which will also go well.”
Spain Said to Consider Palace Sales to Raise Cash (Bloomberg)
The Spanish government is considering a sale of a small, century-old palace in the heart of Madrid’s business district as part of a plan to raise cash from 100 prime properties, a person with knowledge of the matter said. Castellana 19, built in 1903 and later used to house Spain’s stock-market regulator, would be sold outright rather than leased, said the person, who asked not to be identified because the plan’s details aren’t public. The property was valued at 28.7 million euros ($37 million) in 2010, the year before the agency moved out. The government said last month it had selected 100 buildings that could be privatized by the end of 2016.
The properties, mostly in Madrid, will be sold outright or leased for as long as 30 years, the person said. They won’t be part of sale-and-leaseback deals because that would be too costly for the state in the long term, the person said. Spain is seeking to generate more money from its real estate as it tries to avoid following Greece, Ireland and Portugal by requesting a full bailout. Another small palace, owned by the Economy and Finance Ministry, may be leased, the person said. The historically protected property on Calle Duque de Medinaceli was designed by Gabriel Abreu and Fernando Garcia Mercadal and built in the 1920s. It was purchased by the state in 1928 and became the Spanish National Research Council’s library in 1952. Castellana 19 was designed by architects including Miguel de Olabarria, who helped conceive the Almudena Cathedral in Madrid.
