Asian Stocks Head for Two-Week High on Yen, U.S. Jobs (Bloomberg)
Asian stocks gained, with the regional benchmark index set for its highest close in two weeks, as fewer Americans filed for unemployment benefits and a weaker yen boosted the outlook for Japanese exporters. Honda Motor Co. (7267), a Japanese carmaker that gets about 44 percent of sales from North America, climbed 2.2 percent. Sharp Corp. advanced 2.4 percent after Japan’s largest maker of liquid-crystal displays said it has found customers for advanced panels for smartphones and tablets. Woodside Petroleum Ltd., Australia’s second-biggest oil producer, gained 1.4 percent after crude futures rose. The MSCI Asia Pacific Index (MXAP) rose 0.7 percent to 121.76 as of 10:00 a.m. in Tokyo, heading for its highest close since Nov. 8. Almost five shares rose for each that fell. The measure is poised for its first weekly advance in three weeks amid better- than-forecast housing data in the U.S. and signs Congress will reach a budget deal that averts the so-called fiscal cliff.
“The market has momentum,” said Mitsushige Akino, Tokyo- based chief fund officer at Ichiyoshi Asset Management Co., which oversees about 30 billion yen ($364 million). “The yen may weaken to the 85-yen level against the dollar as expectations build that the Liberal Democratic Party will take power after next month’s elections.” The Nikkei 225 Stock Average (NKY) rose 1 percent, poised for its highest close since May 2, as the yen weakened past 82 to the dollar for the first time since April. A weaker currency boosts the value of overseas income at Japanese companies when repatriated. South Korea’s Kospi Index (KOSPI) gained 0.8 percent, while Australia’s S&P/ASX 200 Index climbed 1.3 percent. Markets in China and Hong Kong have yet to open.
Topix Heads for Four-Month High as Yen Weakens Past 82 (Bloomberg)
Japanese stocks rose, with the Topix (TPX) Index set for its highest close in more than four months, led by shipping companies and carmakers as the yen weakened past 82 to the dollar for the first time since April. Canon Inc. (7751), the world’s biggest camera maker, jumped 2.4 percent. Toyota Motor Corp. advanced 1.9 percent after the carmaker said China retail sales have almost returned to levels before a wave of anti-Japan protests erupted in August. Nippon Yusen K.K., Japan’s top shipping line by sales, rose 2.4 percent, after a gauge of cargo rates had its longest winning streak since July. The Topix rose 1 percent to 774.35, its highest level since July 5, as of 9:25 a.m. in Tokyo, with about four shares advancing for each that fell. The gauge is set for a 5 percent gain on the week, extending a rally that started after the ruling party called for elections last week. Japan’s markets are closed tomorrow for a holiday. The Nikkei 225 Stock Average (NKY) gained 1.1 percent to 9,320.31 today.
“The market has momentum,” said Mitsushige Akino, Tokyo- based chief fund officer at Ichiyoshi Asset Management Co., which oversees about 30 billion yen ($364 million). “The yen may weaken to the 85-yen level against the dollar as expectations build that the Liberal Democratic Party will take power after next month’s elections.” The Topix has risen 7.2 percent since Nov. 14, when Prime Minister Yoshihiko Noda called for elections that polls show the opposition party LDP is likely to win. Shares of automakers and steelmakers have led gains, with the gauge set for its biggest advance over a six-day period since March 2011, amid speculation the LDP will push for looser monetary policy.
European Stocks Advance; Carmakers Gain, Siemens Declines (Bloomberg)
European stocks advanced for a third day, as gains by Veolia Environnement SA, SAP AG and carmakers, as well as a decline in applications for U.S. jobless benefits offset the failure of euro-region policy makers to reach a decision on assisting debt-laden Greece. Veolia Environnement rose 1.3 percent after getting approval for the sale of its U.S. waste-management business. SAP AG climbed 2 percent. Fiat SpA climbed 1.6 percent. Johnson Matthey (JMAT) Plc slumped 5.8 percent after it reported a drop in first-half profit. Imagination Technologies Group Plc slipped 3.9 percent as it said that it will monitor mobile chip designer CEVA Inc.’s counter bid for MIPS Technologies Inc. The Stoxx Europe 600 Index (SXXP) rose 0.2 percent to 270.11 at the close of trading. The gauge has climbed 16 percent from its low on June 4, boosted by stimulus announcements from the European Central Bank and U.S. Federal Reserve as well as better-than-forecast economic data.
“The European markets are very keen on at least a small solution for Greece which is enough today to keep the market alive and the U.S. data is not that bad,” said Robert Halver, head of capital markets research at Baader Bank AG in Frankfurt. “This is enough for the markets today and may be the beginning of a year-end rally.” The volume of shares changing hands on the Stoxx 600 was 15 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.
S&P 500 Advances 4th Day After Middle East Cease-Fire (Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher a fourth day, as U.S. Secretary of State Hillary Clinton and Egyptian Foreign Minister Mohamed Amr announced a cease-fire between Israel and Hamas. Hewlett-Packard Co. (HPQ) rallied 2 percent after tumbling 12 percent yesterday. Salesforce.com Inc. (CRM), the largest maker of online customer-management software, rose 8.8 percent after forecasting sales and profit that were in line with analysts’ projections. Deere & Co. (DE), the largest agricultural equipment maker, fell 3.7 percent as earnings missed analysts’ estimates. The S&P 500 gained 0.2 percent to 1,391.03 at 4 p.m. New York time. It rose 2.8 percent in four days for the longest winning streak since Oct. 4. The Dow Jones Industrial Average added 48.38 points, or 0.4 percent, to 12,836.89 today. Volume for exchange-listed stocks in the U.S. was 4.8 billion shares, or 22 percent below the three-month daily average. The U.S. market will close for the Thanksgiving holiday tomorrow.
“The announcement of the cease-fire is by no means a fix to the issue, but it does suggest that the negotiations are going on,” said Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. He spoke in a phone interview. “In the U.S., the economic releases were mixed, but generally positive.” Equities rose as Israel and the Palestinian militant group Hamas agreed to call a halt to more than a week of air strikes and missile attacks, after talks brokered by Egypt’s Islamist government and the U.S.
Recap Stock Index Market Report (CME)
The stock market waffled around both sides of unchanged today but at times the December S&P was able to claw out a higher high. Even though the market action today wasn't particularly impressive, the bull camp might come away from the action today emboldened given the amount of negative news that was discounted today. Investors apparently need to see some form of cease fire in the Middle and perhaps the trade also needs to see more evidence that the two sides of the isle in Washington will get some kind of deal together before the end of the year. Some players suggested that hope for a holiday rally served to underpin equity prices at times today.
Emerging ETF Slips at Eletrobras Drives Rout in Utilities (Bloomberg)
The exchange-traded fund tracking emerging-market stocks dropped for a second day as declining utility and resource stocks offset advances in consumer and financial shares. South Africa’s rand sank to the weakest level since 2009. The iShares MSCI Emerging Markets Index (MXEF) ETF lost 0.2 percent in New York. Voting shares of Centrais Eletricas Brasileiras SA (ELET6), South America’s largest power generator, tumbled to a 17-year low, leading a 0.4 percent drop in Brazil’s Bovespa Index. Angang Steel Co. surged the most since September after the steelmaker said it will swap assets with its Chinese parent to cut losses. AFK Sistema, the parent company of Russia’s largest mobile operator, climbed the most in a month in Moscow.
The MSCI Emerging Markets Index of developing-nation shares was little changed at 980.84 as 404 stocks rose while 357 declined. Fewer Americans filed applications for unemployment benefits last week, and an index of U.S. leading economic indicators rose at a slower pace in October, data today showed. President Barack Obama and lawmakers have started negotiations to avoid tax increases and government cutbacks known as the fiscal cliff scheduled to take effect next year. “The market is falling back on the big focal points of this week,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone in New York today. “To make upside progress we need to see news on a deal on the fiscal cliff, but the parties are saying all the right things, and that has put a floor under risk assets.”
Bovespa Index Falls as Eletrobras Tumbles to Lowest Since 1995 (Bloomberg)
The Bovespa (IBOV) index fell as Centrais Eletricas Brasileiras SA (ELET6) plunged to a 17-year low on concern that the government’s plan to lower electricity costs will hurt the company’s profits. PDG Realty SA Empreendimentos & Participacoes sank to a three-year low after Moody’s Investors Service placed the homebuilder’s rating under review for a possible cut. MMX Mineracao & Metalicos SA, the iron-ore producer controlled by billionaire Eike Batista, fell as metals declined. The Bovespa lost 0.4 percent to 56,242.12 at the close of trading in Sao Paulo. Eletrobras, as Centrais Eletricas Brasileiras is also known, tumbled the most on the gauge while 35 stocks retreated and 32 gained. The real fell 0.8 percent to 2.0962 per U.S. dollar at 5:40 p.m. local time, the weakest on a closing basis since May 2009.
“Some utilities will have the option of not following the government’s guidelines, but Eletrobras will be the company used by the government to reach whatever goals they have,” Marc Sauerman, who helps oversee 650 million reais at J Malucelli Investimentos in Curitiba, Brazil, said in a phone interview. “Some stocks in the electrical sector may be attractive now after recent losses, but for Eletrobras, it’s hard to say how much further down shares can go.” Brazil is pushing utilities with generation and transmission licenses expiring in 2015 and 2017 to cut rates in exchange for automatic renewals, an attempt to curb inflation and help companies become more competitive. The company may sacrifice profits to help achieve those goals, Sauerman said. Eletrobras is controlled by the federal government, and its chairman is Deputy Energy Minister Marcio Zimmermann.
Aussie Dollar Holds Loss on Signs Developed Economies Struggling (Bloomberg)
The Australian and New Zealand dollars remained lower following two-day declines ahead of reports that may show the global economy is struggling to recover, sapping demand for assets linked to growth. The so-called Aussie maintained a drop from yesterday against most of its major peers before purchasing managers indexes that economists say will indicate the euro area’s services and manufacturing industries shrank for a 10th month. U.S. figures next week are forecast to show a drop in demand for durable goods last month. “We haven’t really seen any stabilization as far as the euro-zone economies go,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “The PMI data will feed through to risk appetite and investor confidence, which is important” for currencies such as the Australian and New Zealand dollars, he said.
Australia’s currency traded at $1.0380 as of 12:18 p.m. in Sydney after dropping 0.4 percent in the previous two days to $1.0369. The New Zealand dollar was at 81.56 U.S. cents following a two-day, 0.7 percent slide to 81.45. U.S. financial markets are shut today for the Thanksgiving holiday. Markit Economics is predicted to say today that its composite index for euro-area services and manufacturing was unchanged at 45.7 in November, according to the median estimate of economists surveyed by Bloomberg News. A reading below 50 indicates contraction. In the U.S., orders for durable goods probably fell by 1 percent in October from the prior month, a separate poll of economists indicated before the Commerce Department releases its figures on Nov. 27. A measure that excludes volatile bookings for transportation is forecast to have dropped 0.6 percent.
Australia’s bonds fell, with the benchmark 10-year yield rising seven basis points to 3.26 percent, the highest since Oct. 26.
Euro Rises Versus Most Peers Before EU Budget Summit (Bloomberg)
The euro rose versus most of its 16 major counterparts before leaders of the 27 European Union member nations gather today for budget negotiations. The euro strengthened against the dollar and yen as finance ministers from the 17-nation currency bloc said yesterday talks on aid for Greece will be continued on Nov. 26. The yen touched a seven-month low amid speculation the Japanese opposition party advocating “unlimited” easing will gain power in elections next month and as optimism a cease-fire in the Gaza Strip will hold curbed demand for haven assets. “The market has been quite pragmatic on what’s going to be announced out of Europe next week, which is why we didn’t see the euro collapse,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company.
The euro added 0.2 percent to $1.2857 as of 8:42 a.m. in Tokyo after earlier touching $1.2868, the highest since Nov. 7. It gained 0.3 percent to 106.14 yen. The yen was at 82.56 per dollar, the weakest since April 6, from 82.52 yesterday.
U.S. Leading Economic Indicators Rose 0.2% in October (Bloomberg)
The index of U.S. leading economic indicators rose at a slower pace in October as businesses held back on investment in anticipation of domestic fiscal policy changes set to take effect in January. The Conference Board’s gauge of the outlook for the next three to six months increased 0.2 percent after a revised 0.5 percent gain in September that was lower than initially reported, the New York-based group said today. Economists projected the October gauge would climb 0.1 percent, according to the median estimate in a Bloomberg survey. The fiscal cliff of $607 billion in federal spending cuts and tax increases has been a hurdle for companies even as consumer sentiment has supported the household purchases that account for about 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke yesterday said that a budget deal could help make the coming year “a very good one” for the economy.
“If we look through this volatility, I think the recovery is gaining momentum” boosted by housing gains and pent-up demand in capital expenditures, said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, who correctly projected the 0.2 percent rise. “The outlook is better than it has been over the last three or four years” even as the fiscal cliff remains a near-term obstacle, he said. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,387.78 at 10:20 a.m. New York time, after the Conference Board’s report was released.
Jobless Claims in U.S. Decreased Last Week to 410,000 (Bloomberg)
Fewer Americans filed applications for unemployment benefits last week as damage to the labor market caused by superstorm Sandy began to subside. Jobless claims decreased by 41,000 to 410,000 in the week ended Nov. 17, the Labor Department reported today in Washington. The number of applications matched the median forecast of 48 economists surveyed by Bloomberg. The level of claims reflects the economic drag associated with Sandy, which made landfall in the Northeast on Oct. 29, killing more than 100 in the U.S. and leaving about 8 million homes and businesses without power for days. Before the storm- related surge in unemployment applications, companies limited hiring in the wake of a global economic slowdown and uncertain U.S. fiscal outlook.
Sandy is a “temporary setback for the job market,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who correctly forecast the figure. Beyond the storm, “the job market is still very weak and it’s going to remain that way until we get some fiscal clarity.” Stock-index futures fluctuated between gains and losses after the figures, with the contract on the Standard & Poor’s 500 Index expiring in December rising less than 0.1 percent to 1,387.1 at 8:44 a.m. in New York. The four-week average, a less volatile measure than the weekly figures, rose to 396,250 from 386,750.
Economists’ estimates for claims last week ranged from 365,000 to 500,000. Claims in the previous week were revised to 451,000 from a previously reported 439,000.
U.S. Michigan Consumer Sentiment Index Rises Less Than Forecast (Bloomberg)
Confidence among U.S. consumers rose less than anticipated in November, indicating the impending fiscal tightening may be starting to damp Americans’ moods. The Thomson Reuters/University of Michigan final index of consumer sentiment was little changed at 82.7, a five-year high, from the prior month’s 82.6. The gauge was projected to rise to 84.5, according to the median forecast of 65 economists surveyed by Bloomberg. The preliminary reading was 84.9. President Barack Obama and lawmakers have started negotiations to avoid the so-called fiscal cliff, more than $600 billion of tax increases and government cutbacks scheduled to take effect next year. Less optimism among consumers threatens to weigh on household purchases at the start of the holiday shopping season, which kicks off after Thanksgiving tomorrow.
“The fiscal cliff rhetoric has really picked up in the mainstream media,” Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC in New York, said before the report. “The average person is probably paying more attention to the fiscal cliff now. They’re concerned about the outlook for the economy and for their own pocketbooks.” Estimates for the confidence measure ranged from 79.5 to 86, according to the Bloomberg survey. The index averaged 64.2 during the last recession. It averaged 89 in the five years before the 18-month economic slump that ended in June 2009.
Most Americans in Decade Project Economy Will Get Better (Bloomberg)
More Americans this month said the world’s largest economy will improve than at any time in the past decade, led by a surge among Democrats following the re- election of President Barack Obama. The share of households projecting the economy will get better rose to 37 percent in November, the highest since March 2002, according to a survey accompanying the Bloomberg Consumer Comfort Index. That propelled the survey’s monthly consumer expectations gauge to 4 from minus 7. Jobless claims fell last week, while the index of leading economic indicators advanced in October, other reports showed. Rising home values, job growth and falling gasoline prices are shoring up household finances as retailers such as Kohl’s Corp. (KSS) prepare for the holiday shopping season.
Improved consumer spending will help sustain the expansion as lawmakers strive to avoid the so-called fiscal cliff of tax increases and spending cuts, an outcome that Federal Reserve Chairman Ben S. Bernanke said will put the economy on firmer footing in 2013. “The outlook is better than it has been over the last three or four years -- that’s what Bernanke told us yesterday,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, who correctly projected the 0.2 percent rise in the leading index. “The recovery is gaining momentum. When the fiscal cliff is sorted out, I think growth will go up.” U.S. stocks rose, sending the Standard & Poor’s 500 Index up a fourth day, as Israel and the Palestinian militant group Hamas agreed to a cease-fire. The S&P 500 advanced 0.2 percent to 1,391.01 at 4 p.m. New York time. The yield on the 10-year Treasury note rose to 1.68 percent from 1.67 percent.
BOE Voted 8-1 to Halt Bond Purchases as QE Impact Questioned (Bloomberg)
The Bank of England voted 8-1 to stop expanding its bond-purchase program this month as the majority said uncertainty among consumers and companies may be affecting the impact of quantitative easing on the economy. David Miles dissented from the majority on the Monetary Policy Committee, calling for a 25 billion-pound ($40 billion) increase in the target to 400 billion pounds. The MPC voted unanimously to keep its benchmark interest rate at a record-low 0.5 percent and said it was “unlikely to wish to reduce” it in the “foreseeable future.” “There was a question over the magnitude of the impact of lower yields and higher asset prices on the broader economy at the current juncture,” the central bank said in the minutes of the MPC’s Nov. 7-8 meeting, published today in London. “It was possible that elevated uncertainty and a desire to reduce leverage meant that real activity was less responsive to lower borrowing costs than normal.”
The MPC’s decision was also influenced by the U.K. Treasury’s announcement that it will take coupon income from the BOE’s gilt holdings in a move that would equate to a “small easing in monetary conditions.” While the MPC said it was “confident” the move wouldn’t impact its ability to set policy, it will take account of the arrangement in its decisions. The pound pared a decline against the dollar after the report was released and was trading at $1.5930 as of 9:32 a.m. in London.
London Bankers Become Landlords as Rents Hit Record (Bloomberg)
Vivek Jeswani became a landlord by accident when Deutsche Bank AG (DBK) transferred him to New York two weeks after he moved into a new home in central London. Now back in the U.K., Jeswani views the apartment in Baker Street, the fictional home of Sherlock Holmes, as one of his best assets and is about to buy another home to expand his rental business. “There are no other investments as attractive and you’ve got some security if you’ve got an asset you can use yourself,” the 36-year-old risk officer at China Construction Bank Corp.’s U.K. unit said. “There’s a good yield over 5 percent and being in central London, you’ve got demand domestically and internationally.”
London rents have risen more than 6 percent in the past year to a record, even as job cuts by banks reduce employment in the financial-services industry to a 20-year low. Technology and media companies are drawing workers to the city, while lenders restrict mortgages to all but the most creditworthy customers. That’s encouraged individual investors and companies including KKR & Co. to enter the rental market as central banks push down yields on debt to record lows. The average rent in greater London climbed to 1,240 pounds ($1,974) last month, according to an index compiled by HomeLet. That was up 32 percent from October 2009, when rents averaged 940 pounds per month. The cost of renting a property in the rest of the country increased 7 percent between 2009 and 2012, said Homelet, the U.K.’s largest referencing and rentals insurance company.
Europe Fails to Seal Greek Debt-Cut Deal in IMF Clash (Bloomberg)
European policy makers head into their second confrontation this week saying they’re likely to fall short of agreement on a seven-year budget plan just as they failed to strike a deal on Greek debt. German Chancellor Angela Merkel told lawmakers in the national parliament in Berlin today that budget talks slated for a summit tomorrow may slide into next year. France rejects cuts to farm subsidies, and the U.K. demands a spending cut. “There are deep divisions between the member states,” Irish Prime Minister Enda Kenny said in the Dublin parliament today. “There are fears that it will not be possible to get a deal.” The 27 European Union leaders are preparing to square off over the budget in Brussels tomorrow after euro-region finance ministers’ efforts to agree on a debt-reduction plan for Greece foundered. More than 11 hours of talks ended without a deal early this morning as a bloc of top-rated creditors led by Germany refused to write off a portion of their aid loans.
That stance meant the finance chiefs were unable to scrape together enough funds from other sources to help alleviate Greece’s debt burden, set to hit 190 percent of gross domestic product in 2014. Greece’s fiscal woes have defied three years of rescue efforts, rekindling doubts about Europe’s crisis-containment strategy and maintaining a cloud over the euro, postwar Europe’s signature economic accomplishment.
EU Budget Showdown Pits Bee Subsidies Against Veto Threat (Bloomberg)
A sum equal to 1 percent of the European Union’s gross domestic product will devour 100 percent of the bloc’s political energy when leaders square off over subsidies for everything from bridges and windmills to olive trees and the dwindling honeybee population. The euro debt crisis and a deadlock over Greek aid raise the stakes for EU budget talks starting today in Brussels, testing whether the 27-nation bloc is heading for more integration and whether Britain, a foe of EU spending since the days of Margaret Thatcher, will finally say it’s had enough. Left to economists, a deal on a proposed 1.033 trillion- euro ($1.3 trillion) package for the years 2014-2020 could come together quickly. Political leaders -- already sparring over Greece, the fate of the euro, banking union and EU expansion -- will take longer. The summit may run into the weekend and even then, as in 2005, end in stalemate.
“Resistance from some of our partners with other priorities will not be easy to overcome,” Prime Minister Pedro Passos Coelho of Portugal, a dual beneficiary of EU subsidies and debt-crisis aid, said in Lisbon yesterday. “It is crucial to reach an agreement in a timely manner not only for the bloc’s policies to be effective but also because it would lend enormous credibility to European policy.” Veto threats and uncrossable red lines are typical fare in EU budget negotiations every seven years. The 2012 rendition has run true to form. A clique of net payers including Britain, Germany, Sweden and Finland has insisted on a spending freeze or reduction, while fragmenting over other demands.
U.K. Stocks Little Changed as Utilities Climb (Bloomberg)
U.K. stocks were little changed, after their biggest two-day advance since August, as a rally by utility companies offset a failure by euro-area finance ministers to agree on a debt package for Greece. United Utilities Group Plc (UU/) gained 1.9 percent after JPMorgan Chase & Co. said Ofwat, the water regulator, had clarified proposed changes to companies’ licenses. British Land Co. added 1.8 percent after Morgan Stanley upgraded the shares. Johnson Matthey Plc (JMAT) plunged 5.8 percent after the producer of a third of the world’s autocatalysts reported net income that missed analysts’ estimates. The FTSE 100 Index climbed 3.93 points, or 0.1 percent, to 5,752.03 at the close in London. The gauge rose 0.2 percent yesterday, completing its biggest two-day rally since August, as shareholders approved the $31 billion takeover of Xstrata Plc (XTA) and ministers met to discuss Greece. The FTSE All-Share Index and Ireland’s ISEQ Index were both little changed.
“Having stood their ground yesterday, markets are rather shakier” today, said Chris Beauchamp, a market analyst at IG in London. “Euro-zone ministers once again failed to throw a deal together, as talks over the latest rescue plan for Greece fell apart. The next attempt begins in six days, so we will just have to be patient for now.”
