Asian Stocks Gain as Official Says Greece Deal Reached (Bloomberg)
Asian stocks gained for a fifth day after a European Union official said euro-area finance ministers reached agreements on Greece’s debt burden and its funding gap, concluding more than 12 hours of talks. CSL Ltd. (CSL), the world’s second-biggest maker of blood-derived therapies, surged 7.3 percent in Sydney to a record after saying it expects profit growth of about 20 percent. Rio Tinto Group and BHP Billiton Ltd. led gains among raw-material companies. The MSCI Asia Pacific Index (MXAP) advanced 0.3 percent to 123.72 as of 9:34 a.m. in Tokyo, before markets opened in China and Hong Kong, extending the benchmark’s longest winning streak since the second week of September. The gauge rose 13 percent from this year’s low on June 4 through yesterday as central banks added stimulus to spur economic growth and data showed a slowdown in China may be ending.
“It’s never simple,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “We are still trying to work out what the ramifications are of what’s been agreed and the details.”
Japanese Stocks Head for Four-Day Gain on Greek Debt Deal (Bloomberg)
Nov. 27 (Bloomberg) -- Japanese stocks headed for a four- day advance on a report euro-zone finance ministers reached agreement on Greece’s debt burden. Konica Minolta Holdings Inc. (4902), an imaging-equipment maker that gets 28 percent of its sales in Europe, rose 1.4 percent. Kondotec Inc. plunged 9.1 percent after the producer of construction materials said it planned to raise as much as 713.7 million yen ($8.7 million) in a share sale. Steelmakers led declines on the Topix Index after Nippon Steel & Sumitomo Metal Corp. was downgraded by Fitch Ratings amid a global industry downturn. The Nikkei 225 Stock Average (NKY) added 0.3 percent to 9,413.45 as of 9:57 a.m. in Tokyo. The broader Topix Index advanced 0.2 percent to 781.26, with about nine stocks rising for every five that fell. Gains were limited after a technical indicator yesterday showed recent gains on the Nikkei 225 may have been excessive.
“They jumped the latest hurdle in the debt crisis, and the market is taking a sigh of relief,” said Hitoshi Asaoka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “Greece’s budget crunch will probably resurface a few times.”
U.S. Stocks Fall Amid Talks on Fiscal Cliff, Greek Aid (Bloomberg)
U.S. stocks fell, following the Standard & Poor’s 500 Index’s biggest weekly gain since June, as lawmakers prepared to debate the so-called fiscal cliff and euro-area finance ministers discuss Greek aid. UnitedHealth Group Inc. (UNH) slumped 0.7 percent after providing a profit forecast below estimates. DreamWorks Animation SKG Inc. lost 5.2 percent as “Rise of the Guardians” opened in fourth place in cinemas over the Thanksgiving weekend. Best Buy Co. and EBay Inc. (EBAY) rallied at least 4.9 percent while Macy’s Inc. (M) slumped 4.5 percent as retailers extended deals into Cyber Monday. Apple Inc. (AAPL) gained 3.2 percent as technology shares rebounded. The S&P 500 (SPX) fell 0.2 percent to 1,406.29 in New York, after the benchmark index jumped 3.6 percent last week. The Dow Jones Industrial Average slid 42.31 points, or 0.3 percent, to 12,967.37 today. More than 5.3 billion shares traded hands on U.S. exchanges today, or 13 percent below the three-month average, according to data compiled by Bloomberg.
“We’ve got a lot of negatives,” Peter Sorrentino, who helps manage about $14.6 billion of assets at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “There’s the backdrop of what’s going on in the European Union with the bailouts and recapitalizing the banks. On top of that, we have issues in the U.S. with regard to our fiscal policy. That’s just enough reason at this point in time to take risk off the table and wait for more insight and clarity.” Congress returns from the Thanksgiving recess this week, seeking a budget deal to avoid $607 billion of automatic tax increases and spending cuts from kicking in next year. While Republicans favor raising federal tax revenue by limiting deductions, Democrats have pushed for higher rates on upper- income earners.
Recap Stock Index Market Report (CME)
The December S&P 500 was flat to lower for most of the session, weighed down by ongoing concerns over the European debt situation and uncertainty surrounding the US fiscal cliff. It seemed that the market might have also been held back by mixed reports on Black Friday retail sales reports, which pushed shares of Macy's down 3%. Some traders pointed to a measure of profit-taking after five consecutive higher closes as an additional force keeping stocks in negative territory. Technology related shares rallied into positive territory during the early afternoon hours, supported by a more than 2.5% gains in both the shares of Hewlett-Packard and Apple. Utility-related shares were upside leaders throughout the session.
Europe Priced for No Profit Growth Signals Stocks Rally (Bloomberg)
European stocks are trading at levels that show investors anticipate no profit growth for 2013, increasing optimism among strategists who say equities will rise to a five-year high. The Stoxx Europe 600 Index (SXXP) is priced at 11 times estimated profit, down from 13 before the financial crisis, according to data compiled by Bloomberg. Even though the region entered a recession last quarter, earnings will climb almost 5 percent next year, according to the average of seven strategist forecasts in a Bloomberg survey. They predict the benchmark gauge will gain 10 percent to the highest level since 2008. While bears say 25 percent unemployment in Spain and Greece and austerity from France to Italy make expectations for any earnings growth unrealistic, Graham Bishop at Exane BNP Paribas says valuations 10 percent below historic levels show investors are too pessimistic.
Stocks are the cheapest on record compared with bonds after European Central Bank efforts to stimulate the region’s economy, presenting opportunities to buy companies from Royal Dutch Shell Plc (RDSA) to Madrid-based discounter DIA, according to Macquarie Group Ltd.’s Daniel McCormack. “There is room for further revaluation of euro-zone equities,” Nadege Dufosse, who helps oversee about $100 billion as senior asset manager at Dexia Asset Management in Luxembourg, said in a Nov. 20 phone interview. “Fundamentals are not good and will not change in the near term, but what we can expect is that the riskiness embedded in European equities will continue to decrease.”
European Stocks Decline as Ministers Debate Greek Rescue (Bloomberg)
European stocks declined, following the benchmark Stoxx Europe 600 Index’s biggest weekly rally this year, as euro-area finance ministers met for a third time this month on Greece’s finances. Barclays Plc (BARC) dropped the most in almost five months as Qatar Holding LLC disposed of its remaining warrants in the U.K. lender. ThyssenKrupp AG (TKA) slid 5.1 percent after Credit Suisse Group AG lowered its recommendation on Germany’s largest steelmaker. Straumann Holding AG rose 2.3 percent after Government of Singapore Investment Corp. increased its stake in the maker of dental implants to 14 percent. The Stoxx 600 lost 0.5 percent to 272 at the close in London, falling for the first time in six days. The gauge jumped 4 percent last week as optimism grew that Congress will agree on a U.S. budget that avoids automatic tax increases and spending cuts, and data showed China’s manufacturing expanded.
“After last week’s unbroken gains, it’s natural to have a little breather,” said Jakup Petur Baerentsen, chief equity adviser at Nordea Private Bank in Copenhagen. “The markets have started to turn upwards again after a long period of doing not very much. Of course, the political risks remain, both in Europe and also anything coming out on the U.S. fiscal cliff.” Euro-area finance ministers meet in Brussels to try to clear the next installment of Greek aid and discuss ways to keep the country a solvent member of the currency bloc. They failed to reach agreement in two previous meetings this month.
Most Emerging Stocks Advance as Crude Sinks Energy Shares (Bloomberg)
Most emerging-market stocks rose, led by consumer companies, as Japan said it will act to stimulate its economy, while sliding oil prices drove a decline in Brazilian and Russian shares. Kangwon Land Inc. (035250), the South Korean casino and hotel operator, surged 13 percent after winning approval from the government to expand its gambling business. United Co. Rusal, the world’s biggest aluminum producer, rallied to the highest level in almost two months in Moscow. A gauge of energy companies in the MSCI Emerging Markets Index (MXEF0CD) had the second- largest drop after telecommunications shares. Brazilian oil and gas explorer OGX Petroleo e Gas Participacoes SA tumbled.
The emerging markets measure retreated 0.1 percent to 995.10 in New York as 430 stocks rose and 334 fell. Crude sank as European finance chiefs met to negotiate a bailout payment for Greece and as the U.S. seeks a resolution to its so-called fiscal cliff. Minutes of the Bank of Japan’s Oct. 30 meeting showed policy makers will continue easing monetary policy to stimulate Asia’s second-largest economy. “General risk sentiment has improved,” Christian Keller, the head of emerging-market research at Barclays Plc. in London, said by phone. “Globally, it remains a mixed picture. It’s still not very clear on the real economy.” Brazil’s Bovespa Index (IBOV) lost 1.5 percent and Russia’s Micex Index (INDEXCF) fell 0.7 percent as crude oil futures dropped in New York. The Shanghai Composite Index slid 0.5 percent before the release of data on industrial profits tomorrow. Benchmark indexes in Turkey and the Czech Republic gained more than 0.6 percent. The BSE India Sensitive Index rose 0.2 percent.
Aussie Touches 2-Month High as Officials Reach Greek Deal (Bloomberg)
The Australian dollar touched its highest level in two months as euro-area finance ministers reached agreements on Greece’s debt burden and its funding gap, boosting demand for higher-yielding assets. The so-called Aussie advanced versus most of its 16 major counterparts as the ministers reached a deal after more than 12 hours of talks. New Zealand’s currency, known as the kiwi, snapped a decline from yesterday as Asian stocks climbed for a fifth-straight day. “The initial market reaction to the agreement is positive, but we await further details to see if it’s a sustainable solution,” said Callum Henderson, Singapore-based global head of currency research at Standard Chartered Plc. “At the margin, this is good news for higher-yielding currencies” such as the Aussie and kiwi, he said.
Australia’s dollar rose 0.2 percent to $1.0483 at 12:02 p.m. in Sydney after earlier touching $1.0490, the highest since Sept. 21. It was little changed at 85.92 yen. New Zealand’s currency traded at 82.28 U.S. cents, 0.1 percent above its close at 82.18 in New York. It was unchanged at 67.45 yen. Ten-year bond yields in Australia were little changed from yesterday at 3.26 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 2.63 percent. The MSCI Asia Pacific Index of shares gained 0.5 percent after rising 2 percent in the previous four days. Finance officials from the 17 euro nations started their meeting yesterday at 12:30 p.m. in Brussels, less than a week after an all-night gathering failed to yield agreement on Greece and days after a European Union summit broke up without a proposed seven-year budget.
Treasuries Snap Gain as Greek Deal Cuts Demand for Safety (Bloomberg)
Treasuries snapped a rally from yesterday as euro-area officials ministers agreed on a Greece aid plan, curbing demand for the relative safety of U.S. debt. Gains in Asian shares helped damp investor appetite for debt as investors prepared to bid at three note sales this week. The U.S. is scheduled to sell $35 billion of two-year securities today, the same amount of five-year debt tomorrow and $29 billion of seven-year notes on Nov. 29. “Some of the uncertainty in the European debt crisis may be resolved,” said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender. “It’s good news for equities and bad news for the bond market.”
Ten-year yields increased one basis point to 1.67 percent as of 9:47 a.m. in Tokyo, according to Bloomberg Bond Trader data. The 1.625 percent security due in November 2022 fell 3/32, or 94 cents per $1,000 face amount, to 99 18/32. The yield slid three basis points, or 0.03 percentage point, yesterday, the biggest decline in two weeks. The MSCI Asia Pacific Index (MXAP) of stocks advanced 0.5 percent today, headed for its fifth straight gain. Euro-area finance ministers reached agreements on Greece’s debt burden and its funding gap, a European Union official said in Brussels today.
Treasury Bears Capitulate as Fed Buying Meets Cliff Worry (Bloomberg)
Until last month, Donald Ellenberger, who manages $10 billion for Federated Investors Inc., shunned Treasuries as the U.S. economy improved and 10- year notes yielded less than inflation. Now, he can’t afford to stay out. Ellenberger has plenty of company. Bond bears from Brown Brothers Harriman & Co. to T. Rowe Price Group Inc. are buying Treasuries though the 1.69 percent yield on 10-year notes is less than the rate of inflation and returns on the $10.9 trillion of marketable debt are the least in three years. The combination of Federal Reserve efforts to stimulate the economy by buying bonds and the potential slowdown should politicians fail to avert the so-called fiscal cliff of tax increases and spending cuts has made Treasuries the debt that money managers have to own. Even investors who shun Treasuries don’t see 10-year note yields rising much above 2 percent.
“Treasuries offer little real value, but in the short term, it is just hard to be a bear,” Ellenberger, who is based in Pittsburgh, said in a Nov. 19 telephone interview. The company has moved from significantly “underweight” Treasuries compared with benchmark performance measures to adding the securities. “The fiscal cliff is a big deal, and the Fed is determined to keep rates low.”
Republicans and Democrats Differ on Taxes as ‘Cliff’ Looms (Bloomberg)
U.S. Republican lawmakers advocated raising federal tax revenue by limiting deductions rather than by raising rates to avert the so-called fiscal cliff, as Democrats pushed for higher rates on upper-income earners. “I would be very much opposed to raising tax rates, but I do believe that we can close a lot of loopholes,” including limits on how much people can deduct for charitable giving and home mortgage interest payments, Senator John McCain, an Arizona Republican, said yesterday on “Fox News Sunday.” Senator Richard Durbin of Illinois, the second-ranking Democrat in the chamber, said any deal to reduce budget deficits should allow the top tax rate on ordinary income to rise to 39.6 percent from 35 percent. “Let the rates go up to 39 percent. Let us also take a look at the deductions. Let’s make sure that revenue is an integral part of deficit reduction,” Durbin said yesterday on ABC’s “This Week.”
Democratic President Barack Obama and congressional leaders are trying to find a compromise in the next few weeks to avoid the fiscal cliff, which would trigger $607 billion in tax increases and spending cuts beginning in January. The Congressional Budget Office has said failure to avoid the fiscal cliff could lead to a recession and a jobless rate of about 9 percent, compared with the October rate of 7.9 percent. Federal Reserve Chairman Ben S. Bernanke said Nov. 20 that the fiscal cliff would pose a “substantial threat” to the economic recovery.
Retailers Keep Deals Flowing on 13% Holiday-Sales Jump (Bloomberg)
U.S. retailers are extending deals into Cyber Monday and beyond to try to sustain a 13 percent gain in Thanksgiving weekend sales. Spending in stores and online rose to $59.1 billion in the four days starting Nov. 22, the National Retail Federation said in a statement yesterday. A year ago, sales advanced 16 percent over the holiday weekend. Retailers have turned Black Friday into a week’s worth of deals, with earlier openings and online offers. Thanksgiving Day, once reserved for family gatherings, saw the number of shoppers rise to more than 35 million from 29 million last year, the NRF said. Even today’s so-called Cyber Monday is losing its distinction, with Best Buy Co. yesterday cutting online prices of televisions and J.C. Penney Co. (JCP) discounting cookware.
“What was Cyber Monday is now Cyber Weekend,” Poonam Goyal, a Bloomberg Industries analyst, said in a telephone interview yesterday. “It is no longer a one-day event. Year over year, Black Friday sales were strong and margins should have also been strong.” About 28 percent of the weekend shoppers were in stores on Thursday night, up from about 24 percent last year, the NRF said. Chicago-based researcher ShopperTrak observed a 1.8 percent decline in sales on Black Friday itself, after chains including Wal-Mart Stores Inc. (WMT), the world’s largest retailer, offered early-bird specials. Customers spent $423 on average this weekend, up 6.3 percent from last year, the Washington-based NRF said. The 13 percent jump in total spending suggests that some sales were pulled ahead from December and that retailers will have to keep up the promotions to avoid a lull.
China Search for PBOC Chief Spurs Focus on Finance Regulators (Bloomberg)
China’s likely search for a successor to Zhou Xiaochuan as central bank chief is spurring focus on the nation’s banking and securities regulators as the incoming Communist leadership overhauls top government positions. Guo Shuqing, 56, and Shang Fulin, 61, have both run one of China’s four largest banks, worked as a deputy central bank governor and currently head regulatory agencies -- matching the profile of Zhou, 64, when he took the helm of the People’s Bank of China in 2002. As securities regulator, Guo has accelerated the pace that predecessor Shang set for opening up to foreign investors, suggesting he could favor faster deregulation of financial markets. While Guo’s public appearances have included a U.S. television talk show, Shang has a lower profile and was once described as cautious by former central bank Governor Dai Xianglong.
“Shang Fulin is a very conservative, very cautious individual who in eight years didn’t fundamentally change the stock market at all,” said Fraser Howie, co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.” “If you are looking for reform in the sense of fundamentally trying to change what the model is, then Guo Shuqing is your guy.” The Communist Party is partway through a once-a-decade leadership change, with Xi Jinping replacing Hu Jintao as party head this month and Li Keqiang forecast to succeed Premier Wen Jiabao in March. Zhou wasn’t on the new central committee named Nov. 14, suggesting he will step aside after a decade that included ending the yuan’s peg to the dollar in 2005.
ECB Said to Consider Helping Greece With Holdings (Bloomberg)
The European Central Bank is considering new ways to help reduce Greece’s funding gap by using the Greek debt in its investment portfolios, three euro- area officials said. The national central banks of the euro area hold Greek bonds in their investment portfolios and agreed in February to give any profits back to Greece. The issue has been reopened and the ECB is now looking at options including rolling over the holdings or allowing the Greek government to buy them back, the officials said yesterday on condition of anonymity. There are between 10 billion euros ($13 billion) and 15 billion euros in the portfolios, one official said. The amount saved by Greece would be considerably less than the overall value of the holdings, the person said. An ECB spokesman declined to comment on whether such plans are under discussion.
Euro-area finance ministers were meeting in Brussels last night in the third attempt this month to plug Greece’s funding shortfall. The impasse is holding up the next bailout payment to Athens and, as they have done so often during the sovereign debt crisis, governments are once again turning to the ECB for help. ECB President Mario Draghi attended last night’s meeting. Greece may need as much as 32.6 billion euros in extra financing through 2016, according to an assessment by the country’s creditors obtained by Bloomberg News. Plans to give Greece two more years to meet deficit-reduction targets would open up financing gaps of 15 billion euros through 2014 and 17.6 billion euros in 2015-2016, the assessment shows.
Greek Aid Deal Reached by EU, Debt Relief Ruled Out (Bloomberg)
European finance ministers cut Greece’s interest rates and gave it more time to pay back rescue loans while dismissing for now calls for debt relief that may be needed to keep the country afloat over the longer term. In the fourth Greek crisis meeting in two weeks, the ministers persuaded a skeptical International Monetary Fund that Europe has a formula for putting the country that triggered the debt crisis onto a path back out of it. Greece was also cleared to receive a 34.4 billion-euro loan installment in December. “All initiatives decided upon today will bring Greece’s public debt clearly back on a sustainable path,” Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing a 13-hour meeting that ended early today. “This has been a very difficult deal.”
After three years of false starts, the creditor governments led by Germany proclaimed the latest fix for Greece just as they grapple with swelling financing needs in Cyprus and a potential aid request by Spain, the fourth-largest euro economy. “We didn’t discuss a debt cut,” said German Finance Minister Wolfgang Schaeuble. The agreement reached “on the one hand, tries with a debt buyback to significantly cut the overall debt burden by 2020. On the other hand we closed the financing gap and the measures for the financing of the debt buyback through temporary measures.”
Euro Advance’s After Funding Deal Agreed for Greece (Bloomberg)
The euro advanced after a European Union official said the currency bloc’s finance ministers reached agreement on Greece’s debt burden and its funding gap. The 17-nation currency earlier touched a three-week high amid speculation the International Monetary Fund and the currency bloc’s finance chiefs would agree to cut Greek debt. The yen maintained a three-day gain versus the dollar as expectations eased that Japanese opposition leader Shinzo Abe will push the central bank for more aggressive monetary easing. “We saw the euro pop on the news that a deal has been reached,” said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada. “The actual announcement of the deal has been somewhat of a relief.”
The euro climbed to $1.3009, the strongest since Oct. 31, before trading at $1.2993 as of 9:56 a.m. in Tokyo, 0.2 percent higher than the close in New York yesterday. It was little changed at 106.50 yen. The yen gained 0.1 percent to 81.97 per dollar after climbing 0.5 percent in the previous three days. Finance ministers from the 17-nation euro bloc started their meeting at 12:30 p.m. in Brussels yesterday, less than a week after an all-night gathering failed to yield agreement and days after a EU summit broke up without a proposed seven-year budget. Luxembourg Prime Minister Jean-Claude Juncker said after the agreement was announced that the Greek government is putting an impressive toolbox in place. Under the deal, Greek bilateral loan rates are to be lowered by 100 basis points, he said.
