Monday, October 10, 2011

Today's Headlines

  • Stoxx Eruope 600 Index Posts Biggest Four-Day Jump Since 2008 on Bank Plan. European stocks advanced, with the Stoxx Europe 600 Index posting its biggest four-day rally since November 2008, as the leaders of Germany and France gave themselves three weeks to create a plan to recapitalize banks. The benchmark Stoxx 600 advanced 1.7 percent to 235.94 at the 4:30 p.m. close in London, extending the gauge’s rally over the last four days to 8.5 percent. National benchmark indexes rose in 15 of the 18 western European markets. The U.K.’s FTSE 100 Index gained 1.8 percent. France’s CAC 40 Index climbed 2.1 percent and Germany’s DAX Index jumped 3 percent. All three gauges posted their biggest four-day rallies since 2008.
  • Sovereign, Corporate Credit-Default Swap Indexes Fall in Europe. The cost of insuring against default on European sovereign and corporate debt fell, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments dropped seven basis points to 324 at 3:30 p.m. in London. A decline signals improvement in perceptions of credit quality. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 32.5 basis points to 781, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 9.75 basis points to 179.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 11.5 basis points to 240.5 and the subordinated index dropped 19 to 483.
  • Euro Chiefs Push Back Debt Crisis Summit Amid Tension Over Greek Writedown. European leaders pushed back a debt- crisis summit amid tensions between Germany, France and the European Central Bank over possible deeper-than-planned writedowns of Greek bonds. The planned Oct. 18 meeting was postponed to Oct. 23 as Europe gropes toward dealing with Greece’s oversized debt, insulating the Spanish and Italian markets, and shielding banks from the fallout. “Further elements are needed to address the situation in Greece, the bank recapitalization and the enhanced efficiency of stabilization tools,” European Union President Herman Van Rompuy said in an e-mailed statement in Brussels today. “This timing will allow to finalize our comprehensive strategy.” Germany and France yesterday set an end-of-month deadline for a breakthrough in handling the crisis, which has pushed Greece to the brink of default, roiled global markets and spurred speculation that the 17-nation euro region might not survive in its current form. German Chancellor Angela Merkel and French President Nicolas Sarkozy put recapitalization of Europe’s banks at the top of the priority list in a joint declaration in Berlin yesterday. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 meeting.
  • Greek Public-Health Tragedy Looms, Academics Write in Lancet. The financial catastrophe in Greece is damaging public health and wellbeing, according to six medical academics including Alexander Kentikelenis and David Stuckler of Cambridge University and Martin McKee of the London School of Hygiene and Tropical Medicine. In a letter published in the Lancet, a medical journal with offices in London, New York and Beijing, they analyzed European Union statistics based on replies by 12,346 and 15,045 Greeks in 2007 and 2009, respectively. The group said 2009 saw significant increases in the number of people reporting that they didn’t see a doctor or dentist despite feeling it was necessary to do so, and in those reporting that their health was “bad” or “very bad.” Since Greece’s public health-care system entitles citizens to visit general practitioners free of charge and to attend hospital outpatient clinics at low cost, the reduced access probably reflected the fact that there were cuts of about 40 percent in hospital budgets, understaffing, occasional shortages of medical supplies, and bribery of medical staff to jump queues at overcrowded hospitals, the group wrote. The number of suicides was 17 percent higher in 2009 than in 2007, unofficial figures cited in parliament mentioned a 25 percent increase in 2010 compared with 2009, and the minister of health reported a 40 percent rise in the first half of 2011 compared with the year-earlier period, according to the letter.
  • Morgan Stanley(MS) Leads Financials Higher. Morgan Stanley (MS) and Citigroup Inc. (C) led U.S. banks higher in New York trading after European leaders pledged to deliver a plan to stem the debt crisis that has led to concerns about global lenders’ balance sheets. Morgan Stanley climbed $1, or 7 percent, to $15.24 at 11:11 a.m. in New York Stock Exchange composite trading, bringing its increase during the last week to 22 percent. Citigroup jumped 6.2 percent and Bank of America Corp. (BAC) rose 5.8 percent, helping to lead the 81-company Standard & Poor’s 500 Financials Index to a 3.9 percent gain. The S&P 500 has rebounded about 8 percent from a 13-month low on Oct. 3 amid optimism that European leaders will succeed in taming the debt crisis.
  • China's Stocks Drop to Two-Year Low After Banks, Property Developers Slump. China’s stocks fell, driving the benchmark index to the lowest level since March 2009, as housing sales slumped during a week-long holiday and energy producers declined after the government cut fuel prices. China Vanke Co. and Poly Real Estate Group Co., the nation’s biggest developers, plunged more than 3 percent after industry sales dropped last week and Shanghai Securities News reported high inflation signals tight monetary policies will remain in place. PetroChina Co., the country’s largest oil producer, retreated the most in two weeks as the first reduction in fuel prices this year spurred concerns about earnings. “Tight liquidity has hurt some small companies with anything related to monetary policy dragging banks and the market lower,” said Tu Jun, a strategist at Shanghai Securities Co. “Market sentiment is very weak at the moment and investors are more sensitive to bad news than good.” The Shanghai Composite Index slipped 0.6 percent to 2,344.79 at the close in Shanghai, the lowest since March 25, 2009. The CSI 300 Index (SHSZ300) lost 0.9 percent to 2,557.08. The Shanghai Composite sank 15 percent last quarter, the biggest loss since the three months to June 2010. The index has tumbled 17 percent this year as the government raised interest rates and reserve-requirement ratios for banks to cool inflation that’s at the highest level in almost three years.
  • Oil Rises to Two-Week High. Crude oil climbed to the highest level in two weeks as the leaders of Germany and France pledged to stem the European sovereign-debt crisis. Futures rose as much as 3.8 percent after German Chancellor Angela Merkel and French President Nicholas Sarkozy said yesterday they will deliver a plan to recapitalize the region’s banks and address the Greek crisis by Nov. 3.
  • U.S. Corporate Profit Rebound Loses Steam. This year’s rebound in corporate earnings is losing steam as slower economic growth and greater strain on consumers threaten sales and profit margins at companies from Texas Instruments Inc. (TXN) to Google Inc. (GOOG) Earnings per share for the Standard & Poor’s 500, excluding financial companies, rose 14 percent in the third quarter, the smallest gain since the end of 2009, analysts’ estimates compiled by Bloomberg show. That compares with 19 percent in the second quarter and 20 percent in the first. Analysts have begun reducing forecasts for the current quarter and beyond.
  • Egypt on Alert AFter Deadly Clashes. Egyptian security forces were deployed outside government buildings in central Cairo after a night of clashes between Coptic Christian protesters and security forces that left at least 25 dead. Authorities ordered a fact-finding committee to investigate the violence, which began when several hundred Egyptian Christians protesting a recent attack on a church came under assault by people in plain clothes and were later confronted by security forces, witnesses said. Following the clashes, the army imposed a curfew until 7 a.m. in the center of the capital.
Wall Street Journal:
  • Moody's: Portugal Fiscal Slippage Credit Negative For The Sovereign. Signs of fiscal slippage in Portugal are credit negative for the sovereign, and will make it harder for the government to achieve its deficit reduction targets for 2011 and 2012, Moody's Investors Service said in a report Monday.
  • Tea Party Attacks Put GE(GE) on Defense. General Electric Co., where Ronald Reagan honed his communication skills as a company spokesman, is struggling to fend off attacks from conservatives over its relationship with the Obama administration and ventures in China, raising concerns inside GE that the controversy could damage its brand. Former Republican Alaska Gov. Sarah Palin last month slammed GE for being "the poster child of corporate welfare and crony capitalism." Presidential candidate Newt Gingrich used GE as an applause line during the Republican debate sponsored by the tea party in September. And Fox News television personality Bill O'Reilly has derided the conglomerate and Chief Executive Jeff Immelt almost weekly. The company's critics will get another opening this week. Mr. Immelt is to appear with President Barack Obama at a meeting of the president's jobs council in Pittsburgh on Tuesday, the same day that the Republican presidential contenders square off in a debate at Dartmouth College. The tea party and its allies are taking aim at GE for a number of alleged sins, including the company's paltry 2010 federal tax payment, an aviation joint-venture in China, moving jobs overseas and taking federal stimulus dollars for green-energy projects.
  • Need Work? US Has 3.2 Million Unfilled Job Openings. Want to add about $100 billion more annually to the US economy and lower the unemployment rate by more than a percentage point—all without spending a dime of taxpayer money? Fill America’s more than 3.2 million open jobs. That’s the hidden story of America’s lousy jobs picture. Though there are more than 14 million unemployed, there are also 3.2 million job openings in America.
Business Insider:
Zero Hedge:
24/7 Wall St.:
  • OECD Indicators Paint Dark Picture of Global Economy. The outlook for the world's major economies is continuing to darken according to the latest data from the OECD published on Monday, which showed sharp falls in leading indicators for all countries except Japan. The Paris-based Organization for Economic Cooperation and Development said its composite leading indicator (CLI) for its 33 member countries dropped for a fifth straight month in August, hitting 100.8 after 101.4 in July and signaling a slowdown in economic activity. Individual country readings fell across the board, including for non-OECD member countries, with most seeing their CLIs drop below their long-term average of 100. "For all other major economies, except Japan, the CLIs are now pointing strongly to a slowdown in economic activity below long-term trend," the OECD said. The OECD CLIs are designed to anticipate turning points in economic activity relative to trend - a turnaround in an indicator tends to precede turning points in economic activity by around six months. The consensus at the moment is that many major western economies are teetering on the brink of recession, as they struggle to repay inflated levels of debt. The OECD's reading for the Group of Seven major economies -- France, Germany, Italy, Japan, the United Kingdom and the United States -- slumped to 101.1 in August from 101.7 in July, while the reading for the euro area fell 9 points, to 99.8 from 100.7.
  • Bank Recaps Not An Answer To Crisis - French Bank Assoc. European states must restore confidence in their ability to reduce debt and public deficits, and a long-term solution for Greece must be implemented quickly in order to resolve the euro zone crisis, the French Banking Federation (FBF) said on Monday. The FBF said reinforcing the capital of European banks would not solve the crisis, adding that market worries were based on the public finances of certain euro zone countries and not on concerns about Europe's banks. "Certain states must regain investor confidence to continue to borrow on the markets under satisfactory conditions," the FBF said in a statement. The FBF added that euro zone governance also needed to be improved.
Frankfurter Allgemeine Zeitung:
  • German Chancellor Angela Merkel's government is lobbying for an extensive haircut on Greek debt, citing government officials. Germany's government considers a Greek insolvency unavoidable in the long run.
  • China's Resources Tax Extended Nationwide From Sept. 1. Tax on crude oil, natural gas to be extended to entire country, citing the State Council.

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