Reports

World stock markets news summary (US, UK, Europe, Asia) (August 31, 2010)

Contributed by Paddy Power Trader

By Paddy Power Trader

GfK Consumer Confidence Survey (Aug) M/M -18 vs. Exp. -24 (Prev. -22) (RTRS) British consumer confidence unexpectedly improved in August for the first time since February thanks to a more positive view on the economic outlook.

UK News

Osborne plans 25% Treasury jobs cull. (FT FrontPage) George Osborne is planning to cut staff numbers at the Treasury by about one-quarter and scale back his department’s role as he attempts to lead by example in the search for sweeping spending cuts across Whitehall.

Hometrack Housing Survey (Aug) M/M -0.3% vs. Prev. -0.1%; Y/Y 1.5% vs. Prev. 2.0% (Sources) UK home values dropped in August by the most in 16-months as the housing market endured a “modest re-pricing” that is likely to last as long as a year, according to Honetrack Ltd.

Bank plans to cap risky mortgages. (Telegraph) Charlie Bean, the Bank’s Deputy Governor, said “direct constraints” may be needed to restrict access to credit, and that homebuyers could be forced to put down sizeable deposits before being granted a mortgage by their banks or building societies. This would mean that prospective buyers would have to put down between 10% and 25% of a property’s purchase price as a deposit before being able to obtain a loan.

Further state support may be required to shore up the weak recovery in the global economy, the Bank of England’s deputy governor warned this weekend. (Sunday Times / Telegraph) Charles Bean told the annual gathering of central bankers at Jackson Hole, Wyoming, that policymakers had succeeded in preventing a financial collapse, however had been powerless to prevent what he called the “Great Contraction” of 2008 because control of interest rates was not, in itself, a powerful enough tool. He also hinted that the days of quantitative easing may not be over: “Even so, the deleveraging process is incomplete, the recovery remains fragile…while further policy action may yet be necessary to keep the recovery on track”, Bean said.

The British Chambers of Commerce (BCC) will this week increase its growth forecast for this year from 1.3% to 1.7%, and next year’s figure from 2% to 2.2%. (Sunday Times) David Kern, BCC chief economist said UK GDP was very strong in Q2 of 2010 and the pace of growth will remain satisfactory in the 2H of this year. However, Kern added that he expects a sharp slowdown in the pace of growth to start in the first quarter of next year.

Middle-class Britain may be forced to wait at least five years before taxes come down, the Coalition Government warned on Saturday. (The Mail on Sunday) In a grim forecast, Treasury Chief Secretary Danny Alexander signalled that putting the public finances back in order was the priority. In an interview with The Observer, the Liberal Democrat appeared to dismiss the prospect of net tax cuts before the next general election, planned for 2015.

Vince Cable opened a fresh Coalition rift over immigration yesterday by dismissing the need to cap the numbers coming to Britain. (The Mail on Sunday) The Business Secretary said the Government should not saddle the UK with excessive border controls, which he fears would hurt economic growth.

Peter Spence, economic advisor to the Ernst & Young ITEM Club, wrote a guest article in the Sunday Times. Spence notes that yields on 10-yr gilts have fallen back from 3.5% on the day of the emergency budget in June to a record low of 2.8% this week but does not think that it’s another bubble but a move that is justified by the outlook for inflation and interest rates. Spence also believes that fiscal drag will help by bringing in more tax revenue than the official forecast. (Sunday Times)

Building industry faces double dip as cornerstone economy is under threat. (The Mail on Sunday) Alarm bells will ring this week over fears that the construction industry, the cornerstone of the economy, is heading into its own double-dip recession. The sector has barely dragged itself back from last year’s slump in output – the worst since the 1974 property crash – before the Government’s austerity squeeze looks set to push it back down again. The chief executive of one of Britain’s biggest private building companies this weekend described the state of the economy as “pitiful” and warned that the industry faced the most challenging downturn in two decades.

US News

T-notes were on a steady up-tick and have reversed losses that were seen post better than expected GDP revision data and Bernanke’s speech on Friday as investors turned their attention to what promises to be a disappointing jobs report on Friday. At the pit close T-notes closed up 29 ticks at 126.030. At 0640 BST UST’s were trading up 4 ticks at 126.07

Fed’s Bullard said the US government will have to use its newly legislated authority to liquidate a failing financial firm in order to win investors’ confidence that it is truly through with bailing out big firms. (RTRS)

Obama says discussed additional steps on economy with advisers. Says economic team looking at additional steps to promote economic growth and is looking at extending tax cuts for middle class, tax cuts for businesses, rebuilding infrastructure. (Sources – Monday evening)

Krugman says there is need for more Federal stimulus spending and says another USD 800bln stimulus needed. (CNBC – Monday evening)

BarCap August Treasury month-end index extension seen at 0.12yrs compared to an average of 0.18yrs. (IFR Markets)

European News

ECB to extend emergency bank aid. (FT/Sources – Monday’s edition) The ECB this week is expected this week to extend emergency support for Eurozone banks until early next year as it gauges how well the 16-country region might withstand a big US or global slowdown. Trichet is expected on Thursday to announce that at least until the start of 2011, banks’ demands for weekly, monthly and probably three-month liquidity will continue to be met in full. In other comments ECB’s Trichet said governments risk a “lost decade” of weak economic growth if they delay reversing the surge in public debt triggered by the financial crisis.

French finance minister says sticks to 1.4% in GDP growth in 2010, expects unemployment to decline. (Sources)

The suggestion from a government insider that elections in Greece are imminent have been dismissed by Greek industry and banking sources. (Sources)

The Pan Euro Aggregate index extension seen at 0.02yrs, which is unchanged from last year’s extension, but slightly smaller than the August average of 0.03yrs. (IFR Markets)

Asian News

JGBs gained overnight, bouncing back from the previous day’s losses, as Nikkei slipped on a fall on Wall Street and on a JPY that remained bullish despite easing by the Bank of Japan. JGBs were trading at 142.73 (+0.28) at 0624 BST. (RTRS)

The Bank of Japan expanded a bank loan programme, stepping up its monetary stimulus for the first time since March after the economy’s recovery weakened and the government pressured the central bank to act. (Sources – Early Monday morning) The BOJ will boost the amount of funds in the facility by JPY 10trl to a total of JPY 30trl, the bank said in a statement after an emergency meeting in Tokyo. Also the duration of the lending programme has been increased from 3 months to 6 months. The BOJ also kept the key overnight loan rate at 0.10%, and the rate decision was unanimous. The BOJ said that economy is showing further signs of moderate recovery, however uncertainty about economy, particularly US, is growing. It added that forex and stock markets have been unstable recently, emphasising the need to pay more attention to the downside risk. BOJ said that beating deflation is a critical challenge, and reiterated that the economy will stay on recovery path.

However a former central bank policy board member, Nobuyuki Nakahara, said the BOJ’s decision to expand the bank loan programme was “too little and too late” as a means of halting the JPY’s advance. (Sources)

Japanese PM Naoto Kan and powerbroker Ichiro Ozawa are expected to meet today to try to avoid a clash in a leadership race that could create a policy vacuum as Japan struggles with a strong JPY and fragile economy. (RTRS)

Japan’s FSA has confirmed that the PBOC Governor Zhou met Japanese Financial Services minister Jimi in Beijing yesterday, amid speculation he defected to the US following losses in China’s holdings of US Treasuries. (Sources)

Japanese Nomura/JMMA Manufacturing PMI (Aug) M/M 50.1 vs. Prev. 52.8 Japanese Industrial Production (Jul P) M/M 0.3% vs. Exp. -0.2% (Prev. -1.1%); Y/Y 14.8% vs. Exp. 14.3% (Prev. 17.3%) (RTRS)

The Chinese government’s efforts to curb price rises in the property market are beginning to work, and if the market defies cooling efforts officials should impose more measures, according to a commentary in the People’s Daily newspaper. (People’s Daily)

Forex

CHF continued to strengthen, and overnight EUR/USD reached a new all time low at 1.2934 (RANsquawk)

Australian Retail Sales SA (Jul) M/M 0.7% vs. Exp. 0.4% (Prev. 0.2%, Rev. to 0.4%) (RTRS) Australian retail sales were surprisingly strong in July while sales for June were revised higher, suggesting consumption was not nearly as subdued as feared and the next move in interest rates is still upward.

Australian PM Gillard claimed her Labour Party was best placed to run a stable minority government after the election dead heat, warning of political gridlock if a consensus cannot be found. Gillard also said that she is not in favour of calling a fresh election to resolve the impasse thrown up after neither of the country’s main parties won a majority at the August 21st polls. (RTRS)

Reserve Bank of Australia’s assistant governor said that regulations to restrain leverage in the global financial system will be needed to lessen the risk of another financial crisis, adding that the central banks and the governments would have to remain as lenders of last resort when the financial system as a whole is under pressure. (RTRS)

New Zealand’s economic recovery is slowing and it would benefit from a halt in central bank rate rises until next year, according to New Zealand Institute of Economic Research. It added that the pace of growth has tumbled because of cautious consumer spending, slowing migration gains, weak housing market, and a fall off in non-residential construction work. (RTRS)

Commodities

US crude futures fell to near USD 74 a barrel overnight, extending losses for a second day, as expectations of higher crude inventories fed fears of a slowdown in global economic growth. WTI crude futures were trading at USD 74.01, down USD 0.69, at 0624 BST. (RTRS)

Company News

UK Banks – The companies, which include members of the FTSE100, are preparing to argue publicly that dividing the banks’ retail and investment banking arms will make everyday business activities more expensive and less efficient. The campaign will be the first large-scale intervention by Britain’s corporations – the banks’ biggest customers – in the highly-charged debate on financial reform. (Telegraph)

UK

BP – Co. delayed retrieval of the failed blowout preventer atop its ruptured Gulf of Mexico oil well this week because of bad weather, the top US official overseeing the oil spill. (RTRS) In other news, co. is set to come under renewed fire from US politicians this week as it reveals it has spent more than USD 1mln (GBP 644,000) a week on television and radio advertising since the April 20 oil explosion in the Gulf of Mexico. (Telegraph)

HSBC – Co. completes exit from US auto finance run-off portfolio. (RTRS)

Vodafone – Co. is preparing to raise more than GBP 4bln by selling its shares in China Mobile, the first in a string of planned disposals by the mobile giant. Investors expect the deal to be rubber stamped next month before an update on the co.’s strategy in November. (Sunday Times) In other news, co. is suing Deutsche Telekom after a third of customers that signed up for its DSL connection weren’t served by German network provider. (Handelsblatt)

RBS – Co. is considering a cut-price sale of Direct Line insurance business after a flood of interest from potential bidders, including the billionaire investor Warren Buffett. The bank has been ordered to sell Direct Line by the European Commission as punishment for receiving state aid during the credit crunch. (Sunday Times) In other news, the Russian anti-trust regulator, FAS, has rejected an application from the co. to increase its stake to a controlling one in Russia-based RBS formally known as ZAU ABM AMRO Bank. (Kommersant)

Anglo American – Co. may be offered about USD 1bln for its Scaw Metals steel assets, excluding the main Scaw plant in South Africa which is not for sale, according to an unidentified banker. (Independent)

BHP Billiton – Hedge funds are understood to break ranks with other investors in Potash Corp, by accepting an offer from co. at USD 150 per share. (Sunday Express) In other news, co. denied speculation on Monday that it planned to sell any of Potash Corp’s assets if it success with its USD 38.6bln hostile bid for the world’s largest fertilizer producer. (RTRS)

Rio Tinto – Co. has approved USD 1.6bln for the Hope Downs 4 mine, which will have annual capacity of 15 mln tonnes of high quality iron ore, with the first production seen in 2013. (RTRS)

Tesco – Co. is slashing about 2,000 management roles at its Express convenience stores as part of a restructuring plan. (The Mail on Sunday)

Centrica – Co. and some unidentified companies have approached Connaught to buy its GasForce unit, however Connaught chairman has rebuffed the interest. (FT)

Tullow Oil – Co.’s row with the government of Uganda escalated at the weekend when officials ordered the company to stop work on the second of the company’s three exploration blocks in the country. (Sunday Times)

Diageo – Co. is to reveal it is minded to support a ban on selling alcohol below the cost of duty and VAT, although it denies any link between price and alcohol-related harm. (Telegraph)

Vedanta – Co. is stripped of international safety awards amid concerns that it won without declaring an Indian industrial disaster that cost 40 lives. (Observer)

Reckitt Benckiser – Co. receives FDA approval for Suboxone Sublingual Film C-III. (RTRS)

Encore Oil – The company’s latest big discovery off the Shetland Islands could lead to a takeover approach. (Sunday Times)

Heritage Oil – Co. is targeting Iraq after the Uganda pull-out according to co.’s finance director. (Telegraph)

US

Equities finished the session lower despite a slew of M&A activity as instead investors turned their attention to what promises to be a disappointing jobs report on Friday. The move lower was led by the financials that’s after analyst Meredith Whitney said that American banks will need to increase their capital in order to survive the latest decline in the housing market. The last hour of trade saw stocks print fresh lows and at the closing bell DJIA closed down 1.39% at 10009.73, S&P 500 closed down 1.47% at 1048.92 and NASDAQ 100 closed down 1.09% at 1772.07.

Research in Motion – Co. and India’s government avoided a standoff yesterday by agreeing to extend for two months talks over a demand to open all of its BlackBerry handset services to scrutiny by the intelligence agencies. (FT)

Europe

Carrefour – Co.’s H1 net EUR 82mln vs. Exp. EUR 292mln, reaffirms 2010 profit target (Sources) Infineon – Co. is not currently in talks on new acquisitions. (Frankfurter Allgemeine Zeitung)

Tui – Co. will not get a takeover from Russian investor Alexei Mordashov. (Frankfurter Allgemeine Zeitung)

Irish Banks – Irish banks are gearing up to repay more than USD 25bln of debt in the coming month, in what could prove an important test of investor sentiment towards the broader Eurozone financial sector. (FT)

Aegon – Co. fulfilled its commitment to repay to the Dutch State EUR 500mln of the EUR 3bln in core capital the co. secured in 2008. This is in line with an earlier announcement.