Reports

World stock markets news summary (US, UK, Europe, Asia) (September 09, 2010)

Contributed by Paddy Power Trader

By Paddy Power Trader

Bank must hold its nerve on QE, says Times experts. (Times) The Bank of England’s rate setters should keep interest rates and quantitative easing on hold for another month today, The Times Shadow Monetary Policy Committee recommends. The Times panel of experts voted unanimously to keep rates at 0.5%, but signalled that the next move may be to ease, rather than tighten monetary policy, with two members voting for an extension of quantitative easing. Sushil Wadhwani, a former member of the BOE’s MPC, and Anatole Kaletsky, chief economics commentator at The Times, both said that the economy needed extra support to offset the effects of spending cuts. Mr Wadhwani said he would like to see the Bank extend the asset purchase scheme by about GBP 30bln over the next three months. He added that other central banks should follow suit. Mr Kaletsky voted for a longer term commitment of GBP 60bln over six months.

UK News

UK growth in take-home accelerated in the three months to August, according to VocaLink. (Sources) The pace of annual wage growth after tax and other deductions increased to 1.3% from 0.8% in the three months through July, the group said. The average annual growth rate of 0.8% this year compares with a rate of 2.5% in the same period in 2009, it said.

US News

T-notes finished the session lower as risk appetite returned to the market as fears over the EU sovereign debt alleviated following a well received Portuguese debt auction. The closing stages saw prices move off lows but remain in negative territory post the latest note auction by the US Treasury. At the pit close T-notes finished down 12+ ticks at 124.14+. At 0614 BST UST’s were trading up 6 ticks to 124.20 ahead of the NY Fed’s second Treasury purchase of the week and after ECB’s Stark said German banks may need more capital.

Fed’s Beige Book shows that US economic growth continued but widespread signs that growth decelerated through end of August. (RTRS) Fed’s Beige book says 5 of 12 districts reported mixed conditions or deceleration in activity, while all 5 western districts reported growth at modest pace. Says consumer spending appeared to increase on balance despite consumers sticking to essential purchases and manufacturing activity pointed to further expansion but pace of growth eased in several areas. In addition, says home sales slowed further after an initial drop from end of tax credit, says construction slowed too and demand for commercial real estate remained weak but showed signs of stabilisation in some areas.

Fed’s Fisher says decision to reinvest MBS should ‘not necessarily’ be viewed as reflecting an easing bias or signs that further easing imminent. (RTRS) Fed’s Fisher says economy remains anaemic, sees growth of around 2% for H2 2010. Says not much more the central bank can do to stimulate the economy, barring another crisis situation and that deflation not a major concern, Y/Y inflation running at about a 1% rate.

San Fran. Fed official says economy is still making ‘forward progress’ and says odds of a double dip recession are very low. (Sources) The Fed official says the economy still expanding, albeit at slow pace and specifies that some of the recent weakness is tied to temporary factors. Says 2010 GDP to rise 2.5%, up by 3.5-4% in 2011 and says unemployment likely to be above 8% into 2012. In addition, says inflation to stay subdued and sees low odds of deflation. Separately, Fed’s Kocherlakota said that sees GDP growth of 3% in 2011 and says inflation temporarily ‘a little low’ sees inflation at 1.5-2% in 2011.

US President Obama ruled out extending Bush-era tax cuts for wealthier Americans as he sought to draw a sharp distinction between his Democrats and Republicans in this election year. (RTRS/CNBC) ‘This isn’t to punish folks who are better off – it’s because we can’t afford the USD 700bln price tag,’ said Obama. Obama also said that if the midterm election is referendum on the US economy then Democrats will not do well. Separately, US Treasury’s Geithner says thinks there is enough support in Congress to get Obama’s stimulus measures passed.

Projected US economic growth for the rest of this year and next was revised down for a third month in a row by a panel of about 50 economists. (RTRS) The latest Blue Chip Economic Indicators report said the weaker outlook for the second-half 2010 growth stemmed from lower expectations for consumer spending, business investment and private construction. For 2010, real GDP now is forecast to increase 2.7% on a Y/Y basis, 0.2% less than a month ago and 0.6% less than that predicted in June. The real GDP growth in 2011 is cut by 0.3% from a month ago to 2.5%.

USD 21bln 10y note auction received a b/c 3.21 vs. Avg. 2.89 (Prev. 3.04) and Indirects were 54.7% vs. Avg. 40.23% (Prev. 45.80%). The auction drew a yield of 2.670% vs. Exp. 2.685% with a total of 54.70% of issuance was allotted at the high. (RTRS)

US Consumer Credit (Jul) M/M (USD) -3.6bln vs. Exp. -4.7bln (Prev. -1.3bln, Rev. to -1.0bln) (RTRS)

EIA cuts US 2010 GDP growth forecast to 2.8% vs. prior 3.1% and 2011 GDP growth cut to 2.3% vs. 2.7%. (RTRS)

European News

ECB steps up Eurozone bond buying. (FT) The ECB has bought between EUR 100mln and EUR 300mln of Greek, Irish and Portuguese bonds so far this week, traders said on Wednesday, as worries over the health of some highly indebted Eurozone economies resurfaced.

ECB’s Stark tells German lawmakers German banks are undercapitalised. (RTRS) ECB’s Stark says the US is betting German banking system won’t be able to stay in current form under Basel III and says advises privatisation of German savings banks, says Spain a role model. Says wonders whether IMF has exit strategy from economic support measures and fears slight inflation trend in the US due to Obama’s stimulus programme.

ECB’s Weber reiterates expects new Basel III rules to be passed on Saturday/Sunday. (RTRS) Weber says expects new regulation will not endanger economic growth and says expects new regulation will not endanger credit dynamics.

ECB’s Liikanen said the US economic outlook is uncertain, adding that a double dip scenario is not likely. He also said that the growth will slow, not slump, after stimulus ends. (Sources)

France’s Lagarde says banks need to strengthen balance sheets. (La Tribune/RTRS) Lagarde says Basel capital requirements must not choke growth and says France won’t apply Basel rules unless US does. Separately to this, French economy ministry says to propose raising tax on telecom bundles to 19.6% and French budget minister said economy likely to beat official growth forecast in 2010, meet forecast in 2011.

French budget minister, Baroin, said France is targeting a 2011 budget deficit of less than EUR 100bln, compared with a predicted EUR 152bln this year. (Les Echos)

Asian News

Long end Japanese government bonds fell overnight but their losses were limited as the JPY stayed near a 15-year peak against the USD and worries simmered about the outlook for Tokyo shares and the economy. However, later in the session, JGBs pared earlier losses and were trading at 141.88 (+0.10) at 0620 BST. (RTRS)

BOJ’s governor Shirakawa said the central bank must avoid giving markets the impression it is monetising debt or trying to directly influence long term interest rates. (RTRS) He also said that he did not talk about currencies and monetary policy at a government meeting on Thursday aimed at discussing ways to achieve economic growth.

The Japanese government is contemplating compiling a supplementary budget for fiscal 2010 to address the surging JPY and boost the economy together with the year-end preparation of the budget for fiscal 2011 in order to avoid new bond issuance to finance the stimulus package, according to government sources. (Sources) In other news, big Japanese manufacturers expect conditions to worsen in the final three months of 2010 as they feel the pinch from slowing overseas growth and a strong JPY, despite a pick-up in optimism in the business environment in the July-September quarter, according to a government survey. (RTRS)

Japanese Consumer Confidence (Aug) M/M 42.5 vs. Prev. 43.4 (RTRS)

Forex

US Treasury Secretary Geithner said China must let the CNY rise more quickly to show trading partners that it is following through on its promises. (Sources)

Australian Employment Change (Aug) M/M 30.9K vs. Exp. 25.0K (Prev. 23.5K, Rev. to 25.0K) Australian Unemployment Rate (Aug) M/M 5.1% vs. Exp. 5.2% (Prev. 5.3%) (RTRS)

Australian employment surged in August as full time jobs were created at the fastest pace in two years, adding to the risk of renewed hikes in interest rates and lifting AUD/USD to a four-month peak.

Reserve Bank of Australia’s assistant governor, Debelle, said the mood in world financial markets remains fragile but there were signs risk appetite had improved enough to encourage a revival in the AUD carry trade. (RTRS)

Commodities

Oil pared gains overnight to stay below USD 75 a barrel as Chinese commodity markets tumbled on talk about a crackdown over illegal funds. Chinese commodity futures prices fell about 2% on Thursday as traders scrambled to identify the cause of a widespread sell-off. WTI crude futures were trading at USD 74.72, up USD 0.05, at 0620 BST. (RTRS)

US EIA raises forecast for 2010 world oil demand growth by 50,000 BPD, now sees 1.62mln BPD Y/Y increase. (RTRS) The EIA cuts forecast for 2011 world oil demand growth by 100,000 BPD, now sees 1.41mln BPD Y/Y and says does not change forecast that China oil demand will grow 650,000 BPD in 2010, 2011 oil demand growth cut by 30,000 BPD. Also says US natgas consumption up 4% in 2010 (Prev. up 3.8%), flat in 2011.

US API Crude Oil Inventories W/W (Sep 3) -7308K vs. Prev. 4765K US API Cushing Crude Inventory W/W (Sep 3) -40K vs. Prev. -503K

US API Distillate Inventory W/W (Sep 3) 1288K vs. Prev. -1860K US API Gasoline Inventories W/W (Sep 3) 654K vs. Prev. -589K (RTRS)

Company News

Large Banks are considered to be systemically significant could be required to hold up to 4% more core Tier 1 capital than other lenders under so-called Basel III rules to be completed on September 12. (Telegraph)

UK

BP – Co. says well may need to be cemented from top and bottom and says still deciding on how to proceed with final kill. (Sources)

HSBC - Co. is unlikely to be prevented from taking majority control of Nedbank, according to a source familiar with the situation. (Sources)

Lloyds – Co. is to sell its interest in Crest Nicholson to US investment fund Varde, would have a combined normal value of about GBP 150mln. (Sources)

Vodafone – Co. has lost a landmark legal battle against the Indian tax authorities in a case that lawyers warn will have implications for future cross-boarder deals. The Mumbai high court ruled that co. must pay capital gains tax in India for its USD 11bln acquisition of a controlling stake in Hutchinson Essar, a domestic mobile phone operator. The UK mobile operator could face a total tax bill of more than USD 2bln. (FT)

Morrison – Co.’s H1 underlying pretax profit GBP 410mln vs. Exp. GBP 409mln, and interim dividend up 14% to GBP 0.0123. Co. says has confidence that it will deliver its profit expectations for the year. (RTRS)

Home Retail Group – For FY co. expects to deliver group benchmark profit before tax of GBP 250mln – GBP 275mln, in line with bottom half of current analysts range. Co. says total group benchmark profit before tax in the first half is expected to reduce by approximately 20%-25%. Co. says Argos Q2 like-for-like sales down 5.0%, and Homebase Q2 like-for-like sales flat. (RTRS)

Centrica – Co. shares gained 2.1% yesterday on fresh bid rumours. (FT)

Companies paying Dividend: Rio Tinto (GBP 0.2821)

FTSE 100 index changes: – Home Retail, Segro and Cable & Wireless Worldwide to exit Britain’s FTSE 100 index.

- Weir Group, Tomkins and Resolution to enter FTSE 100 index.

Dana Petroleum - Co.’s largest shareholder backs KNOC bid. (Guardian) Also, KNOC won’t increase its USD 2.6bln bid for co. KNOC said that its offer of GBP 18.00 per share of co. is full and final. (Times/Sources)

Hays – Co. share price gained yesterday on rumours of a GBP 15 per share takeover from Adecco. (Daily Mail)

US

Equities posted modest gains as risk surrounding the Eurozone sovereign states subsided following a well received debt auction from troubled Portugal. The move higher was led by the financials and industrial sectors, closely followed by oil & gas which benefited from higher commodity prices on the back of a weaker USD. Elsewhere, NASDAQ 100 outperformed its peers, with Apple (+2.00%) leading gains after UBS analyst upped price target to USD 350 from USD 340. The latter half saw indices settle into a range-bound trade and at the closing bell DJIA closed up 0.45% at 10387.01, S&P 500 closed up 0.64% at 1098.87 and NASDAQ 100 closed up 1.27% at 1880.00.

Goldman Sachs – Co. is facing a near record fine from the UK’s financial regulator following a five-month investigation into the investment bank’s international business initiated in the wake of fraud charges against co. in the US. The fine is to be announced by the Financial Services Authority, and is likely to be a about GBP 20mln. (FT)

Genzyme – Sanofi-Aventis has pitched a new offer to acquire co. for USD 71 per share in exchange for the opportunity to conduct partial due diligence, according to sources. (RTRS)

Europe

Total – CO. has agreed to buy a 20% stake in Australia’s Gladstone liquefied natural gas project from Santos and Malaysia’s Petronas, according to Santos. Santos said it was selling a 15% stake for USD 597.4mln, with co. buying 5% from Petronas. (RTRS)

Sanofi-Aventis – Co. says phase 3 trial of Aflibercept in second-line metastatic colorectal cancer to continue as planned at recommendation of independent data monitoring committee. Says final analysis expected in H2 2011 and says study will continue to completion as planned, with no modifications due to efficacy or safety concerns. (RTRS) In other news, co. has pitched a new offer to acquire Genzyme for USD 71 per share in exchange for the opportunity to conduct partial due diligence, according to sources. (RTRS)

EDF – Co. and Areva are in talks over strategic accord that has been demanded by the French government and which could be concluded by the end of the year. (La Tribune)

EADS – Co.’s CEO says strong cash position gives company room for ‘reasonable’ acquisitions. Says won’t take too long on acquisition talks as ‘we could lose some of the opportunities.’ (RTRS)

Axa – Australia’s competition regulator has blocked National Australia Bank’s USD 12bln bid for Axa Asia Pacific for a second time, dealing a blow to NAB’s efforts to cement its dominance in the world’s fourth largest wealth management market. (RTRS)

German banks – ECB’s Stark tells German lawmakers German banks are undercapitalised. ECB’s Stark says the US is betting German banking system won’t be able to stay in current form under Basel III and says advises privatisation of German savings banks, says Spain a role model. (RTRS)

Infineon – Co. is unlikely to funnel proceeds from its wireless unit sale into a special dividend in the near term. (Sources)

Telefonica – Co. will stick to its plan to raise its stake in China Unicom, the Hong-Kong listed mobile company. (Hong Kong Economic Times)

Enel - Co. says Enel Green power 2009 pro forma net profit EUR 453mln, pro forma ebitda EUR 1.331bln. (RTRS)

Swisscom – Co. is open to further buys in Italy, according to co.’s spokesperson. (Tagesanzeiger)