Regions

Muthukali · Oct 3, 2012

Most Asian Stocks Advance on China Stimulus Speculation
By Jonathan Burgos and Yoshiaki Nohara - Oct 3, 2012 10:08 AM GMT+0800

Most Asian stocks gained as China’s services industry weakened, stoking speculation the nation will step up measures to stimulate the world’s second-largest economy and overshadowing concern Europe’s debt crisis will worsen as Spain says there are no imminent plans to seek a bailout.

Agricultural Bank of China Ltd., the country’s third- biggest lender by market value, rose 1 percent in Hong Kong. Toyota Motor Corp., the world’s largest carmaker, climbed 1.2 percent after its U.S. sales surged 42 percent in September. Daiichi Sankyo Co. dropped 4.9 percent as the Japanese drug maker and partner ArQule Inc. halted a study of a lung-tumor treatment.

The MSCI Asia Pacific Index slipped less than 0.1 percent 122.03 as of 11:01 a.m. in Tokyo, with about six shares rising for every five that fell. The regional index gained 4 percent in September amid speculation China will add to stimulus measures, following moves by central banks in the U.S. and Japan. Australia cut its benchmark interest rate yesterday.

“China’s economy is decelerating and will probably achieve a soft landing,” said Khiem Do, Hong Kong-based head of multi- asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. “China will introduce additional stimulus measures in their own time. There are a lot of issues in Europe because it’s not easy to execute austerity programs. Spain needs financial aid, but there are always political and social considerations. Austerity is tough.”

Hong Kong Rally
Hong Kong’s Hang Seng Index (HSI) gained 0.6 percent as it resumed trading following a long weekend. The Hang Seng China Enterprises Index of mainland companies climbed 0.7 percent. China’s non-manufacturing industries expanded at a weaker pace in September, stoking speculation policy makers will step up measures to reverse a slowdown in the world’s second-biggest economy.

Japan’s Nikkei 225 Stock Average added 0.1 percent, while Australia’s S&P/ASX 200 Index gained 0.2 percent. Markets in China and South Korea are closed today for holidays.

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The gauge added 0.1 percent in New York yesterday as a rebound in Apple Inc. overshadowed disappointment after Spain’s Prime Minister Mariano Rajoy said a bailout request is not imminent.

The MSCI Asia Pacific Index (MXAP) gained 7.2 percent this year through yesterday as policy makers boosted stimulus measures to counter a global economic slowdown and tame Europe’s debt crisis. Stocks in the Asian benchmark are valued at 12.8 times estimated earnings on average, compared with 13.8 times for the Standard & Poor’s 500 Index and 12 times for the Stoxx Europe 600 Index.

To contact the reporters on this story: Jonathan Burgos in Singapore at [email protected]; Yoshiaki Nohara in Tokyo at [email protected]

To contact the editor responsible for this story: Nick Gentle at [email protected]

Muthukali · Oct 4, 2012

Services in U.S. Expanded More Than Forecast in August
By Michelle Jamrisko - Oct 4, 2012 2:38 AM GMT+0800

Service industries in the U.S. expanded in September by the most in six months, underpinning an economy that lost momentum in the first half of the year.

The Institute for Supply Management’s non-manufacturing index climbed to 55.1, exceeding the most optimistic projection in a Bloomberg survey, from 53.7 in August, figures from the Tempe, Arizona-based group showed today. Readings above 50 signal expansion. ADP Employer Services said in a separate report that private payrolls increased 162,000 last month.

“The economy seems to be leveling off,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts, who projected the services index would rise. “Domestic factors are starting to improve. Jobs are being created and people are feeling a little more confident so they are going to spend more.”

A sustained pickup in industries from construction to retailing that account for almost 90 percent of the economy will help make up for recent weakness in manufacturing. At the same time, a cooling global economy has prompted some service providers such as FedEx Corp. (FDX) to trim growth forecasts.

Stocks advanced after the U.S. figures, with the Standard & Poor’s 500 Index climbing 0.3 percent to 1,450.34 at 2:37 p.m. in New York.

The U.S. figures stand in contrast to other data today showing services industries from Asia to Europe slowed after the euro-area debt crisis pulled economies including Spain and Italy into recession.

China, Europe
The purchasing managers’ index fell to 53.7 in September from 56.3 in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing said today. That’s the lowest since at least March 2011. In the euro-area, a gauge slipped to 46.1 last month from 47.2 and a U.K. measure also fell.

Economists projected 53.4 for the September services gauge, according to the median of 77 estimates in a Bloomberg survey. Forecasts ranged from 51.5 to 54.7. Since the recession ended in June 2009, the gauge averaged 53.4 through August.

Roseland, New Jersey-based ADP said the September increase in payrolls followed a revised 189,000 rise the prior month that was smaller than initially estimated. The median estimate of 38 economists surveyed by Bloomberg projected a 140,000 advance.

Another report showed housing is among the brightest sectors. Mortgage applications last week climbed to the highest level in more than three years as borrowing costs slid. The Mortgage Bankers Association’s index jumped 16.6 percent in the period ended Sept. 28 from the prior week to reach the highest point since April 2009, the Washington-based group said today. Purchase applications rose 3.9 percent and refinancing surged 19.6 percent.

Mortgage Rates
Mortgage rates at all-time lows and cheaper properties are driving sales for companies like Lennar Corp. (LEN) The third-largest builder by revenue said on Sept. 24 that its quarterly profit more than quadrupled from a year earlier.

“The homebuilding business is beginning to revert to normal and that’s positive for the U.S. economy in general, which is in turn good for a sustained recovery in the housing market,” Stuart Miller, chief executive officer at Lennar, said on a conference call. “Overall demand has been improving and we’ve seen a consistent sales pace at improving prices.”

The ISM non-manufacturing survey’s gauge of business activity jumped to 59.9, the highest since February, from 55.6. The new orders index increased to a six-month high of 57.7 from 53.7.

Government Budgets
A “smattering” of companies reported an increase in orders from state and local government agencies for projects at the end of the fiscal year, Anthony Nieves, chairman of ISM’s non-manufacturing survey committee, said in an interview after the report. Government procurement typically picks up at the end of the fiscal year as agencies use up their budgets, he said.

A gauge of employment dropped to 51.1 from 53.8 in the prior month. The index of prices paid increased to 68.1 from 64.3.

The group’s manufacturing index, released Oct. 1, unexpectedly expanded in September after three months of contraction, the longest such stretch since the recession ended in June 2009.

For FedEx, operator of the world’s largest cargo airline, weaker global growth is taking a toll. On Sept. 18 the economic bellwether, because it ships goods from financial documents to electronics, pared its forecast for 2012 U.S. expansion to 1.9 percent from a June projection of 2.4 percent. Global growth will cool to 2.3 percent this year and 2.7 percent in 2013, the Memphis-based company said.

“The global trading economy is still the largest single economy in the world,” Fred Smith, chief executive officer at FedEx, said on a conference call. “But over the last several months, particularly as we went into this fiscal year, it’s been disappointing. It’s reflective of the low growth in the U.S., contraction going on in Europe” and the effect those issues are having on Chinese exports, he said.

To contact the reporter on this story: Michelle Jamrisko in Washington at [email protected]

To contact the editor responsible for this story: Christopher Wellisz at [email protected]

The exhaust duct of the gas turbine at unit one of the Pacific Gas and Electric Co. (PG&E) Colusa Generating Station in Maxwell, California.

Muthukali · Oct 4, 2012

ECB holds rates, Draghi eyed on Spain
By Eva Kuehnen
BRDO PRI KRANJU, Slovenia | Thu Oct 4, 2012 7:53am EDT

(Reuters) - The European Central Bank kept its interest rates on hold on Thursday as markets awaited signals from its President Mario Draghi about when he might pull the trigger on his new bond-buying plan.

A month after Draghi unveiled a bond-purchase program for struggling euro states that was hailed by many as a savior for the single currency bloc, investors are still waiting for Spain to bite the bullet and request a formal rescue.

Before it does, the ECB cannot act, and markets are likely to remain jittery. Spanish two-year note yields have climbed more than half a percentage point in the weeks since Draghi's plan was unveiled - a reminder that action not words are needed to resolve euro zone's three-year old crisis.

"Draghi will be careful, but he will put a little more pressure on Spain to ask for support, given that if that doesn't happen, market turmoil, market volatility could increase again," said Elwin de Groot of Rabobank.

Before the Italian ECB president's 1230 GMT news conference, the central bank announced that its governing council had decided to keep its main refinancing rate steady at 0.75 percent, a record low.

Analysts expect the bank to cut rates later this year, but only after the new bond program has started.

Annual inflation in the euro zone stood at 2.7 percent in September, the 22nd straight month that it has been above the ECB's target of just below 2 percent. This has limited its room to act on rates, even as the currency bloc risks returning to recession in the third quarter.

The rate decision was in line with expectations -- a majority of 73 economists polled by Reuters had expected no change on Thursday from the council meeting in Slovenia, one of two the bank holds annually away from its Frankfurt base.

Purchasing managers data on Wednesday showed companies face dwindling orders and faster layoffs, increasing worries about the economy.

Moreover, the ECB has said its interest rates are not filtering through to households and companies, especially in troubled southern Europe where lending rates are much higher.

It hopes the new bond program will reduce borrowing costs.

Since announcing his plan to buy the short-term debt of struggling euro zone countries to reduce their borrowing costs, Draghi has stressed repeatedly that it is up to governments to take action.

At the news conference he will be quizzed on his assessment of the current negotiations with Spain, which has announced new budget measures in recent weeks to try to regain the confidence of markets.

Beset by anti-austerity protests and threats of secession by the wealthy northwestern region of Catalonia, Spanish Prime Minister Mariano Rajoy has resisted a formal aid request, in part because Germany opposes it, sources told Reuters this week.

He is also worried about the perception that Spain's policies are being dictated from abroad, although analysts said the ECB was unlikely to attach stricter conditions to any bond-buying than those set by the EU and the IMF.

"The ECB will not be setting additional conditionality, you cannot reasonably expect it to do that," said Unicredit economist Marco Valli, who believes Spain will apply for aid after local elections later this month.

(Editing by Noah Barkin/Jeremy Gaunt)

Muthukali · Oct 4, 2012

Bank of England on hold for now, more stimulus on the cards
By Sven Egenter and David Milliken
LONDON | Thu Oct 4, 2012 7:32am EDT

(Reuters) - The Bank of England shied away from stepping up its program of government bond buying on Thursday, as the economy is showing signs of growth and new schemes to boost credit may yet spur lending.

Britain probably exited recession in the third quarter as production bounced back from the effect of an extra public holiday in June and ticket sales for the London Olympics and Paralympics boosted growth.

Still, another cash injection later this year remains a safe bet in the eyes of many economists because the recovery looks feeble, government spending cuts continue to weigh, and the dangers from the unresolved euro zone crisis loom large.

"Pressure for immediate further stimulative action has been eased by the economy recently showing signs of modest underlying growth," said Howard Archer, economist at IHS Global Insight.

"With any recovery currently looking feeble and fragile, we expect the Monetary Policy Committee to decide to give the economy a further helping hand in November," he added.

After its two-day meeting, the Monetary Policy Committee made no change to its current plan to buy 50 billion pounds of British government bonds, which will take its total purchases to 375 billion pounds by November.

The central bank also left its interest rate unchanged at the record low of 0.5 percent, in line with a Reuters poll of economists, who had bet on unchanged policy.

Sterling inched up after the BoE announcement, while gilts showed little reaction.

SPLIT
Britain has not fully recovered the output lost during the 2008-2009 slump, which has left many Britons worse off, and the country fell back into recession late last year.

In another sign that the economy was likely to show some growth, British car sales rose by 8.2 percent in September, nearly twice the annual rate seen so far this year.

"Although the economic outlook remains challenging, we are starting to see a tentative return of consumer confidence," said the chief executive of car lobby SMMT, Paul Everitt.

But mortgage lender Halifax reported a drop in house prices in September, providing a reminder that a sustained recovery was still far from certain.

A slew of weak business surveys have highlighted the fragility of the economy, and the Funding for Lending scheme to get credit flowing has yet to prove its worth.

And the government has little room to provide a meaningful boost to the economy because it is struggling to reduce the country's huge budget deficit despite its tough austerity plan.

So most economists expect another dose of stimulus in November, although the decision may not be unanimous.

"Some members - Spencer Dale, Ben Broadbent and Martin Weale, in our view - are closer to our hawkish view on inflation, and we think their lack of enthusiasm for doing more is likely to be clear again," said Nomura economist Philip Rush.

"However, we still doubt they will 'win the debate' and block the committee from announcing more QE in November," he said.

The central bank will not disclose the discussions until the release of the minutes of the meeting on October 17.

New growth and inflation forecasts in November's quarterly inflation report will help policymakers decide whether more economic stimulus is needed.

The BoE rate-setters will also watch closely if the European Central Bank's pledge to buy Spanish and Italian government bonds to calm the euro zone turmoil will help stabilize Britain's largest export market and the banking industry.

(Reporting by Sven Egenter and David Milliken; Editing by Hugh Lawson)

Muthukali · Oct 5, 2012

U.S. jobless claims point to steady labor market
By Lucia Mutikani
WASHINGTON | Thu Oct 4, 2012 4:53pm EDT

(Reuters) - The number of Americans filing new claims for unemployment benefits rose only slightly last week after a big drop the week before, a hopeful sign the job market is still on the mend.

Other data on Thursday showed a sharp drop in new orders for U.S. factory goods, although orders outside the transportation sector rose for a second straight month, which should calm fears of a rapid loss of momentum in factory activity.

"The economy is obviously feeling the strain from cooler global conditions and the policy uncertainty that continues to over hang us here as we turn the corner on 2012 and into 2013," said Robert Dye, chief economist at Comerica in Dallas.

Worries over the so-called fiscal cliff - automatic tax rises and government spending cuts that will remove about $600 billion from the U.S. economy next year unless Congress acts - have made businesses cautious about ramping up hiring.

The report on jobless claims, however, offered little sign that companies were laying off workers on a wide scale.

Initial claims for state unemployment benefits climbed 4,000 last week to a seasonally adjusted 367,000, the Labor Department. But that followed a drop of 22,000 and a four-week average, which offers a view of trends, held steady at 375,000.

The distressed labor market has been a hurdle to President Barack Obama's bid for re-election, and the monthly U.S. Labor Department employment report due on Friday for September is seen offering cold comfort.

That report, the penultimate one before the November elections, is expected to show employers added 113,000 jobs to their payrolls in September, according to a Reuters poll of economists. That would likely be too few to lower the nation's 8.1 percent jobless rate, which is seen rising to 8.2 percent.

Persistently poor labor market conditions prompted the Federal Reserve last month to announce a plan to buy $40 billion worth of mortgage-backed securities each month until it sees a sustained turnaround in employment. It hopes the purchases will drive down long-term borrowing costs and spur the recovery.

Minutes of the Sept 12-13 Fed meeting released on Thursday showed the U.S. central bank might adopt numerical thresholds for inflation and joblessness that would serve as guideposts for policy.

FACTORIES COOLING BUT NO HARD LANDING
A separate report from the Commerce Department on Thursday showed new orders for manufactured goods tumbled 5.2 percent - the biggest drop since January 2009 when the economy was in the grip of a recession.

But the decline was due to a collapse in demand for aircraft and a softening of automobile purchases, and orders excluding transportation rose 0.7 percent.

Manufacturing has carried the economic recovery and while activity has cooled significantly in recent months, there are so far little signs of a hard landing. A closely watched index released on Monday show that national factory activity expanded in September for the first time in four months.

Stocks on Wall Street rose on Thursday on the claims data and comments by European Central Bank President Mario Draghi on tools to tackle the eurozone debt crisis.

The Standard & Poor's 500 index rose for a fourth day, putting it near a new five-year high. The U.S. dollar fell to a two-week low against the euro and prices for U.S. Treasury debt slipped.

A third report bolstered the view that fiscal cliff fears were not leading businesses to lay off workers.

While planned layoffs at U.S. firms rose 4.9 percent in September, they came in at a 15-year low for the month, consultants Challenger, Gray & Christmas said.

"Though private business surveys have indicated that companies are concerned about the tax hikes ... this report suggests that there has not yet been a pickup in plans by larger firms to reduce employment levels," said John Ryding, chief economist at RDQ Economics in New York.

SOME BRIGHTER SIGNS
Last week's unemployment claims data fell outside the survey period for the September employment report due Friday, but applications dropped 18,000 from the first week of the month, signaling some improvement in the pace of job creation.

A modest improvement in the labor market has also been telegraphed by increases in measures of manufacturing and service sector jobs in September. In addition, payrolls processor ADP on Wednesday reported better-than-expected private sector jobs gains in September.

Even while businesses may be showing some caution, fears of tighter fiscal policy do not yet appear to be weighing on consumers, who are being cushioned by rock bottom borrowing costs engineered by the Fed.

September sales at U.S. retailers looked solid as shoppers finished up their back-to-school buying.

Sales at stores open at least a year at 17 chains tracked by Thomson Reuters I/B/E/S rose 3.6 percent, matching analysts' expectations. In September 2011, such sales rose 6.4 percent.

"Consumer access to credit is fueling home sales, auto sales and other big ticket items that consumers purchase, but we really need to see job growth for that to continue. For now, the credit availability is keeping the economy afloat," said Dye.

(Additional reporting by Jessica Wohl; Editing by Tim Ahmann)

Muthukali · Oct 5, 2012

Asian Stocks Rise With Region’s Currencies, Gold; Samsung Drops
By Glenys Sim - Oct 5, 2012 10:49 AM GMT+0800

Asian stocks gained, led by commodity producers, and regional currencies rose for a seventh week, the longest winning streak since October 2010. The euro and Treasuries were little changed after the European Central Bank said it’s ready to buy bonds and before U.S. jobs data.

The MSCI Asia Pacific Index advanced 0.5 percent at 11:38 a.m. in Tokyo, and futures on the Standard & Poor’s 500 Index rose 0.2 percent. The Bloomberg-JPMorgan Asia Dollar Index advanced 0.4 percent. The euro was at $1.3016 after climbing to $1.3032 yesterday, the strongest since Sept. 21. Yields on the U.S. 10-year note were near the highest in a week. Gold increased to an 11-month high of $1,796.10 an ounce. Financial markets in China are closed.

The Bank of Japan concludes a policy meeting today while Samsung Electronics Co.’s earnings beat estimates. ECB President Mario Draghi reiterated a pledge to buy government bonds to help ease borrowing costs in the region. Data in the U.S. may show the unemployment rate climbed to 8.2 percent from 8.1 percent. Federal Reserve Bank of St. Louis President James Bullard said investors are skeptical the central bank will hold inflation within its 2 percent goal.

“Europe has woken up with Draghi’s involvement and the Fed has also woken up the U.S. economy,” said Khiem Do who helps manage about $8 billion as head of multi-asset strategy at Baring Asset Management (Asia) Ltd. in Hong Kong, on Bloomberg Television’s “First Up.” “The big money is still waiting for China to wake up and until the dragon flies again, we’ll still trade within the range.”

Asian Currencies
Asian currencies rose for a second day as an improvement in the U.S. economy brightened the outlook for the region’s exports. Reports yesterday showed U.S. jobless claims and factory orders were better than forecast. The won strengthened 0.3 percent after earlier reaching 1,109.60, the highest level since Nov. 1. Malaysia’s ringgit gained 0.4 percent to 3.0459.

The euro was little changed at $1.3016, after climbing to $1.3032 yesterday, the strongest since Sept. 21. Price swings in major currencies ebbed before Chinese markets reopen next week. The JPMorgan G7 Volatility Index fell to 7.68, the lowest since October 2007.

About two stocks rose for every one that fell on the MSCI Asia Pacific Index (MXAP), which is up for a second day. BHP Billiton Ltd., Australia’s second-biggest oil producer, rose 0.7 percent after crude prices surged 4.1 percent yesterday. Nippon Sheet Glass Co., which depends on Europe for 40 percent of its sales, advanced 1.7 percent.

Samsung Earnings
Samsung, the world’s top maker of TVs and mobile phones, dropped 0.6 percent even after reporting a record profit that surpassed analysts’ estimates. Earnings at the mobile-phone business surged 93 percent in the quarter with the May debut of the Galaxy S III and the Note, according to a Bloomberg News survey of six analysts, helping mask a slump in profit from selling computer-memory chips.

“Samsung is priced as if the earnings have peaked,” said Khiem, who has an overweight position on the stock. “Maybe there’s a little bit of profit taking but the trend is still up.”

To contact the reporter on this story: Glenys Sim in Singapore at [email protected]

To contact the editor responsible for this story: Alexander Kwiatkowski at [email protected]

Muthukali · Oct 5, 2012

U.S. Jobless Rate Declines to 7.8%; 114,000 Jobs Added
By Alex Kowalski - Oct 5, 2012 9:02 PM GMT+0800

The unemployment rate in the U.S. unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, as employers took on more part-time workers.

The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000. The jobless rate dropped from 8.1 percent and hourly earnings climbed more than forecast.

Stock futures and Treasury yields advanced as investors bet an improving job market will give workers with the wherewithal to boost their spending, helping cushion the economy from a global slowdown. Today’s employment report is the penultimate before the November elections as Obama and challenger Mitt Romney debate whose policies would best spur job growth.

“Things are improving, but it’s really a small down payment on a very big project we’ve got ahead,” James Glassman, senior economist at JPMorgan Chase & Co. in New York, said on Bloomberg Radio. “Politically, it’s important news. It’s nice to see the unemployment rate coming down.”

The unemployment rate, derived from a survey of households, was forecast to rise to 8.2 percent, according to the survey median. Estimates ranged from 8 percent to 8.3 percent.

The contract on the Standard & Poor’s 500 Index expiring in December rose 0.5 percent to 1,462.5 at 9:01 a.m. in New York. The yield on the benchmark 10-year Treasury note climbed to 1.72 percent from 1.67 percent late yesterday.

Part-Time Workers
The household survey showed an 873,000 increase in employment, the biggest since June 1983, excluding the annual Census population adjustments. Some 582,000 Americans took part- time positions because of slack business conditions or those jobs were the only work they could find.

Joblessness fell most among teenagers, declining to 23.7 percent last month from 24.6 percent.

Payrolls projections in the Bloomberg survey ranged from increases of 60,000 to 165,000 following an initially reported 96,000 gain in August. Revisions to July and August added a total of 86,000 jobs to payrolls in the previous two months.

Private payrolls, which exclude government agencies, rose by 104,000 in September. They were projected to advance by 130,000, the survey showed.

Factories eliminated 16,000 positions, compared with the survey forecast of no change and following a 22,000 decrease in the previous month.

Construction Jobs
Employment at private service-providers increased 114,000. Construction companies added 5,000 workers, and retailers hired 9,400 more employees.

Government payrolls increased by 10,000 after a 45,000 jump the month before.

Average hourly earnings climbed 0.3 percent to $23.58, today’s report showed.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 14.7 percent.

Economic issues play a central role in the race for commander-in-chief. Only one president, Ronald Reagan, has been re-elected since World War II with unemployment above 6 percent. On Election Day 1984, the rate was at 7.2 percent, having fallen almost three percentage points in the previous 18 months.

Obama, Romney
To boost employment, Obama last September proposed the American Jobs Act, which would cut payroll taxes for workers and employers, provide aid to states and increase spending on public-works projects. Romney has vowed to create 12 million new jobs as part of a plan that includes developing the energy sector and reducing taxes. The two debated this week.

Companies, nonetheless, may hold back on hiring plans amid concern over Europe’s weakening economy and the so-called fiscal cliff, a combination of tax increases and government spending cuts that will occur next year if Congress doesn’t act.

The share of U.S. chief executive officers planning to add employees or invest more in the next six months declined last quarter, and a bigger share said they’d cut jobs and spending, according to a Business Roundtable survey last month. The group’s economic-outlook index slumped to the lowest since 2009.

“Over the past several months, we’ve seen the economy lose some of the momentum it had generated coming into the year,” Carl Camden, president and chief executive officer at temporary- staff provider Kelly Services Inc. (KELYA), said during a Sept. 13 conference. About a year ago, “we were seeing good signs of a fairly solid recovery. But all of that is definitely slowed and you see that in staffing volumes around the world.”

Finding Work
Still, the labor market has finally become brighter for Jennifer Arnold. The 39-year-old started her job as an assistant grant writer at United Way in Columbus, Ohio, this month after being unemployed for a year and a half. She relied on networking and career counseling to help secure the new position.

“It wasn’t easy,” said Arnold, who has a master’s degree in public administration. “Sometimes I just couldn’t even do it because it was just too much.”

Lenovo Group Ltd. (992) is among those companies hiring. The Beijing-based computer maker said this week that it’s starting a production line in Whitsett, North Carolina, that will create 115 jobs.

Signaling that it can’t combat a slowdown in growth caused by stricter fiscal policy, the Fed last month said it would hold its target interest rate near zero until at least mid-2015 to stimulate more hiring. The central bank also began a third round of stimulus, buying $40 billion in mortgage bonds a month. The S&P 500 rose the next day to its highest close since December 2007.

“We’re looking for ongoing, sustained improvement in the labor market,” Fed Chairman Ben S. Bernanke told reporters following the announcement on Sept. 13. “What we’ve seen in the last six months isn’t it.”

To contact the reporter on this story: Alex Kowalski in Washington at [email protected]

To contact the editor responsible for this story: Christopher Wellisz at [email protected]

Muthukali · Oct 5, 2012

U.S. Stock Futures Rise as Jobless Rate Declines
By Namitha Jagadeesh and Nikolaj Gammeltoft - Oct 5, 2012 9:18 PM GMT+0800

U.S. stock futures rose, with the Standard & Poor’s 500 Index heading for the first weekly gain in three, after data showed the nation added 114,000 jobs last month and the jobless rate unexpectedly fell to 7.8 percent.

Bank of America Corp. (BAC) and Citigroup Inc. (C) jumped at least 1.1 percent to lead advances among financial shares. Caterpillar Inc. (CAT) and Schlumberger Ltd. (SLB) increased more than 0.8 percent to pace gains among the largest companies. Avon Products Inc. climbed 3.5 percent as the door-to-door cosmetics seller said Andrea Jung will step down as executive chairman. Zynga Inc. (ZNGA) slid 20 percent after cutting its forecast for full-year bookings.

S&P 500 futures expiring in December rose 0.5 percent to 1,463.4 at 9:15 a.m. in New York. The equity benchmark has rallied 1.4 percent this week as U.S. economic reports topped estimates. Dow Jones Industrial Average futures added 60 points, or 0.4 percent, to 13,558 today.

“On balance the report looks pretty decent,” Mark Luschini, who helps manage $54 billion as chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, said in a phone interview. “The September number was pretty close to being spot on consensus and it came with an upwards revision to the August number. The market reaction is positive on a report that’s solid even if it’s unspectacular.”

The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for an advance of 115,000. The jobless rate dropped to 7.8 percent from 8.1 percent and hourly earnings climbed more than forecast.

November Elections
Improving employment prospects that lead to stronger wage growth provide workers with the wherewithal to boost their spending, helping cushion the economy from a global slowdown. Today’s employment report is the penultimate before the November elections as President Barack Obama and challenger Mitt Romney debate whose policies would best spur job growth.

“The report is a step in the right direction, but I doubt the champagne corks are popping at the Federal Reserve,” John De Clue, the Minneapolis-based global investment strategist at U.S. Bank Wealth Management, which oversees $113 billion, said in a telephone interview. “Most market participants are probably looking at this in the context of the presidential election rather than in the context of any fundamental change in the economy because we’re still at an unemployment rate that’s not making the Fed happy.”

Central Banks
The S&P 500 has rallied 16 percent this year as central banks from the U.S. to China took steps to stimulate economic growth. The Fed last month announced a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.”

For the first time this year, hedge funds are turning away from a rally in the global stock market. The ratio of bullish to bearish bets among professional speculators fell last week and is below historical averages, according to a survey by International Strategy & Investment Group. The reduction came as the MSCI All-Country World Index (MXWD) extended its yearly advance to 12 percent and contrasts with January, when managers bought shares as they rose, data compiled by ISI and Bloomberg show.

Financial companies rallied today. Bank of America jumped 1.6 percent to $9.56. Citigroup climbed 1.1 percent to $35.35.

Caterpillar, the world’s biggest construction and mining equipment maker, added 1 percent to $86.80. Schlumberger, the biggest oilfield-services provider, increased 0.8 percent to $72.24.

Avon Climbs
Avon Products climbed 3.5 percent to $16.79. Jung will step down as executive chairman at the end of the year and will be replaced by Fred Hassan, currently lead independent director. Avon said in December that Jung would relinquish the chief executive officer position amid slumping earnings and a foreign- bribery investigation. Avon rebuffed a takeover offer from Coty Inc. earlier this year.

Zynga plunged 20 percent to $2.26 as the online-game maker cut its forecast for full-year bookings, a predictor of sales, citing lower demand for titles such as “The Ville.”

Bookings this year will be in the range of $1.085 billion to $1.1 billion, compared with an earlier forecast of $1.15 billion to $1.225 billion, Zynga said after markets closed yesterday. The San Francisco-based company also wrote down the value of its acquisition of OMGPop Inc.

Facebook Inc. (FB) slipped 2.2 percent to $21.47. Zynga makes most of its money by selling virtual goods in games played on Facebook’s social network.

Biogen Falls
Biogen Idec Inc. (BIIB) lost 0.6 percent to $151.69 after Oppenheimer & Co. lowered its recommendation on the third- largest U.S. biotechnology company to market perform, the equivalent of hold, from outperform.

The price of bearish options on U.S. makers of household goods has fallen to the lowest level in 13 months on speculation the stocks will beat the market as the economy slows.

Puts with an exercise price 10 percent below the Consumer Staples Select Sector SPDR Fund cost 4.75 points more than calls betting on a 10 percent rally, according to six-month implied volatility data tracked by Bloomberg. The price relationship known as skew for the exchange-traded fund, which tracks companies like Procter & Gamble Co. and Wal-Mart Stores Inc., reached 4.67 on Sept. 14, the lowest level since August 2011.

To contact the reporters on this story: Namitha Jagadeesh in London at [email protected]; Nikolaj Gammeltoft in New York at [email protected]

To contact the editor responsible for this story: Lynn Thomasson at [email protected]

Muthukali · Oct 5, 2012

Former GE CEO Jack Welch Says White House Manipulates Jobs Data
By Tim Catts - Oct 5, 2012 9:06 PM GMT+0800

Former General Electric Co. (GE) Chief Executive Officer Jack Welch accused the Obama administration on Twitter of manipulating today’s employment data for political advantage.

“Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers,” Welch wrote in a message posted immediately after the U.S. Labor Department reported that the economy added 114,000 jobs last month, pushing the unemployment rate to 7.8 percent, the lowest since President Barack Obama took office in January 2009.

Roseanne Badowski, Welch’s secretary, said the retired CEO is the only one with access to the Twitter account and is now unavailable for the rest of the day in meetings.

To contact the reporter on this story: Tim Catts in New York at [email protected]

To contact the editor responsible for this story: Ed Dufner at [email protected]

Muthukali · Oct 5, 2012

Lehman brokerage, Europe unit settle $38 billion in claims
Fri Oct 5, 2012 9:03am EDT

(Reuters) - The U.S. brokerage unit and a European unit of the former Lehman Brothers Holdings Inc said they settled a dispute over $38 billion in claims over client and creditor assets, a major step toward allowing customers and creditors to recover money.

Lehman Brothers Inc and Lehman Brothers International Europe (LBIE) announced the agreement in principle in a joint statement on Friday.

The accord requires approval by U.S. Bankruptcy Judge James Peck in Manhattan as well as by the English High Court.

On Thursday, the U.S. brokerage unit announced a separate agreement with its former Swiss-based derivatives unit Lehman Brothers Finance AG.

Taken together, the agreements resolve two of the biggest outstanding claims facing the U.S. brokerage unit.

Friday's agreement "sets the stage for distributions that will provide for 100 percent recovery of customer property," said James Giddens, the trustee for the Lehman brokerage unit.

Tony Lomas, joint administrator of LBIE, said the accord allows it to focus on how to distribute more than $7 billion of client assets.

Under the agreement, the European unit will be allowed $8 billion in claims for customer accounts. The accounts include $7.5 billion in securities and cash and $500 million in cash net equity.

The unit will also be entitled to a $4 billion general property claim, plus $600 million of "post-filing income." Lehman Brothers Inc's $13.8 billion unsecured claim against the European unit will be eliminated.

In March, the parent company emerged from the largest U.S. bankruptcy in history after 3-1/2 years in Chapter 11. Lehman had been Wall Street's fourth largest investment bank.

The cases are In re: Lehman Brothers Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-01420; and In re: Lehman Brothers Holdings Inc in the same court, No. 08-13555.

(Reporting By Jonathan Stempel in New York; Additional reporting by Tom Hals in Wilmington, Delaware; Editing by Gerald E. McCormick and Jeffrey Benkoe)

Muthukali · Oct 6, 2012

Welch Conspiracy Theory on Jobs Data Not Tied to Reality
By Hans Nichols and Lorraine Woellert - Oct 6, 2012 7:55 AM GMT+0800

A good conspiracy theory is irrefutable. A bad one usually collapses when confronted by reality.

The claim by some supporters of Republican challenger Mitt Romney that President Barack Obama’s Chicago-based campaign doctored September’s unemployment figures for political gain fall into the second category, according to members of both parties who have served in the government’s economic data system.

Jack Welch, the former chief executive officer of General Electric Co. (GE), touched off an Internet-based frenzy yesterday when he suggested on Twitter that Obama’s team lowered the country’s unemployment rate to 7.8 percent to give the president a boost. “Unbelievable jobs numbers. . . these Chicago guys will do anything. . . can’t debate so change numbers,” he wrote.

The charge then was picked up by Arizona Senator John McCain and Florida Representative Allen West, both Republicans.

Welch’s message was re-sent via Twitter 3,832 times, meaning each of those people re-broadcasted it to their groups of followers, in the first 10 hours. Rebuttals posted by journalists on Twitter, including Keith Olbermann and Politico’s Roger Simon, were re-tweeted at least 300 times combined. Representative West’s message of support was re-tweeted 592 times.

‘Too Important’
During a television interview last night, when CNBC host Larry Kudlow said it was unrealistic to allege the White House tampered with the data, Welch tempered his words.

“Let’s hope that’s totally correct, Larry,” Welch said. Still, he said, “This election is too important for one number that might be corrected next month to determine the election. I want to see a real debate about this number.”

Economists, including one who worked for McCain, dismissed the very suggestion that U.S. Bureau of Labor Statistics would, or even could, manipulate the data.

The people who compile the numbers “are professionals” and “do this as a career,” said Doug Holtz-Eakin, economist for the Council of Economic Advisers under President George W. Bush and the policy director for McCain’s 2008 campaign. “I have a lot of respect for them.”

‘Weird Number’
“I’ve never been one of those who felt that the numbers get doctored,” said Holtz-Eakin. “Like any other enterprise, every now and then you just get a weird number and this one makes no sense.”

Welch, 76, had quickly concluded the opposite.

Five minutes after the U.S. Labor Department reported at 8:30 a.m. that the unemployment rate fell to 7.8 percent last month, Welch pushed the button on his Twitter message. He took aim at the figures that may matter most before Election Day on Nov. 6; the October report due on Nov. 2 may be too late to change voters’ perceptions about the economy.

The Obama administration called the allegation baseless and defended BLS, which computes the figures. Alan Krueger, chairman of the White House Council of Economic Advisers, told Bloomberg Television that Welch’s remark was “irresponsible.”

“No serious person would question the integrity of the Bureau of Labor Statistics,” Krueger said in the interview. “These numbers are put together by career employees.”

Romney campaign aides said they weren’t disputing the data, keeping their focus on criticism of Obama’s record.

‘Anemic Trend’
“We’re going to address the numbers as they’ve been released,” Romney’s policy director, Lanhee Chen, said on Fox Business. “What you see, as you’ve said on the show, is an anemic trend. This is not a real recovery.”

Gary Sheffer, vice president of communications and public affairs at GE, declined to comment.

Each month, federal agencies, staffed by career civil servants, compile the raw data that eventually become two jobs- day numbers: the unemployment rate and the total number of jobs added to the economy.

It begins on the Sunday of the week that has the 19th in it, with 2,000 Census Bureau workers knocking on 60,000 doors, asking residents if they were employed, or if they were seeking employment, in the last week, said Nancy Potok, the bureau’s associate director, in an interview on July 30.

The bureau has 20 days to complete the survey and send it to the BLS, which then has two or three days to provide the numbers to the Council of Economic Advisers, said Gary Steinberg, a BLS spokesman, in an Aug. 1 interview. Before transmitting the numbers to the CEA, the Census Bureau weights the data to adjust for non-answers and unresponsive households.

Work-Site Questionnaires
At the same time, the BLS is conducting the so-called establishment survey, by sending and receiving questionnaires to 486,000 work sites. The main question that separate survey seeks to answer: how many jobs the work sites had on their payrolls on the 12th of the month.

On the Thursday afternoon before Labor Department’s Friday release of the numbers, the BLS transmits both data sets to the Council of Economic Advisers, over a secure system. It then becomes the CEA chairman’s responsibility to provide the president with the numbers. All the data is transmitted over secure systems and it is often walked to the West Wing by the CEA chairman, Austan Goolsbee, Obama’s previous CEA chairman said in a Sept. 5 interview.

Thirty years ago, few guidelines applied to the release of U.S. economic reports. In 1972, during President Richard Nixon’s term, Senator William Proxmire, a Democrat from Wisconsin and chairman of Congress’ Joint Economic Committee, called the U.S. data unreliable. He decried “misleading economic indicators,” according to press reports at the time.

Release Manipulated
After an investigation, the committee concluded that the Nixon administration had manipulated the packaging and release of economic data, said Bernard Baumohl, chief global economist at Economic Outlook Group LLC in Princeton, New Jersey.

Since then, “controls have been increasingly made stricter,” he said.

“There’s no politics that goes into these numbers at all,” he said. “The way the U.S. collects economic statistics is viewed around the world as the gold standard.”

“For sure, some conspiracy theorist will contend that the BLS is cooking the data for political reasons. Such theories are absolutely garbage,” said Ray Stone, managing director of Stone & McCarthy Research Associates in Princeton, New Jersey, in a note to clients. “The BLS never lets politics enter the data.”

“The conspiracy theorists are assuming that the Obama administration would manipulate the data for political purposes,” said Keith Hennessey, Bush’s last director of the National Economic Council. “I assume that the new employment numbers, while a bit surprising, are real.”

Too Many People
“I don’t think they could manipulate it,” said Hennessey, who received the jobs reports on Thursday nights before their release when he was in government. “Too many people would have to be involved and they couldn’t coordinate that many people lying about the data.”

“It would be very difficult,” to manipulate numbers at the BLS, said Elaine Chao, U.S. Labor Secretary from 2001 to 2009.

Ward McCarthy, chief financial economist at Jefferies & Co. in New York, said that the drop in unemployment “stirred up the conspiracy-theory pots.”

While the numbers are unbelievable, “no, we do not think that there has been a Washington conspiracy to ‘cook the books’ as some have claimed,” McCarthy wrote in a note to clients. The numbers, rather, simply don’t reflect current economic conditions, he said.

When asked about Welch’s assertion on CNBC this afternoon, McCain, the Republican presidential nominee four years ago, said, he “wouldn’t put anything past this administration.”

He then added that he was “not enough of an economist” to interpret the jobs data.

To contact the reporters on this story: Hans Nichols in Washington at [email protected]; Lorraine Woellert in Washington at [email protected]

To contact the editor responsible for this story: Steven Komarow at [email protected]

Welch’s Conspiracy Theory on Jobs Data Isn’t Rooted in Reality

Craig Ruttle/Bloomberg
Jack Welch, former chief executive officer of General Electric Co.

Muthukali · Oct 6, 2012

Muthukali · Oct 6, 2012

Muthukali · Oct 8, 2012

Record Crash Prompts Indian Exchanges to Seek New Limits
By Santanu Chakraborty - Oct 8, 2012 2:30 AM GMT+0800

Indian exchanges asked the market regulator to narrow the range it allows some stocks to trade after erroneous orders caused a record plunge in the S&P CNX Nifty (NIFTY) Index, according to officials familiar with the proposal.

Price limits for 216 of the biggest and most liquid stocks should be lowered from 20 percent to 9 percent, the three officials said. The measure was proposed to the Securities & Exchange Board of India by exchange executives at a meeting in Mumbai on Oct. 6, said the people, who asked not to be identified as the talks were private.

Trading in the benchmark Nifty and some stocks stopped for 15 minutes on Oct. 5 after the 50-stock gauge sank 16 percent. The incident, which briefly erased $58 billion in value, is the latest in a series of mishaps that has put pressure on regulators globally to prevent market errors. Bad trades sent Kraft Foods Group Inc. (KRFT) up as much as 29 percent on Oct. 3, and in May, the Nasdaq Stock Market blamed software for delays in order confirmations in the debut of Facebook Inc.

“Everyone is very sensitive to these electronic errors,” Adam Mattessich, head of international trading at Cantor Fitzgerald LP, said by phone from New York on Oct. 5. “It’s the kind of thing that could be nothing or it could become a financial calamity.”

Of the 4,100 companies on the National Stock Exchange of India, the nation’s largest bourse, 19 slumped 19 percent or more intraday. Reliance Industries Ltd. (RIL), the biggest company by market value, rebounded from a 20 percent plunge to close up 0.6 percent at 857.8 rupees. Housing Development Finance Corp. (HDFC), the biggest mortgage lender, lost 5 percent to 749.95 rupees after also falling 20 percent.

Wrong Orders
As many as 59 erroneous trades by a dealer at Emkay Global Financial Services Ltd. (EMKAY) in Mumbai that led to trades valued at 6.5 billion rupees ($125 million) caused the problem, the NSE said in a statement on Oct. 5.

Circuit-breaker limits enforced by the NSE get activated “after existing orders are executed,” Ravi Varanasi, head of business development at the exchange in Mumbai, said by phone on Oct. 5. “We are investigating the reason behind the wrong orders and how checks and balances at the member’s end failed.”

The NSE’s trading limits for the Nifty index range from 10 percent to 20 percent. The exchange and rival BSE Ltd., Asia’s oldest bourse, have price caps on individual stocks that range from 5 percent to 20 percent. Stocks traded in the futures and options segment are permitted to rise or fall 20 percent in a single session without a halt in trading.

‘Review Orders’
“Lowering these limits may prevent flash crashes in the future,” Nirakar Pradhan, chief investment officer at Future Generali India Life Insurance Co. in Mumbai, said by telephone yesterday. “Traders will get room to review and modify their orders” after price limits are reached, he said.

Exchange officials are meeting the market regulator today to discuss the implementation of the proposal, the people said. S. Ramann, executive director at the Securities and Exchange Board, declined to comment on the plan. BSE spokesman Ketan Mehta was not immediately available for comment.

In May 2010, high-frequency orders worsened the U.S.’s so- called flash crash, which briefly wiped $862 billion from the nation’s stocks. While the drop in India drew comparisons with rout in American equities, the U.S. event spurred many times the losses of the Nifty’s drop and affected more stocks.

About 20 companies in India saw declines of 19 percent or more on Oct. 5, compared with the more than 300 securities that lost at least 60 percent during the flash crash before the trades were canceled, a September 2010 report from the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission found. The decline and rebound in the Nifty lasted seconds, compared with more than 15 minutes for stocks, futures and indexes in the flash crash.

‘Fat-Finger’
“It’s definitely concerning but we feel it was a fat- finger mistake rather than a market structural issue,” Ben Rozin, who helps manage the $600 million Manning & Napier International Fund, which includes Indian stocks, said by phone from Rochester, New York on Oct. 5. “When we look at the Indian equity market, we think it’s pretty well run, and that this has very low impact.”

The NSE controls more than 90 percent of India’s $28 billion equity derivatives market and handles 75 percent of the stock trades. The stoppage, the biggest such problem in more than two years, comes as a burst of policy reforms by Prime Minister Manmohan Singh propels Indian stocks to a 17-month high. Foreigners have plowed a net $16.5 billion into local shares this year, the most among 10 Asian markets tracked by Bloomberg, excluding China.

Volumes Recover
Combined daily volumes on the nation’s two biggest bourses averaged 989 million shares last month, 27 percent more than in August, data compiled by Bloomberg show. Trading last year in the Nifty, at 35.5 billion shares, was the lowest in four years.

“It’s not something that India needed at this stage when volumes are just beginning to recover,” A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte., which manages about $400 million, said by phone from Singapore on Oct. 5.

Emkay in a statement issued Oct. 6 said the “obvious and apparent error would justify the annulment of these trades,” on the NSE. The trades won’t be scrapped as the exchange’s systems weren’t at fault, said Varanasi.

Emkay’s shares plunged by the daily limit of 10 percent to 31.05 rupees on Oct. 5.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at [email protected]

To contact the editor responsible for this story: Allen Wan at [email protected]

Record Crash Said to Prompt Indian Exchanges to Seek New Limits

A passerby looks at the screen showing stock market activity, at the Bombay Stock Exchange building, in Mumbai, India (AP Photo/Rajesh Nirgude)

Muthukali · Oct 9, 2012

Inflation Bonds May Ease Singapore Price Pinch
By Sharon Chen and Wes Goodman - Oct 9, 2012 12:01 AM GMT+0800

Singapore is considering issuing bonds that protect against inflation after price gains sent the cost of a public-housing apartment to a record S$1 million ($813,000) last month and made cars as expensive as U.S. homes.

Singapore’s consumer price index rose 3.9 percent in August from the year before, more than double the 1.7 percent rate in the U.S., the world’s biggest economy. Inflation in the island state averaged 5 percent for the past year. With the nation home to world’s highest proportion of millionaire households, the central bank is studying the feasibility of securities to help savers protect their funds from rising costs.

Assets in inflation-protected bond funds worldwide climbed to a record $183.8 billion as of Aug. 31, according to EPFR Global in Cambridge, Massachusetts. In the U.S., the largest market for the debt at $729.8 billion, bond payments are based on a principal amount that increases or decreases in line with the consumer price index. Japan, South Korea, Australia and Hong Kong are Asia-Pacific economies that already sell inflation- linked debt, according to data compiled by Bloomberg.

“For whoever is looking at managing inflation risks, it would be a handy tool which has been developed in many other markets already, particularly those that consider themselves financial centers,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd., part of Japan’s third- biggest lender by market value. “I think we see a need to go ahead and say, ‘let’s get this done.’”

Inflation will be within the government’s forecast of 4 percent to 4.5 percent this year, Varathan said.

More Millionaires
An index of debt that protects against rising costs has returned 5.6 percent in 2012, versus 3.6 percent for sovereign securities, according to Bank of America Merrill Lynch data. Inflation-linked bonds have beaten conventional debt every year since 2008, when the global economy was in a recession, the indexes show.

Singapore’s millionaire households expanded by 14 percent last year, according to a Boston Consulting Group study published May 31. The proportion of millionaire homes was 17 percent, the highest in the world, followed by Qatar and Kuwait.

A public housing apartment sold for a record S$1 million in September, according to Singapore’s Straits Times newspaper. The 17-year-old unit was 1,615 square feet (150 square meters), according to the article.

BMW Cost
The cost of a 5 Series sedan made by Bayerische Motoren Werke AG starts at S$257,800, according to prices posted on SGCarMart.com by dealer Performance Motors Ltd., or about $209,000. The price includes the cost of the car plus taxes and a permit fee imposed by the government. The median price of a U.S. existing home was $187,400 in August, data from the National Association of Realtors show.

Inflation-protected bonds would follow a series of measures by Prime Minister Lee Hsien Loong to cope with price pressures.

The government raised taxes on purchases of private residential property in December, according to the Ministry of National Development’s website. It announced plans last month to increase public housing units, according to the Housing Board website. Singapore’s central bank said last week it would restrict home-loan maturities for new residential properties to a maximum 35 years to avoid a housing bubble.

The Land Transportation Authority took steps in May to increase the supply of driving permits that are auctioned every two weeks. The government this year introduced vouchers to aid lower- and middle-income people and the elderly in offsetting the 7 percent sales tax.

‘Losing Money’
Singapore may follow Hong Kong by selling bonds that are tailored for individuals and linked to the consumer price index, said Tan Su Shan, a so-called nominated member of Parliament who has limited voting rights and is appointed by the president. Tan proposed such a debt plan in Parliament earlier this year.

“Some kind of CPI-linked bonds in the Singapore market, specifically for the retail market, will be great,” said Tan, who is also head of wealth management at DBS Group Holdings Ltd. (DBS), Southeast Asia’s largest bank. “It’s no secret that the regular saver is losing money” to inflation, she said.

High inflation rates make the set payments on debt less valuable over time and can cause bonds to deliver negative returns. The fixed deposit rate for 12 months is 0.32 percent at Singapore banks, according to the MAS. The so-called real rate that accounts for inflation is negative 3.58 percent. Yields of 1.36 percent on Singapore’s 10-year government notes are also less than the rate of price increases in the economy.

Hong Kong Model
The central bank is “studying the feasibility of such bonds,” Lawrence Wong, a board member at the MAS, said in Parliament on July 9 in response to Tan’s question. Inflation is “uncomfortably high,” and the government “is mindful of the problems such an environment poses to savers and depositors,” he said.

An MAS spokeswoman confirmed on Oct. 1 that the central bank’s stance expressed by Wong in July still holds.

Hong Kong first issued HK$10 billion ($1.3 billion) of the securities in July 2011, and it sold another HK$10 billion of bonds in June.

Investors could buy amounts as small as HK$10,000, equivalent to $1,289, by placing orders through a bank. Both bonds have three-year maturities, and their interest rates are linked to inflation measured by the composite CPI.

Investors seeking to buy at the second sale in June submitted orders for HK$49.8 billion of securities, a record for the local retail bond market, according to a statement from the Hong Kong Monetary Authority.

Rajeev De Mello, who oversees $7 billion as the Singapore- based head of Asian fixed-income assets at Schroder Investment Management, said he would like to add inflation-linked bonds from the nation to his portfolios.

“The average investor would also be interested,” he said.

To contact the reporters on this story: Wes Goodman in Singapore at [email protected]; Sharon Chen in Singapore at [email protected].

To contact the editor responsible for this story: Rocky Swift at [email protected]

Muthukali · Oct 9, 2012

IMF Sees ‘Alarmingly High’ Risk of Deeper Global Slump
By Sandrine Rastello - Oct 9, 2012 9:50 AM GMT+0800

The International Monetary Fund cut its global growth forecasts as the euro area’s debt crisis intensifies and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent.

“A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,” the IMF said in its World Economic Outlook report. “The answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges.”

The IMF’s 188 member countries convene in Tokyo this week as low growth damped by fiscal consolidation in the richest economies hurts developing counterparts from China to Brazil. As the IMF urged measures to boost confidence, uncertainties out of Europe show no sign of abating, with leaders still divided over a banking union and Spain resisting a bailout.

Confidence Fragile
“Confidence in the global financial system remains exceptionally fragile,” the IMF said. “Bank lending has remained sluggish across advanced economies” and increased risk aversion has damped capital flows to emerging markets, it said.

The MSCI Asia Pacific Index of stocks was up 0.1 percent as of 10:37 a.m. in Tokyo.

In Seoul, World Bank President Jim Yong Kim told a forum today that he saw mildly encouraging signs in Europe. In Tokyo, IMF Chief Economist Olivier Blanchard indicated that yields on Spanish and Italian bonds, which decreased after the European Central Bank’s bond-buying plan announcement, could rise if the countries don’t request bailouts.

The IMF report called for U.S. policy makers to find an alternative to planned automatic tax increases and spending cuts that would trigger a recession. Europeans must follow on their commitments for a more integrated monetary union, and many emerging markets can afford to cut interest rates or pause tightening to fight off risks to their economies, the IMF said.

Europe’s Contraction
The 17-country euro area economy will contract 0.4 percent this year, 0.1 percentage point worse than forecast in July, and grow 0.2 percent in 2013, less than the 0.7 percent predicted three months ago, the IMF said.

The U.S. is seen expanding 2.2 percent this year, higher than an earlier forecast, and growing 2.1 percent next year, less than previously predicted. Japan’s estimate was cut to 2.2 percent this year and to 1.2 percent in 2013.

Spain’s economy will shrink 1.3 percent next year, 0.7 percentage point worse than predicted in July. German growth is seen at 0.9 percent each year, with the 2013 estimate half a percentage point less than previously forecast.

“Spain and Italy must follow through with adjustment plans that re-establish competitiveness and fiscal balance and maintain growth,” Blanchard wrote in a foreword to the report. “To do so, they must be able to recapitalize their banks without adding to their sovereign debt. And they must be able to borrow at reasonable rates.”

Emerging Economies
Growth forecasts were also lowered for emerging markets, where domestic factors add to external constraints, the IMF said. Brazil had some of the steepest cuts, with growth seen at 1.5 percent this year from 2.5 percent and 4 percent next year.

India’s economy may grow 4.9 percent this year and 6 percent next year, lower than previous forecasts of 6.2 percent and 6.6 percent respectively. China’s estimate was cut by 0.2 percentage point each year to 7.8 percent in 2012 and 8.2 percent in 2013.

Monetary policy should remain accommodative in developed economies, with expectations for slower inflation giving the European Central Bank “ample justification for keeping policy rates very low or cutting them further,” the IMF said. The Bank of Japan may need to ease further, it said.

Other risks to the global economic outlook in the short term include a renewed increase in oil prices and an inability to raise the U.S. debt ceiling, it said.

The IMF forecasts assume oil at $106.18 a barrel this year and $105.10 next year, based on the average prices of U.K. Brent, Dubai and West Texas Intermediate crudes. That compares with estimates of $101.80 and $94.16 in July.

Japan’s Trade
In economic releases in the Asia Pacific region today, Japan reported a larger-than-estimated 454.7 billion yen ($5.8 billion) current-account surplus. In Australia, business confidence recovered in September as the prospect of interest- rate reductions overshadowed weaker sentiment among miners and manufacturers, a private survey showed.

In South Korea, the central bank said today that the nation’s economy faces increased external risks and the finance ministry said it will step up efforts to boost growth.

In Europe, the U.K. may report today that industrial production fell in August, a Bloomberg News survey of economists indicates.

To contact the reporter on this story: Sandrine Rastello in Washington at [email protected]

To contact the editor responsible for this story: Paul Panckhurst at [email protected]

Muthukali · Oct 10, 2012

Fraser & Neave Gets S$1.4 Billion Offer for Hospitality Unit
By Joyce Koh - Oct 10, 2012 8:22 AM GMT+0800

Fraser & Neave Ltd. (FNN), the Singapore- based conglomerate that agreed to sell its brewing assets to Heineken NV (HEIA), got a S$1.4 billion ($1.1 billion) offer for its hospitality and serviced residence business.

F&N, which didn’t identify the bidder, said it won’t respond to the offer, citing takeover rules and the business’s value within its property division, according to a statement to the Singapore exchange today. The party making the bid isn’t related to any directors or substantial shareholders, it said.

The offer complicates a S$9 billion takeover bid Thai billionaire Charoen Sirivadhanabhakdi made last month to gain control of the conglomerate. Fraser & Neave is set to complete the sale of its brewing business to Heineken for S$5.6 billion later this year.

Japan’s Kirin Holdings Co. (2503), which has a 15 percent stake in F&N, has said it is interested in its soft-drink and food businesses.

To contact the reporter on this story: Joyce Koh in Singapore at [email protected]

To contact the editor responsible for this story: Stephanie Wong at [email protected]

Muthukali · Oct 10, 2012

Asian Stocks Drop as China Slowdown Weighs on Earnings
By Jonathan Burgos and Yoshiaki Nohara - Oct 10, 2012 8:26 AM GMT+0800

Asian stocks fell, with the regional benchmark index heading for a one-month low, on concern China’s economic slowdown and its territorial dispute with Japan are weighing on corporate earnings.

Komatsu Ltd. (6301), a maker of construction equipment that gets about 14 of sales from China, slid 2.9 percent in Tokyo. Toyota Motor Corp. slipped 1.9 percent, pacing declines among Japanese carmakers that reported their biggest drop in China sales since at least 2008. Korea Electric Power Corp. sank 3 percent in Seoul after shareholder KR&C offered to sell shares in the utility company.

The MSCI Asia Pacific Index (MXAP) dropped 0.7 percent to 120.80 as of 9:25 a.m. in Tokyo, heading for its lowest close since Sept. 12. Markets in China and Hong Kong have yet to open. Alcoa Inc., the largest U.S. aluminum producer, cut its forecast for global consumption of the metal as the Chinese economy slows.

“We are clearly seeing the impact of a Chinese slowdown globally and it’s indicated in Alcoa’s numbers,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “Equity markets have had a very strong run. So, it won’t be surprising if they go through some correction. In a sense, actually a correction will be healthy.”

To contact the reporters on this story: Jonathan Burgos in Singapore at [email protected]; Yoshiaki Nohara in Tokyo at [email protected]

To contact the editor responsible for this story: Nick Gentle at [email protected]

Muthukali · Oct 10, 2012

Global financial confidence "very fragile", euro crisis key threat: IMF

By Anna Yukhananov
TOKYO | Tue Oct 9, 2012 5:32pm EDT

(Reuters) - The International Monetary Fund urged European policymakers to deepen the financial and fiscal ties within the euro area with some urgency to restore sagging confidence in the global financial system.

In its semi-annual check on the world's financial health, the Fund said the euro area's debt crisis was a key threat and the risks to global financial stability had risen in the last six months leaving confidence "very fragile".

The euro area's plodding progress means European banks are likely to offload $2.8 trillion in assets over two years to reduce their risk exposure, an increase of $200 billion from a prediction six months ago, the IMF estimated.

"Despite many important steps already taken by policymakers, this agenda remains critically incomplete, exposing the euro area to a downward spiral of capital flight, breakup fears and economic decline," the IMF said in its Global Financial Stability Report (GFSR) released on Wednesday.

"Risks to financial stability have increased since the April 2012 GFSR, as confidence in the global financial system has become very fragile," the IMF said.

The report adds to the gloomy backdrop to the IMF's semi-annual meeting to be held in Tokyo later this week. On Tuesday, it said the global economic slowdown was worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.

Last week, Canada's Finance Minister Jim Flaherty expressed his latest sign of frustration over progress in resolving Europe's debt crisis by saying it represented a "clear and present danger".

In September, the European Central Bank agreed to buy the bonds of debt-strained governments once they have signed up for a euro zone bailout program, restoring some market confidence and narrowing the spread between core and peripheral debt in the region.

But private investors still lack confidence in peripheral European markets and the difference between the yields on peripheral and core debt from banks and companies remains high, threatening any recovery, the IMF said.

Under current policies, the IMF estimated European banks will shed $2.8 trillion in assets between the third quarter of 2011 and the end of 2013, higher than the $2.6 trillion it had predicted in April, further squeezing credit availability.

And if European policymakers do not fulfill promises to establish a common bank supervisor, and peripheral countries do not follow through with adjustment programs, the costs could be even higher, with $4.5 trillion in lost assets, and additional impacts on employment and investment.

Risks from the euro zone could also spill into emerging markets, where growth is already slowing. Countries in central and eastern Europe are the most vulnerable to financial shocks, given their exposure to the euro zone and their own entrenched external debts, the report said.

And while the United States and Japan have benefited from safe-haven flows away from the euro zone, the IMF said both countries need to do more to reduce their fiscal burdens in the medium term.

The U.S. faces a so-called "fiscal cliff" -- government spending cuts and tax rises due to take effect early in 2013. Japan is carrying the biggest public debt burden among leading industrialized nations at twice the size of its $5 trillion economy at a time when its social welfare spending is under constant pressure from a rapidly ageing population.

"The key lesson of the past few years is that imbalances need to be addressed well before markets start flagging credit concerns," the report said.

(Editing by Neil Fullick)

Muthukali · Oct 10, 2012

U.S. sues Wells Fargo in mortgage fraud case

By Rick Rothacker and Aruna Viswanatha
Tue Oct 9, 2012 7:31pm EDT

(Reuters) - The U.S. government filed a civil mortgage fraud lawsuit on Tuesday against Wells Fargo & Co, the latest legal volley against big banks for their lending during the housing boom.

The complaint, brought by the U.S. Attorney in Manhattan, seeks damages and civil penalties from Wells Fargo for more than 10 years of alleged misconduct related to government-insured Federal Housing Administration loans.

The lawsuit alleges the FHA paid hundreds of millions of dollars on insurance claims on thousands of defaulted mortgages as a result of false certifications by Wells Fargo, the fourth-biggest U.S. bank as measured by assets.

"As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," said Manhattan U.S. Attorney Preet Bharara.

Wells, the largest U.S. mortgage lender, denied the allegations and said in a statement it believes it acted in good faith and in compliance with FHA and U.S. Department of Housing and Urban Development rules. The bank said many of the allegations have been previously addressed with HUD and added that its FHA delinquency rates have been as low as half the industry average.

In a regulatory filing in August, the bank said it was being investigated for possible violations of laws and regulations relating to mortgage origination practices, including FHA loans. Wells said it will vigorously defend itself against the suit.

Bharara's office has brought similar cases in the past few years, including one against Citigroup Inc unit CitiMortgage Inc, which settled the case for $158.3 million in February, and against Deutsche Bank, which paid $202.3 million in May to resolve its case.

The U.S. Attorney's office in Brooklyn brought the biggest such case, against Bank of America Corp's Countrywide unit, which agreed in February to pay $1 billion to resolve the allegations.

The Wells Fargo case is brought under the False Claims Act, which provides penalties for fraud against the government, and under the Financial Institutions Reform, Recovery, and Enforcement Act, or FIRREA for short, a little-used statute that has grown in popularity in the past year.

The law requires a lower burden of proof than criminal charges, has a longer statute of limitations than other financial laws and potentially could bring big fines.

A civil fraud unit that Bharara created in March 2010 filed its first lawsuit under FIRREA in December of that year.

DAMAGES AND PENALTIES
At issue In Tuesday's suit are loans Wells Fargo made through a program that allows banks to originate, underwrite and certify mortgages for FHA insurance, according to the complaint. Under the so-called Direct Endorsement Lender program, neither the FHA nor HUD reviews a loan before it is approved for FHA insurance, but lenders are supposed to follow program rules.

Between May 2001 and October 2005, according to the complaint, Wells certified more than 100,000 loans for FHA insurance, even though the bank knew its underwriters had failed to verify information that was directly related to the borrower's ability to make payments.

"The extreme poor quality of Wells Fargo's loans was a function of management's singular focus on increasing the volume of FHA originations (and the bank's profits), rather than the quality of the loans being originated," the complaint said.

The bank also failed to properly train its staff, hired temporary workers and paid improper bonuses to its underwriters to encourage them to approve as many loans as possible, the complaint said.

During a 7-month stretch in 2002, at least 42 percent of the bank's FHA loans failed to actual qualify for the insurance they were submitted for, even though the bank's internal benchmark for such violations was set at 5 percent.

Wells also kept its defective loans secret from HUD, the complaint said. From January 2002 to December 2010, the bank internally identified more than 6,000 "materially deficient" loans, including 3,000 that had defaulted in the first six months, but did not comply with its self-reporting obligations, the complaint said.

Prior to October 2005, the bank did not self-report a single bad loan, and the inadequate reporting continued even after a HUD inquiry that year, the suit states. All told, from 2002 through 2010 the bank self-reported only 238 loans, according to the complaint.

Some of the mortgages Wells Fargo suspected of fraud but declined to report to HUD include loans it separately reported as suspicious activity to the U.S. Treasury Department, according to the suit.

The complaint seeks treble damages and penalties for hundreds of millions of dollars in insurance claims already paid to Wells Fargo, as well as penalties on claims HUD may pay in the future.

Citi, in its settlement, paid $158 million to resolve allegations that a "substantial percentage" of around $200 million in insurance claims failed to meet FHA requirements.

The Wells Fargo complaint also includes specific allegations that the lender failed to report another $190 million in loans it should have flagged as potentially problematic to HUD, which potentially adds to any eventual payout from the bank.

The lawsuit adds to the growing number of civil cases the government has filed targeting conduct that allegedly contributed to the financial crisis.

The Justice Department has indicted few individuals and institutions on criminal charges for roles in the collapse, and officials have said prosecutors determined much of the conduct amounted to greed but not crimes.

A joint federal-state task force set up earlier this year to continue to probe conduct tied to the 2007-2009 crisis has also acknowledged the bulk of its inquiries are under civil law.

(Reporting by Rick Rothacker in Charlotte, N.C. and Aruna Viswanatha in Washington; Editing by Matthew Lewis and Tim Dobbyn)

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