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Muthukali

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Asset
Treasuries Surge as Stocks Fall After U.S. Jobs Report

Treasuries rose, driving 10-year yields below 1.50 percent for the first time, while stocks tumbled after U.S. employers created fewer jobs than economists estimated and Chinese manufacturing slowed. Commodities slumped.

Yields on 10-year Treasuries dropped eight basis points to 1.48 percent at 9:11 a.m. New York time. Standard & Poor’s 500 Index futures retreated 1.9 percent to 1,284.70, and the Stoxx Europe 600 Index slumped 2.1 percent. The S&P GSCI gauge of 24 commodities slipped to the lowest level since October as crude oil futures retreated 3.6 percent to $83.43 a barrel. The yield on Germany’s two-year note fell as low as minus 0.012 percent. Gold futures climbed 1.4 percent to $1,586.30 an ounce.

Payrolls climbed by 69,000 last month, less than the most- pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, the Labor Department said. The median estimate called for a 150,000 increase in May. The jobless rate rose to 8.2 percent. A report showed Chinese manufacturing grew less than estimated.

“Yuck, this is really not good,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a phone interview. “We’re at a very precarious point right now as far as investors’ psyche is concerned.”

Treasuries last month had their highest returns since August, returning 1.8 percent, reflecting the declining stability of the 17-member euro currency amid a worsening sovereign debt crisis, according to indexes compiled by Bank of America Merrill Lynch. The MSCI All-Country World Index of shares lost 8.9 percent including dividends, the biggest monthly decline since September. The euro declined 6.6 percent versus the dollar in May, the most since September.

April Peak
The S&P 500 peaked in 2012 on April 2, when it reached a four-year high of 1,419.04. Losses accelerated after the April 6 employment report from the U.S. Labor Department showed the slowest job creation in five months. Today’s report bolstered concern that the labor-market recovery is stalling.

Thirty-year Treasury bond yields declined nine basis points to 2.55 percent, and fell to 2.5089 percent earlier, the lowest in Federal Reserve records beginning in 1953.

Valuation measures show Treasuries are at the most expensive levels ever. The term premium, a model created by economists at the Fed, touched negative 0.91 percent, the most expensive level ever. A negative reading indicates investors are willing to accept yields below what’s considered fair value.

Alcoa, Caterpillar
In the U.S. stock market, Alcoa Inc., Caterpillar Inc. and Bank of America Corp. dropped at least 2 percent to pace losses among the largest companies. Wynn Resorts Ltd., MGM Resorts International and Las Vegas Sands Corp. slumped more than 3 percent as Macau casino gambling revenue grew at the slowest pace since July 2009. Facebook Inc. slid 3 percent after yesterday posting the biggest rally since its initial public offering last month.

Stocks fell around the world earlier after China led a slowdown in manufacturing across Asia. China’s Purchasing Managers’ Index fell to 50.4 in May from 53.3 in April, China’s statistics bureau and logistics federation said today in Beijing. Economists projected 52, according to the median estimate in a Bloomberg News survey. Measures for India, South Korea and Taiwan also declined.
 

Muthukali

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Asset
U.S. Stock Futures Slump Amid Disappointing Jobs Report

U.S. stock futures fell, after the worst monthly drop in the Standard & Poor’s 500 Index since September, as employers added the smallest number of workers in a year, the unemployment rate increased and manufacturing output shrank in Europe and slowed in China.

Alcoa Inc. (AA), Caterpillar Inc. (CAT) and Bank of America Corp. (BAC) dropped at least 2 percent to pace losses among the largest companies. Wynn Resorts Ltd. (WYNN), MGM Resorts International (MGM) and Las Vegas Sands Corp. (LVS) slumped more than 3 percent as Macau casino gambling revenue grew at the slowest pace since July 2009. Facebook Inc. slid 3 percent after yesterday posting the biggest rally since its initial public offering last month.

S&P 500 futures expiring in June lost 2 percent to 1,282.90 at 8:50 a.m. New York time. Dow Jones Industrial Average futures slid 197 points, or 1.6 percent, to 12,186.

“Yuck, this is really not good,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. He spoke in a phone interview.“The overall jobs report is bad. We’ve got weak economic figures on a worldwide basis. We’re at a very precarious point right now as far as investors’ psyche is concerned.”

Equity futures slumped as the jobs report showed a looming recession in the euro area and slower growth in China and Brazil (IBOV) are starting to take a toll on the U.S. Payrolls climbed by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.

Global Manufacturing
Earlier today, data showed that a gauge of manufacturing in the 17-nation euro zone fell to a three-year low of 45.1 in May, indicating a 10th month of contraction, while unemployment reached 11 percent, the highest on record. China’s Purchasing Managers’ Index dropped to 50.4 from 53.3, the weakest production growth since December.

A divergence in the sovereign yields of euro countries shows bets against the integrity of the 17-member currency bloc are growing. The euro area is in real danger of disintegrating unless policy makers revamp the bloc’s fiscal and economic ties, Economic and Monetary Commissioner Olli Rehn said.

Concern about a global slowdown and a worsening of Europe’s debt crisis drove the S&P 500 down 6.3 percent in May, for the second straight monthly retreat. The MSCI All-Country World Index of stocks tumbled 9.3 percent while the MSCI BRIC Index entered a bear market after plunging more than 20 percent from the March peak. The gauge tracks shares in Brazil, Russia, India and China, the biggest emerging markets.

Lehman Brothers
Facebook Inc. (FB) led U.S. initial public offerings to their worst monthly performance since Lehman Brothers Holdings Inc. collapsed, as Europe’s debt crisis scuttled IPO plans from New York to Hong Kong.

The Bloomberg IPO Index (BIPO), which tracks U.S. equities in the first year after their IPOs, sank 15 percent last month, with Facebook posting the worst one-week performance among the 30 largest U.S. IPOs since 2011. The IPO index’s decline is in line with the drop in October 2008, the month after Lehman’s bankruptcy triggered the worst financial crisis since the Great Depression.

Kayak Software Corp. and Russian social-networking company VKontakte shelved listings this week, while Graff Diamonds Corp. delayed a Hong Kong sale and the Formula One auto-racing series said its Singapore IPO may not occur until later this year. Facebook’s 22 percent slump since going public has shaken investors already reeling from tumbling equity markets and the slumping European economy, said Jeffrey Sica of Sica Wealth Management LLC.

“We’ve reached a breaking point where sentiment is so negative and scrutiny is so high that companies don’t want to go public and investors aren’t prepared to look at them,” said Sica, who oversees more than $1 billion as chief investment officer of the Morristown, New Jersey-based firm. “You’re talking about long-standing damage to the psyche of companies wanting to go public and investors.”
 

Muthukali

Alfrescian (Inf)
Asset
U.S. Stocks Fall for Week as Dow Erases 2012 Gain on Jobs

U.S. stocks tumbled, falling for the fourth time in five weeks and erasing the Dow Jones Industrial Average’s 2012 gain, amid concern the global economy is slowing and Europe’s debt crisis is worsening.

The Standard & Poor’s 500 Index slumped 2.5 percent today, the most since November, after American employers added the fewest workers in a year during May. All 10 industries in the benchmark index slipped in the holiday-shortened week. Energy shares sank 4.6 percent as oil had the biggest monthly decline in more than three years. An index of homebuilders tumbled 10 percent, the most since August, amid worse-than-expected housing data. Facebook Inc. plunged 13 percent.

The S&P 500 lost 3 percent to 1,278.04 for the week, trimming its gain for the year to 1.6 percent. The Dow dropped 336.26 points, or 2.7 percent, to 12,118.57, putting it below 2011’s closing level and erasing a year-to-date rally that had been 7.1 percent as of May 1.

“People are just de-risking,” Joseph Keating, who helps oversee $1 billion as chief investment officer at CenterState Wealth Management in Birmingham, Alabama, said in a phone interview. “It’s unclear what policies would be put in place by the European leaders to basically facilitate whatever is going to happen in Greece, along with how to hold the banking system in Europe together,” he said. In the U.S., “companies are just not hiring. That puts the recovery at risk.”

Jobs, Manufacturing
Equities declined amid the monthly employment figures and data showing the U.S. economy grew more slowly in the first quarter than previously estimated. A gauge of manufacturing in the euro zone dropped to a three-year low while China’s Purchasing Managers’ Index showed the weakest production growth since December. Europe’s debt crisis intensified as investors focused on Spain’s finances and Greece’s ability to remain in the euro region.

Concern about a global slowdown and a worsening situation in Europe drove the S&P 500 down 6.3 percent in May for the biggest monthly loss since September. Treasuries rallied, pushing yields on 30-year and 10-year debt to record lows. The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, surged 23 percent to 26.66, the highest since December.

The retreat in equities has cut the S&P 500’s valuation to 12.9 times earnings from the last 12 months. That’s about 21 percent below average of 16.4 since 1954, according to data compiled by Bloomberg. Earnings in the S&P 500 are forecast to reach a record $104.74 a share in 2012. The S&P 500’s earnings yield reached 7.74 percent, close to the highest on record when compared with the 10-year Treasury rate, according to Bloomberg data going back to 1962.

‘Very Bullish’
“I’m actually getting prepared for turning very bullish” on stocks, David Rosenberg, Toronto-based chief economist and strategist at Gluskin Sheff & Associates Inc. said in a phone interview. “But several things have to fall into place. We’re going to have to get to levels on dividend yields, price-to- earnings ratios and sentiment that will be consistent with an onset of a secular bull market.”

The dividend yield for the S&P 500 has increased to 2.23 percent from last year’s low of 1.78 percent. During the depths of the U.S. subprime-mortgage crisis, the payout surged to 4.10 percent in March 2009.

Exxon Mobil Corp. (XOM), the largest energy producer by market value, fell the most in the Dow, sinking 5.1 percent to $77.92. Crude fell to the lowest level in almost eight months amid concern fuel demand may tumble. Cabot Oil & Gas Corp. slipped 10 percent to $31.15.

Homebuilders, Facebook
An S&P gauge of homebuilders plunged 10 percent after the number of Americans signing contracts to buy previously owned homes fell in April by the most in a year. PulteGroup Inc. (PHM), the biggest U.S. builder by revenue, slumped 11 percent to $8.26. D.R. Horton Inc. slipped 11 percent to $15.21 while Lennar Corp. (LEN) tumbled 11 percent to $25.02.

Facebook plunged 13 percent to $27.72 amid concern the world’s largest social-networking service will struggle to wring profit from its 901 million users. The stock has declined 27 percent since it began trading on May 18, and has slipped below the low end of the $28-to-$35 price range Facebook set for its initial public offering before boosting the asking price and number of shares.

Groupon Inc. (GRPN) plunged 20 percent to $9.69, the lowest level since its November IPO, as a lockup period expired, permitting insiders to sell shares of the largest daily coupon website.

Edward Lampert
Kohl’s Corp. (KSS) sank 11 percent to $44.70. The retailer said May same-store sales decreased 4.2 percent. That compares with the average estimate for a 1.1 percent decline. Sears Holdings Corp. (SHLD), the department-store chain controlled by hedge fund manager Edward Lampert, tumbled 15 percent to $48.45.

Joy Global Inc. (JOY) lost 7.5 percent to $55.69. The maker of P&H and Joy mining equipment cut forecasts for full-year earnings and revenue as mining companies ease capital spending amid concern over an economic slowdown in China. Caterpillar Inc., the largest maker of construction and mining equipment, slipped 4.9 percent to $85.52.

Gold producers jumped as signs of weakening job growth in the U.S. fueled expectations the Federal Reserve will take further steps to spur growth, boosting the appeal of the precious metal as an inflation hedge. Newmont Mining Corp. (NEM), the largest U.S. gold producer, advanced 3 percent to $50.30 for the second-biggest advance in the S&P 500. Barrick Gold Corp. (ABX) climbed 4.8 percent to $41.91.

The central bank is close to completing its program to replace $400 billion of shorter-term debt in its holdings with longer maturities to support the economy by keeping down borrowing costs. The program, known as Operation Twist, ends this month. The Fed bought $2.3 trillion of debt in two rounds of quantitative easing since the subprime-mortgage crisis that have become known as QE1 and QE2.

The Fed is more likely to provide added stimulus when its current effort winds down, according to Morgan Stanley. The probability of more central bank policy action is 80 percent, up from 50 percent before today’s jobs report, the firm said.
 
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Muthukali

Alfrescian (Inf)
Asset
Asian Stocks, Oil Fall After U.S. Jobless Rate Rises

Asian stocks declined for a fourth day, with Japan’s Topix Index dropping to the lowest level since 1983, and oil fell after the American jobless rate increased last month, wiping out this year’s gains in the Dow Jones Industrial Average. Australian bonds and the U.S. dollar rose.

The MSCI Asia Pacific Index (MXAP) lost 1.4 percent as of 9:40 a.m. in Tokyo, while the Topix slid 2.2 percent, heading for the lowest close since Dec. 2, 1983. Australia’s S&P/ASX 200 Index (AS51) retreated 1.6 percent after non-manufacturing industries in China grew at the slowest pace in a year. Standard & Poor’s 500 Index futures slid 0.7 percent. Oil futures dropped for a fifth day in New York.

“The poor U.S. payrolls number should start to deflate investor optimism about U.S. growth that we’ve encountered, leaving few places for investors to hide,” said Gerard Minack, a developed-market strategist at Morgan Stanley in Sydney.

U.S. unemployment rose to 8.2 percent in May from 8.1 percent the previous month and payrolls increased by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey of economists, Labor Department figures showed on June 1. The non-manufacturing purchasing managers’ index in China fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing. European leaders remain divided on solutions for the region’s debt crisis.

The Australian dollar fell 0.5 percent to 96.51 U.S. cents from its June 1 close in New York. Australia’s bonds climbed, with three-year yields falling as much as 12 basis points to a record 1.91 percent.

Oil for July delivery lost as much as 1 percent to $82.44 a barrel in electronic trading on the New York Mercantile Exchange. Prices slid $3.30, or 3.8 percent, to $83.23 a barrel June 1, the lowest close since October.
 

Muthukali

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Asset
Asia Stocks Climb Amid Global Policy Stimulus Speculation

Asian stocks rose amid speculation global policy makers will take steps to stimulate economic growth and after a four-day drop left the regional gauge at the cheapest level this year.

BHP Billiton Ltd. (BHP), the world’s largest mining company, increased 1.6 percent as commodity prices advanced. Canon Inc. (7751), a Japanese camera maker whose shares fell yesterday to the lowest level since April 2009, gained 3.6 percent. Qantas Airways Ltd., Australia’s largest carrier, tumbled 15 percent to a record low after forecasting full-year profit may plunge as much as 91 percent.

The MSCI Asia-Pacific Index (MXAP) rose 0.9 percent to 110.04 as of 11:13 a.m. in Tokyo, snapping a four-day decline and recouping some of yesterday’s 2.1 percent loss.

“We are likely to see a reasonably strong policy response in a number of countries,” said Angus Gluskie, managing director at White Funds Management in Sydney, who manages more than $350 million. “It’s stacking up to be a reasonably good buying opportunity.”

The MSCI Asia-Pacific has fallen 15 percent from its peak this year on Feb. 29. The measure slumped 10 percent in May, the biggest monthly loss since October 2008, when global markets tumbled following the collapse of Lehman Brother Holdings Inc. Equities continued declines into June as a U.S. jobs report added to concern global growth is slowing amid a deepening debt crisis in Europe.

In Seoul, the Kospi Index gained 0.7 percent, while Japan’s Nikkei 225 rose 0.5 percent. Japan’s broader Topix Index, which entered a bear market yesterday, with stocks plunging to a level not seen since 1983, rose 1 percent today.

Interest Rates
Australia’s S&P/ASX 200 Index jumped 1.4 percent. Reserve Bank of Australia Governor Glenn Stevens may cut the overnight cash-rate target today by half a quarter percentage point to 3.25 percent, swap markets show.

U.S. Federal Reserve Chairman Ben S. Bernanke may respond to weakness in the job market by announcing further steps to stimulate growth, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.

The European Central Bank may cut its benchmark interest rate from 1 percent as soon as this week, Holger Schmieding, chief economist at Berenberg Bank in London, said in a June 1 report. China will respond with a 2 trillion yuan ($314 billion) fiscal stimulus this year and next, according to Donald Straszheim, senior managing director of New York-based ISI Group.

Europe Call
Finance ministers and central bank governors from the Group of Seven countries will hold a call today to discuss the European debt crisis, Canadian Finance Minister Jim Flaherty told reporters yesterday in Toronto.

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. The index advanced less than 0.1 percent in New York yesterday, reversing earlier losses.

The MSCI Asia-Pacific fell 4.2 percent this year through yesterday, compared with a 4.4 percent drop on the Stoxx Europe 600 Index and a 1.6 percent gain on the S&P 500. Declines in regional equity markets dragged down valuations on the Asian benchmark to 11.2 times estimated earnings on average, the lowest this year. That compares with 12.2 times for the S&P 500 and 9.7 times for the Stoxx 600.

The Thomson Reuters/Jefferies CRB Index of raw materials climbed 0.6 percent yesterday.
 

Muthukali

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Asset
G-7 Officials to Speak on Europe Today Ahead of Summit

Finance ministers and central bank governors from the Group of Seven countries will hold a call today to discuss the European debt crisis.

“We do have continuing discussions,” Canadian Finance Minister Jim Flaherty told reporters yesterday in Toronto. He said G-7 members would have more talks today ahead of a summit of leaders from the Group of 20 in two weeks and later said in Ottawa that officials would discuss “the situation in Europe,” without elaborating about the call.

Markets have been bracing for further deterioration in Spain’s banking industry and a possible Greek departure from the 17-member euro area as the region’s leaders wrangle over the details of support for the currency bloc. President Barack Obama meanwhile laid the blame for slowing U.S. job growth at the feet of European leaders, saying they haven’t done enough to resolve the crisis, now in its third year.

G-7 members are “concerned about the unstable situation in the current global economy and we need to share these concerns in some way,” Japanese Finance Minister Jun Azumi said at a press conference in Tokyo today, while declining to comment on whether a call would take place. “I have my own thoughts and if there is a chance to speak, I will express Japan’s stance.”

The euro fell to as low as $1.2288 on June 1, the weakest level since July 2010. The currency today advanced for a third day, trading at $1.2530 at 11:13 a.m. Tokyo time.

The Stoxx Europe 600 has tumbled about 14 percent from its 2012 high amid concern Greece will be forced to leave the euro currency union.

Leaders from the G-20, which includes the G-7 advanced- economy nations along with major emerging markets, are scheduled to gather in Los Cabos, Mexico June 18-19.
 

Muthukali

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Asset
ECB to keep pressure on governments, could signal rate cut

(Reuters) - The European Central Bank is expected to hold back from policy moves when it meets on Wednesday, instead urging governments to address the euro zone's crisis, but it could indicate a readiness to cut interest rates as early as next month given a weakening economy and Spain's banking troubles.

The ECB is widely seen as the only institution capable of immediate action on behalf of the currency bloc, raising pressure on the bank to announce new measures after its meeting - which will be held a day earlier than usual due to a holiday.

The bank's dilemma is that if does too much, pressure for government action falls. Yet if it does nothing, troubled sovereign debtors could find it harder and harder to finance themselves or maintain confidence in the banks that have bought much of their debt. Consequently, the ECB is likely to keep its weapons holstered until after the EU summit at the end of June.

Even then, the measures it is most likely to take are ones which it views as being most directly in its purview and that help the economy and ease pressure on banks, without letting governments off the hook: an interest rate cut and an additional ultra-long term loan, similar to the two 3-year offers it has already made. And these are likely to be dependent on summit decisions.

"They are likely to signal the possibility of rate cuts and additional (long-term refinancing loans for banks) if progress is made on the political front," Citigroup strategist Steven Englander said in a note.

"Investors are likely to view it as the ECB using the policies they are comfortable with, rather than the ones that will be effective."

RATE RELIEF
Forward-looking indicators have been dismal over the past month and business surveys showed on Tuesday that all the euro zone's major economies are in decline - even Germany is no longer immune.

But the ECB traditionally seeks to prepare markets for such policy moves, and President Mario Draghi told the May news conference the Governing Council had not talked about cutting rates.

"We did not discuss any specific move on interest rates but we certainly discussed our general monetary policy stance, which we found accommodative," Draghi said last month.

In a Reuters poll, 11 out of 73 economists expect the ECB to cut rates on Wednesday and 27 - up from 14 just two weeks ago - see a decrease by the end of the year. <ECB/INT>

While ECB policymakers have recently stressed that they are close to their policy limit, they also want to avoid appearing disengaged, and could signal they are ready to cut rates from the already record-low level of 1.0 percent next month.

"We doubt that the ECB will cut interest rates as soon as Wednesday - although it is not inconceivable given the euro zone's heightened economic and sovereign debt problems," IHS Global Insight economist Howard Archer said in a note.

"But we do now think it is highly likely that the ECB will cut interest rates to 0.75 percent in the third quarter."

Adding to calls for ECB action, International Monetary Fund Managing Director Christine Lagarde said the ECB has room to cut interest rates.

If the ECB signaled a rate cut, it could also indicate a drop in its deposit rate to zero from the current 0.25 percent, to discourage banks from parking the cheap funds they have borrowed from the ECB back at the central bank.

But some analysts question the efficacy of rate cuts.

"It is hard to think that the euro's problems result from too high a refi rate," Citigroup's Englander said.

PAIN IN SPAIN
Spain said on Tuesday that it was getting priced out of credit markets. Finance chiefs of the Group of Seven major economies held emergency talks as the debt crisis honed in on the bloc's fourth largest economy, whose autonomous regions have overspent and whose banks and homeowners are laden with bad debts from a burst property bubble.

Despite Spanish pleas for the ECB to restart its bond-buying program, Draghi is likely to stick unflinching to his line that the program is still ongoing - even though the central bank has not bought any bonds in the past three months.

However, one measure it could take on a short notice is to further loosen the rules against which it lends funds to banks. This would open up reliable funding to banks that are being shunned by other lenders in the money market - but even here, the ECB wants to wait until after the summit.

The ECB is universally expected to extend its unlimited provision of loans in liquidity operations. So far, the promise runs until July, and the ECB will offer to give banks all the money they request until the end of the year or even longer.

The ECB will also publish its next set of staff economic forecasts, which analysts expect to show somewhat lower growth for this year and next but to leave inflation estimates largely unchanged.

In March, the ECB forecast the economy would shrink 0.1 percent this year, bouncing back to 1.1 growth in 2013. Prices were seen rising 2.4 percent in 2012 and 1.6 percent next year.

Especially interesting will be the estimate for next year's inflation. Even a minor downward revision would put it well below the ECB's goal of just below 2 percent and drum up calls for deeper cuts in interest rates.
 

Muthukali

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Asset
Australian GDP Expands at More Than Twice Pace Forecast

Australia’s economy expanded at more than twice the pace economists forecast last quarter, driven by household spending and engineering construction. The local currency soared.

First-quarter gross domestic product advanced 1.3 percent from the previous three months, when it rose a revised 0.6 percent, a Bureau of Statistics report released in Sydney today showed. The result compared with the median of 24 estimates in a Bloomberg News survey for a 0.6 percent gain.

The report covers a period before Europe’s sovereign-debt crisis weighed on Asian demand for commodities that prompted Reserve Bank of Australia Governor Glenn Stevens to make back- to-back interest-rate cuts. A pipeline of resource projects by companies such as BHP Billiton Ltd. (BHP) has helped cushion a slump in manufacturing and services hit by a strong currency.

“The major driver of growth in the quarter is the investment phase of the mining boom gathering momentum,” James McIntyre, a senior economist in Sydney at Commonwealth Bank of Australia (CBA), said in a research report before today’s release. “Despite the concerns, and hits to confidence, household spending remains solid.”

The local currency gained, buying 98.23 U.S. cents at 11:36 a.m. Sydney time, compared with 97.76 cents immediately before the data were released.

The Australian dollar, the world’s fifth-most traded currency, has gained 39 percent against the U.S. dollar since the start of 2009 and reached $1.1081 on July 27, the highest level since it was floated in 1983.

Currency’s Retreat
It has since retreated as signs mount that Europe’s debt crisis will sap global growth. The currency dropped 6.7 percent last month after the central bank unexpectedly cut its benchmark interest rate by half a percentage point and as data from China, Australia’s biggest trading partner, indicates a slowing economy.

Stevens yesterday lowered rates by a quarter-point to a 2 1/2-year low of 3.5 percent.

Compared with a year earlier, the economy expanded 4.3 percent in the first quarter, today’s report showed. Economists forecast a 3.3 percent year-over-year gain.

Household spending rose 1.6 percent in the first quarter, adding 0.9 percentage point to GDP growth, today’s report showed. Non-dwelling construction soared 12.6 percent, adding 1 point to growth, the report showed. Exports dropped 1.3 percent, shaving 0.2 point from the expansion.

The nation’s household savings ratio was little changed at 9.3 percent in the three months through March from 9.4 percent in the fourth quarter of 2011, today’s report showed.
 

Muthukali

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Asset
U.S. Stock Futures Rise Before ECB Interest-Rate Decision

U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will extend yesterday’s rally, as investors awaited the European Central Bank’s monthly interest-rate decision.

Bank of America Corp. (BAC), the second-largest U.S. lender by assets, and Citigroup Inc. (C) both gained more than 2 percent in early New York trading. Chesapeake Energy Corp. (CHK) jumped 4.9 percent after the company was said to be in talks to sell pipelines for more than $4 billion.

S&P 500 futures expiring this month rose 1.2 percent to 1,300.5 at 7:26 a.m. in New York after the benchmark measure rallied 0.6 percent yesterday. Dow Jones Industrial Average futures added 113 points, or 0.9 percent, to 12,239 today.

“The pressure on the ECB to act has intensified ahead of today’s meeting,” said Ioan Smith, a director at Knight Capital Europe Ltd., in London. “It is likely the ECB will hold out for now with Greek elections ahead, but further action is likely to be in the pipeline.”

Stocks climbed yesterday, amid the cheapest valuation for the S&P 500 in six months, after a measure of service industries increased more than economists had estimated. The S&P 500 has retreated 9.4 percent from its 2012 high in April amid disappointing data and concern the euro area’s sovereign-debt crisis is escalating.

While most economists predicted the ECB will keep interest rates on hold, 12 of the 44 surveyed by Bloomberg News forecast a cut. Eleven projected a quarter-point reduction and one forecast a half-point cut. The Bank of England’s policy makers meet tomorrow.

The Dollar Index fell after Federal Reserve Bank of Chicago President Charles Evans said in a speech in New York late yesterday that recent U.S. economic data warrants “extremely strong accommodation.”

Beige Book Survey
The Fed will publish its Beige Book survey of business conditions in 12 national districts today, two weeks before the Federal Open Market Committee meets to set monetary policy. The U.S. economy grew at a “modest to moderate” pace, according to the April 11 survey.

Bank of America rose 2.1 percent to $7.25 in early New York trading and Citigroup gained 2.1 percent to $26.28. JPMorgan Chase & Co. (JPM) increased 1.9 percent to $32.60 in Germany.

Chesapeake Energy jumped 4.9 percent to $17.84 in early New York trading after two people with knowledge of the matter said the company has held advanced talks to sell pipelines to Global Infrastructure Partners.

The energy explorer, facing a $22 billion cash-flow shortfall after natural-gas prices touched a decade low has discussed selling its entire stake in Chesapeake Midstream Partners LP and other pipeline assets, said the people, who spoke on condition of anonymity because the talks remain private. The negotiations may lead to a deal within days and could also fall apart, the people said.
 

Muthukali

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Asset
European Stocks Advance as ECB Keeps Interest Rate Steady

European stocks rose for a second day after the euro-area central bank kept its benchmark interest rate unchanged. U.S. index futures and Asian shares advanced. Diageo Plc (DGE), the maker of Johnnie Walker, J&B and Buchanan’s Scotch whiskys, rose after saying it will invest 1 billion pounds ($1.54 billion) in production. Petropavlovsk Plc (POG) gained after UBS AG recommended increasing holdings of the stock.

The Stoxx Europe 600 Index (SXXP) rose 1.6 percent to 238.28 at 12:47 p.m. in London. European Central Bank officials, convening a day earlier than usual due to a public holiday in some German states tomorrow, left the benchmark interest rate at 1 percent, as predicted by 49 of 60 economists surveyed by Bloomberg News. Standard & Poor’s 500 Index futures gained 0.9 percent, while the MSCI Asia Pacific Index added 1.2 percent.

“While not cutting rates or setting up a new bazooka, the ECB keeps the door open for further measures if warranted, confirming what investors consider the most likely scenario,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “The central bank is keeping its gunpowder dry for now and sustains the pressure on euro-zone politicians.”

European stocks advanced yesterday for the first day in five as the U.S. services industry expanded at a faster pace than forecast and finance ministers and central bank governors from the Group of Seven economies agreed to coordinate their response to the euro area’s sovereign-debt crisis.
 

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Japan, Australian Stock Futures Gain on Stimulus Outlook

Japanese and Australian stock futures climbed as global policy makers signaled they may take steps to stimulate economic growth.

American Depositary Receipts of Mitsubishi Corp. (8058), the biggest Japanese trading house, rose 2.3 percent from the closing price in Tokyo and those of Komatsu Ltd., a mining equipment maker, gained 2.9 percent as investors bought shares of companies with profits closely tied to economic growth. ADRs of BHP Billiton Ltd. (BHP), the world’s largest mining company, advanced 2.4 percent in Sydney as metals prices climbed.

Futures on Japan’s Nikkei 225 Stock Average expiring this month closed at 8,665 in Chicago yesterday, up from 8,530 in Osaka, Japan. They were bid in the pre-market at 8,650 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index advanced 1.5 percent today. New Zealand’s NZX 50 Index rose 0.5 percent in Wellington.

“The Chinese will take action to stimulate the economy and the Americans will similarly respond with an extension of Operation Twist or more quantitative easing,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “For a sustained rally, we need a period of stability where we’re not in a fire-fighting-crisis mode.”

European Central Bank President Mario Draghi said policy makers discussed cutting interest rates yesterday and officials stand ready to act as the euro region’s growth outlook worsens.

Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, the central bank’s stimulus program that lengthen maturities of debt on its balance sheet, is an “option on the table.” Chinese Premier Wen Jiabao vowed last month to focus more on increasing growth after trade and domestic demand were below forecasts in April.

U.S. Futures
Futures on the Standard & Poor’s 500 Index advanced 0.1 percent today. The gauge soared 2.3 percent yesterday for its biggest gain of the year.

The MSCI Asia-Pacific (MXAP) fell 2 percent this year through yesterday, compared with a 1.9 percent drop on the Stoxx Europe 600 Index and a 4.6 percent gain on the S&P 500. Declines in regional equity markets cut the average price of stocks on the Asian benchmark to 11.3 times estimated earnings. That compares with 12.6 times for the S&P 500 and a multiple of 10 for the Stoxx 600.

The Asian benchmark gauge has dropped 13 percent from its peak this year on Feb. 29. amid concern growth is slowing in China and the U.S. as Europe’s debt crisis deepens.

The S&P GSCI gauge of commodities gained 1.3 percent yesterday.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. climbed 2.7 percent to 90.21 yesterday in New York, bringing its two-day gain to 4 percent, the most since April 12.
 

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Facebook is Top Short-Seller Target Among Large Stocks

No large U.S. company is attracting more attention from short sellers than Facebook Inc. (FB), amid bets the world’s biggest social-networking company will keep falling after losing $27 billion since its initial public offering.

Short interest on the Menlo Park, California-based company reached 5.9 percent of shares outstanding, according to data compiled by Bloomberg and Data Explorers Ltd., a New York-based research firm. None of the Standard & Poor’s 500 Index companies with at least $50 billion in market capitalization has short interest higher than 3 percent, the data show. Facebook, which has a market value of about $63.8 billion, isn’t in the S&P 500.

Shares of Facebook have slumped 29 percent since they began trading on May 18 amid concern that the IPO was overvalued and the company will struggle to increase profit from its 901 million users. At the time of its debut, underwriters led by Morgan Stanley set a price that valued Facebook at 107 times reported earnings in the past 12 months, more than every S&P 500 stock except two.

“Facebook is one of those companies whose future potential is unknown and unknowable,” said Robert Stimpson, a money manager at Akron, Ohio-based Oak Associates Ltd., which oversees about $900 million and doesn’t own Facebook. “The stock is expensive. The short interest might also reflect a bet that there is more bad news to come and Facebook will be punished.”

Short sellers borrow shares and sell them, hoping to profit from a decline by repaying the loan with cheaper stock. About 37.5 million Facebook shares were sold short as of June 4, compared with an average daily volume of 72.6 million shares excluding the first day of trading, according to data compiled by Bloomberg and Data Explorers.

Average Interest
Short interest among the 52 biggest S&P 500 companies averaged 0.73 percent, according to data compiled by Bloomberg. Visa Inc., (V) the world’s biggest payments network has the highest ratio at 2.95 percent, followed by entertainment company Walt Disney Co., at 2.56 percent, the data show.

The eight-year-old social-network’s debut of trading produced the worst five-day return among the largest U.S. IPOs of the past decade. The 13 percent plunge through May 24 exceeded the 10 percent drop by MF Global Holdings Inc. in its first five sessions, according to data compiled by Bloomberg. Facebook, which went public at $38, rose 3.6 percent to $26.81 at 4 p.m. New York time. At that price it’s valued at 58.3 times reported earnings, compared with a multiple of 13.3 for the S&P 500.

‘Somewhat Dangerous’
Facebook and Morgan Stanley have faced criticism for increasing the number of shares to be sold in the IPO by 25 percent to 421.2 million days before the offering and pushing up the asking price.

“It makes a lot of sense to short it, from a valuation standpoint and all the controversy surrounding the company every day and what happened pre-IPO,” Jeffrey Sica, who oversees more than $1 billion as president and chief investment officer at Sica Wealth Management LLC in Morristown, New Jersey, said in a telephone interview. “It’s a double-edged sword because there’s so much short interest that the littlest positive could propel the stock up. You could get annihilated on it. It’s somewhat dangerous right now.”
 

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Moody's downgrades 6 German banks

The international credit rating agency Moody's said Wednesday it has downgraded the credit ratings of six German banks, including the country's number two Commerzbank.

Moody's said in a statement it was downgrading by one notch the credit ratings of Commerzbank, DekaBank, DZ Bank, regional banks LBBW, Helaba and NordLB in view of "the increased risk of further shocks emanating from the euro area debt crisis, in combination with the banks' limited loss-absorption capacity."

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The international credit rating agency Moody's said Wednesday it has downgraded the credit ratings of six German banks, including the country's number two Commerzbank.
 

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Bank of Korea Holds Benchmark Rate for 12th Month

The Bank of Korea held off from altering borrowing costs for a 12th straight month as easing inflation gave policy makers room to wait and see how Europe’s debt crisis and China’s slowdown affect the economy.

Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rate unchanged at 3.25 percent as predicted by all 15 economists surveyed by Bloomberg News.

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Pedestrians walk in front of the Bank of Korea headquarters in Seoul.

South Korea has braced for weaker demand for its cars and electronics as European leaders struggle to coordinate a response to turmoil threatening global growth. Finance ministers and central bankers from the world’s leading economies agreed this week to cooperate on helping Spain and Greece improve public finances, while China cut borrowing costs for the first time since 2008.

“Fears of a euro-zone breakup and weak data from China are likely to keep the central bank on the sidelines,” Sukhy Ubhi, an economist at Capital Economics Ltd. in London, said before today’s announcement. “Given that inflation is in retreat and concerns over the global economy are on the rise, we believe the BOK’s stance will soon shift towards supporting growth.”

The won was little changed at 1,172.85 per dollar as of 10:15 a.m. in Seoul after touching a two-week high following China’s rate action, according to data compiled by Bloomberg. The Kospi index of stocks declined 0.2 percent.

South Korean officials are trying to sustain growth in Asia’s fourth-biggest economy after corporate investment and government spending fueled the fastest expansion in a year in the first quarter. Exports have contracted in all but one month this year, while inflation remained at a 21-month low of 2.5 percent in May.

Clouded Outlook
A slowdown in China, the risk of a Greek exit from the euro and rising Spanish borrowing costs are clouding the outlook for overseas sales, which account for about half of South Korea’s gross domestic product. China, whose economy expanded at the slowest pace in almost three years in the first quarter, buys about a quarter of South Korean products.

Exports to China dropped 10.3 percent and shipments to the U.S. fell 16.5 percent in the first 20 days of May, the most recent data available, according to a government report. South Korea’s sales to the European Union declined 16.4 percent in that time.

Still, data from the region has been mixed, with Australia’s gross domestic product expanding 1.3 percent last quarter from the previous three months, compared with the median 0.6 percent gain predicted by economists in a Bloomberg News survey.

Rate Cuts
This week the Reserve Bank of Australia cut its benchmark interest rate by a quarter percentage point to the lowest since 2009 and China, in addition to the rate move, loosened controls on banks’ lending and deposit rates. Indian Prime Minister Manmohan Singh pledged to revive growth in Asia’s third-largest economy through infrastructure spending.

Federal Reserve Chairman Ben S. Bernanke said yesterday the economy must be monitored closely, while refraining from discussing steps the central bank might take to protect the expansion.
 

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Steepest Global Slide Since Recession Pushes Rate Cuts

Monetary-policy makers from around the world are being pressed into action to shore up a global economy that is suffering its steepest slowdown since the recession ended in 2009.

On the heels of a June 5 interest-rate cut by Australia, China yesterday unveiled its first reduction in borrowing costs in more than three years to counter what Premier Wen Jiabao has called increasing downward economic pressure.

European Central Bank President Mario Draghi left the door open at a June 6 press conference to a rate cut, while highlighting the limitations of the ECB’s tools in countering the region’s financial turmoil.

And Federal Reserve Chairman Ben S. Bernanke told a Congressional committee yesterday that policy makers will discuss later this month whether to do more to spur growth, though he said the steps they could take may have “diminishing returns.”

“Across the board, we’re seeing the central banks being galvanized into action by weak growth around the world,” said Nariman Behravesh, chief economist in Lexington, Massachusetts, at IHS Inc.

The global economy will grow 1.7 percent this quarter and 2 percent next, after expanding at an annual pace of 2.5 percent in the final quarter of 2011, economists at JPMorgan Chase & Co. in New York said in a June 1 report. The result is “an extended soft patch as weak as anything experienced in the past two decades outside the Great Recession,” they wrote.

Pump Growth
Stock markets have surged this week on mounting anticipation that policy makers will act to pump up growth, although those gains were trimmed yesterday after Bernanke refrained from explicitly pledging further steps in testimony before the Joint Economic Committee in Washington.

The Standard & Poor’s 500 Index (SPX) erased a rally of as much as 1.1 percent to close little changed yesterday. The gauge is up 2.9 percent on the week.

David Hensley, director of global economics at JPMorgan in New York, looks for a “loosely coordinated round of global policy easing,” with the Fed moving at its June 19-20 meeting, followed by an ECB rate cut in July and further steps by the Bank of Japan and the Bank of England to boost growth.

He predicts the Fed will extend its pledge to keep its benchmark rate at “exceptionally low levels” into 2015 and will continue its Operation Twist program to bring down long- term rates beyond the scheduled completion this month.

Held Rates
The Fed has held the target for the federal funds rate at a record low between zero and 0.25 percent since December 2008. The ECB returned its benchmark rate to a record low in December.

Emerging markets probably will join in, with both Brazil and India reducing rates further in the coming months, according to Behravesh. Brazil has cut borrowing costs by four percentage points to a record low 8.5 percent since August. India’s monetary authority reduced its repurchase rate by 50 basis points to 8 percent in April and has trimmed its reserve ratio by 125 basis points this year to 4.75 percent.

China coupled its rate cut -- it lowered the benchmark one- year lending rate to 6.31 percent from 6.56 percent -- with moves to give banks extra freedom to set the amounts they pay on deposits and charge for loans.

“This is a very positive pro-market move that is quite bullish,” Donald Straszheim, senior managing director of New York-based ISI Group, said in a note to clients.

Rate-Cut Cycle
Shen Jianguang, a Hong Kong-based economist with Mizuho Securities Asia Ltd. who has worked for the ECB, said China’s move is “the beginning of a rate-cut cycle” and predicted “at least one more reduction this year.

Wen called for steps to stabilize growth and offset downward pressure on the economy in a speech last month in the southern Chinese province of Hunan, according to the Hunan Daily newspaper.

Industrial output in China, the world’s biggest producer of steel and cement, probably rose 9.8 percent last month from a year earlier, close to the slowest pace in three years, according to the median estimate in a Bloomberg News survey of 27 economists ahead of a report due June 9.

Fixed-asset investment may have grown at a slower pace in the first five months, with Caterpillar Inc. (CAT), the world’s largest maker of construction and mining equipment, among companies reporting a slowdown in sales.

Reflate Bubble
In spite of decelerating growth, China had held off from cutting interest rates because it was worried that such steps would push inflation back up and reflate a housing bubble, Hensley said.

The ECB also has been reticent about taking further action to tackle a spreading recession and financial-market instability in the 17-nation euro area. Having already cut its benchmark rate to 1 percent and injected more than 1 trillion euros ($1.3 trillion) of three-year loans into the banking system, the ECB is reluctant to do more heavy lifting as governments procrastinate over the reforms it deems necessary to put the monetary union on a sustainable footing.

Draghi said the ECB stands ‘‘ready to act” should the sovereign-debt crisis damp the euro-area economy further, and “a few” Governing Council members pushed for a rate reduction at the June 6 policy meeting.

Still, “we have to be aware that the context is one where you have liquidity constraints and tensions in financial markets,” he said after keeping rates on hold. “Price signals in this situation have a relatively limited immediate effect.”

Full Effects
Draghi also cast doubt on the impact of further longer-term refinancing operations, or LTROs, saying the full effects of previous loans have yet to be felt.

Former U.S. Treasury Secretary Lawrence Summers said the ECB and the region’s governments must do more to restore confidence amid the euro-area debt crisis.

“A central bank wants to bend over backwards to be reassuring, to reassure people that liquidity is there,” the Harvard University professor told Bloomberg Television on June 6. “The overwhelming imperative of the situation is to instill more confidence than there is today.”

While the euro area narrowly avoided falling into a recession in the first quarter, unemployment was a record 11 percent in March and April and economic confidence is at the lowest since 2009. Behravesh said the mounting gloom will push the ECB into cutting interest rates next month.

Divided Officials
In the U.S., Fed officials are divided over whether the central bank should take additional steps to support an economy that is being buffeted by the financial strains coming out of Europe. The next meeting of the policy-making Federal Open Market Committee will come just days after Greece holds elections on June 17. The results could hand power to parties that oppose the terms of the nation’s rescue package, precipitating its exit from the monetary union.

More easing isn’t necessary, regional Fed Presidents Richard Fisher in Dallas and James Bullard in St. Louis said in separate speeches June 5. Additional stimulus would be “pushing on a string,” Fisher said, while Bullard said there’s time to assess the economy and no need to change policy now. Neither is currently a voting member of the FOMC.

Three of their colleagues, led by Fed Vice Chairman Janet Yellen, suggested on June 6 that conditions may warrant some action.

“Scope remains for the FOMC to provide further policy accommodation,” Yellen said in a Boston speech. “It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.”

Discussion Outlook
Bernanke, for his part, didn’t tip his hand during his testimony yesterday. Instead, he outlined the course of discussion he foresees at the next meeting of the FOMC.

“The main question we have to address has to do with the likely strength of the economy,” Bernanke said. “Will there be enough growth going forward to make material progress on the unemployment rate?”

U.S. employers added 69,000 workers last month, the fewest in a year, while the jobless rate rose to 8.2 percent from 8.1 percent in April.

AT&T Inc. (T) Chief Executive Officer Randall Stephenson said June 1 that smaller companies have reduced hiring as business conditions get “tighter and tighter,” cutting demand for the largest U.S. phone company’s services.

With growth slowing around the world, “the central banks are in motion,” Hensley said. “Some of the motion is action. Some of it is rhetoric.”
 

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New stock exchange board for smaller firms considered

A stock trading board for smaller companies and startups is currently being considered, says Vorapol Sokatiyanurak, secretary-general of the Securities and Exchange Commission (SEC).

High-yield bonds are also being researched as another possible funding option for small and medium-sized enterprises (SMEs).

The aim is to enable an additional 10,000 companies to access the capital markets by issuing bonds or listing on the new board, which if formed would be the country's third.

In general, SMEs are relatively weak and are unable to meet the requirements for financing through existing public markets.

The Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI) require minimum asset levels, profits, and the use of certain accounting standards.

"It's hard to find SMEs that can meet those requirements, so they have limited sources of funds. They can only borrow from the banks," he said.

The SEC's idea is to help SMEs access sources usually reserved for larger, more established companies.

To promote the new market, the commission may organise and coordinate with investors with an appetite for high-risk assets.

"We will complete all details for this plan and hope the plan can be implemented without constraints so the SMEs can use the capital markets as an alternative financial resource," said Dr Vorapol. "I hope to see the SME board trading during my term."

The SEC is planning to launch an SME credit scoring system in cooperation with credit rating firms, banks and state agencies.

The scores will be an important tool for investors. They can also be used as benchmarks for determining credit ratings for bond issues as well as lending rates.

The SME trading board it only being studied at this point, but it is already clear the listing rules will differ from those of the SET and MAI.

The requirements will be more flexible. There will be no minimum paid-up capital size and no need for a history of profits.

The SEC will ease the issuing processes and reduce the issuing fees. Under the plan, certain accounting and disclosure requirements will be maintained to protect investors.

The companies will have to file financial statements twice a year. The MAI and SET require quarterly reports.

Listing fees will be waived or very low, and the SEC will cooperate with financial advisory companies if necessary. It will also allow venture capital funds to invest in an SME and exit the company when it lists on the SME board.

The SME board will be operated under the SET but will only allow institutional investors and sophisticated individual investors _ known as accredited investors _ to trade.

"This is due mainly to the risks of SMEs and to the relaxed listing rules," said Dr Vorapol.

The SME board in Thailand will be similar to the SME trading board currently under development by the Korea Exchange.

The SEC will release details soon about accredited investors qualified to invest in high-risk assets
 

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U.S. Stocks Gain as Dollar Falls on Central Bank Optimism

U.S. stocks surged, sending benchmark indexes to the highest levels of the month, while the dollar slid amid reports central banks may take steps to help economies battered by Europe’s debt crisis. Treasuries retreated while commodities gained.

The Standard & Poor’s 500 Index added 1.1 percent at 4 p.m. in New York while the dollar weakened against all 16 major peers, with the euro increasing 0.6 percent to $1.2633. Ten-year Treasury yields climbed four basis points to 1.64 percent, while the rate on Spain’s 10-year bond rose to a euro-era record after Moody’s Investors Service cut its rating. The S&P GSCI commodities index rose 0.9 percent as natural gas surged 14 percent on a smaller-than-forecast gain in U.S. supplies.

Speculation grew that the Federal Reserve will discuss stimulus efforts as reports showed jobless claims unexpectedly climbed and the cost of living fell by the most in more than three years. Stocks extended gains amid reports central banks may boost liquidity as financial markets brace for potential turmoil following Greek elections this weekend. Greece’s benchmark stock index surged 10 percent on bets the party that backs terms of the nation’s bailout will win elections.

“Economic deceleration puts the Federal Reserve in the driver’s seat,” Chad Morganlander, a Florham Park, New Jersey- based money manager at Stifel Nicolaus & Co., which oversees about $115 billion of assets, said in a telephone interview. “There’s an improvement within the euro. There’s a modest amount of optimism that the Greek vote will bode well for the markets.”

Market Whipsawed
U.S. stocks briefly pared gains after Egan-Jones Ratings Co. reduced France’s government debt, a day after the firm preceded Moody’s in cutting Spain, fueling concern about contagion from the debt crisis.

The rally resumed amid reports of plans by central banks. Bloomberg News reported that U.K. Chancellor of the Exchequer George Osborne and Bank of England Governor Mervyn King are preparing two programs to increase the flow of credit. Reuters said that central banks of major economies are prepared to take action if needed to boost liquidity in financial markets if the Greek elections cause tumultuous trading, citing officials linked to the Group of 20 nations.

“A coordinated central bank action would be a net positive for market sentiment,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an e-mail. “Hence the knee-jerk pop.”

Dow Leaders
Travelers Cos., Home Depot Inc. and Bank of America Corp. rallied more than 2 percent to lead gains in 28 of 30 stocks in the Dow Jones Industrial Average (INDU), which surged 155.53 points to 12,651.91 for its highest close since May 14. All 10 of the main industry groups in the S&P 500 (SPX) advanced, with telephone, energy and consumer-discretionary stocks rising more than 1.3 percent to lead gains.

Kroger Co. rallied 6.1 percent after the largest U.S. grocery-store chain boosted its annual profit forecast and announced a $1 billion share buyback. International Game Technology, a maker of casino machines, jumped 14 percent for the biggest gain in the S&P 500 after authorizing a share- repurchase plan of as much as $1 billion.

The S&P 500 fell yesterday following a decrease in U.S. retail sales and higher borrowing costs at auctions in Italy and Germany. The index tumbled as much as 9.9 percent from a four- year high in April through June 1 amid lower-than-forecast economic data and concern Europe’s debt crisis was spreading. The index has rebounded 4 percent since then after the retreat dragged its valuation to 12.9 times reported earnings, the cheapest since November.

Commodities Advance
Sixteen of 24 commodities tracked by the S&P GSCI index advanced. Oil for July delivery gained 1.6 percent to settle at $83.91 a barrel on the New York Mercantile Exchange, the biggest percentage increase since April 11. Futures extended their advance in after-hours electronic trading, climbing as much as 2.2 percent.

Natural gas futures jumped 14 percent, the most since September 2009, to $2.495 per million British thermal units. The Energy Department said stockpiles rose 67 billion cubic feet to 2.944 trillion. Analysts projected a gain of 75 billion, according to the average estimate in a Bloomberg survey. The five-year average increase for the week is 88 billion cubic feet.

Treasuries remained lower after the U.S. sold $13 billion of 30-year bonds at a record low yield. The bonds yielded 2.720 percent, compared with a forecast of 2.725 percent in a Bloomberg News survey of eight of the Fed’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.40, versus an average of 2.66 at the past 10 sales. Rates on existing 30-year bonds increased three basis points to 2.74 percent.

Italian Yields
Italian 10-year yields lost nine basis points to 6.13 percent, halting a six-day increase. Italy sold 4.5 billion euros ($5.6 billion) of debt, with the yield on its benchmark three-year bond rising to 5.3 percent from 3.91 percent at the last auction on May 14.

The Stoxx Europe 600 Index slipped 0.3 percent, recovering most of an early 1.2 percent slide. Credit Suisse slumped 10 percent to its lowest price since 1992. British Sky Broadcasting Group Plc and BT Group Plc tumbled more than 3 percent after winning the rights to show live English Premier League soccer matches by paying an extra 70 percent. Nokia Oyj plunged 18 percent after reducing its outlook for the second quarter.

Greek Rally
The rally in Greek stocks pared the Athens Stock Exchange Index’s decline this year to 19 percent. Greeks will vote for a second time in six weeks after a May 6 ballot failed to result in a government. New Democracy, the largest pro-bailout party, led Syriza, the group opposed to spending cuts, according to the last poll on June 1. Under Greek law, there is a ban on publication of opinion polls two weeks before an election.

German Chancellor Angela Merkel rejected quick solutions proposed to fix Europe’s financial crisis such as joint debt sharing, saying her nation can’t save the world economy alone and other G-20 countries must help. She said the debt crisis and Germany’s role in stemming contagion will be a “central topic” at next week’s G-20 summit.

“Europe is sliding further into a recession and the global and U.S. economies are still slowing down,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “It’s still time for caution on the short-term view.”

Spanish Yields
Spain’s 10-year yield climbed as much as 24 basis points to 6.998 percent before paring gains and ending at 6.92 percent.

The nation’s two-year note yield surged seven basis points to 4.98 percent and the cost of insuring against a Spanish default using credit-default swaps climbed four basis points to 604, compared with an all-time high of 613.5 reached on June 1. A report showed borrowings by the nation’s banks from the European Central Bank rose to a record 287.8 billion euros in May from 263.5 billion euros in April.

The MSCI Emerging Markets Index slipped 0.6 percent after closing yesterday at its highest level since May 29. The Hang Seng China Enterprises Index and the Philippine Stock Exchange Index lost at least 1.5 percent. India’s Sensex Index fell 1.2 percent after inflation quickened more than economists estimated.
 

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Most Asian Stocks, Oil Gain on Stimulus Bets; Dollar Declines

Most Asian stocks, copper and oil advanced, while the dollar held its declines on speculation that central banks may increase measures to boost economies as Europe’s debt crisis hurts growth.

The MSCI Asia Pacific Index rose 0.1 percent at 9:29 a.m. in Tokyo, with five stocks advancing for every four that fell. The Nikkei (NKY) 225 Stock Average increased 0.2 percent. Standard & Poor’s 500 Index futures were little changed. Copper was set to snap a six-week decline and crude advanced 0.5 percent in New York. Australia’s currency traded above parity with its U.S. counterpart, poised for a weekly gain. The Dollar Index fell for a fourth day.

Bank of England Governor Mervyn King said the central bank will activate a sterling liquidity facility to aid banks, and plans to have a form of credit easing operating to boost lending as the case for looser policy “is growing.” U.S. economic data yesterday showed less growth and inflation, supporting the case for further stimulus by the Federal Reserve when it meets for two days starting June 19.

Markets “believe that low inflation plus increasingly soft labor-market numbers equals another round of quantitative easing,” said Matthew Sherwood, Perpetual Investments’ head of investment markets research in Sydney. Perpetual manages about $23 billion. “Investors are on guard for the Greek election.”

Greece voters head to the polls for a second time in six weeks on June 17 in elections that may determine if the country upholds austerity conditions attached to international aid, and could lead to the first ouster from the euro bloc. Monetary policy makers from the U.K. to Japan and Canada stepped up warnings about the threat to world financial markets should Europe fail to contain its debt crisis. Group of 20 leaders prepare to meet in Mexico on June 18-19 amid the weakest international economy since the 2009 recession.

The dollar was set for weekly declines against most major peers before U.S. data today that may show industrial production slowed and consumer confidence fell. Oil headed for a second week of gains while silver was poised to climb for the first week in eight.
 

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Fed Gets Room to Ease With Little Growth or Inflation

More Americans applied for jobless benefits and consumer prices dropped by the most in three years, giving the Federal Reserve room to spur an economy that’s generating little growth or inflation.

Claims for unemployment insurance payments unexpectedly climbed by 6,000 to 386,000 in the week ended June 9, Labor Department figures showed today in Washington. The cost of living fell 0.3 percent in May, led by the biggest decrease in gasoline prices in three years, the agency also reported.

Stocks rose as investors increased bets Fed policy makers meeting next week will take additional steps to boost growth and cut an unemployment rate stuck above 8 percent since February 2009. Cheaper energy costs also provide some relief for Americans against a backdrop of moderating job and wage gains that has slowed consumer spending.

“The Fed is really concerned about the outlook for employment and growth,” said Kevin Logan, the chief U.S. economist at HSBC Securities USA Inc. in New York who correctly forecast the decline in prices. “They’ve been pretty sanguine about the inflation outlook, and today’s data certainly didn’t contradict that outlook.”

The Standard & Poor’s 500 Index climbed 1.1 percent to 1,329.1 at the 4 p.m. close in New York. Shares extended gains late in the day amid reports policy makers may take steps to help economies battered by Europe’s debt crisis.

Investors were also waiting for the results of elections in Greece this weekend that may determine the fate of the euro.

Another report today showed consumer confidence climbed last week for a fourth consecutive time.

Swiss Franc
Elsewhere, the Swiss central bank pledged to keep defending its franc cap and left borrowing costs at zero to protect the economy from “exceptionally high” risks as the euro area’s crisis intensifies.

Credit Suisse Group AG and Deutsche Bank AG reduced forecasts for China’s growth this year as weakness in exports and in investment drag on the world’s second-biggest economy.

Economists projected jobless claims would fall to 375,000 from a previously reported 377,000 the prior week, according to a Bloomberg survey of 49 economists. Estimates ranged from 370,000 to 385,000.

The unemployment insurance report showed the four-week moving average of claims, a less-volatile measure, climbed to 382,000, the highest since April 28, from 378,500.

Reports ‘Disappointing’
“We’ve seen some disappointing employment reports,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “The labor market is just kind of mediocre right now, not gaining much traction.”

The Labor Department’s inflation report showed energy costs decreased 4.3 percent from a month earlier. Gasoline prices slumped 6.8 percent, the largest decline since December 2008, and natural gas and fuel oil also fell.

Food costs were unchanged as gains in fruit and vegetables were offset by cheaper beverages, dairy products and meats.

Consumer prices increased 1.7 percent in the 12 months ended in May, the smallest 12-month gain since January 2011, the report showed.

Fed policy makers, who said they anticipated the run-up in energy costs would subside, aim for 2 percent inflation as part of their dual mandate of stable prices and maximum employment. Their preferred price gauge, issued by the Commerce Department and tied to consumer spending, rose 1.8 percent in the 12 months ended in April, the smallest gain in more than a year.

Fed Views
Fed Vice Chairman Janet Yellen said last week she sees more scope for easing, while San Francisco Fed President John Williams, a voting member of the FOMC this year, called on policy makers to stand ready to act should the recovery falter.

“Substantial resource slack in U.S. labor and product markets should continue to restrain inflationary pressures,” Fed Chairman Ben S. Bernanke told Congress’s Joint Economic Committee last week. With a “subdued” inflation outlook, high unemployment and “strains in global financial markets,” the central bank anticipates it will keep its benchmark lending rate near zero though late 2014, he said.

The so-called core measure, which excludes more volatile food and energy costs, increased 0.2 percent in May for a third month. They were up 2.3 percent over the past 12 months, matching the gains for years ended in April and March.

The increase in the core measure was driven by medical care, cars and airfares. A measure used to calculate how much an owner-occupied house would rent for showed a 0.1 percent last month, the smallest increase since February.

Lower Expectations
Inflation expectations have “definitely come down,” David Tehle, chief financial officer of Dollar General Corp. (DG), said during a June 4 earnings call. The Goodlettsville, Tennessee- based dollar-store chain anticipates 0.5 percent inflation for the full year, compared with 2 percent in the final three months of 2011, Tehle said.

Dollar General expects no apparel inflation this year and sees broad slowing in commodity prices, Chief Executive Officer Rick Dreiling said during the call.

The drop in the cost of living last month allowed Americans to stretch their paychecks further, another Labor Department report showed. Hourly earnings adjusted for inflation climbed 0.3 percent, the biggest increase since April 2010.

That is probably one reason confidence is improving. The Bloomberg Consumer Comfort Index rose to minus 36.4 in the week ended June 10, marking the highest level since late April, from minus 37.6 the prior period, according to another report today. Each of three components -- the economy, finances and buying plans -- advanced.

“It is likely a function of the steady drop in gasoline prices,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Households feel a bit more comfortable about their own financial situation.”
 
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Muthukali

Alfrescian (Inf)
Asset
Greek election hopeful for euro

New coalition faces task of avoiding exit


The outcome of Greece's parliamentary election on Sunday after an inconclusive first round on May 6 gave a brief respite to investors, as the two parties now preparing to form a government ran on a platform of tackling the sovereign debt crisis from within the euro zone.

The New Democracy Party, which won 129 seats, and the Pasok Party, which grabbed 33 seats, are poised to form a coalition of 162 seats in the 300-seat parliament, while the Syriza Party, which campaigned for abandonment of fiscal tightening, came in second with 71 seats.

European leaders welcomed the likelihood that Greece would form a government committed to previous agreements with the European Central Bank, the European Commission and the International Monetary Fund.

Bandid Nijathaworn, recently named a member of the International Institute of Finance, said the Greek government's ability to renegotiate terms could become a benchmark in future cases of financial assistance involving multinational lenders.

The failure of European agencies to prop up confidence in crisis-hit countries would cause the circumstances to deteriorate.

The fear is that the US would soften in line with EU sluggishness, and there is scepticism about the effectiveness of more money injection by the US Federal Reserve."During the sub-prime crisis in 2008-09, the world economy benefited from growth in emerging economies," Dr Bandid said at an economic forum.

"It's not wrong to say that the world economy is now in a slowdown mode. Countries must prepare [for the impact of the euro economic crisis] many years in the future, rather than this year or next year."

Kanit Saengsubhan, director of the Fiscal Policy Research Institute, agreed that the election outcome could allay fears that Greece will default because of political instability.

"The direct and indirect cost of Greece exiting the euro zone is far greater than that of supporting the country to maintain its status," Dr Kanit said.

He said Thai economic growth could fall to 2.2% this year from an earlier 5% forecast, compared with a contraction of 2.3% in 2009.

But Supavud Saicheau, managing director of Phatra Securities, cautioned that the growing popularity in Greece of the Syriza Party would mean better odds for future discontinuity.

The party emerged from Sunday's election with 70 seats, up from 52 in May and 11 previously. The prospect of youth unemployment at 50% could test the people's tolerance for fiscal tightening now that the country has spent five years in recession.

Dr Supavud said economic growth could dip from 5.7% to 2% this year if the European economies contract by 2.5% in the worst case.

He urged the government to forge ahead with a plan of 2-3 trillion baht in investment and to support the business sector's ventures in Myanmar.

Meanwhile, the Bank of Thailand said after a special meeting with its two independent committees on monetary policy and financial supervision that the euro crisis would make the local capital market increasingly volatile.

But the strong local banking system and ample liquidity should accommodate the economy.
 
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