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Tuesday, November 9, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.66% and Dec S&Ps up +3.70 points. Commodities surged as the dollar fell with gold at a record high, silver at a 30-year high, crude oil at a 25-month high and copper at a 28-month high. European stocks received a boost after Deutsche Bank AG predicted that European stocks will rally 16% by the end of next year as growth in the global economy drives earnings. The Oct Bank of France business sentiment unexpectedly rose +1 to 103, matching a 2-1/2 year high, as improved consumer spending and investment help lift demand. Vodafone Group Plc rallied 1.1% as the world's largest mobile-phone company raised its full-year profit forecast after it reported first-half profit of 7.36 billion pounds ($11.9 billion), higher than analysts' estimates of 7.29 billion pounds. Vodaphone also announced plans to sell its interests in Japanese wireless operator Softbank Corp. for 3.1 billion pounds ($5 billion) as it d isposes of minority assets to focus on data services and other growth areas. Limiting gains in European stocks is an increase in sovereign-debt risks after the yield spread between Irish 10-year bonds and similar-maturity benchmark German bunds widened to a record 553 bp and the yield spread between Portuguese 10-year bonds and bunds widened to 450 bp, also a record.

•   The Asian markets today closed mixed with Japan down -0.39%, Hong Kong -1.02%, China -0.69%, Taiwan +0.18%, Australia -0.79%, Singapore +0.40%, South Korea +0.14%, India +0.38%. China will force banks to hold more foreign exchange and strengthen auditing of overseas fund raising after China's State Administration of Foreign Exchange said it will introduce new rules on currency provisioning and tighten management of banks' foreign-debt quotas. China is stepping up efforts to curb hot-money inflows that may inflate asset bubbles and add pressure for a stronger yuan. The yuan jumped to 6.6440 per dollar, its highest since the end of a dollar peg in 2005, on speculation that China will permit faster appreciation of the yuan before Group of 20 leaders meet this week in South Korea. Also today, Taiwan's Financial Supervisory Commission said it would restore curbs on foreign investments in fixed-income securities to include government debt due in more than a year after capi tal inflows from overseas investors helped push the Taiwan dollar up the most in more than a decade.

Wednesday, November 10, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -0.19% and Dec S&Ps are little changed, up +0.70 of a point. The dollar is higher, which has prompted a retreat in most commodity prices, while Treasuries are lower. A 2.8% decline in Holcim is leading European stocks lower after the world's second-biggest cement maker said reaching last year's operating profit will be "challenging." Natixis, the investment-banking unit of Credit Agricole SA, plunged 7.6% and is leading financial stocks lower after it reported Q3 profit of 305 million euros ($421 million), well below analysts' estimates of 366 million euros. European sovereign-debt risk concerns are still high as the yield spread between Irish 10-year bonds and similar-maturity German bunds widened to a record 571 bp. Government bonds in Greece and Portugal have been under pressure and Irish bond prices have fallen for 12 straight days since European Union leaders agreed on Oct 29 to cons ider German Chancellor Merkel's proposal for a permanent rescue mechanism as of 2013 that would involve debt restructuring with losses for private holders of sovereign bonds.

•   The Asian markets today closed mixed with Japan up +1.40%, Hong Kong -0.85%, China -0.70%, Taiwan +0.06%, Australia -0.86%, Singapore -0.74%, South Korea +1.21%, India -0.27%. China's Shanghai Stock Index closed lower after the PBOC said it will increase the reserve ratio requirement for the nation's banks by 50 bp starting Nov 16. The Chinese yuan rose to 6.6395 against the dollar, the strongest level since China unified official and market exchange rates at the end of 1993, as the government seeks to appease world leaders ahead of this weekend's G-20 summit. Japan's Nikkei Stock Index rallied to a 4-1/2 month high led by gains in Japanese banks after the FT reported that Group of 20 leaders meeting in South Korea this week may seek to exempt large Asian banks from stricter global regulations. Asian chipmakers rallied after Taiwan Semiconductor Manufacturing, the world's largest maker of custom chips, said its Oct parent-level sales rose +28% from a year earlier.

Thursday, November 11, 2010...

Overnight Developments

•   European stocks are weaker with the European DJ Stoxx 50 down -0.02% and Dec S&Ps down -6.30 points. The dollar is higher on an increase in safe-haven demand as most European stocks retreated on continued concern about the region's most indebted nations. An 11% plunge in Cisco Systems led technology shares lower after the company late yesterday forecast lower-than-expected earnings. Bank of Ireland Plc and Royal Bank of Scotland Group Plc led a sell off in banks, falling more than 3%, after Ireland's central bank Governor and ECB Council member Honohan said Irish and international banks' loan losses in the country may total at least 85 billion euros ($117 billion). Comments from French Finance Minister Lagarde fueled further losses in the bonds of Europe's most indebted nations when she said "investors must share the cost of sovereign debt restructurings," which raised concern some nations may need to restructure their debt in order to avoid default ing. Limiting losses in European stocks is a rally in mining companies after copper surged to a 2-1/2 year high and Moody's Investors Service raised China's debt rating.

•   The Asian markets today closed mostly higher with Japan up +0.31%, Hong Kong +0.82%, China +0.31%, Taiwan -0.16%, Australia +0.61%, Singapore +0.13%, South Korea -2.99%, India -1.37%. China's Shanghai Stock Index rose to a 9-1/2 month high after Moody's Investors Service raised China's debt rating by one step to Aa3, the fourth-highest investment grade, saying the Chinese economy's "resilient performance" and the prospects of "continued strong growth" mean China will be able to manage and contain losses from record lending. Commodity prices surged after the upgrade, with crude oil posting a 25-month high and copper surging to a 2-1/2 year high; as the upgrade bolsters optimism the economic recovery will continue. Ahead of the G-20 meeting starting today in Seoul, the yuan reached 6.6173 per dollar, its highest since 1993, amid speculation Chinese policy makers will accept a stronger currency to curb inflation, which was reported at a 2-1/2 year hig h of +4.4% y/y today, and also to meet the demands of the international community. Japan's Nikkei 225 Stock Index climbed to a 4-1/2 month high after bank stocks rallied when Deutsche Bank AG raised its rating on Japan's banks, while South Korea's Kospi index plunged in the last minutes of trading as the expiration of options contracts spurred the largest-ever sales of equities by foreign investors.

Friday, November 12, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -0.64% and Dec S&Ps down -7.10 points. The dollar index climbed to a 5-week high on increased safe-haven demand as global equity markets tumbled, while Treasuries rose and most commodities weakened. Concerns that China is poised to increase interest rates again after its Oct consumer prices accelerated to their fastest pace in 25 months is pressuring global equities. European Q3 GDP figures were all revised lower with growth in the Euro-Zone cut to a +0.4% q/q increase from the previously reported +0.5% q/q, while Germany was cut to +0.7% q/q from +0.8% q/q and growth in France was revised lower to +0.4% q/q from +0.5% q/q. Keeping the pressure on European equities was the unexpected decline in Sep Euro-Zone industrial production, which fell -0.9% m/m, weaker than the expected +0.3% m/m gain and the biggest decline in 18 months. In an attempt to stem the rout in the bond markets of Europe's periphe ral nations (i.e., Ireland, Spain & Portugal), European finance ministers that are meeting other global leaders at the G-20 summit in South Korea, said a crisis-resolution mechanism they're discussing that may force bondholders to share the cost of a bailout wouldn't apply to outstanding debt. The euro rebounded from a 1-1/4 month low against the dollar and Irish bonds rallied for the first time in 14 days after the statement was released.

•   The Asian markets today closed lower with Japan down -1.39%, Hong Kong -1.93%, China -6.21%, Taiwan -1.43%, Australia -0.76%, Singapore -1.26%, South Korea +0.34%, India -2.10%. Concern that growth in China may slow as it takes additional steps to damp inflation undercut most Asian stock markets with China's Shanghai Stock Index falling the most in over a year. Japanese exporters declined as the yen rallied and Japanese bank stocks tumbled after a WSJ article contradicted a Nov 10 report from the FT that the Group of 20 leaders may consider different capital rules for lenders with mostly domestic operations and those for global banks. Sep India industrial production rose +4.4% y/y, smaller-than-expected and the slowest pace of growth in 16 months, which may prompt the RBI from further raising interest rates as consumer demand slows from the previous six rate hikes the RBI has already made this year.

Monday, 15 November 2010...

Overnight Developments
•European stocks are higher with the European DJ Stoxx 50 up +0.17% and Dec S&Ps are up +3.70 points. The dollar index climbed to a 1-1/4 month high and the euro weakened after Greece's 2009 budget deficit was revised up to 15.4% of GDP from 13.6%, the largest in the Euro-Zone. According to the EU's statistics office, the total budget gap for the Euro-Zone in 2009 widened to 6.3% of GDP in 2009, the biggest since the euro was introduced in 1999. Treasuries weakened after Richmond Fed President Lacker said the Fed may need to tighten monetary policy, even with an elevated US unemployment rate, to avoid a surge in inflation. European stocks fluctuated as the market awaits more information on whether Ireland will seek assistance to deal with its debt burden. Bank of Ireland slumped 4.2% after an Irish Finance Ministry spokesman said his country is in talks with officials about current "market conditions" as Germany pushes it to accept a bailout before tomorrow's meeting of European finance ministers. A report in the Irish Independent newspaper said Irish Finance Minister Lenihan may ask his European counterparts at Tuesday's meeting for as much as 80 billion euros ($10 billion) in aid between 2011 and 2013, according to Barclays Capital. Increased M&A activity is boosting European stocks with MAN SE up 6.6%, after Scania, the Swedish truck maker controlled by Volkswagen AG, said it's considering merging with MAN to create Europe's largest maker of commercial vehicles. Premier Oil Plc jumped 6.5% after the Observer newspaper reported Korea National Oil Corp. may make a bid for the UK oil producer, and Invensys Plc surged 7.4% after the Daily Telegraph reported the producer of control panels for Whirlpool Corp. washing machines may be bought by Chinese railcar maker CSR Corp.


•The Asian markets today closed mixed with Japan up +1.06%, Hong Kong -0.81%, China +0.70%, Taiwan -0.91%, Australia -0.10%, Singapore -0.47%, South Korea +0.35%, India +0.76%. The yen weakened to a 1-1/4 month low against the dollar and Japanese stocks rallied after Q3 Japan GDP was reported up +0.9% q/q and +3.9% annualized, stronger than expectations of +0.6% q/q and +2.5% annualized. Chinese bank stocks weakened after the state-run China Real Estate Business reported that China's four largest lenders have stopped making new loans to property developers until next year. Asian mining companies also weakened as copper prices fell on concern demand will wane as China takes steps to curb lending and cool its economy.

Tuesday, November 16, 2010...

Overnight Developments

•   European stocks are weaker with the European DJ Stoxx 50 down -1.50% and Dec S&Ps down -7.40 points. The dollar index climbed to a 1-1/2 month high which prompted a fall in commodities with crude oil sliding to a 1-1/2 week low. European and US stocks are under pressure on concern that China will have to rake additional measures to cool inflation, while European finance ministers are in Brussels to address Ireland's debt crisis. In the UK, the Oct UK CPI unexpectedly accelerated to 3.2% y/y, exceeding the government's 3.0% limit and forcing BOE Governor King to write his fourth letter of explanation to the Treasury this year. Mining companies and basic-resource producers are weaker as metals prices fell and European banks are weaker as well, with HSBC down 2.2% and Santander, Spain's largest lender, down 1.6%. Salzgitter slid 3.3% and led steelmakers lower after Deutsche Bank AG downgraded Germany's second-largest steelmaker to "hold" from "bu y." European stocks fell even after German investor confidence rose for the first time in 7 months in November after the Nov German ZEW economic sentiment rose +9.0 to 1.8.

•   The Asian markets today closed mostly lower with Japan down -0.31%, Hong Kong -1.39%, China -4.38%, Taiwan +0.87%, Australia +0.26%, Singapore -0.76%, South Korea -0.55%, India -2.19%. China's Shanghai Stock Index slumped to a 1-month low and dragged other Asian markets lower after the China Securities Journal reported the country will introduce measures to control rising food prices and after PBOC Governor Zhou Xiaochuan said China is under "pressure" from capital inflows as he reiterated the central bank's goals of "moderate" credit growth and stronger liquidity management. South Korea's Kospi Stock Index declined after the Bank of Korea increased interest rates for the second time this year and dropped a reference to keeping borrowing costs "accommodative." The BOK raised the 7-day repurchase rate by 25 bp to 2.50% and BOK Governor Kim said that while the benchmark isn't currently at a neutral level, the economy isn't ready for "n ormal" rates yet, which signals the central bank will be slow to raise rates further.

Wednesday, November 17, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.31% and Dec S&Ps up +2.00 points. The dollar is slightly higher and commodities are mixed with copper sliding to a 1-1/2 month low and crude oil falling to a 2-week low. Credit-default swaps on Irish government debt rose after Irish Finance Minister Lenihan said talks with the European Commission, the ECB and the IMF on potential aid for his country's banks will start tomorrow. Irish bonds also fell after LCH.Clearnet Ltd. raised the margin requirement for trading the securities to 30% of net positions, making it more expensive to buy the nation's debt. A rally in health-care stocks is boosting the European market after Actelion Ltd. surged 9.6% on reports that Amgen is considering buying the Swiss drugmaker. GlaxoSmithKline Plc climbed 2.2% after the UK drugmaker and Human Genome Sciences won a US panel's backing to sell the first new lupus drug, Benlysta, in more than 50 years. In the UK, the number of people receiving jobless benefits in Oct unexpectedly declined -3,700 m/m, the first drop since July, and better than an expectations for a +6,000 increase.

•   The Asian markets today closed mostly lower with Japan up +0.15%, Hong Kong -2.02%, China -2.07%, Taiwan -0.68%, Australia -1.62%, South Korea -0.22%, Singapore and India closed for holiday. China's Shanghai Stock Index fell to a 1-month low on concern the government will take further measures to curb inflation. China's cabinet said today that the government may impose price controls on "important daily necessities" and production materials, while the China Securities Journal reported that the PBOC may raise interest rates for a second time this year as soon as Nov 19. Asian energy and basic resource companies fell, as commodities declined on concern demand will decrease on China's tightening policies. Japan's Nikkei 225 Stock Index closed slightly higher as exporters gained after the yen held near a 1-1/4 month low against the dollar.

Thursday, November 18, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +1.24% and Dec S&Ps up +13.20 points. Treasuries are weaker and the euro and commodities rallied sharply on the prospect of a European Union-led bailout for Ireland. Credit-default swaps on Irish government debt sank 14.5 bp after Irish central bank Governor Honohan said Ireland will probably seek a bailout from the EU and the IMF worth "tens of billions" of euros to rescue its battered banks and probably pay an interest rate close to 5%, similar to what was offered to Greece when it requested a bailout in April. EU, IMF and ECB officials are scheduled to arrive in Dublin later today to study the books of the country's lenders as European policy makers put pressure on Ireland to accept a bailout to prevent contagion spreading through the Euro-Zone. European stocks rallied even after the Organization for Economic Cooperation and Development (OECD) cut its global forecast for next year, predicting a "soft spot" in 2011 as government stimulus is withdrawn and an investment recovery slows. The OECD now predicts the global economy will expand 4.2% next year instead of the 4.5% predicted in May.


•   The Asian markets today closed higher with Japan up +2.06%, Hong Kong +1.82%, China +1.42%, Taiwan +0.34%, Australia +0.34%, Singapore +0.10%, South Korea +1.56%, India +0.33%. Asian markets received support from news that Ireland is on the brink of accepting a bailout with gains in mining and energy companies leading the way as commodities rallied. Japanese exporters led a gain the Nikkei 225 Stock Index to its highest level in 4-3/4 months as the yen held near a 1-1/4 month low against the dollar. South Korea's won climbed from a 7-week low and stocks gained after sales at the 3 largest department stores climbed 13.3% in Oct, the fastest pace of growth in 8 months and a sign that the recovery in Asia's fourth-biggest economy is in tact. In an attempt to slow capital inflows that are driving up the won, South Korea's finance ministry said today that policy makers will revive a tax on foreigners' debt holdings.

Friday, November 19, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -1.18% and Dec S&Ps down -2.90 points. The dollar is weaker and Treasuries and most commodities are higher, while the euro strengthened on optimism that a European Union bailout of Ireland would limit contagion of sovereign-debt risks throughout the rest of the Euro-Zone. The main bearish factor for stocks today was the action by China to order its banks to set aside larger reserves for the fifth time this year in an attempt to limit inflation and asset bubbles. Also undercutting European stock prices was the larger-than-expected increase in Oct German producer prices which rose +0.4% m/m and +4.3% y/y, with the +4.3% y/y gain the fastest pace of increase in nearly 2 years. Speaking at a ECB conference in Frankfurt today, Fed Chairman Bernanke defended the Fed's QE 2 program, saying it will aid the world economy, while he implicitly took a shot at China saying countries that undervalue their currenc ies may eventually inhibit growth around the world and risk financial instability at home. Also speaking at the same ECB conference, ECB President Trichet said that while the ECB and the Fed are dealing with different economic structures, they both have a "very large unity of purpose" when maintaining price stability.


•   The Asian markets today closed mixed with Japan up +0.09%, Hong Kong -0.13%, China +0.98%, Taiwan +0.27%, Australia -0.24%, Singapore -0.56%, South Korea +0.75%, India -1.73%. After the Asian markets closed, the PBOC said it will increase the ratio requirements for China's banks by 50 bp with effect from Nov 29 as it drains cash from the financial system, saying the aim is to step up liquidity management and "appropriately control" credit and loans. Japan's Nikkei 225 Stock Index rose to a 4-3/4 month high after exporters rallied as the yen slipped to a 1-1/2 month low against the dollar. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency. Technology stocks in Japan also gained after computer-memory chipmaker Elpida Memory jumped 4% after receiving a brokerage upgrade.

Monday, November 22, 2010...

Overnight Developments

•   European stocks are slightly lower with the European DJ Stoxx 50 down -0.17% and Dec S&Ps down -0.20 of a point. The euro strengthened to a 1-week high against the dollar and most commodities gained after Ireland became the second Euro-Zone member to seek a rescue from the European Union and the IMF in an attempt to prevent a run on its banks. Credit-default swaps on Irish government debt slid 28.5 bp to a 3-week low as Irish Prime Minister Cowen said he expected talks on the rescue package to be completed in the "next few weeks." Finance Minister Lenihan said the loan would be less than 100 billion euros ($137 billion), though he refused to give any further details, while Moody's Investors Service said a "multi-notch" downgrade on Ireland's credit rating was most likely as an increase in the debt burden poses a "credit negative" for the country. European stocks fluctuated between slight gains and losses as the euphoria of the Ir ish bailout was offset by a plunge in Irish banks, with Bank of Ireland down 17% and Irish Life & Permanent down 24% on concern that a bailout will dilute existing shareholder stakes. Strength in European stocks was also limited on concern that the debt crisis may not be over with credit-default swaps on Portuguese government debt increasing 5 bp.

•   The Asian markets today closed mixed with Japan up +0.93%, Hong Kong -0.35%, China -0.22%, Taiwan +0.83%, Australia +0.31%, Singapore -0.20%, South Korea +0.38%, India +1.90%. Asian stocks received support on news of a bailout for Ireland, with Japan's Nikkei 225 Stock Index climbing to a 5-month high as exporters rallied after the yen weakened. China's Shanghai Stock Index closed lower however, as the markets react to the 50 bp increase in the reserve ratio requirements for Chinese banks announced by the PBOC following the markets' close last Friday.

Tuesday, 23 November 2010...

Overnight Developments

•European stocks are lower with the European DJ Stoxx 50 down -0.72% and Dec S&Ps down -11.10 points. The dollar and Treasuries are stronger and most commodities are weaker on escalating tensions in Korea along with concern the European sovereign-debt crisis will spread. The Markit iTraxx SovX Western Europe Index of credit-default swaps linked to the debt of 15 governments rose 3 bp to a record 180 bp. Bank of Ireland sank 21% after Irish Prime Minister Cowen said he will seek national elections early next year, while Barclays slipped 2.1% after the US Securities and Exchange Commission said the bank got two transfers totaling about $1.3 billion from Lehman Brothers in Sep 2008 that may have violated securities laws. European Union and IMF officials said Greece will need to make an "extra effort" to cut its 2011 budget deficit enough to keep receiving emergency aid and that "deep structural reforms are needed" to boost tax revenue and make state spending and agencies more efficient. Limiting losses in European stocks was the larger than expected increases in the European PMI manufacturing indexes. The Nov Euro-Zone PMI composite unexpectedly rose +1.6 to 55.4, stronger than expectations for a -0.2 point decline to 53.6.


•The Asian markets today closed lower with Japan closed for holiday, Hong Kong -2.67%, China -2.04%, Taiwan -0.55%, Australia -1.17%, Singapore -2.03%, South Korea -0.74%, India -1.33%. Asian stocks were undercut after North Korea fired dozens of artillery shells at Yeonpyeong island, near the western border with South Korea, which injured 14 South Korean soldiers and prompted South Korea to scramble fighter jets and return fire. China's Shanghai Stock Index fell to a 6-week low as bank stocks plunged after people with knowledge of the matter said China's biggest banks are close to reaching annual lending quotas and plan to stop issuing new loans. China's regulators are monitoring banks' loan balances to ensure the official target of 7.5 trillion yuan ($1.1 trillion) in new lending for 2010 isn't exceeded as the government steps up efforts to limit credit expansion after inflation quickened and property prices surged.

Wednesday, November 24, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.44% and Dec S&Ps up +2.30 points. The dollar index climbed to a 2-week high after Standard & Poor's cut Ireland's long-term debt rating two steps to A-1 from A-1+ with a negative outlook, while the euro slumped to a 2-month low against the dollar on concern the European sovereign-debt crisis is spreading. Spain's 10-year note yield relative to benchmark German bunds widened 12 bp to 246 bp, the highest level since the inception of the euro in 1999, while credit-default swaps insuring Portuguese government debt climbed 13.5 bp to 500.5 and rose 9 bp on Spanish debt to 310, both at record highs. Despite the negativity regarding the debt crisis, European stocks moved higher after the Nov German IFO business climate unexpectedly rose +1.6 to 109.3, its highest level since data began in 1991. Porsche SE jumped 4.3% and led automakers higher after it reported earnings before interest and taxes surge d to 395 million euros between Aug and Oct compared with 52 million euros a year earlier as sales soared 80% to 2.1 billion euros, while Compass Group Plc rallied 3.7% after the world's largest catering company said its full-year profit rose 15%, beating analysts estimates. Sep Euro-Zone industrial new orders fell -3.8% m/m, more than expected and the biggest monthly decline in 1-3/4 years.

•   The Asian markets today closed mixed with Japan down -0.84%, Hong Kong +0.56%, China +2.25%, Taiwan -0.38%, Australia -0.10%, Singapore +0.34%, South Korea +0.10%, India -1.18%. Asian markets were still feeling the negative effects of North Korea's artillery attack Tuesday on South Korea, although the markets settled well above their worst levels. Defense-related stocks rallied as US President Obama said he "strongly condemned the attack" and told South Korean President Lee Myung Bak that the US "stands shoulder to shoulder" with its Asian ally. After an emergency meeting of government and central bank officials, South Korea's finance ministry said the BOK would supply "ample" liquidity in local and foreign currencies if needed to shield markets.

Friday, November 26, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -1.40% and Dec S&Ps down -12.10 points. The dollar index jumped to a 2-month high and Treasuries were stronger after global stock markets declined as tensions between North and South Korea escalated and concerns remained high over Europe's debt crisis. The euro slumped to a 2-month low against the dollar after credit-default swaps to insure Spain's government debt rose 21 bp to a record 320.5 bp, climbed 19 bp to a record 599.5 to insure Ireland's government debt and rose 31.5 bp to a record 507.5 bp to insure Portuguese government debt. The euro was also pressured after comments from ECB Council member Liikanen who said that the ECB might keep emergency liquidity measures in place for longer "if required." European bank stocks are leading stock market declines with Santander, Spain's biggest lender, down 3.7%, Banco Bilbao Vizcaya Argentaria SA down 3.9% and BNP Paribas down 3.1%. Concer ns that Portugal may become the next victim of Europe's debt crisis intensified after the Financial Times Deutschland reported that by putting pressure on the Portuguese government, the ECB and other countries within the Euro-Zone aim to avoid a bailout of Spain, citing unidentified people within Germany's finance ministry. Also helping to keep European stocks in negative territory was the weaker-than-expected Oct French consumer spending that fell -0.7% m/m and -0.3% y/y, worse than expectations of -0.5% m/m and +0.4% y/y.

•   The Asian markets today closed mostly lower with Japan down -0.40%, Hong Kong -0.77%, China -0.89%, Taiwan -0.45%, Australia +0.11%, Singapore -0.04%, South Korea -1.24%, India -0.94%. Rising tensions on the Korean peninsula undercut Asian stocks after North Korea said that joint military exercises between South Korea and the US will bring the region to the "brink of war" and it threatened a "shower of terrifying fire" should the US or South Korea infringe on its sovereignty. The US aircraft carrier Washington was headed toward the Yellow Sea for joint drills with South Korea between Nov 28 and Dec 1. A decline in Chinese bank stocks and property developers led China's Shanghai Stock Index lower after Shanghai Securities News said the Chinese government may cut the target for new lending next year.

Monday, November 29, 2010...

Overnight Developments

•   European stocks are trading lower with the European DJ Stoxx 50 down -0.33%. However, Dec S&Ps are trading mildly higher by 2.60 points (+0.22%). Eurozone finance ministers on Sunday approved an 85 billion euro bailout package for Ireland that did not force senior bondholders of major Irish banks to take a write-down. Eurozone finance ministers also gave Greece an extra 4-1/2 years to repay its bailout package, extending the term to 7 years in order to match the loan length in the new Irish bailout package. Eurozone finance ministers also agreed that the post-2013 bailout facility will not force automatic losses on sovereign bondholders and that instead the IMF will have the power to determine bondholder losses on a case-by-base basis, which was a defeat for German Chancellor Angela Merkel's hardline position for automatic losses that helped cause of the latest phase of the European debt crisis. The question now is whether Sunday's agreements will relieve th e pressure in the markets, or whether the markets are going to keep pushing Portuguese and Spanish risk measures higher and force a near-term bailout of at least Portugal and perhaps Spain. The markets have thus far been unimpressed with Sunday's agreements. The euro is down by 0.72% and credit default swap prices today have risen by 23 bp for Spain and by 40 bp for Portugal. However, CDS prices today are down by 20 bp for Ireland and by 21 bp for Greece. The European Commission today in its latest GDP forecasts said that Eurozone GDP growth will weaker to +1.5% in 2011 from +1.7% in 2010. The report forecast 2.2% GDP growth for Germany in 2011 but only 1.6% growth for French GDP growth and 1.1% for Italian GDP growth. The report forecast contractions for Greece and Portugal but +0.9% growth for Ireland. The European Commission reported today that Eurozone Nov confidence rose to 105.3 from 103.8 in October, which was stronger than expectations of 105.0 and was the hig hest level in 3 years.

•   The Asian markets today closed mostly higher: Japan +0.86%, Hong Kong +1.26%, China -0.15%, Taiwan +0.66%, Australia +0.44%, Singapore unchanged, South Korea -0.16%, and India +1.40%. Asia stocks were supported today by Nomura's upgrade for Sony to a "buy."

Tuesday, November 30, 2010...

Overnight Developments

•   European stocks are slightly higher with the European DJ Stoxx 50 up +0.12% and Dec S&Ps are down -4.20 points. The euro slumped to a 2-1/2 month low against the dollar and most commodities declined on concern the European sovereign-debt crisis is deepening. The difference in yield between Italian 10-year bonds and German bunds widened to as much as 212 bp, the most since 1996, while credit-default swaps insuring Italian, Spanish and Portuguese government bonds all rose to record highs. The Oct Euro-Zone unemployment rate rose +0.1 to 10.1% a 12-year high, and Oct French producer prices rose a more-than-expected +0.8% m/m and +4.3% y/y, a 2-year high. German unemployment fell for a 17th straight month in Nov by -9,000 to 3.14 million, the lowest amount of unemployed in 18 years, which may keep domestic demand firm in Europe's largest economy.


•   The Asian markets today closed mostly lower with Japan down -1.87%, Hong Kpng -0.68%, China -1.66%, Taiwan +0.06%, Australia -0.74%, Singapore -0.43%, South Korea +0.29%, India +0.60%. Asian stock markets were undercut after an economist at the Chinese Academy of Social Sciences said that China needs to raise interest rates by 200 bp as the recent increases in the reserve-requirement ratios of Chinese banks won't be enough to reign in excess liquidity in the system. Oct Japan industrial production fell -1.8% m/m, its fifth consecutive monthly drop and the biggest decline in 20 months, while the Japanese economy lost -180,000 jobs in Oct, the biggest drop since May, as the jobless rate increased +0.1 to 5.1%. The data adds to evidence that Japan's economy may contract for the first time in 5 quarters, as the expiration of stimulus measures and weak exports prompt companies to curb production.