European Stocks / The Asian Markets

[setravis]

Wednesday, December 1, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +1.15% and Dec S&Ps up +13.30 points. The euro and commodities strengthened while Treasuries fell after ECB President Trichet signaled the ECB may step up their response to the debt crisis. Credit-default swaps to insure European government debt fell after ECB President Trichet said he didn't believe that financial stability in the Euro-Zone "could really be called into question," which fueled speculation that ECB policy makers at their monthly meeting on Thursday may indicate further measures to curb the spread of the debt crisis. Stocks rose despite the comment from Standard & Poor's Ratings Service that it may cut Portugal's credit ratings on concern the government has made little progress at boosting economic growth to offset the fiscal drag from scheduled 2011 budget cuts. European banks gained and basic-resource stocks rose as commodities moved higher after Chinese manufacturing e xpanded for a fourth month in November. Oct German retail sales jumped +2.3% m/m, more than expected and the biggest monthly increase in 2-1/2 years, while the Nov UK PMI manufacturing unexpectedly rose +2.6 to 58.0, its fastest pace in 16 years as export orders climbed.


•   The Asian markets today closed mostly higher with Japan up +0.51%, Hong Kong +1.05%, China -0.03%, Taiwan +1.76%, Australia +0.05%, Singapore +1.18%, South Korea +1.27%, India +1.88%. Asian stocks received a boost after manufacturing activity in China expanded more than expected in November when the Nov China manufacturing PMI rose +0.5 to 55.2, its fastest pace of expansion in 7 months. Asian stocks also rose after US consumer confidence rose more than expected in Nov, which benefited Asian exporters. The Australian dollar slid to a 10-week low against the US dollar after Q3 Australia GDP was reported at +0.2% q/q, less than the expected increase of +0.4% q/q as a stronger currency contributed to the biggest drop in exports in more than 7 years. This slowing in growth indicates little immediate need for the RBA to add to its seven interest rate increases since Oct 2009 that have slowed consumer spending and reined in an expansion in housing.

[setravis]

Thursday, December 2, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.25% and Dec S&Ps up +4.00 points at a 2-1/2 week high. The euro and most commodities are higher with copper and crude oil posting 2-1/2 week highs on speculation the ECB at its monthly policy meeting today will act to stem the European sovereign-debt crisis. The yield on the 10-year German bund climbed to a 6-1/2 month high of 2.854% as strength in the equity market reduces the safe-haven demand of government debt. Bayerische Motoren Werke AG is up 1.3% and leading gains among carmakers after its Nov US auto sales surged +30% y/y. IMF Managing Director Dominique Strauss-Kahn said the current European debt crisis is "serious" and that the IMF stands ready to support member countries that seek help. The Oct Euro-Zone PPI rose +0.4% m/m and +4.4% y/y, more than expected with the +4.4% y/y gain the biggest annual increase in 2 years.


•   The Asian markets today closed higher with Japan up +1.81%, Hong Kong +0.86%, China +0.61%, Taiwan +0.77%, Australia +1.95%, Singapore +0.50%, South Korea +1.27%, India +0.72%. Asian markets closed higher and were supported by gains in European and US stock markets as concerns eased over the European debt crisis, while exporters rallied after the Fed's Beige Book said that manufacturing and job growth expanded in the US. Japan's Nikkei Stock Index jumped to a 5-1/4 month high after Japanese companies boosted spending for the first time in 3 years. Q3 Japan capital spending excluding software rose +4.8% y/y, its first increase since Q1 of 2007 and a positive sign that Japan's economic recovery may continue.

[setravis]

Friday, December 3, 2010...

Overnight Developments

•   European stocks are little changed with the European DJ Stoxx 50 down -0.06% and Dec S&Ps down -0.20 of a point. The dollar is weaker and commodities and Treasuries are little changed ahead of the release of the Nov US employment report later this morning. The Bundesbank raised its forecast for German economic growth this year by the most since data for a reunified Germany began in 1992. In its bi-annual economic outlook released today, the German central bank predicts German GDP will expand 3.6% in 2010 and 2.0% in 2011, higher than its Jun estimates of 1.9% for this year and 1.4% next year. Other positives for European stock prices include the upward revision to the Nov Euro-Zone PMI composite which was raised to 55.5 from the previously released 55.4, and strength in retail sales as the Oct Euro-Zone retail sales increased +0.5% m/m and +1.8% y/y, stronger than expectations of +0.2% m/m and +1.0% y/y. Limiting strength in European bourses was the action b y Standard & Poor's Ratings Services to place Greece's "BB+" long-term sovereign credit rating on "CreditWatch" with negative implications. Standard & Poor's Ratings Services also placed the long and short-term counterparty credit ratings on Portugal's three largest publicly traded banks, Banco Espirito Santa SA, Banco BPI SA and Banco Comercial Portugues SA on CreditWatch with "negative implications."


•   The Asian markets today closed mostly higher with Japan up +0.10%, Hong Kong -0.55%, China +0.10%, Taiwan +0.45%, Australia +0.38%, Singapore -0.80%, South Korea +0.64%, India -0.13%. The state-run Xinhua News agency reported that China will shift to a "prudent" monetary policy next year as the government seeks to rein in liquidity, accelerating inflation and limit the risk of asset bubbles. The PBOC last used the term "prudent" for monetary policy in 2007 before shifting to a tighter stance and has described the current monetary stance as "moderately loose" since late 2008. The PBOC last hiked interest rates on Oct 19 and today's announcement suggests further rate hikes as soon as this month. Japan's Nikkei 225 Stock Average posted a 6-1/2 month high today and closed higher after stronger-than-expected US economic data on pending home sales and retail sales prompted a rally in exporters on increased optimism that the economic recovery m ay continue.

[setravis]

Monday, December 6, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -0.03% and Dec S&Ps down -3.00 points. Treasuries are stronger and most commodities are weaker after Fed Chairman Bernanke said on Sunday's "60 Minutes" news program that Fed purchases beyond the $600 billion already announced are "possible" given that US unemployment may take 5 years to fall to a normal level. Bernanke also said a return to recession "doesn't seem likely" because sectors of the economy such as housing can't become more depressed. European bank shares slipped and led stock prices lower and the euro weakened after Moody's Investors Service cut Hungary's debt to the lowest investment grade and indicated it may cut the rating to junk. The euro and European stocks were also pressured after the Belgian finance minister said that the 750 billion-euro ($1 trillion) bailout fund might be expanded, while Germany opposes any increase. European finance ministers meet later today in Brussels and Reuters reported that the IMF would ask the EU to enlarge the bailout package. Today's meeting also comes after Luxembourg Finance Minister Juncker and his Italian counterpart Tremonti wrote a letter to the Financial Times calling for the introduction of a joint European government bond or an "E-bond" which would be sold by a European Debt Agency. German Chancellor Merkel rejected the idea for an E-bond saying European treaties don't "allow Eurobonds as far as we're concerned," which points to a rift among European leaders over the steps needed to stem the sovereign debt crisis.


•   The Asian markets today closed mixed with Japan down -0.11%, Hong Kong -0.36%, China +0.23%, Taiwan +0.91%, Australia -0.12%, Singapore +0.28%, South Korea -0.13%, India +0.07%. Japanese exporters weakened and led Japanese stocks lower after the yen strengthened to a 3-week high against the dollar last Friday. Hyundai Motor slid 1.6% and led South Korean stocks lower after South Korea and the US revised a stalled free-trade accord, which allows the US to end a 2.5% tariff on automobiles in 5 years instead of immediately or after 3 years, as was previously agreed. Chinese raw material and material producers closed higher and lifted Chinese stocks after crude oil touched a 26-month high in overnight electronic trade. Crude oil has since fallen back as the dollar strengthened.

[setravis]

Tuesday, December 7, 2010...

Overnight Developments

European stocks are higher with the European DJ Stoxx 50 up +1.34% and Dec S&Ps up +11.40 points at a contract high. Stock and commodity prices surged, with crude oil at a 26-month high and gold at a record high, after President Obama agreed to a 2-year extension of the Bush-era tax cuts. The European Union is set to give formal approval to Ireland's 85 billion euro rescue package, while European finance ministers ruled out immediate aid for Portugal or Spain or an increase in the 750 billion-euro ($1 trillion) debt crisis fund. Treasuries are lower on reduced safe-haven demand, with the yield on the 10-year German bund rising to a 6-1/2 month high of 2.915%. Unilever climbed 4.2% after Morgan Stanley raised its recommendation on the world's second-largest consumer-goods maker to "overweight" from "underweight," and Porsche SE gained 7.1% after Barclays Plc lifted its recommendation on the carmaker to "overweight" from "equal weight." European stocks extended their gains when Oct UK manufacturing rose +0.6% m/m, twice as much as market expectations, and a sign that the economic recovery is maintaining momentum into the final quarter of the year.


The Asian markets today closed mostly higher with Japan down -0.26%, Hong Kong +0.82%, China +1.10%, Taiwan +0.02%, Australia +0.81%, Singapore +0.33%, South Korea +0.51%, India -0.23%. Honda Motor closed down 1.9% and led shares of Japanese exporters lower on concern the dollar at a 3-week low against the yen will cut overseas earnings. Material and energy companies led gains in other Asian markets as copper climbed to a 2-1/2 year high and silver surged to a 30-year high. The Reserve Bank of Australia left its overnight cash rate target at 4.75% today and RBA Governor Stevens said monetary policy is "appropriate for the economic outlook."

[setravis]

Wednesday, December 8, 2010...

Overnight Developments

•   European stocks are slightly higher with the European DJ Stoxx 50 up +0.40% and Dec S&Ps down -1.60 points. The dollar strengthened and Treasuries and bunds fell, with the yield on the German 10-year bund climbing to a 7-month high of 3.03%, on speculation an extension of the Bush-era tax cuts will help spur economic growth. Most commodities declined on concern China may raise interest rates as soon as this weekend. European stocks received a boost from the stronger-than-expected Oct German industrial production, which climbed +2.9% m/m, stronger than expectations for a +1.0% m/m gain. The Nov Bank of France business sentiment was also better than expected after it climbed +3 to 107, a 2-3/4 year high. Insurance companies are leading gains in European stocks with Prudential Plc up +2.7% after UBS AG added Britain's largest insurer to its European "key calls" list. Limiting gains in stocks was the unexpected decline in Oct German exports that fell -1.1% m/m as Europe's sovereign debt crisis and a cooling global economy curbed demand.


•   The Asian markets today closed mixed with Japan up +0.90%, Hong Kong -1.43%, China -0.89%, Taiwan -0.01%, Australia -0.57%, Singapore +0.34%, South Korea -0.43%, India -1.19%. Chinese stocks declined after the China Securities Journal reported that the PBOC may raise interest rates around the time set for the release of November's inflation data, which has been moved up to Dec 11, 2 days earlier than planned. South Korea's Kospi Stock Index closed lower after Yonhap News reported that North Korea fired artillery shells into its own waters near the disputed western border with South Korea. Japan's Nikkei 225 Stock Index climbed to a 6-1/2 month high as the yen fell back from a 3-week high against the dollar, which prompted a rally in exporters. Japanese railway companies also rallied after Goldman Sachs maintained its "buy" rating on the sector saying, "we think recent declines have left the stocks undervalued."

[setravis]

Thursday, December 9, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.58% and Dec S&Ps up +4.10 points at a fresh contract high. The dollar and most commodities are higher after strong economic reports from the Asia Pacific region boosted confidence in the global economic recovery. Japan's Q3 GDP was revised higher and Australian employers in Nov added more than double the number of workers forecast. As expected, the BOE maintained its benchmark interest rate at 0.50% and its asset purchase target at 200 billion pounds. The euro weakened after the release of the ECB's monthly bulletin which said the central bank will keep its emergency liquidity measures "as long as necessary, and at least" until mid-April. The ECB also stepped up its purchases of government bonds this month to fight "acute" financial market tensions and last week settled 1.97 billion euros ($2.62 billion) of government bond purchases, the most in 22 weeks. Undercutting gains i n European stocks is weakness in automakers with Volkswagen down 7% and Porsche SE down 3.9% after the vice secretary-general of the China Automobile Industry Association said that China may end tax incentives for buying passenger cars next year.


•   The Asian markets today closed mostly higher with Japan up +0.52%, Hong Kong +0.34%, China -1.53%, Taiwan +0.58%, Australia +0.88%, Singapore +0.23%, South Korea +1.87%, India -2.31%. Japan's Nikkei 225 Stock Index rallied to a 6-1/2 month high after Japan's Q3 GDP was revised up to a 4.5% annualized pace, faster than the 3.9% annualized pace reported last month as capital investment in Q3 was revised up to 1.3% from the +0.8% originally reported. Deflation concerns still remain however, after Japan's Q3 GDP deflator was revised down to -2.4% compared with the -2.0% drop originally reported, its fourth straight quarterly decrease. Stocks in Australia closed higher and the Aussie dollar rallied after Nov Australian payrolls were reported up +54,600 m/m, more than double market expectations of +20,000 and the biggest monthly increase in 10 months. The jobless rate fell -0.2 to 5.2% even as more people entered the workforce. The improvement in Australia's labor market will keep the pressure on the RBA to raise interest rates, which it has done 7 times since Oct 2009, in order to keep inflation in check.

[setravis]

Friday, December 10, 2010...


•   European stocks are little changed with the European DJ Stoxx 50 -0.19% and Dec S&Ps up +4.10 points. The dollar is slightly weaker and Treasuries and most commodities are higher. The euro is under pressure as European leaders disagreed on how to stem the sovereign-debt crisis. France backed Germany in refusing to add to the European Union's 440 billion ($581 billion) rescue fund and rejected the idea of issuing joint euro-bonds, which deepens bloc-wide divisions before the Dec 16-17 EU summit. European stocks are slightly weaker after Oct French industrial and manufacturing production both unexpectedly declined -0.8% m/m, after strikes and protests blocked ports and triggered the shutdown of refineries and petrochemical plants. On the positive side, Goldman Sachs predicts that European equities will climb 12% through the end of 2011 as rising earnings and record-low interest rates help companies overcome the sovereign-debt crisis.


•   The Asian markets today closed mixed with Japan down -0.72%, Hong Kong -0.04%, China +1.24%, Taiwan -0.40%, Australia +0.10%, Singapore -0.77%, South Korea -0.22%, India +1.39%. China's Shanghai Stock Index closed higher after China's trade surplus and lending exceeded forecasts in November. Nov China exports rose +24.9% y/y to a record $153.3 billion and imports advanced +37.7% y/y to a record $130.4 billion, leaving a +$22.9 billion surplus, higher than expectations of +$21.0 billion. Nov Chinese new lending was reported at 564 billion yuan ($85 billion), which exceeded market expectations of 500 billion yuan and leaves this year's total about 50 billion yuan short of the government's maximum target of 7.5 trillion yuan. Undercutting gains in Chinese stocks was the action by the PBOC to raise the reserve requirements for banks by 50 bp to 18.5%, the third increase in the last five weeks, as the central bank tries to counter an increase in inflation. Chinese leader s meet tomorrow in Beijing to set economic guidelines for next year. Chinese inflation data is also to be released tomorrow with Nov China CPI expected at +5.1% y/y, the highest since Jul 2008.

[setravis]

Monday, December 13, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.42% and Mar S&Ps up +2.30 points. Global stocks and commodities rallied after China decided not to raise interest rates over the weekend even as consumer prices climbed at the fastest pace in more than 2 years in Nov. Treasuries sank to a 5-1/2 month low on decreased safe-haven demand and crude oil moved higher after OPEC kept its production output for 11 of its members at 24.845 million barrels a day at its Dec 11 meeting. Mining companies and raw material producers are and leading gains in European stocks as copper soared to a 2-1/2 year high. Increased M&A activity is also boosting share prices with Wellstream up 5.1% after General Electric agreed to buy the UK based oilfield-services provider for about 800 million pounds ($1.3 billion) and Q-Med surged 13% after the Swiss maker of Cetaphil skin creams agreed to be bought by Galderma SA for as much as 7.45 billion kroner ($1.08 billion). U ndercutting European share prices was the quarterly report released from Germany's Bundesbank that said 2011 German GDP growth may weaken to 2.0% from 3.6% this year and that in Q1 of 2011 the German economy may show a "considerable slowdown" given "continuous uncertainty" in financial markets and the "fragile situation" of government budgets in some countries.


•   The Asian markets today closed mostly higher with Japan up +0.80%, Hong Kong +0.67%, China +3.13%, Taiwan +0.20%, Australia +0.24%, Singapore -0.10%, South Korea +0.60%, India +0.94%. Asian stocks rallied and helped to boost global stock markets after China refrained from raising interest rates over the weekend despite the surge in consumer prices when Nov China CPI surged 5.1% y/y, its largest increase in 28 months. Chinese policy makers have instead drained money from the financial system over the past 2 months by setting higher reserve requirements for banks. The Xinhua News Agency reported after an annual conference in Beijing by Chinese leaders to set economic policy guidelines that the government is likely to set a target of at least 7 trillion yuan ($1.1 trillion) of new lending for 2011, from a target of 7.5 trillion yuan this year. The government also aims for 4% inflation, 8% GDP growth and a 16% expansion in money supply for 2011 from this year's targets o f 3% inflation. 8% GDP growth and a 17% increase in money supply.

[setravis]

Tuesday, December 14, 2010...

Overnight Developments

•   European stocks are little changed with the European DJ Stoxx 50 down -0.16% and Mar S&Ps up +1.80 points. The dollar index slipped to a 3-week low and most commodities are higher with copper posting a 2-1/2 year high on speculation the Fed may announce at its FOMC meeting today more bond purchases to stimulate the economy. The yield on Spain's 10-year bond rose by 9 bp to 5.58% after the nation raised less than its 3 billion-euro maximum target at a sale of 12-month and 18-month bills today. Outokumu fell 6.1% and led European steel makers lower after the Finnish stainless-steel maker forecast that Q4 operating profit would be "clearly negative." In its quarterly report released today, the European Commission predicts that Europe's economic growth will moderate next year amid national deficit-cutting measures before improving in 2012 on an increase in private demand. The commission predicts that the Euro-Zone expansion will weaken to 1.5% in 2011 from 1.7% this year and that Ireland and Spain will return to growth next year while Greece will remain in recession. On the positive side, German investor confidence rose for a second month in Dec after the Dec German ZEW economic sentiment rose a more-than-expected +2.5 to 4.3. European airline stocks rallied after Credit Suisse Group AG raised its recommendation on Air France and Lufthansa to "outperform" from "neutral."


•   The Asian markets today closed mostly higher with Japan up +0.22%, Hong Kong +0.49%, China +0.26%, Taiwan +0.04%, Australia +0.21%, Singapore -0.17%, South Korea +0.69%, India +0.55%. Raw-material and commodity producing stocks have pushed most Asian stock markets higher on speculation that demand for commodities will grow and the global expansion will continue after China refrained from raising interest rates. Li & Fung, the number one supplier of goods to Wal-Mart Stores, advanced 1.6% on speculation that today's US Nov retail sales report will show strong consumer demand, while Hyundai Heavy Industries jumped 8.9% after the world's largest shipbuilder said that Hapag-Lloyd AG increased an order to 10 container ships from 6. Japanese stocks also received a boost after Prime Minister Kan called for a 5% cut in Japan's corporate tax rate.

[setravis]

Wednesday, December 15, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -0.52% and Mar S&Ps down -4.30 points after Moody's Investors Service said it may cut Spain's credit rating. Treasuries and the dollar are stronger and most commodities are weaker after Moody's placed Spain's Aa1 debt rating on review for a possible downgrade, citing the 170 billion euros ($226 billion) the nation needs to raise next year, while also having to refinance 30 billion euros for its regions and 90 billion euros for its banks. The euro slumped and the yield on Spain's 10-year government note climbed to near its highest yield in 10 years on concern the European sovereign-debt crisis is spreading. Bank stocks are leading stock prices lower with Banco Santander SA, Spain's largest bank, down 3.6% and Barclays Plc down 2.9%. European Union leaders are meeting tomorrow for a 2-day summit to discuss the creation of a permanent mechanism to shore up over-indebted countries. Limiting stock losse s was a rally in healthcare stocks led by a 7.1% surge in Novartis AG after the company agreed to pay $12.9 billion to take full control of Alcon, ending an 11-month dispute with minority shareholders.


•   The Asian markets today closed mixed with Japan down -0.07%, Hong Kong -1.95%, China -0.67%, Taiwan +0.19%, Australia +0.02%, Singapore -0.94%, South Korea +0.31%, India -0.76%. Japanese stocks closed lower after confidence among its largest manufacturers worsened for the first time since Mar 2009. The Q4 Japan Tankan large manufacturers business sentiment index dropped to 5 from 8 in Q3 after a strong yen eroded export gains and the effect of government stimulus measures faded. Asian raw materials and energy producers closed lower after crude oil and metals prices declined. Weakness in Chinese bank stocks led Chinese stocks lower as Industrial & Commercial Bank of China Ltd., the world's number one bank by market value, closed down 1.9% on concern China will act further to slow inflation.

[setravis]

Thursday, December 16, 2010...

Overnight Developments

•   European stocks are little changed with the European DJ Stoxx 50 up +0.16% and Mar S&Ps up +2.30 points. Treasuries are higher and the dollar is lower, while commodities and stocks fluctuated as European leaders gather for a 2-day summit in Brussels to discuss the debt crisis. Spanish borrowing costs rose after Spain sold 2.4 billion euros of 10-year and 15-year bonds at an auction today, below a maximum target of 3 billion euros. Europe's services and manufacturing industries slowed more than expected in Dec, as smaller Euro-Zone countries failed to keep up with Germany's export-led expansion. The Dec Euro-Zone composite index fell to 55.0 from 55.5 in Nov, weaker than the 55.3 level that was expected. Helping to boost European stocks was the +2.8 increase in the Dec German PMI manufacturing index to a 5-month high of 60.9, stronger than expectations for a +0.1 increase to 58.2 and points to continued strength in the German economy. Also benefiting stock p rices was the +0.8% y/y increase in Q3 Euro-Zone lobar costs, the smallest increase since data began in 1996.


•   The Asian markets today closed mixed with Japan up +0.01%, Hong Kong -1.33%, China -0.52%, Taiwan +0.29%, Australia +0.34%, Singapore +0.01%, South Korea -0.39%, India +1.10%. Asian stocks fluctuated as chip-industry stocks rose after analysts said prices of some memory may climb, while raw materials producers finished weaker after metal prices dropped. India refrained from raising interest rates today after six increases already this year as a cash crunch prompted a pause in the central bank's rate hike cycle. The RBI said today it plans to buy government bonds worth as much as 480 billion rupees via open-market auctions in the next month to inject liquidity into the country's banks, and also cut the statutory liquidity ratio, or the proportion of deposits commercial banks need to invest in government bonds, to 24% from 25%. After the Asian markets closed, Standard & Poor's raised China's debt rating to AA-, the fourth-highest ranking, from A+ with a stable outl ook as it cited China's "substantial" foreign-exchange reserves and strong fiscal position.

[setravis]

Friday, December 17, 2010...

Overnight Developments

•   European stocks are lower with the European DJ Stoxx 50 down -0.62% and Mar S&Ps down -0.90 of a point. The dollar is weaker and Treasuries and most commodities are higher after EU leaders agreed to amend the bloc's treaties to create a permanent debt-crisis mechanism in 2013. EU leaders are still debating the issue of debt sustainability and possible insolvency problems prior to 2013. The euro strengthened after the Dec German IFO business climate unexpectedly rose +0.6 to 109.9, the highest since records for a reunified Germany began in 1991. Also supporting the euro was the unexpected rise in the Dec French business confidence indicator, which rose +3 to 103, a 2-1/2 year high. Pressuring stock prices was the action by Moody's Investors Service to downgrade Ireland's credit rating five notches to Baa1 from Aa2, with a negative outlook. Allied Irish Bank and Bank of Ireland each sank 6.2% as Moody's said Ireland's banks may need to use 10 billion euros ($ 13.3 billion) out of a 25 billion-euro contingency capital fund being set up for the country's banks as part of an international bailout package. Also undercutting market sentiment was the unexpected -7 point decline in Nov UK nationwide consumer confidence to a 20-month low of 45 as the looming budget squeeze dented Britons' outlook for 2011.


•   The Asian markets today closed mixed with Japan down -0.07%, Hong Kong +0.20%, China -0.15%, Taiwan +0.41%, Australia -0.44%, Singapore +0.17%, South Korea +1.04%. The BOJ reported that Japanese companies accumulated a record amount of cash last quarter, funds that have failed to bolster business sentiment or spur economic growth. Non-financial companies held 206 trillion yen ($2.5 trillion) in currency and deposits at the end of Q3, up +5% y/y, the eighth straight quarter cash holdings have increased and the largest amount since quarterly data began in 1979. According to the China Daily newspaper, PBOC Governor Zhou Xiaochuan indicated that turbulence in the global economy is limiting the nation's ability to raise interest rates to counter inflation. The PBOC raised reserve requirements for lenders for the third time in five weeks on Dec 10, while refraining from adding to October's interest rate increase, the first since 2007. The China Daily also said the PBOC Go vernor pledged more measures to curb liquidity and inflation, without being more specific.

[setravis]

Monday, December 20, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up % and Mar S&Ps up +5.50 points at a fresh contract high. Treasuries and commodities are higher; while the euro slipped to a 2-week low against the dollar amid concern Europe's debt crisis is deepening. The ECB said in a report that it has "serious concerns" that Ireland's new banking legislation might threaten the central bank's ability to run liquidity operations. The ECB is concerned that the Irish government may alter the status and the treatment of incumbent bondholders of Irish banks and could raise uncertainty about the collateral, which is used in the ECB refinancing operations. A rally in automakers is leading European stocks higher with Volkswagen AG, Europe's biggest automaker, up 2.8% after saying it expects sales in China to grow 10% to 15% next year, and PSA Peugeot Citroen gained 1.9% after the French automaker said it plans to sell 200,000 vehicles in China in 2011 and 150,00 0 this year. Limiting gains in European stocks was a decline in airline stocks with British Airways Plc down 2.4% and Deutsche Lufthansa down 1.5% as snow in Europe disrupted air travel for a third day. The Confederation of British Industry predicts the BOE will start raising interest rates within 6 months to curb inflation and may increase its benchmark rate by 25 bp every 3 months from Q2 of 2011 until mid-2012.


•   The Asian markets today closed mostly lower with Japan down -0.85%, Hong Kong -0.33%, China -1.46%, Taiwan -0.56%, Australia -0.56%, Singapore -0.64%, South Korea -0.09%, India +0.12%. South Korean stocks retreated and undercut other Asian-Pacific markets after South Korea's armed forces commenced a live-firing drill that drew threats of retaliation from North Korea and the United Nations Security Council couldn't agree on steps to ease tensions in the region. Chinese stocks closed lower, led by declines in pharmaceutical and health-care companies after the Economic Observer reported that the Chinese government may cut medicine prices by 40%. Asian shipping companies also closed lower after the Baltic Dry Index, which measures the cost of shipping commodities, fell for the ninth consecutive session to its lowest level in 4-1/2 months.

[setravis]

Tuesday, December 21, 2010...

Overnight Developments

•   European stocks are higher with the European DJ Stoxx 50 up +0.28% and Mar S&Ps up +3.90 points. The dollar is weaker and most commodities gained with copper climbing to a 2-1/2 year high. Treasuries are slightly higher as the cost of insuring Portuguese government debt rose to a 3-week high after Moody's Investors Service said it may cut Portugal's bond rating "by a notch or two" because of concerns over "sluggish" economic growth. European stocks received a boost after Chinese Vice Premier Wang Qishan said that China has taken "concrete action" to help ease the European sovereign-debt crisis. The Spanish newspaper Jornal de Negocios reported that China is willing to invest 4 billions euros ($5.3 billion) to 5 billion euros in Portuguese government debt in the first quarter of next year. China's purchases would cover about a third of Portugal's refinancing needs through April, the Jornal said. An increase in M&A activity i s also lending support to stock gains after Royal DSM NV climbed 3% after it agreed to buy Martek Biosciences for $1.09 billion and UPM-Kymmene Oyj surged 7% after Europe's second-biggest papermaker agreed to buy Myllykoski Oyj and Rhein Papier Gmbh for about 900 million euros ($1.2 billion) in total as the industry consolidates. Limiting stock gains was the unexpected drop in the Jan German GfK consumer confidence survey, which fell -0.1 to 5.4.


•   The Asian markets today closed higher with Japan up +1.51%, Hong Kong +1.57%, China +2.23%, Taiwan +0.67%, Australia +0.75%, Singapore +0.22%, South Korea +0.71%, India +0.86%. Asian stocks climbed as tensions between North and South Korea eased after the North failed to respond to military drills near the disputed western sea border. North Korea also agreed to let inspectors visit its uranium-enrichment facilities. As expected, the BOJ left its benchmark rate unchanged at 0.0% to 0.1% and left the size of its asset-buying fund at 5 trillion yen ($60 billion) and its credit program at 30 trillion yen. The BOJ also said following its monetary policy meeting today "the bank will steadily purchase various financial assets and provide longer-term funds" so that "the effects of comprehensive monetary easing spread." Japanese exporters gained as the yen weakened and after St. Louis Fed President Bullard said that recent US economic data "bodes wel l" for 2011.