European Stocks / The Asian Markets

[setravis]

Wednesday, May 25, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 up +0.40% and June S&Ps down -2.10 points. The dollar and Treasuries are higher amid speculation Europe's debt crisis is getting worse. European stocks rose, led by gains in German utility companies, after the Financial Times Deutschland reported that the German government may scrap a tax on nuclear reactors. Limiting stock gains was the 3% drop in Applied Materials after the world's largest producer of chip-making equipment forecast earnings that missed estimates. The euro weakened against the dollar after EU Economic and Monetary Affairs Commissioner Rehn told the French newspaper Les Echos that Greece is the "most difficult case" among the three countries that have received bailouts from the EU and IMF. The euro was also pressured after the Jun German GfK consumer confidence survey fell -0.2 to 5.5, weaker than expectations of -0.1 to 5.6 and its lowest level in 6-months.



•   The Asian stock markets today closed mixed with Japan down -0.57%, Hong Kong +0.07%, China -1.19%, Taiwan -0.34%, Australia -0.95%, Singapore +0.18%, South Korea -1.16%, India -0.91%. Japanese stocks closed lower after Apr Japan exports plunged -12.5% y/y, their biggest decline in 1-1/2 years as Japan posted its first trade deficit (-463.7 billion yen) for the month of April in 31 years. BOJ Governor Shirakawa said his board members were "examining whether there's a way to enhance" a 3 trillion yen ($37 billion) lending program for industries that can spur growth. Asian technology stocks took a hit after Applied Materials forecast weaker-than-expected Q3 profit and sales. China's Shanghai Stock Index fell for a fifth day and posted a 3-3/4 month low as a decline in lenders led the index lower after Standard & Poor's said policy tightening may spur a jump in credit losses and weaken profitability in Chinese banks. Chinese property developers weakened af ter the Shanghai Securities News reported that China will curb speculative demand for homes and maintain basically stable real estate prices to control the property market. Societe Generale predicts that the PBOC will raise interest rates twice more this year and increase lenders' reserve-rate requirements three more times in an attempt control excess liquidity in the markets.

[setravis]

Thursday, May 26, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 down -0.12% and June S&Ps up +2.10 points. The dollar and Treasuries are weaker, while the euro gained and gold slumped on speculation China will increase its purchases of European bonds, which eases concern that the European sovereign-debt crisis will spread. The Financial Times reported that European Financial Stability Facility (EFSF) CEO Regling said that Asian investors, including the Chinese government, may compromise a "strong proportion" of Portuguese bailout bond buyers when the EFSF sells them next month. China, the world's biggest holder of foreign-exchange reserves, bought 16% of the 4.75 billion euros ($6.7 billion) of 5-year notes sold yesterday to fund Portugal's bailout, according to the European Commission. Another positive for European stocks was the Apr German import price index which climbed +0.3% m/m and +9.4% y/y, weaker than expectations of +0.7% m/m and +9.9% y/y.



•   The Asian stock markets today closed mostly higher with Japan up +1.48%, Hong Kong +0.67%, China -0.40%, Taiwan +0.70%, Australia +!.65%, Singapore +0.16%, South Korea +2.87%, India +1.11%. China's yuan strengthened to a 17-year high today as the PBOC set the currency's reference rate at 6.4921 per dollar, the highest in 6 years. The yuan briefly touched 6.4858, the strongest level since 1993, as speculation mounts that China will tighten monetary and fiscal policies further to curb rising domestic inflation. Most Asian stocks rose, led by raw material producers, after Deutsche Bank AG upgraded basic resource companies to "overweight." South Korea's Kospi Index closed nearly 3% higher after Credit Suisse Group AG and Citigroup predicted that South Korean stocks may gain amid improved earnings and attractive valuations and recommended that investors buy the nation's equities on "dips."

[setravis]

Friday, May 27, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 up +0.43% and June S&Ps up +1.00 point. The dollar weakened and commodities advanced after leaders of the Group of Eight said the strengthening of the world economy will pave the way for reductions in debt. European debt concerns eased after ECB Council member Wellink said he's "fully confident" Greece will meet conditions to receive its 3.3 billion-euro ($4.7 billion) aid payment by the IMF next month. Treasury and bund prices gained on a flight-to-safety after Japan's credit outlook was lowered to negative by Fitch Ratings while European confidence in the economic outlook weakened for a third month in May as the worsening debt crisis and surging commodity costs weighed on sentiment. The May Euro-Zone economic confidence slipped -0.6 to a 7-month low of 105.5, weaker than expectations of -0.5 to 105.7. European money supply growth rose less than expected in April, which may prompt the ECB to pause in its interest rate tightening cycle, after the Apr Euro-Zone M3 money supply rose +2.1% 3-month avg and +2.0% y/y, weaker than expectations of +2.3% 3-month avg and +2.4% y/y. Strength in European banking shares in leading gains in European stocks after Citigroup raised its recommendation on the sector to "overweight."



•   The Asian stock markets today closed mixed with Japan down -0.42%, Hong Kong +0.95%, China -0.51%, Taiwan +0.25%, Australia +0.51%, Singapore +0.38%, South Korea +0.37%, India +1.23%. Japan had its AA- credit rating outlook lowered to negative from stable by Fitch Ratings which cited "rising government indebtness." Japan's gross government debt reached 210% of GDP by the end of 2010, the highest ratio for any Fitch rated sovereign, the ratings company said. A weaker than expected Q1 US GDP along with a rally in the yen to a 1-1/2 week high against the dollar undercut Japanese exporters, while China's Shanghai Stock Index tumbled to a 4-month low after profit growth slowed among industrial companies and concern intensified inflation will accelerate this month. The National Bureau of Statistics reported that profit at China's industrial companies rose +29.7% in the first four months y/y, weaker than the +32% y/y gain in Q1, while the National Business Daily r eported that China's consumer prices may increase as much as +5.5% y/y this month, higher than April's +5.3% y/y pace.

[setravis]

Tuesday, May 31, 2011...

Overnight Developments

•   Global stocks are higher with the European Euro Stoxx 50 up +0.90% and June S&Ps up +12.30 points. The dollar slumped to a 2-1/2 week low and Treasuries are weaker, while commodities rose with crude at a 2-week high and copper and gold at 3-week highs. Jean-Claude Juncker, leader of the Euro-Zone finance ministers, said in Paris yesterday that EU leaders will decide on a new aid package for Greece by the end of June and that EU officials have ruled out a "total restructuring" of Greece's debt, which sent the yields on Greek government bonds tumbling 30 bp and boosted the euro to a 3-week high against the dollar. The WSJ also reported that Germany may stop demanding an early rescheduling of bonds for Greece so the nation can get a new package of loans. A rally in Greek bank stocks led the rally in European equity prices, with Alpha Bank SA and EFG Eurobank Ergasias SA up over 5%. May German unemployment -8,000 to 2.97 million. its 23rd straight mont hly decline, while the unemployment rate fell -0.1 to 7.0%, the lowest since records for a reunified Germany began in 1991. Another boost to European stocks was the May Euro-Zone CPI estimate which slowed to a +2.7% y/y pace, weaker than the +2.8% y/y increase expected, and eases pressure on the ECB for further interest rate increases.


•   The Asian stock markets today closed higher with Japan up +1.99%, Hong Kong +2.16%, China +1.59%, Taiwan +1.87%, Australia +0.87%, Singapore +0.63%, South Korea +2.33%, India +1.49%. Japanese stocks rallied as the yen weakened against the dollar, lifting exporters, and after a Trade Ministry survey of Japanese manufacturers said they plan to increase factory output 8% this month and a further 7.7% in June, which would confirm that Japanese factory production is coming back online to pre-quake levels. Japanese stocks gained even after Moody's Investors Service put Japan's debt rating on review for a downgrade, citing faltering growth prospects and "a weak policy response" that may hinder government efforts to cut the nation's debt burden. Separately, Apr Japan industrial production rose +1.0% m/m, half of market expectations for a +2.0% m/m increase, while Japan's Apr jobless rate rose +0.1 to 4.7%. China's Shanghai Stock Index closed higher after hte Apr Ch ina leading index rose to 102.11, its highest level in 6 months.

[setravis]

Wednesday, June 1, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 down -0.19% and June S&Ps down -1.60 points. The dollar index is little changed after falling to a 3-1/2 week low in overnight trade and most commodities are weaker. The euro fell back from a 3-1/2 week high against the dollar after the German newspaper Frankfurter Allgemene Zeitung reported that the IMF may not pay out its fifth tranche of aid to Greece in June after officials assess the country's progress in cutting its budget deficit. European stocks fell back after manufacturing activity in the Euro-Zone was unexpectedly revised lower in May. The May German PMI manufacturing index was revised down to 57.7 from the originally reported 58.2 and the May Euro-Zone PMI manufacturing index was revised down to 54.6 from 54.8, both to 7-month lows. The British pound weakened against the dollar after the May UK PMI manufacturing index fell -2.3 to 52.1, a 1-1/2 year low and weaker than expectations of -0.5 t o 54.1.


•   The Asian stock markets today closed mixed with Japan up +0.27%, Hong Kong -0.24%, China +0.09%, Taiwan +0.82%, Australia -0.02%, Singapore +0.41%, South Korea unchanged, India +0.57%. Chinese manufacturing activity in May fell to its slowest pace in 9 months as the May China PMI manufacturing index slid -0.9 to 52.0, although it was slightly stronger than expectations of -1.3 to 51.6. Asian technology companies gained, especially those that are rivals to Nokia Oyj such as HTC, LG Electronics and Samsung, after Nokia said mobile phone sales will "substantially" fall short of expectations and it lowered its sales and profit forecasts as it lost market share to competitors. Australian stocks finished slightly lower after Q1 Australia GDP slumped -1.2% q/q, its biggest quarterly decline in 20 years, after flooded coal mines, railways and farmland hurt exports.

[setravis]

Thursday, June 2, 2011...

Overnight Developments

•   Global stocks are mostly lower with the European Euro Stoxx 50 down -0.78% and June S&Ps are up +3.40 points. Treasuries are little changed and the euro climbed to a 3-1/2 week high against the dollar after German Chancellor Merkel said the European Union remains committed to the euro and the outlook for German growth is "very positive." European stocks weakened on concern the economic recovery is faltering and as Portuguese and Greek debt insurance surged to records after Moody's Investors Service late yesterday said Greece has a 50% chance of default. US stock futures gained after yesterday's plunge left the S&P 500 at 13.2 times estimated earnings of its companies, its lowest valuation since March 18.


•   The Asian stock markets today closed lower with Japan down -1.69%, Hong Kong -1,58%, China -1.61%, Taiwan -0.78%, Australia -2.27%, Singapore -0.39%, South Korea -1.41%, India -0.62%. Asian stocks were undercut after May US manufacturing data expanded at its weakest pace in 20 months and employers hired fewer workers than forecast, which fueled concern the global economic recovery will slow. Japanese automakers led declines in Japanese stocks as Toyota's May US monthly sales fell -33% y/y, Honda's US sales fell -23% y/y and Nissan's May US sales slipped -9.1% y/y, as the quake crisis limited production and supplies of some models ran low. China's Shanghai Stock Index tumbled to a 4-1/4 month low on concern slowing economic growth and government tightening policies will hurt corporate earnings. The Shanghai Daily News reported that the PBOC may raise interest rates ahead of a public holiday on Jun 6 because consumer prices are expected to rise to a new high in May. C hinese automakers closed lower after China's Passenger Car Association reported that China's May passenger car sales, excluding minivans, fell -11% m/m and -1.0% y/y to 850,000 units.

[setravis]

Friday, June 3, 2011...

Overnight Developments

•   Global stocks are mostly lower with the European Euro Stoxx 50 down -0.49% and June S&Ps down -3.90 points. Treasuries are higher and the dollar is little changed as the market awaits the US May payrolls report later this morning. The euro is little changed as European Union and IMF officials today complete a review of Greece's plan for 78 billion euros ($113 billion) in asset sales and austerity measures as they prepare for the nation's second bailout in little more than a year. The British pound slipped to a 1-week low against the dollar after May UK PMI services fell -0.5 to 53.8, weaker than expectations of -0.1 to 54.2. A drop in EON AG and RWE AG, Germany's biggest utilities, is weighing on European stocks after Financial Times Deutschland reported that Germany's four largest electric companies will lose about 3.5 billion euros in sales per year from the permanent shut down of 8 out of Germany's 17 nuclear power plants. Limiting stock declines was the unexpected upward revisions of May German PMI services to 56.1 from the originally reported 54.9, and to the May Euro-Zone PMI composite to 55.8 from the originally reported 55.4.


•   The Asian stock markets today closed mixed with Japan down -0.66%, Hong Kong -1.31%, China +1.04%, Taiwan +0.61%, Australia -0.38%, Singapore -0.47%, South Korea +0.03%, India -0.64%. Most Asian markets closed lower on concern recent economic data that point to a slowdown in the US economy will lead to weakened demand for Asian goods. A rally in the yen to a 2-1/2 week high against the dollar undercut Japanese exporters, while Prime Minister Kan's pledge to step down sparked a contest to select the next Japanese leader. Kan survived a no-confidence vote in parliament yesterday, but the process of selecting a new leader may add to delays in reconstruction from the March earthquake and to approval of plans to boost taxes and shrink the deficit needed to restore growth and ease credit concerns.

[setravis]

Monday, June 6, 2011...

Overnight Developments

•   Global stocks are mostly lower with the European Euro Stoxx 50 down -0.41% and June S&Ps down -2.50 points. The dollar index slipped to a 1-month low and most commodities are weaker on concern the global economic recovery is faltering. The euro fell back from a 1-month high against the dollar after the Jun Euro-Zone Sentix investor confidence fell a more-than-expected -7.3 to 3.5, its lowest level in 11 months. German bund yields declined and fell back toward 3.00% after ECB Executive Board member Smaghi said a Greek sovereign debt restructuring should be an option of "last resort" as it may have "severe implications" on the country and investors. Bank stocks are leading declines in European shares after data from the BIS showed that at the end of 2010, Greek government bonds held by banks in countries reporting to the BIS totaled $54.2 billion, of which 96% was owned by European lenders. Airline stocks are weaker after the International Air Transport Association cut its 2011 industry profit forecast by 54% because of higher oil prices, political protests in the Middle East and North Africa, and the Japan earthquake. A larger-than-expected increase in European producer prices is also weighing on stocks after the Apr Euro-Zone PPI rose +0.9% m/m and +6.7% y/y, greater than expectations of +0.8% m/m and +6.6% y/y.


•   The Asian stock markets today closed mostly lower with Japan down -1.18%, Australia -0.31%, Singapore -1.02%, India +0.24%, while the markets in Hong Kong, China, Taiwan, and South Korea were closed for a holiday. Asian stocks closed lower after last Friday's weaker-than-expected US May payrolls report questioned the sustainability of the global economic recovery. Japan's Nikkei 225 Stock Index fell to a 2-1/4 month low, led by a slump in exporters, after the yen climbed to a 1-month high against the dollar. Shares of Tepco, owner of the crippled Fukushima Dai-Ichi nuclear power plant, slumped as much as 28% to a 37-year low after the President of the Tokyo Stock Exchange said the utility should follow the same route as Japan Airlines did in 2010 and file for bankruptcy protection. Tepco has slumped 90% since the Mar 11 earthquake and the Japan Center for Economic Research estimates that the cost of dismantling the Fukushima plant may reach 20 trillion yen and compen sation for households in the 20-kilometer evacuation zone may total 630 billion yen over 10 years.

[setravis]

Tuesday, June 7, 2011...

Overnight Developments

•   Global stocks are higher with the European Euro Stoxx 50 up +0.20% and June S&Ps up +6.50 points. The dollar index slipped to a 1-month low and most commodities are higher on optimism over the European debt crisis. The euro climbed to a 1-month high against the dollar after ECB President Trichet said a rollover of Greek debt as an alternative means of easing Greece's funding squeeze "is not a default, and is something the ECB would consider appropriate." The ECB has been opposed to any measure that could be classified as a default to avoid what EU Economic and Monetary Affairs Commissioner Rehn said would be a "Lehman Brothers catastrophe." European stocks were also boosted by better-than-expected economic data as Apr Euro-Zone retail sales rose +0.9% m/m and +1.1% y/y, stronger than expectations of +0.3% m/m and unchanged y/y, while Apr German factory orders advanced +2.8% m/m and +10.5% y/y, stronger than expectations of +2.0% m/m and +9 .1% y/y. Crude oil prices slipped in overnight trade after a Gulf delegate said OPEC will raise its oil output target tomorrow. Speculation has been building that Saudi Arabia is seeking an agreement to boost production by as much as 1.5 million barrels a day.



•   The Asian stock markets today closed mixed with Japan up +0.67%, Hong Kong -0.35%, China +0.60%, Taiwan +0.12%, Australia -0.06%, Singapore +0.07%, South Korea -0.67%, India +0.41%. The yen fell back from a 1-month high against the dollar and lifted Japanese exporters after Japan's Finance Minister Noda said "I will closely monitor developments in the markets." Chinese stocks closed higher despite the report from the Economic Information Daily that said the PBOC may raise interest rates by 25 bp this weekend and may increase banks' reserve requirement ratios by 50 bp next week after inflation and other economic indicators are released. The RBA left its benchmark interest rate unchanged for a sixth straight meeting and signaled little urgency to increase borrowing costs as a stronger currency helps contain inflation. RBA Governor Stevens held Australia's overnight cash rate at 4.75% and said "inflation will be close to target over the next 12 months.&qu ot;

[setravis]

Wednesday, June 8, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 down -1.01% and June S&Ps down -6.30 points, both at 2-1/2 month lows. The dollar and Treasuries strengthened and most commodities are lower as concern deepened the global recovery may slow. Crude oil is lower on expectations for an increase in OPEC production when the cartel meets later today in Vienna. The World Bank lowered its global growth projection for this year to 3.2%, from a Jan forecast of 3.3%, while Fed Chairman Bernanke said late yesterday that the US recovery was "frustratingly slow." The euro weakened against the dollar and European stocks were undercut after German industrial production unexpectedly declined and German exports were weaker than expected. Apr German industrial production was down -0.6% m/m and +9.6% y/y, weaker than expectations of +0.2% m/m and +10.0% y/y, while Apr German exports slid -5.5% m/m, weaker than expectations of -3.0% m/m.



•   The Asian stock markets today closed mostly lower with Japan up +0.07%, Hong Kong -0.91%, China +0.15%, Taiwan -0.55%, Australia -0.65%, Singapore -0.42%, South Korea -0.91%, India -0.55%. Most Asian stocks closed lower after comments from Fed Chairman Bernanke late yesterday questioned the sustainability of the global economic recovery. Japanese utility stocks slumped after the Nikkei newspaper reported that all of Japan's 54 nuclear reactors could be idled by next spring if those shut for scheduled maintenance don't receive the required local approval to restart. An estimate by Japan's trade and industry ministry predicts using fossil fuel instead of nuclear for power would cost Japan's utilities 3 trillion yen annually ($37 billion). Japanese stocks managed to eke out a small gain despite the rally in the yen to a 1-month high against the dollar, after the May Japan Eco Watchers Survey rose more than expected to 36.0, a 3-month high. China bought a net 1.33 trill ion yen ($16.6 billion) in Japanese long-term government bonds in Apr, the most since records began in 2005, as it seeks to diversify the world's largest currency reserves.