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Asian shares fall amid euro zone, banking worries

 

(Reuters) - Asian shares fell and the euro slipped on Tuesday amid fears that Europe's sovereign debt troubles are worsening and could trigger a second full-blown banking crisis.

European stocks tumbled 4 percent on Monday, with financial shares falling to their lowest in more than two years. Wall Street was closed on Monday for a holiday, but S&P 500 futures traded in Asia were down 2.3 percent.

 

"It's the European disease that is infecting markets all around the world at the moment," said Michael Heffernan, senior client adviser and strategist at Austock Group in Australia.

 

Adding to the gloom are worries that the United States may be sliding back into recession, a concern heightened by a slew of downbeat data, most recently employment figures that showed the world's top economy failed to create any jobs last month.

 

Gold, traditionally seen as a safe asset in times of uncertainty, sat just short of $1,900 an ounce, not far off its record high, while the yield on 10-year Japanese government bonds(JGBs), another safe haven, fell below 1 percent.

 

Tokyo's Nikkei fell 1.2 percent, while MSCI's broadest measure of Asia Pacific shares outside Japan was off 1.1 percent, putting the index more than 18 percent down from its April high.

 

Hardest hit sectors in the MSCI index were materials and financials. Banks with heavy exposure to Europe were sold, including HSBC, whose Hong Kong listed shares dropped 2.8 percent.

 

EURO CRISIS

 

The latest focus of Europe's slow motion crisis is Italy, whose bonds were sold off on Monday on worries that Rome is not doing enough to bring its debt under control. Italian 10-year yields rose near 5.6 percent, their highest since early August.

 

While European leaders have been able to put together bailout packages for Greece, Ireland and Portugal, investors fear the consequences of a similar crisis engulfing a bigger economy such as Italy or Spain.

 

The chief executive of Deutsche Bank said on Monday that the euro zone sovereign debt crisis would stunt bank profits for years and could cause the collapse of weaker lenders.

 

The euro traded around $1.4070, having fallen as low as $1.4060. That helped the dollar index climb above 75.200, its highest in nearly a month.

 

The European Central Bank, the only major Western central bank to raise interest rates since the 2008/09 financial crisis, meets on Thursday but is expected to leave borrowing costs unchanged at 1.5 percent, which could put the single currency under further pressure.

 

"Without the support of a more hawkish central bank, the euro will look very vulnerable," Societe Generale strategists Kit Juckes and Sebastien Galy wrote in a note.

 

JGBs were in demand, as investors retreated from riskier assets, with September 10-year futures up 0.12 point at 142.91, after hitting a 10-month high, while the benchmark 10-year yield fell 1.5 basis points to 0.995 percent.

 

Brent crude oil rose 0.7 percent $110.82 a barrel, but U.S. crude, whose volume was trimmed by Monday's holiday was down nearly 3 percent, at just below $84.

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Swiss franc plunges 10 percent vs euro on SNB shocker

 

(Reuters) - The Swiss franc plunged nearly 10 percent against the euro on Tuesday, posting its worst day ever, after Switzerland's central bank jolted markets by setting a limit on how much the franc can gain.

 

The euro surged after the Swiss National Bank said it would enforce a limit of 1.20 francs to the euro by buying foreign currencies in unlimited quantities. The dollar also rose sharply, gaining 9.6 percent against the franc.

 

Investors have poured money into the franc, which they see as one of the few safe places for assets amid global financial turmoil. The franc's rise sparked worries among Swiss officials that its export-driven economy will be damaged by the currency's strength.

 

"When a central bank communicates that it doesn't want its currency to strengthen, it's generally a bad idea to go against that central bank. Today is a reminder why," said Jonathan Lewis, founding principal at Samson Capital Advisors, with assets under management of $7 billion.

 

The euro rose as high as 1.22 francs on trading platform EBS, ending four days of losses.

 

The SNB's latest move comes after it cut its already low interest rate target to nil on August 3. It also flooded the banking system with francs, effectively driving money market and forward rates deep into negative territory and making holding Swiss francs a costly proposition for investors.

 

The SNB had made repeated warnings that it wouldn't tolerate a strong currency.

 

Many analysts believed the SNB may have finally instilled fear in investors still trying to seek shelter in the franc away from the euro zone's sovereign debt crisis. The SNB's ability, however, to hold the floor at 1.20 francs to the euro will very much depend on developments in the euro area.

 

"An intensification of the euro zone crisis is a reasonable prospect and such an event could yet result in a significant step up in demand for the Swiss franc," said Jane Foley, senior currency strategist at Rabobank in London.

 

However, since there is zero inflation in Switzerland, the SNB could potentially just print francs and sell them on an unlimited basis to counter the surge in currency inflows. For this reason, Foley believes the 1.20 cap on the euro/Swiss franc could hold in the near term.

 

In late trading, the euro was up 8.7 percent at 1.20550 francs, rising a low of 1.10200 and a closing level at 1.11000 on Monday,

 

The Swiss franc has dropped roughly 20 percent versus the euro in the past month as the single currency has soared from a lifetime low of 1.00750 hit on August 9 on EBS.

 

As a result, fund managers who took bets that the franc would fall around that time were sitting on hefty gains.

 

The U.S. dollar rose as high as 0.86250 franc on EBS and was last up 9.4 percent at 0.86150 franc, snapping a four-day drop against the franc.

 

FLOWS INTO NORWAY

 

The Swiss central bank action also funneled some safe-haven flows into the Norwegian crown, a currency with robust fundamentals -- an oil exporter and a country with a current account surplus. The euro fell 1.2 percent against Norway's crown to 7.5772.

 

One-month implied volatility on the euro/Norwegian crown pair, a measure of the market's expectations of future movements in either direction, jumped to 9.7 percent from 8.4 percent late on Monday, suggesting more trading action seen on this cross.

 

Despite the euro's steep gains against the Swiss franc, the single currency fell against the dollar, down 0.7 percent on the day at $1.39910. It fell to a low of $1.39720, trading below its 200-day moving average around $1.40150 for the first time since July 12.

 

Market players said the key risk for the euro this week was that the European Central Bank would signal a pause in its rate tightening cycle.

 

Concerns that the next tranche of bailout funds for Greece may be delayed, worries about European bank funding and rising Italian government bond yields on speculation Rome may struggle to implement new austerity measures kept the euro under pressure.

 

The dollar rose against the yen on EBS on speculation the SNB's measures could encourage Japanese authorities to intervene in coming days. The dollar was up 1.0 percent at 77.690, well off a record low of 75.941 struck on Aug 19.

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Asian stocks run out of steam, euro vulnerable

 

(Reuters) - A rebound in Asian stocks ran out of steam on Thursday, as worries over the widening impact of the euro zone crisis and the faltering U.S. economy gnawed at investor confidence.

 

The euro edged down, and remained vulnerable to concerns that European efforts to contain a two-year-old sovereign debt crisis are flagging.

 

"Volatility still persists and the market is likely to continue to dance to the tune of policy risks involving the U.S. and European economies," said Kim Hyung-ryol, a market analyst at Kyobo Securities in Seoul.

 

Global equities suffered their worst correction since 2008 in August, on fears of renewed recession in the United States and worries about Europe's widening crisis, and the MSCI All-Country World index .MIWD00000PUS remains 16 percent below its 2011 high, reached in May.

 

Japan's Nikkei .N225 rose 0.5 percent, paring earlier gains, while MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.2 percent.

 

Germany's top court on Wednesday rejected lawsuits aimed at blocking Berlin's participation in bailout packages for Greece and other heavily indebted euro zone countries, offering some temporary relief to global markets.

 

European stocks rose 3.1 percent markets/index?symbol=gb%21FTPP">.FTEU3 and on Wall Street the S&P 500 rose 2.9 percent .SPX.

 

The euro, after jumping on the German court decision, eased on Thursday to around $1.4060, as traders awaited a European Central Bank rate-setting meeting later.

 

CHANGE OF TACK

 

The ECB is the only major Western central bank to have raised rates since the global financial crisis, but is expected to signal a change in policy tack and halt its tightening cycle in response the sovereign debt crisis.

 

Market players will also be closely watching for any comment from ECB President Jean-Claude Trichet on the central bank's buying of Italian and Spanish bonds to force down yields, a policy that has deeply divided its governing council.

 

"If Trichet makes cautious remarks on bond buying, Italian and Spanish spreads could rise again and hurt investor sentiment," said Junya Tanase, chief strategist at JPMorgan Chase.

 

Federal Reserve Chairman Ben Bernanke is due to speak later on Thursday, at 1730 GMT, and President Barack Obama will outline to Congress his plans for reviving the faltering economy at 2300 GMT. With unemployment stuck above 9 percent, Obama will lay out a plan to spur job creation.

 

Many analysts expect Bernanke to hint at further easing steps to try to stimulate the economy, which could put downward pressure on the dollar.

 

The U.S. currency was a little firmer against the yen at around 77.40, while the dollar index .DXY, which measures its performance against a basket of major currencies, edged up around 0.2 percent.

 

Gold rebounded 1 percent to trade around $1,835 an ounce, after tumbling 3 percent in the previous session.

 

The precious metal has hit a succession of records, most recently at $1,920.30 on Tuesday, driven by its appeal as both a safe haven in times of economic uncertainty and as a hedge against inflation, which some fear will be the eventual consequence of the ultra-loose monetary policies being pursued in much of the developed world.

 

"Concerns about economic growth in the United States and euro zone will keep supporting gold prices. Even though we may see liquidation repeatedly along the way, gold will rise toward $2,000," said a dealer at a Tokyo-based bullion house.

 

Oil was little changed, with U.S. crude flat at $89.33 a barrel and Brent crude down 0.2 percent at $115.60.

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Euro off 2-month low but vulnerable after ECB

 

 

(Reuters) - The euro bounced off a two-month low against the dollar on Friday but the risk of a break below its July trough is seen rising after a deepening debt crisis forced the European Central Bank to drop its tightening policy bias, a key driver in the euro's rally this year.

 

The market showed a mostly muted response to U.S. President Barack Obama's $447 billion package on jobs that is made up largely of tax cuts for workers and business, amid doubts over whether he can push it through a divided Congress.

 

"The euro now doesn't have the support of expectations for rising interest rates, which clearly points to the higher possibility that the euro will fall below (its July low near) $1.38. In addition, strains on European banks' funding are rising. Given all this, the euro looks likely to fall further," said Minori Uchida, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.

 

For now though, sizable buying in the euro against the yen, thought to be from Japanese investors, lifted the euro 0.4 percent against the dollar and the yen in Asia.

 

The euro rose to $1.3933, after dropping to $1.3873 on Thursday, its lowest in two months. The common currency also gained to 108.00 yen, about a half-yen above its six-month low of 107.54 yen hit on Thursday.

 

Traders expect the currency to head toward the July low of $1.38376, a break of which could send a strongly bearish signal, with $1.35 cited as its next possible target.

 

"The euro is unequivocally bearish. It broke through its long-term support and is likely to go significantly lower," said David Scutt, a trader at Arab Bank Australia.

 

The European Central Bank held rates steady at its policy meeting on Thursday, saying inflation risks are no longer skewed to the upside and that economic growth in the region will be slow at best, prompting money markets to fully price in a rate cut by the year-end.

 

Dollar funding strains for European banks showed no sign of abating with the euro/dollar basis swap spread on Thursday hitting its highest since last 2008.

 

POTENTIAL PITFALL

 

Another potential pitfall for the euro is uncertainty over Greece's debt swap plan as Friday is the deadline Athens has given investors in Greek bonds to say whether they intend to take part in its debt exchange offer, a key part of a second 109 billion euro bailout package it clinched on July 21 to avoid bankruptcy.

 

Greece had threatened to cancel the deal unless it got 90 percent participation, a stance some banks think may just be tactics by Athens to get most bondholders on board. Still, a low participation rate in Greece's debt swap could mean reluctant euro zone partners will have to cough up more cash for the overall package to work.

 

But the dollar also lacked traction after Obama's long-awaited job proposals failed to boost hopes of a U.S. recovery. U.S. jobless claims unexpectedly rose last week, highlighting the fragile state of the U.S. job market.

 

"To some extent, this was largely in line with the chatter we heard before it's release. It may even be a bit smaller than needed given the gravity of the problem. That could prevent markets from reacting too positively," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington.

 

"And at the end of the day, it depends on what the finished product will be. A lot of this will be chopped up before it is passed. We've seen a lot of political paralysis in Washington."

 

Federal Reserve Chairman Ben Bernanke offered little new insight as to what the central bank will do at its policy meeting on Sept 20-21 in his speech on Thursday, though most players remain convinced that the bank will start buying longer-dated bonds in a bid to try to lower longer bond yields.

 

The dollar index slipped to 76.09, having surged to two-month highs of 76.319 on Thursday. Against the yen, the dollar stood flat at 77.48 yen.

 

The Australian dollar gained 0.3 percent to $1.0620, but lacked the energy to tackle a resistance-packed zone from $1.0630, its 55-day moving average, through $1.0648, the 100-day average, to $1.6057, a 61.8 percent retracement of its decline earlier this month.

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Brent oil steady near $115 on storms, U.S. jobs package

 

(Reuters) - Brent crude edged up toward $115 a barrel on Friday, after falling more than a dollar in the previous session, supported by storm threats and uncertainty about President Barack Obama's latest plan to revive the world's largest economy.

 

Brent for October delivery was on track for a weekly gain of more than 2 percent, trading up 10 cents at $114.65 a barrel by 0627 GMT.

 

U.S. crude oil fell seven cents to $88.98 a barrel and was set for a gain of more than 3 percent this week.

 

Concerns over economic growth and tepid demand for oil remain the main pressure points for the oil markets, blunting bullish sentiment from Libya's civil war, hurricanes and a battered U.S. dollar.

 

"The question for the oil market is demand destruction and how confident the consumer is, both of which are very uncertain," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

 

"If European and U.S. policymakers can find some compromise and willingness to work together before economics force their hand, then that is bullish for oil. But I think we will probably see the market grind sideways," he added.

 

JOBLESS PROBLEM

 

Obama unveiled a $447-billion package of tax cuts and new spending to revive a stalled job market but he faces an uphill fight with Republicans.

 

Federal Reserve Chairman Ben Bernanke also highlighted the elevated jobless rate and sluggish underlying growth at a speech on Thursday, but disappointed investors by stopping short of laying out a plan for action at the central bank's policy-setting meeting this month.

 

The U.S. dollar index .DXY barely reacted to Obama's job package, trading down 0.4 percent to 76.214.

 

Oil continued to find support from the busy 2011 hurricane season in the Atlantic and supply outages in OPEC member Libya.

 

Tropical Storm Nate, the 14th named storm, was gaining strength and could become a hurricane on Friday or Saturday, the U.S. National Hurricane Center said. The tropical storm has prompted producers in the Gulf of Mexico to begin another round of evacuations of nonessential workers.

 

The U.S. Energy Information Administration said commercial oil inventories fell nearly 4 million barrels last week, far deeper than the forecast for a 1.9 million barrel drawdown.

 

Inventories dropped as imports slid more than 1 million barrels per day with offloading hampered by Hurricane Irene's passage through the East Coast that also compelled refineries to cut utilization rates by more than a quarter.

 

In Libya, the man tasked with running the country, interim Prime Minister Mahmoud Jibril, reminded his forces that the war was not over yet as the latest deadline for the surrender of pro-Muammar Gaddafi towns loomed and fighters massed on both sides.

 

"The consensus is that with the Libyan civil war essentially over, market pressures are easing, but the reality is that we are at the peak point of Libyan stress -- without crude production, but with high imports to meet internal fuel needs," analysts at J.P. Morgan said in a research note.

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Euro seen under pressure on lack of G7 support

(Reuters) - The euro and growth-linked currencies may fall on Monday, hit by a lack of concrete measures from Group of Seven finance chiefs to address either faltering growth, the escalating euro zone debt crisis, or exchange rate volatility.

The dollar, yen and, to a lesser extent, Swiss franc are set to advance with more investors seeking safe-haven currencies on the back of rising financial market stress.

 

That will raise the risk of more solo intervention from Japanese and Swiss authorities.

 

The flight to safety should drive core government bonds like German Bunds and British gilts higher, leading to wider spreads over euro zone peripheral debt, while European banking shares may ease on mounting worries about contagion engulfing bigger economies like Italy and Spain.

 

Finance ministers and central bankers from the Group of Seven industrialised nations pledged to respond in a concerted matter to a global slowdown. However, they offered no specific steps and differed in emphasis on Europe's debt crisis.

 

That will likely offer little solace to investors who had expected some sort of coordinated policy response from G7 policymakers at a time when stock markets have been falling and global growth in showing increasing signs of stalling.

 

"As this falls short of any commitment to undertake co-ordinated action in currency markets, investors are likely to react with disappointment when trading resumes on Monday," said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS.

 

He expected Japan to stay on intervention watch.

 

Japan's finance minister, Jun Azumi, said he met with little resistance to further intervention at the G7 meeting. Japan last intervened in the currency market on August 4 to topple the yen from a record high against the dollar.

 

"We expect Japan's authorities will act again unilaterally if dollar/yen tests its post-war lows of 75.95 yen. As a result we think investors should instead keep favouring the dollar now when they seek safe-haven currencies," UBS's Mohi-uddin said.

 

The dollar index .DXY, which measures its performance against a basket of six currencies which includes the euro, yen and sterling, rose to its highest in six months at 77.276 on Friday.

 

In a bullish signal, it closed above its 55-week moving average at 77.01. Resistance was seen at the base of the weekly Ichimoku cloud around 78.05, while strong resistance was at the 38.2 percent retracement of the index's fall from a high of 88.71 on June 7, 2010 to a low of 72.696 on May 4, 2011 which comes in at 78.80.

 

The dollar is set to make strong gains against the euro, which last week fell to its lowest in six months, at around $1.3627. The euro posted its biggest weekly fall since mid-August last year, with many looking for it to test $1.35 in the near term.

 

EURO ON THE WAY DOWN

 

The euro also fell sharply against the safe-haven Japanese yen on Friday, dropping to its lowest in nearly a decade. It ended the week at 105.85 yen, and a break below the psychologically key 105.00 level could see it drop towards 100 yen in coming weeks, analysts said.

 

Howard Wheeldon, a strategist at BCG Capital Partners, said the weekend's developments provided little confidence to investors in the euro zone, and the coming week will see increased volatility in stock markets.

 

That could hurt the euro more in coming days.

 

The euro was sold off last week after European Central Bank President Jean-Claude Trichet shifted the monetary stance from a hawkish bias to a more neutral one.

 

The shock resignation of ECB board member Juergen Stark, which highlighted sharp divisions within the central bank over purchases of government bonds in the secondary market and concerns that Greece may not secure its latest aid tranche from the IMF/European Union, also added to the euro's woes.

 

Investors will also likely be unsettled by a weekend report from Der Speigel magazine that the German finance ministry was looking at scenarios that included Greece abandoning the euro.

 

Indeed, latest data from the Commodity Futures Trading Commission showed speculators added to their bearish bets against the euro in the week to September 6.

 

"With $1.40 going last week, I think the euro could fall to $1.35 in the next few days," said Michael Derks, chief strategist at FXPRO. "The dollar be will the currency that will gain from safe-haven inflows given the risk of intervention in the yen and the line in the sand that has been drawn on the Swiss franc by the Swiss National Bank."

 

On the charts, near term support was seen at $1.3426, a low hit on February 14 and from where the euro started its move to a 17-month high at $1.4939 struck on May 4.

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Asian stock fall, dollar firm on Europe woes

 

(Reuters) - Asian stocks fell and the euro remained under pressure on Monday after the resignation of a top German European Central Bank board member cast further doubt on Europe's ability to tackle its worsening sovereign debt crisis.

 

Oil prices slipped and the dollar gained broadly as the worries about euro zone's woes combined with fears about flagging world growth to ensure no let up in the gloom that has gripped global markets for much of the past six weeks.

 

"People are quite nervous about Greece and other countries in the European area, so that is why investors are escaping to the dollar," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. "It's risk aversion."

 

Juergen Stark's plan to resign from the ECB's board underscored the internal divisions over its bond-buying program -- one of the central bank's main weapons in fighting the debt crisis by forcing down yields of country's under pressure from the bond markets.

 

Japan's Nikkei .N225 fell 2.2 percent, while the MSCI's broadest index of Asia Pacific shares outside Japan fell around 1 percent.

 

Data from Lipper showed a brief flirtation with stocks at the end of August has waned, with less than a net $600 million flowing into U.S. equity funds in the ended September 7, compared with a net inflow of $6.3 billion in the previous week.

 

MSCI's All-Country World index is now 19 percent below its 2011 high set in May, not far from the 20 percent decline that is the rule-of-thumb definition of a bear market.

 

The euro was struggling at around $1.36, after a sharp slide at the end of last week, while the dollar index .DXY, which tracks the greenback against a basket of major currencies, firmed around 0.3 percent.

 

U.S. crude slid by 87 cents on Monday to $86.37 a barrel and Brent crude eased as much as 97 cents to $111.80.

 

Gold, a traditional safe haven at times of market volatility, was steady around $1,856 an ounce.

[EmpireGlobalfx]

Global stocks hit hard by Greek worries

 

(Reuters) - World shares tumbled nearly 2 percent on Monday with European equities at 26-month lows, down more than 20 percent this year, as investors worried Greece would default amid signs of rifts among euro zone policymakers.

 

Japan's Nikkei closed at a 2-1/2 year low.

 

Yields on long-term core euro zone debt, home to safety plays during times of strife, fell sharply and the euro slumped against the dollar and yen.

 

The cost of insuring peripheral euro zone debt against default rose, to record levels for Greece and Portugal.

 

Markets were partly reacting to the failure over the weekend of the Group of Seven industrialized nations' finance ministers to come up with more than a stated commitment to help turn the world economy around.

 

But they were mainly focused on the euro zone debt crisis.

 

"Europe is not just lurching from one crisis to another. It is lurching into a new one before the previous one is solved," said Makoto Noji, senior strategist at SMBC Nikko Securities.

 

The pan-European FTSEurofirst was down 2.6 percent.

 

German policymaker Juergen Stark's resignation from the European Central Bank's board on Friday underscored internal divisions over its bond-buying program -- one of the bank's main weapons in fighting the debt crisis, by forcing down yields on debt of countries under pressure from the bond markets.

 

At the same time, worries bubbled up again over Greece's ability to meet commitments to qualify for more bailout money.

 

Fears about a Greek default rose last week after senior politicians in German Chancellor Angela Merkel's center-right coalition started talking openly about it. Greece, meanwhile, confirmed on Monday that the country has cash for only a few more weeks.

 

International lenders threatened last week to withhold the sixth bailout payment of about 8 billion euros ($11 billion) because of the country's repeated fiscal slippage.

 

The Greek government announced on Sunday a new property tax to make sure it would meet its budget targets and qualify for the tranche.

 

"The Greek situation is dominant, chances of some sort of default have increased -- the Germans seem to be hinting at that," one bond trader in Europe said.

 

EURO SINKS

 

The euro dived to a seven-month low against the U.S. dollar and a 10-year trough versus the yen.

 

"The outlook for Greece is almost completely unknown. Support for the country appears to be shaking. The market is starting to think the worst could happen," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Banking.

 

"It's as if policymakers are starting to prepare for that," Kitakura said.

 

The euro fell as low as $1.34949, its lowest since February.

 

On bond markets, Italian and Spanish government bond yields rose, feeling the pressure of upcoming debt supply and the rising concern over Greece.

[EmpireGlobalfx]

Global stocks, euro recover after slide; outlook wary

 

(Reuters) - Asian stocks rose and the euro edged off a seven-month low on Tuesday after a report that Italy may get financial support from China sparked a bout of short-covering but did nothing to ease fears that Europe is sliding into another banking crisis.

 

Growing expectations of a Greek debt default, sharp drops in European shares -- especially French banks due to their sovereign exposure -- and a surge in Italian bond yields meant sentiment remained fragile and any rally was likely to be short lived.

 

"There are still enormous challenges facing the European system at this point and fears around a default in Greece are very high and it's hard to see that changing any time soon," said Greg Gibbs, a strategist at RBS in Sydney.

 

The dollar eased broadly, helping lift dollar-denominated commodities such as gold, copper and crude oil.

 

Japan's Nikkei share average .N225 rose 1 percent and Australia's benchmark index .AXJO gained 0.9 percent, while MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS edged up 0.2 percent. .T .AX

 

The MSCI index is nearly 20 percent below its 2011 high reached in April. A fall of 20 percent or more is the generally accepted definition of a bear market.

 

U.S. stocks bounced back late in Monday's session after a report that Italy could get financial support from China tempered investors' worst fears over the euro zone debt crisis. .N

 

S&P 500 index futures rose 0.3 percent in Asia on Tuesday.

 

Market sell-offs like those of the last six weeks -- driven by the euro zone crisis and fears of renewed recession in the United States -- are often punctuated by "short-covering" rallies, when traders buy to realize profits on bets that an asset would fall in price.

 

EURO CRISIS

 

The Financial Times reported that Italy had asked China to make "significant" purchases of Italian debt. Italy has seen its borrowing costs spike in recent weeks on doubts about the political will in Rome to tackle its swollen debt.

 

Greece warned on Monday it would run out of cash next month without the next tranche, around 8 billion euros, of a bailout loan. Euro zone policymakers have threatened to withhold the money as patience with Athens' repeated fiscal slippages wears thin.

 

A growing number of policymakers, as well as market economists, are convinced it is only a matter of time before Greece, which keeps falling behind on its fiscal targets after two EU/IMF bailouts, will have to default.

 

"The contagion impact of a default will be severe, because next in the firing line will be Italy, Spain and it will take in the whole of the European banking sector too," Suki Mann, a strategist at Societe Generale, wrote in a note.

 

In currency markets, the euro climbed to around $1.3685 against the dollar after falling to a seven-month low of $1.3495 in the previous session, though weak demand at an Italian bond auction later in the day may see the single currency fall back again.

 

"All eyes are squarely on that seven-month low around $1.35 hit overnight," said Koji Fukaya, director of global foreign exchange research at Credit Suisse Securities in Tokyo.

 

"The downtrend in the euro will surely continue, but my sense is that unless the Italian bond auction goes extremely badly, this level may hold today."

 

The dollar index .DXY, which tracks the U.S. currency against a basket of major peers, fell 0.7 percent.

 

The weaker greenback made dollar-denominated assets cheaper for holders of other currencies.

 

Copper rose 1 percent to $8,840 a tonne and oil also gained, with U.S. crude up 0.9 percent at $89 a barrel and Brent crude rising 0.6 percent to $112.90, although traders remained wary.

 

"This is a shallow bounce because of Wall Street ending higher, so there is some confidence returning, but I don't think anybody would be putting any big positions given the global situation," said Victor Say, an analyst at Informa Global Markets in Singapore.

 

Gold bounced about 1 percent to around $1,831 an ounce, after dropping by more than 2.5 percent in the previous session, also supported by the safe-haven appeal that drove it to a record high of $1,920.30 last week.

 

"There is a slow-motion train wreck going on in Europe at the moment, which is going to be relatively supportive of gold," said Nick Trevethan, senior commodities strategist at ANZ.

 

"All the factors that have been supporting gold for the past few months are still there. Nothing has changed."

[EmpireGlobalfx]

Gold edges up on euro zone crisis; technicals cap gains

 

(Reuters) - Spot gold edged higher on Wednesday, supported by worries about a worsening debt crisis in euro zone, while short-term bearish technicals are likely to cap gains.

 

FUNDAMENTALS

 

* Spot gold inched up 0.2 percent to $1,837.44 an ounce by 0026 GMT. U.S. gold rose 0.6 percent to $1,841.80.

 

* Technical analysis suggested that U.S. gold could move sideways in the next few weeks, while commodities as a whole may correct moderately by the end of the year, said Reuters market analyst Wang Tao.

 

* Fears over the euro zone's debt crisis hit new heights on Tuesday, with U.S. President Barack Obama pressing the bloc's big countries to show leadership as talk of a Greek default escalated and markets heaped pressure on Italy.

 

* Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, edged lower to 1,241.311 tones by September 13 from a 2-1/2-week high of 1,241.917 tones on September 9.

 

* Barrick Gold, the world's largest gold producer, plans to invest $550 million in Peru by 2013, the head of Barrick Misquichilca, the company's Peruvian subsidiary, said on Tuesday.

 

MARKET NEWS

 

* U.S. stocks gained on Tuesday as investors bought shares beaten down in recent weeks and bet European leaders would take action soon to ease the Greek debt crisis. .N

 

* The euro held onto modest gains against the greenback in Asia on Wednesday, as bears trimmed short positions just in case EU leaders surprised by making progress on Greece in a conference call later in the day.

[EmpireGlobalfx]

Asian stocks, euro edge up on Europe debt hopes

 

(Reuters) - Asian stocks bounced on Thursday yet investors remained wary that obstacles which policymakers face in Europe could weigh on the euro and Asian currencies in the medium term.

 

The early gains in Asia, tracking the rise in global markets, came one day after the MSCI Asia ex-Japan index .MIAPJ0000PUS hit a 14-month low.

 

On Thursday, that index was up 1.2 percent. Japan's Nikkei markets/index?symbol=jp%21n225">.N225 was up 1.7 percent with chipmaker Elpida (6665.T) up 6.1 percent.

 

The euro rebounded to $1.3750, easing back from a high above $1.3800 reached after Germany and France voiced their commitment to keeping Greece in the euro zone, giving traders a chance to find better levels to short the common currency.

 

Optimism over tentative steps to resolve Europe's debt crisis trumped weaker-than-expected retail sales data in the U.S., helping the S&P 500 finance/markets/index?symbol=us%21spx">.SPX close up over a percent.

 

Some traders attributed the gains on Wall Street to short-covering ahead of inflation numbers in the U.S. with Europe still the clear focus.

 

European finance ministers have been warned confidentially of the danger of a renewed credit crunch as a "systemic" crisis in euro zone sovereign debt spills over to banks, according to documents obtained by Reuters on Wednesday.

 

The gains in Asian stocks put safe-haven bets like U.S. Treasuries and gold on the backfoot.

 

Spot gold steadied around the $1,820 an ounce level after having fallen nearly one percent in the previous session. It hit a lifetime high of around $1,920 an ounce last week.

 

Yields on ten-year U.S. notes held at 1.99 percent, not far away from its lowest levels in at least 60 years of around 1.91 percent tested last Friday.

 

Brent crude for October delivery settled at $112.40 a barrel on Wednesday, gaining 51 cents, snapping four days of losses while U.S. October crude held below the $89 per barrel line.

[EmpireGlobalfx]

Empire Global FX : now accepting local deposits in Hungary, Poland, Bulgaria,Malaysia

 

Great news for our friends and customers from Hungary, Poland, Bulgaria and Malaysia! Apart from the new correspondent banks in different countries and new currencies ( EUR; GBP, USD (england), and CHF (switzerland), Japanese Yen, Hong Kong Dollar, Australian Dollar (with local deposit), New Zealand Dollar, Swiss Krone (with local deposit) and Thai Baht). , our Broker is now working with local Banks in these 4 new countries!

 

This means that if living in any of these 4 locations, you can now invest in the world markets through local deposits with our new correspondent banks.

 

We expect to have our corporate website translated soon into your local languages for your comfort and convenience.

 

Good trades!!!

[EmpireGlobalfx]

Investors peer through the gloom

 

 

(Reuters) - Even after a rare four-day rally in world stocks, investors are unlikely to let their guard down in a week filled with heavy U.S. and euro zone policy risks that could potentially disappoint again and trigger a sell-off.

 

There is no doubt gloom is widespread. However, investors are also beginning to realize that betting too strongly on a collapse of financial markets with policymakers poised for action to combat global crisis may be unwise.

 

Thursday's coordinated action by five major central banks to add liquidity to a European banking system struggling with its dollar funding needs has lifted world stocks, measured by MSCI .MIWD00000PUS, from a one-year low.

 

Focus in the coming week will be on a policy meeting of the U.S. Federal Reserve. The Fed is posed to increase downward pressure on long-term interest rates to spur the recovery, reviving "Operation Twist," first undertaken in the 1960s.

 

Despite the rally in the past week, the MSCI index is still down more than 9 percent since January and the third quarter performance looks set to be the worst since the June-September period in 2010.

 

Furthermore, against conventional wisdom, total returns on a 10-year rolling basis on government bonds are higher than on equities. This is providing much food for thought for long-term investors.

 

"In a very short term, positive news may come out and policymakers will announce something. Economic data is not as bad as falls in the market would've suggested. So over the next 4-6 weeks we could get slightly higher," said Jeremy Beckwith, chief investment officer at wealth manager Kleinwort Benson.

 

"Everyone is hoping policymakers are coming up with good ideas, although it's hard to see what good ideas are... The euro zone is such a huge issue and one day you could wake up and find out Greece has defaulted and get caught out. So our position is to underweight risk."

 

The euro rose more than 1 percent against the dollar last week, its biggest weekly gain since July. But analysts expect the single currency to come under pressure again in the coming week as EU finance ministers again failed to eliminate fears of Greek sovereign default at their weekend meeting.

 

EU finance ministers broke no new ground in dealing with the euro zone debt crisis and made no decision on whether to give more firepower to the 440-billion euro bailout fund, suggested by U.S. Treasury Secretary Timothy Geithner.

 

"The euro zone's medium term structural issues of excessive sovereign debt and banks' exposure remains unresolved," UBS said in a note to clients.

 

"Thus investors will continue to worry about the risk of Greece defaulting on its bonds over the next couple of quarters as well as the efforts of Spain, Portugal and Italy to tackle their own public finances. This will also keep investors fearful over the solvency - not just liquidity - of euro zone banks."

 

The coming week promises a heavy dose of policy actions.

 

Finance ministers of the BRIC emerging countries -- Brazil, Russia, India and China -- meet in Washington on Thursday, on the sidelines of the International Monetary Fund meeting, to discuss steps to offer support to the euro area.

 

If they buy euro-denominated bonds -- as suggested in preliminary talks -- this may help turn around sentiment, after the European Central Bank's 70 billion euro operation failed to stop the crisis from spreading to Spain and Italy.

 

Investors will also keep a close eye on U.S. President Barack Obama who is presenting a deficit-reduction plan on Monday that will cover the cost of his recent jobs bill.

 

POLICY EASING

 

There are signs monetary policy is shifting from withdrawing stimulus toward further easing at a global level -- which would also be supportive for asset markets in the long term.

 

The Fed has already pledged to keep its policy rate at record lows until at least mid-2013 and, in Operation Twist, may introduce a program involving buying long-dated Treasuries to lower mortgage rates and other long-term borrowing costs.

 

The Bank of Japan eased policy in August by boosting asset purchases and the ECB has signaled that it had halted a cycle of interest rate rises begun just five months ago.

 

Even in emerging markets, the tightening cycle seems to be nearly over. Brazil and Turkey have cut interest rates, Mexico and Chile's central banks have left the door open for easing, Israel and South Africa are expected to cut rates.

 

"Risk markets will rebound when everyone is short risk, the worst is priced in, data stop surprising on the downside and policymakers take decisive counter action," JPMorgan said in a note to clients.

 

"Our perception is that most investors are sitting on the fence and that there is no surplus of risk underweight positions... Policymakers across the world will likely try their best to prevent another contraction, and it is here that upside surprises could come from."

[EmpireGlobalfx]

Greek cabinet meets to decide more austerity steps

 

(Reuters) - Greek Prime Minister George Papandreou chairs a cabinet meeting on Sunday to decide on more austerity measures to secure continued funding under an international bailout.

 

EU and IMF inspectors are holding a conference call with Finance Minister Evangelos Venizelos on Monday to hear what measures Greece will take to plug this year's shortfall in the budget before they release an 8 billion euro ($11 billion) loan tranche it needs by October before it runs out of money.

 

Papandreou canceled a planned visit to the United States on Saturday to deal with the deepening crisis at home as euro zone partners made clear further funding for the debt-ridden country would hinge on adhering to agreed fiscal targets.

 

"The meeting is set to examine measures from public sector layoffs to more pension cuts," said a government official on condition of anonymity.

 

Last week, the government blamed the shortfall on a deeper-than-expected recession and decided to put a new tax on real estate in the hope of collecting about 2 billion euros annually.

 

But international inspectors, known as the troika, expressed doubts this one-off tax measure would work and demanded more details on how the government hoped to catch up this year and the next.

 

"The troika thinks the recently announced property levy will not suffice to plug the budget hole and is pressing for measures on the spending side -- cuts in public sector wages and employment," said a second government official who asked not to be named.

 

The conservative New Democracy opposition has criticized the government for overtaxing the economy and driving it into a tail spin.

 

Its leader, Antonis Samaras, called for snap elections on Saturday saying the policy mix was wrong and was not yielding any results despite peoples' sacrifices.

 

"A renegotiation with our lenders to restart the economy is a condition to get out of this crisis," Samaras told a news conference on Sunday.

 

International lenders are also concerned with the lack of political consensus in Greece on the measures needed to emerge from the crisis.

 

The conservatives have been buoyed by growing public discontent after two years of austerity measures and are proposing tax cuts and growth boosting measures instead.

 

Papandreou's socialists have a majority in parliament but political analysts say internal dissent and public unrest, such as strikes and violent protests, may force snap elections.

 

Lenders have long warned against one-off measures and more taxes as a way out of the crisis shaking the euro.

 

They have asked for urgent reforms and privatizations to make the economy more competitive and a reduction in the bloated public sector.

[EmpireGlobalfx]

Empire Global FX: Obama urges higher taxes to curb deficit by $3 trillion

 

(Reuters) - President Barack Obama, in a rallying call to his Democratic base, will vow on Monday to veto any cuts in Medicare if Congress fails to raise taxes on corporations and wealthy Americans to curb the deficit.

 

Obama's recommendations to a congressional "super committee" would deliver deficit savings of more than $3 trillion over the next decade, his aides said, with roughly half of those savings coming from higher tax revenues.

 

Under fire from Democrats to defend Medicare and Medicaid healthcare programs as he seeks to galvanize supporters ahead of the election next year, Obama will demand that all Americans share the burden of controlling the budget.

 

"He will veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share," a senior administration official told reporters.

 

Medicare, for elderly and disabled Americans, and Medicaid for the poor, are viewed by analysts as the biggest contributors to the long-term deficit.

 

The so-called super committee of six Democrat and six Republican lawmakers is seeking at least $1.2 trillion in new budget savings by November 23. That is on top of $917 billion in 10-year savings agreed in an August deal to raise the debt limit.

 

Obama will lay out his recommendations in the White House Rose Garden at 10.30 a.m. EDT on Monday.

 

"In his remarks tomorrow, the president will make clear he is not going to support any plan that asks everything of some Americans, nothing of others," the official said.

 

The plan will include a "Buffett Rule," named after billionaire investor Warren Buffett, that would set a minimum tax rate for anyone making more than $1 million a year.

 

A clearly populist step, the tax would only apply to a tiny minority of the millions of Americans who file tax returns every year. But White House aides said it would set a standard of fairness that would yield more revenue if it became law.

 

Congress can ignore his suggestions. With the House of Representatives controlled by Republicans who oppose any tax hikes, they are likely to be declared dead on arrival.

 

Obama's opening bid to find deficit savings by December 23 to head off painful automatic cuts will be under close scrutiny.

[EmpireGlobalfx]

S&P cuts Italy ratings one notch, outlook negative

 

 

(Reuters) - Standard and Poor's cut its unsolicited ratings on Italy by one notch on Monday, warning of a deteriorating growth outlook and damaging political uncertainty, in a move that took markets by surprise and added to pressure on the debt-stressed euro zone.

 

S&P's downgraded its unsolicited ratings on Italy to A/A-1 from A+/A-1+ and kept its outlook on negative, sending the euro more than half a cent lower against the dollar.

 

The agency, which put Italy on review for downgrade in May, said that the outlook for growth was worsening and there was little sign that Prime Minister Silvio Berlusconi's fractious center-right government could respond effectively.

 

Under mounting pressure to cut its 1.9 trillion euro debt pile, the government pushed a 59.8 billion euro austerity plan through parliament last week, pledging to balance the budget by 2013.

 

But there has been little confidence that the much-revised package of tax hikes and spending cuts, agreed only after repeated chopping and changing, will do anything to address Italy's underlying problem of persistent stagnant growth.

 

"We believe the reduced pace of Italy's economic activity to date will make the government's revised fiscal targets difficult to achieve," S&P's said in a statement.

 

"Furthermore, what we view as the Italian government's tentative policy response to recent market pressures suggests continuing future political uncertainty about the means of addressing Italy's economic challenges," it said.

 

Berlusconi's coalition has been plagued by infighting and policy disagreements and the prime minister himself has been battling a widening prostitution scandal which has distracted the government and badly damaged his personal credibility.

 

On Monday, Italian sources said the government was preparing to cut its growth forecast to 0.7 percent in 2011 from a previous forecast of 1.1 percent and cut the 2012 forecast to "1 percent or below."

 

SURPRISE MOVE

 

Italy, the euro zone's third largest economy, has been dragged to the center of the debt crisis over the past three months as concern has grown over a debt burden equal to some 120 percent of gross domestic product.

 

But the move from S&P came as a surprise as the market had thought Moody's was more likely to downgrade Italy first. Moody's last week said it would take another month to decide on its action.

 

"Was it anticipated tonight? No. But again is it really shocking given what yields have done?" said James Paulsen, Chief Investment Strategist, Wells Capital Management.

 

Only the European Central Bank, which has been buying Italian bonds to prop up the market, has kept Rome's borrowing costs from spiraling out of control, but yields have crept back up steadily since the ECB stepped into the market in August.

 

On Monday, yields on Italian 10 year bonds stood at 5.59 percent, within sight of the levels above 6 percent they reached just before the ECB intervention.

 

The intervention has caused growing strain within the central bank, causing Chief Economist Juergen Stark to announce his resignation and prompting open opposition from the Bundesbank.

 

The S&P downgrade, which came as Greece struggles to meet demands from lenders for yet more austerity measures, underlined the mounting seriousness of the euro zone crisis, which has seen global markets hammered.

 

"It's just more of the same negative news," said Stephen Roberts, a senior economist at Nomura in Sydney.

 

"It only adds to the contagion risk over Greece and has encouraged the flight to safety in markets here," he added, pointing to a sharp fall in the Australian dollar on the news. The Aussie dollar is influenced by expectations for commodity prices and so sensitive to the outlook for global demand.

 

S&P 500 futures also dropped 0.7 percent and early hopes for a bounce in Asian shares on Tuesday looked to be still-born now.

 

European stocks had already slid on Monday, while yields on Italian and Spanish bonds rose sharply on fears of a Greek default, compounded by the failure of EU finance ministers to agree new steps to resolve Europe's debt crisis at weekend talks.

 

International lenders told Greece on Monday it must shrink its public sector and improve tax collection to avoid running out of money within weeks as investors spooked by political setbacks in Europe dumped risky euro zone assets.

[EmpireGlobalfx]

Empire Global FX: Gold to clear $2,000 in 2012 as rally cools: LBMA poll

 

(Reuters) - Gold's rally will extend beyond $2,000 an ounce in the next year, but won't match the record-breaking 50 percent surge of the last 12 months, according to an annual survey of gold investors and analysts at the world's biggest bullion traders event.

 

With no let up seen in the financial markets uncertainty that fanned the safe-haven investment spree, bullion is expected to rise to $2,019 an ounce by November 2012, according to an anonymous survey of delegates at the conclusion of the London Bullion Market Association's (LBMA) annual conference on Tuesday. That is about 12 percent above current levels.

 

If history is any guide, the consensus view from the biggest gathering of gold market traders, experts and users may prove too conservative -- for the past three years, prices have outpaced the survey. A year ago delegates predicted gold would rise to $1,450 in 12 months; on Tuesday it hit $1,800.

 

Most were optimistic on the outlook in spite of the past month's extraordinary volatility, which has caused some traders to question gold's credentials as a haven of stability. But few expect a repeat of the past year's torrid rally.

 

"We've heard so much about the perfect storm that has driven gold to where it is now, that the odds of it increasing a similar amount have to be a lot less," Robin Bhar, an analyst at Credit Agricole, told Reuters at the conference.

 

"There are good reasons why gold has been taken to where it has, but can we really assume that those factors are going to remain, for it to power on to $3,000, $4,000? We are assuming global GDP will grow and the fear factors will lessen, so there will be less reason to be owning gold."

 

Well over 500 analysts, traders, fund managers, refiners and miners, as well as official sector and wider industry delegates, attended the meeting, one of the most significant in the precious metals calendar.

 

Attendance at the meeting has swelled as gold has become an increasingly sought-after asset in recent years, with prices hitting a record $1,920.30 an ounce on September 6. They have since retreated, however, and are down 2.5 percent so far this month after a period of intense volatility.

 

The view was largely similar at a simultaneous conference of major gold miners halfway across the continent, in Colorado Springs, where executives from the likes of Newmont Mining Corp (NMC.TO) (NEM.N) and AngloGold Ashanti Limited (ANGJ.J) saw prices rising to $2,200 an ounce and beyond.

 

"I'm a big believer that all of the ingredients for a higher gold price are there: geopolitical risk, economic uncertainty, inflation," Yamana Gold (YRI.TO) Chief Executive Peter Marrone said on Monday. "It just seems natural to me for gold prices to go to substantially higher levels."

 

STRETCHED, BUT NOT TO BREAKING POINT

 

Analysts have suggested this volatility pointed to overstretched conditions, but delegates disputed that it marked the start of a deeper correction.

 

"The higher levels of volatility is a function of increased economic uncertainty... but it doesn't portend a reversal of the gold market," HSBC analyst Jim Steel, who has a 2012 gold forecast of $2,025 an ounce, said on the sidelines of the conference.

 

"The macroeconomic climate remains positive for gold. The fact that there's a high level of volatility in the market doesn't take away from its safe-haven status. You've got to look at it over time compared to paper assets. If it were treated as a currency, it would have outperformed every other currency in the last 12 months."

 

John Fallon, president of hedge fund Pia Capital Management, said gold is "in an orbit by itself" among commodities and remains his favorite investment in the sector, due to its high liquidity and the support offered by solid physical demand.

 

"Gold still has our undivided interest," he told Reuters at the conference. "We favor both the (gold) ETFs and the actual spot OTC market."

 

There were few outright bearish views.

 

Christoph Eibl, CEO and founding partner of the $2 billion Swiss commodity hedge fund Tiberius Group, was a rare voice of stern caution, warning that gold could fall back below $1,000 an ounce in line with production costs for miners.

 

But even Eibl, who considers himself a converted contrarian after years as an unabashed gold bug, wasn't prepared to bet big against bullion's newfound popularity.

 

"We know it's too dangerous to stand in front of a truck that may run you over," he said.

 

Unsurprisingly, delegates expected leading gold consumers China and India to remain main demand drivers for the yellow metal, with the World Gold Council estimating that Chinese demand could grow 10 percent this year.

 

Chinese consumers are willing to spend more on gold jeweler as product quality and disposable income increase, and due to the investment function of gold, Wai-Chan Chan, a partner at China's OC&C Strategy Consultants, said.

 

PLATINUM FAVORED

 

Among other precious metals, delegates forecast a platinum price of $2,163 an ounce in November next year, giving it a touch more upside than gold from its current price near $1,770 an ounce. Palladium was forecast at $826 an ounce, compared to its current $710.

 

Platinum group metals prices will have to rise, or the rand to weaken, to ease pressure on South African platinum miners, Aquarius Platinum chief executive Stuart Murray argued in a well-received presentation on Monday.

 

Once tax, royalties, costs and investments were taken care of, he said, shareholders and capital providers were seeing a return of less than 3 percent.

 

"The reality is that for us, for the risks that are taken, for the effort that goes into mining an ounce of platinum, returns greater than 3 or 4 percent are needed," he said.

 

Delegates forecast silver prices at $47 an ounce next year.

 

Silver was favored by Claymore Investments president Som Seif, who argued in a presentation on Monday that rising demand from the industrial and investment sectors and supply constraints argued for higher prices.

 

However, analysts said investors were likely to remain wary of silver after its sharp correction from record highs earlier this year. Prices lost a third of their value in the six trading sessions after they peaked near $50 an ounce in April.

 

Nonetheless, the Royal Canadian Mint said its silver bullion sales were on track for a 30 percent rise this year, taking them to 25 million ounces.

[EmpireGlobalfx]

Nikkei drops 2 percent after Fed; Softbank plunges

 

(Reuters) - The Nikkei stock average lost more than 2 percent on Thursday after the Federal Reserve cited significant risks to the U.S. economy, while Softbank Corp (9984.T) plunged to its lowest since July 2010 on a report it would lose exclusive rights to sell the iPhone in Japan.

 

Some strategists said selling could intensify after September 27, which is the last day for investors to buy many Japanese stocks and still get dividends on them for the April-September half year.

 

"Once the dividend-buying factor is no longer supporting the market next week, we could see a tough situation, and the Nikkei could break below 8,500," said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities.

 

Market participants said Tokyo's losses were also due in part to domestic position adjustments ahead of the end of the April-September half-year this month, when investors often lock in profits.

 

But market players say attractive valuations still support the Tokyo market. The Nikkei has lost more than 15 percent since early July, when it last traded above 10,000, while the Standard & Poor's 500 Index markets/index?symbol=us%21spx">.SPX lost about 13 percent in the same period.

 

The Nikkei finance/markets/index?symbol=jp%21n225">.N225 ended down 2.1 percent at 8,560.26. It was trading below its 25-day moving average of 8,756, but remained above support at its September 14 low of 8,499.34, which was its lowest intraday level since March.

 

The broader Topix index .TOPX slipped 1.7 percent to 744.54.

 

Also weighing on Japanese shares on Thursday were reports from China that suggested the world's No. 2 economy may not be able to pick up the slack from flagging U.S. and European growth.

 

A preliminary survey showed China's manufacturing sector contracted for a third consecutive month in September, while separate indicator showed inflation picked up.

 

"The China data just adds to negative factors already on everyone's mind, such as U.S. economic worries, the yen's strength against the dollar and the euro, as well as Europe's debt problems and whether Greece will default," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

 

U.S. WOES

 

The decline in the Nikkei was, however, more moderate than Wall Street, which slid 3 percent for its worst drop in a month after the Fed's announcement, with selling accelerating as volume spiked in the last hour of trading.

 

The Fed said there were significant risks to an already weak U.S. economy, including strains on global financial markets, even as it launched a new plan to lower long-term borrowing costs and bolster the battered housing market.

 

The U.S. central bank said it would sell $400 billion of short-term Treasury bonds to buy the same amount of longer-term U.S. government debt.

 

Shares of Softbank, which has long been the sole provider of Apple Inc's (AAPL.O) iPhone in Japan, plunged 12.3 percent to 2,282 yen. It earlier sank as low as 2,271 yen, its lowest point in 14 months, on a report that rival KDDI Corp (9433.T) will start selling the iPhone 5 in November.

 

KDDI initially rose, but then gains unraveled and its shares fell 0.8 percent to 624,000 yen. Softbank and KDDI were the heaviest-traded shares by turnover.

 

Financial shares fell after a slide in their U.S. counterparts, after Moody's Investors Service lowered debt ratings for Bank of America Corp (BAC.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) on Wednesday, saying the U.S. government is getting less comfortable with bailing out large troubled lenders.

 

Sumitomo Mitsui Financial Group (8316.T), the fifth-most traded issue by turnover, fell 1.8 percent to 2,089 yen, while Mitsubishi UFJ Financial Group (8306.T) shed 1.5 percent to 332 yen. Nomura Holdings (8604.T) lost 4.8 percent to 281 yen.

 

Volume was slightly below recent daily averages, with about 1.70 billion shares trading on the Tokyo Stock Exchange's main board. That fell short of last week's average of 1.75 billion shares, but topped Wednesday's volume of about 1.44 billion.

[EmpireGlobalfx]

Greece sees possibility of 50 percent haircut on debt: reports

 

(Reuters) - Greece's finance minister has told lawmakers he sees three scenarios to resolve the debt crisis, including one involving an orderly default with a 50 percent haircut for bondholders, two Greek newspapers reported on Friday.

 

A government spokesman dismissed the reports, which said the other scenarios would be a disorderly default or the implementation of a second, 109 billion euro ($146 billion) bailout plan agreed between Greece and its lenders on July 21.

 

Newspaper Ta Nea, citing a person who heard a speech by Finance Minister Evangelos Venizelos to ruling Socialist party lawmakers, quoted him as saying "it would be dangerous to request" the 50 percent haircut.

 

He also said: "This would require an agreed and coordinated effort by many," the paper reported.

 

A finance ministry spokeswoman said she could not comment on the reports, but deputy government spokesman Angelos Tolkas said the government would stick to the bailout plan agreed between Greece and its lenders two months ago.

 

"What we are choosing is (for Greece) to stay in the heart of Europe by implementing the July 21 decisions," he said. "The big challenge is to avoid any default or collapse."

 

Two Socialist deputies who said they were present at the speech in which Venizelos tried to rally support among the ruling party for a new wave of austerity measures, denied that he had floated the 50 percent haircut scenario.

 

"I categorically deny it. There is no such scenario," lawmaker Theodora Tzakri told Reuters.

 

Venizelos is traveling to Washington for a weekend meeting with inspectors from Greece's lenders, the International Monetary Fund and the European Union.

 

The reports came as Moody's Investors Service cut the credit ratings of eight Greek banks. It cited a struggling domestic economy and falling deposits among reasons for the move, which markets had expected.

 

Moody's said the outlooks for all the ratings remained negative. The downgrade concluded a review begun on July 25.

 

Some European banks in July agreed to contribute to a rescue plan for Greece by taking a 21 percent loss on bonds maturing before 2020.

 

The deal, which involves banks swapping debt for longer maturity bonds of 15 or 30 years, prompted banks to take a loss on their bonds in second-quarter results.

 

The European sovereign debt crisis has kept banks hostage to market worries about their capital strength and access to funding.

 

Earlier this month, Deutsche Bank (DBKGn.DE) Chief Executive Josef Ackermann said many European banks could go under if they had to accept a haircut at current market valuations on their entire sovereign debt holdings instead of the 21 percent writedown that has been proposed on Greek sovereign debt.

[EmpireGlobalfx]

Silver, gold tumble as recession fear grips markets

(Reuters) - Gold and silver prices tumbled on Monday, led by a nearly 10 percent drop in spot silver prices, as investors liquidated their positions on fears of an impending recession.

 

Spot gold fell more than 3 percent to $1,604.29 an ounce, wiping off gains over the past two months.

 

U.S. gold dropped 2 percent to $1,607.2, tracking the weakness in spot prices.

 

U.S. silver shed 6.6 percent to $28.10.

[EmpireGlobalfx]

World stocks fall on doubts over EU plans

 

(Reuters) - World stocks fell toward the previous week's 14-month low on Monday and the euro hit a 10-year low against the yen as doubts grew over how effective Europe's latest crisis-battling steps would be in containing the continent's sovereign debt problems.

 

European policymakers began working on new ways to stop fallout from Greece's near default, focusing on ways to beef up their existing 440-billion-euro rescue fund.

 

But deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

 

Concerns over the potential effect from Greece's possible default, especially on the banking sector, and worries over a U.S. economic slowdown have been weighing on world stocks, fanning safety-seeking flows into top-rated government bonds.

 

"Overall it's still an inconclusive situation -- no tangible action plan coming out of the weekend gathering so the net result will still be risk aversion," said Rainer Guntermann, strategist at Commerzbank.

 

MSCI world equity index fell 1.1 percent, having hit its lowest since July 2010 on Friday. The index has fallen more than 23 percent since hitting a three-year high in May and is also down 17 percent since January.

 

European stocks lost 0.8 percent while emerging stocks hit their weakest since September 2009.

 

"The lurch lower in risk appetite can only reflect a growing fear that policymakers will be incapable of acting in time or with sufficient potency to turn things around," said Herv Goulletquer, analyst at Credit Agricole.

 

U.S. crude oil dropped 1.8 percent to $78.40 a barrel.

 

Bund futures were up nine ticks before trimming gains.

 

The dollar was steady against a basket of major currencies.

 

The euro fell as low as 101.90 yen and hit an eight-month low of $1.3361.

[EmpireGlobalfx]

Stocks rise, euro steady on European hopes

 

(Reuters) - Global equities rose and bond prices fell on Monday on hopes that Europe was tackling Greece's debt woes.

 

Wall Street stocks recovered from early declines but European shares pared gains of more than 2 percent as concerns about Europe's ability to contain the crisis persisted. Markets have whipsawed for months over fears of European debt contagion and hopes that officials will finally contain the long-simmering crisis.

 

Still, European shares closed higher and broad indexes on Wall Street climbed more than 1 percent after a weekend meeting of European policymakers buoyed hopes for a larger bailout fund and the injection of money into weaker banks.

 

But euro zone officials played down reports of nascent plans to halve Greece's debts and recapitalize European banks, saying no such plan is yet on the table.

 

"Europe is a day-to-day story, it seems like we flip-flop back and forth over whether Greece is going to get the bailout they want and how concerned the markets are about Greece," said James Newman, head of Treasury and Agency trading at Keefe, Bruyette and Woods in New York.

 

"I don't see that ending any time soon," he said.

 

The euro extended losses and damped risk appetite after data showed U.S. new home sales fell 2.3 percent in August to a six-month low, a fresh sign of the struggling housing market -- a pillar of the U.S. economy.

 

The euro rebounded at midday to trade near break-even at $1.3507.

 

MSCI's all-country world equity index .MIWD00000PUS was little changed, down 0.01 percent.

 

The FTSEurofirst 300 markets/index?symbol=gb%21FTPP">.FTEU3 added 1.7 percent, following a 0.8 percent gain on Friday.

 

A broad measure of the U.S. stock market, the S&P 500 index, climbed into positive territory after an early loss, as did the tech-rich Nasdaq, while the Dow traded higher.

 

After three hours of trading, the Dow Jones industrial average finance/markets/index?symbol=us%21dji">.DJI was up 143.42 points, or 1.33 percent, at 10,914.90. The Standard & Poor's 500 Index .SPX was up 9.96 points, or 0.88 percent, at 1,146.39. The Nasdaq Composite Index .IXIC was up 1.00 points, or 0.04 percent, at 2,484.23.

 

Government debt prices on both sides of the Atlantic fell on reports the European Union was looking at boosting the region's 440 billion euro rescue fund and other ways to avert a Greek debt default.

 

The benchmark 10-year U.S. Treasury note was down 18/32 in price to yield 1.89 percent. The December Bund future shed 72 ticks to 137.40.

 

Brent and U.S. crude oil futures turned positive in volatile trading as the U.S. dollar weakened against a basket of currencies, improving investors' risk appetite.

 

Brent crude oil slipped below $104 a barrel as investors worried European governments and banks would be unable to resolve the euro zone debt crisis and avert wider financial contagion.

 

Brent futures for November rose 62 cents to $104.59.

 

U.S. light sweet crude oil rose 52 cent to $80.37 a barrel.

 

"These are very critical days and weeks ahead, reminiscent very much of the touch-and-go situation we were in back in 2008," said Edward Meir, senior commodities analyst at brokers MF Global. "The key difference this time around is that it is countries and not companies that are in danger of going bust."

 

Gold futures fell, on course for their largest monthly slide in three years as investors scrambled for cash in the face of mounting fear over the impact of a potential Greek default.

 

Spot gold prices fell $55.30 to $1,599.90.

[EmpireGlobalfx]

Barroso comments lifts euro, risk appetite shaky

 

(Reuters) - The euro edged up against the dollar on Wednesday after a top EU official indicated more would be done to resolve the debt crisis but was vulnerable to selling in the absence of concrete steps to beef up region's rescue fund.

 

In his State of the Union address European Commission President Jose Manuel Barroso said he expected the European Central Bank would ensure the stability of the euro area and indicated Greek banks could receive more help.

 

He also said the euro zone could issue jointly underwritten bonds once there was deeper integration.

 

The single currency rose to last trade up 0.2 percent on the day at $1.3623, and off a low of $1.3541. It pared some of the previous day's gains when it hit a high of $1.3668.

 

But market players warned the lift from Barroso's comments and a bounce the previous day on talk of proposals to leverage up the 440 billion euros European Financial Stability Facility, could just be temporary.

 

"Barroso sounded very optimistic but I don't think he will be able to give much lasting impetus to the FX market," said Lutz Karpowitz, currency analyst at Commerzbank.

 

"The recovery in euro/dollar and in equity markets amid speculation we might see leveraging of the EFSF was overdone. I cannot see how that proposal will work and there is likely to be some disappointment ahead in the market."

 

Event risk remains high for the euro this week, with the Finnish parliament voting on proposals to enlarge the EFSF as agreed back in July later on Wednesday, while Germany's parliament votes on Thursday.

 

Technical charts showed as long as the euro remained stuck below resistance at $1.3670/1.3710 the risk was for a break of $1.3540 support. A move below $1.3470 would open the door to new lows in the $1.3250/00 area.

 

YEN STRENGTH

 

Meanwhile, the yen rose, buoyed by Japanese fund repatriation and buying by Japanese exporters ahead of the quarter-end and the end of Japan's financial half-year.

 

The dollar slipped 0.5 percent to 76.42 yen, not far from a record low of 75.941 yen hit in August on trading platform EBS. Traders cited heavy system fund stops layered under 75.90 yen and real money stops under 75.70 yen.

 

The euro fell 0.3 percent to 104.13 yen paring some of the previous day's gains, when it climbed 1.1 percent. The euro had hit a decade-low versus the yen near 101.95 earlier in the week.

 

Some market players had been speculating Japan could intervene this week ahead of its financial half-year end, to offer some relief to Japanese exporters, which have been stung by the dollar's 5.9 percent drop versus the yen so far in 2011.

 

Tsutomu Soma, senior manager at Okasan Securities' foreign securities department in Tokyo said that while yen-selling intervention may be a possibility, it would probably only happen if moves in the yen turned particularly violent.

 

"If the dollar falls below its record low near 75.95 yen, triggers some stops and the move becomes volatile, I think there is the possibility of another one-off intervention," he said.

 

The Australian dollar edged 0.1 percent higher to $0.9911, although selling by model funds weighed on the currency, traders said. It struck a 10-month trough of $0.9622 earlier in the week.

 

The dollar index firmed slightly, up 0.15 percent at 77.618 as risk sentiment remained fragile.

 

Federal Reserve Chairman Ben Bernanke gives a speech at 2100 GMT and might offer some reaction to the market's mostly negative response to last week's Operation Twist. Any hint that even more easing is possible could help underpin risk appetite.

[EmpireGlobalfx]

Wall Street drops, led by commodities on economic fear

 

 

(Reuters) - Commodity-related stocks drove Wall Street lower on Wednesday as stiff declines in energy and metals prices underscored investor concerns about global economic weakness and Europe's raging debt crisis.

 

A sharp 7 percent dive in the price of copper, seen as a leading indicator for the economy, rattled investors and led to a drop of 4.5 percent in the S&P materials index. Freeport-McMoRan Copper & Gold Inc fell 7.3 percent to $32.29.

 

Investors were on a knife edge as inspectors from the EU and IMF headed to Greece to scrutinize austerity plans while German Chancellor Angela Merkel worked to defuse a revolt within her government ahead of a vote to expand Europe's bailout fund on Thursday.

 

Wednesday's declines put the S&P 500 on course for its worst quarter since the high noon of the financial crisis in the fourth quarter of 2008. The drop also illustrates how sensitive the market has become to news on Europe's troubles.

 

"There is certainly a lot of headline risk and a lot of weak hands that hold stocks after this big rally we've had in the last three days," said Robert Francello, head of equity trading for Apex Capital, a hedge fund in San Francisco.

 

"Traders who have either gotten long during the rally or covered their shorts are probably going just to flatten themselves out, either taking profits or getting out of the market," he said.

 

Brent crude resumed its downward trend, falling more than $3 in afternoon trade, sending an S&P index of energy stocks down 3 percent. Chevron fell 1.9 percent to $91.74.

 

News early in the afternoon that bans on short-selling stocks in France, Italy and Spain have been extended highlighted the regulatory risk faced by investors and increased selling pressure.

 

The Dow Jones industrial average dropped 179.79 points, or 1.61 percent, to 11,010.90. The Standard & Poor's 500 Index dropped 24.32 points, or 2.07 percent, to 1,151.06. The Nasdaq Composite Index dropped 55.25 points, or 2.17 percent, to 2,491.58.

 

Traders said volume would likely be light and market movements accentuated during the rest of the quarter due to the Jewish New Year holiday of Rosh Hashanah.

 

So far, the S&P 500 has fallen 12.8 percent this quarter, its worst decline since the fourth quarter of 2008 when it fell 22.6 percent.

 

In the commodities sector, Cliffs Natural Resources Inc sank 8.4 percent to $55.66. Gold prices fell more than 2 percent.

 

"It's fear of a global slowdown," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. "It's a pure flight to safety into the dollar here, and that's killing commodities."

 

A push to solidify a euro-zone rescue fund and alleviate the region's sovereign debt crisis lifted stocks on Tuesday for a third consecutive session, following four straight days of losses for the benchmark S&P 500. The S&P gained more than 4 percent over that three-day period.

 

Amazon.com Inc gained 2.5 percent to $229.71 after it unveiled a new tablet computer with a $199 price tag. Apple Inc, which makes the popular iPad tablet, fell 0.6 percent to $397.01.

 

Microsoft Corp dipped 0.4 percent to $25.58 after Samsung Electronics Co Ltd unveiled software pacts with the company.

 

In earnings news, Jabil Circuit Inc advanced 8.2 percent to $18.81 a day after reporting fourth-quarter earnings that beat expectations, while Family Dollar Stores Inc fell 1.6 percent to $53.31 after its results.

 

In economic news, orders for long-lasting U.S. manufactured goods slipped in August on weak demand for motor vehicles, but a rebound in a gauge of business spending suggested the economy would avoid another recession.

 

About five stocks fell for every one that rose on both the New York Stock Exchange and the Nasdaq. About 7.96 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, in line with this year's average.

[EmpireGlobalfx]

Greece to face inspectors, Merkel hints at bailout

 

(Reuters) - EU and IMF inspectors will return to Greece on Thursday to decide whether Athens has done enough to secure a new batch of aid vital to avoid bankruptcy, while Germany suggested a new bailout may have to be renegotiated.

 

Facing a wave of strikes and protests, Greece's Socialist government is accelerating budget measures to meet the terms of an International Monetary Fund and European Union rescue deal so it can receive a new loan next month.

 

The "troika" team of inspectors, which had threatened to cut off aid if Athens did not move faster, will hold talks on a plan to deepen budget cuts and raise taxes which has driven protesters back onto the streets for the first time since June.

 

"I can confirm the Eurogroup (of euro zone ministers) will hold an additional meeting as soon as possible, still in October, to discuss the situation of Greece and consider the disbursement of the next tranche," a European Commission spokesman said in Brussels, announcing the troika's return.

 

German Chancellor Angela Merkel suggested that parts of a planned new 109-billion-euro ($148.6 billion) rescue for the debt-laden country could be reopened, depending on the outcome of the troika's audit.

 

"We have to wait and see what the troika ... finds and what it will tell us (whether) we will have to renegotiate or not," she told Greek state television NET, without elaborating.

 

Several hundred activists affiliated with the Greek Communists converged on the finance ministry on Wednesday waving a banner saying "We won't pay!." They burned bills for a new one-off income tax introduced this summer, while Athens and other parts of the country were hit by transport strikes.

 

If deemed adequate by the inspectors, the new austerity drive will secure an 8-billion-euro loan Greece needs to pay bills and salaries in October and bring it closer to moving on to a second bailout agreed in July.

 

As a condition of the visit and to resolve the row with the lenders, the Greek government had promised to send a written assurance outlining its new plan to meet its bailout targets. Its contents have not been made public.

 

"Instead of coming and going, the troika should spend a month with a pensioner, a family-man and then tell us whether these measures are human," said 50-year-old aviation worker, Costas Papalambros, a father of two.

 

"The next tranche will just be an aspirin, it won't cure the patient. What we need is growth and I don't see it happening They need to change policies," he told Reuters.

 

Even Deputy Prime Minister Theodoros Pangalos, who said he faced selling real estate to pay a new property tax, admitted Greeks' pain threshold was being tested.

 

"I think that the tax-paying limits of Greek society have been exhausted. I would say they have been exhausted for some time now," he told Mega TV. "But I think that we should act on the other side of the problem which is spending."

 

Germany has repeatedly said negotiations about the details of the second rescue deal can begin only when the troika says Greece has qualified to receive the tranche expected in October, the sixth under a first bailout agreed in 2010.

 

At the same time, leaders from around the world have urged euro zone capitals to end a tortuous debate and create a safety net big enough to prevent Greece's problems from spreading to other euro members and triggering a fresh global downturn.

 

DEBT SWAP DEBATE DEEPENS

 

The second bailout aims to ease Greece's debt burden by imposing a 21 percent loss on private Greek bondholders.

 

After intensifying debate among economists and policymakers that only a 50 percent loss would make the country's debt viable, more investors have signed up to the bond exchange plan, Greek financial daily Naftemporiki reported.

 

Citing an unidentified finance ministry official, it said Greece's weeks-long struggle to lure private bondholders into the rescue plan had ended with it reaching the 90 percent participation target.

 

The finance ministry declined to comment on the report.

 

There is no agreement yet among euro zone governments on whether a renegotiation is needed, including more pain for Greece's bank creditors, or on a U.S.-sponsored plan to leverage the bloc's rescue fund to give it more firepower.

 

Germany's Bundestag (lower house) will vote on Thursday on widening the scope of the European Financial Stability Facility bailout fund, as agreed by the EU leaders on July 21.

 

Merkel faces a revolt within her conservative camp and may have to rely on support from the opposition Social Democrats and Greens to get the measure approved, damaging her authority.

 

STRIKES GRIP GREECE

 

Late on Tuesday, police dispersed about 1,000 anti-austerity protesters with tear gas in Athens' Syntagma Square, the epicentre of anti-austerity protests.

 

Taxi drivers, bus and tram operators staged strikes on Wednesday, causing long traffic jams leading into the ancient city center and forcing luggage-hauling tourists scrambling to find rides to the airport.

 

Other trades ranging from craftsmen, printers and tax officials also staged stoppages and activists planned marches on

 

parliament and the port of Piraeus later in the day.

 

"I've been trying to find a job for a year now and it's impossible," said Maria Kappa, a graduate of the School of Philosophy in Athens. "I don't see the rich people hurt by this austerity, it's always the poor who have to pay."

 

Lawmakers opened the way to the troika visit on Tuesday by passing a property tax bill. That piles the pressure on Greeks suffering from several waves of belt-tightening and deepens an economic downturn heading into its fourth year.

 

Prime Minister George Papandreou's 154 Socialist deputies forced the measure through in the 300-seat parliament.

 

In the accelerated strategy, the government will cut the 730,000 public workforce by a fifth, reduce the public wage bill by 20 percent, as well as lower overall pensions by 4 percent in addition to a 10 percent cut already agreed in previous plans.

 

It will also now extend the new real estate tax until 2014, two years longer than originally planned, after the troika judged Greece's estimate that it would raise 2 billion euros a year to be too high.