Tuesday, 8 October 2013

European Stocks Fall as Yen Weakens, Emerging Shares Rise

By Pratish Narayanan & Stephen Kirkland - Oct 8, 2013 2:03 PM GMT+0400
European stocks fell for a second day and Standard & Poor’s 500 Index futures erased earlier gains as investors awaited efforts to end a U.S. government shutdown and the start of the earnings season. The yen weakened as emerging-market shares rose to a two-week high.
The Stoxx Europe 600 Index slipped 0.5 percent to 307.72 at 6:01 a.m. in New YorkS&P 500futures fell less than 0.1 percent. The MSCI Emerging Markets Index added 0.4 percent as trading resumed in China and India eased liquidity curbs. Japan’s currency slid 0.4 percent to 97.08 per dollar, retreating from an eight-week high. Spanish and Italian bonds declined. West Texas Intermediate oil climbed 0.5 percent.
Tokyo Stock Exchange Visitors look at an electronic board displaying stock figures at the Tokyo Stock Exchange in Tokyo. Japan’s Topix dropped 0.2 percent. Photographer: Junko Kimura/Bloomberg
Oct. 4 (Bloomberg) -- Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, talks about the outlook for commodities and his investment strategy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Oct. 8 (Bloomberg) -- Laura Fitzsimmons, a Sydney-based vice president for futures and options at JPMorgan Chase & Co., talks about the U.S. government shutdown, the political stalemate over the debt ceiling, and the implications for global financial markets. She also talks about Reserve Bank of Australia monetary policy and the local currency. She speaks with Rishaad Salamat on Bloomberg Television's "On the Move." (Source: Bloomberg)
Oct. 8 (Bloomberg) -- Ronald Wan, chief China adviser at Asian Capital HK Co., talks about the nation's economic outlook, stocks and investment strategy. He also speaks about Alibaba Group Holding Ltd.’s planned initial public offering in New York. Wan speaks with Rishaad Salamat on Bloomberg Television's "On the Move." (Source: Bloomberg)
Oct. 4 (Bloomberg) -- Thanos Vamvakidis, currency strategist at Bank of America Merrill Lynch, talks about the outlook for the pound and dollar in light of recent economic data and Fed policy. He speaks with Bloomberg's Niki O'Callaghan in London. (Source: Bloomberg)
Oct. 3 (Bloomberg) -- Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore, talks about the U.S. debt ceiling, Federal Reserve monetary policy, and the implications for the dollar and the euro. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Gold Bars Gold climbed 0.2 percent to $1,326.13 an ounce at 12:02 p.m. in Tokyo. Photographer: Norm Betts/Bloomberg
Federal Reserve Bank of Dallas President Richard Fisher said yesterday the U.S. “cannot afford to default” and that debt ceiling talks “will come down to the wire.” With the country’s borrowing authority set to lapse Oct. 17, President Barack Obama reiterated that he won’t negotiate with Republicans over raising the debt ceiling or reopening the government. German factory orders unexpectedly declined in August, a government report showed today. Alcoa Inc. releases earnings today, marking the unofficial start of the U.S. quarterly reporting season.
“Investors are nervous because of the political wrangling in the U.S., though we do believe that there will be a last-minute compromise and nobody wants to be caught short,” said Carsten Hilck, who oversees about $6.8 billion as senior fund manager at Union Investment Privatfonds GmbH in Frankfurt.

Test Vote

Senate Democrats are planning a test vote before the end of this week on a measure that would grant Obama authority to raise the $16.7 trillion debt ceiling, probably for a year unless two-thirds of both chambers of Congress disapprove.
“Markets will start to fear that there won’t be a solution to avoid damage to the economy and therefore greater odds of a debt default will start to be priced in,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has $131 billion under management. “The longer it drags on, the greater the degree of uncertainty.”
More than two shares fell for every one that gained in the Stoxx 600 as trading volumes were 26 percent higher than the 30-day average, data compiled by Bloomberg show.
TGS Nopec Geophysical ASA (TGS) tumbled 13 percent as Norway’s largest surveyor of underwater oil and gas fields cut its revenue forecast. Rival Petroleum Geo-Services ASA slid 4.4 percent. Getinge AB retreated 5.9 percent as the Swedish maker of sterilization systems said third-quarter profit missed analysts’ estimates.
Banca Monte dei Paschi di Siena SpA, Italy’s third-biggest bank, rose 1.6 percent after pledging to cut an additional 3,360 jobs and increase capital to win support from the European Union for 4.1 billion euros ($5.6 billion) in state aid.

Alcoa Earnings

The S&P 500 (AA) fell to a four-week low yesterday. Alcoa, the largest American aluminum producer, will unofficially kick off the U.S. earnings season after the close of New York trading today. It advanced 0.1 percent in German trading before reporting results.
The MSCI Emerging Markets Index rose to a two-week high. India’s S&P BSE Sensex increased 0.7 percent after the central bank relaxed liquidity curbs. Central bank Governor Raghuram Rajan scaled back emergency steps taken to boost the currency, cutting the marginal standing facility rate after the rupee rebounded from a record low on Aug. 28.
The Shanghai Composite Index (SHCOMP) added 1.1 percent on the first day of trading after a week-long holiday and the Hang Seng China Enterprises Index in Hong Kong increased 1 percent. China’s retail and catering combined sales grew 14 percent during the holiday, according to a statement posted on the website of the Commerce Ministry. The yuan advanced by the most in almost two months as the central bank raised the currency’s reference rate to a record.

Yen Weakens

The yen weakened against all of its 16 major peers after reaching 96.57 per dollar earlier today, its strongest level since Aug. 12. The Japanese currency dropped most against Taiwan’s dollar and Norway’s krone. It fell 0.3 percent to 131.74 per euro.
Implied volatility on the dollar against the yen traded near a nine-month low, a sign investors are confident in a resolution to U.S. debt-ceiling talks, according to Westpac Banking Corp. One-week implied volatility was at 9.95 percent after touching 9.56 percent yesterday, the lowest since Jan. 8. It’s averaged 13.3 percent this year.
Spanish bonds declined for a second day as the Financial Times reported that the European Banking Authority may penalize banks that rely on cash from the European Central Bank’s longer-term refinancing operations for funding. The 10-year yield rose three basis points to 4.24 percent while the rate on similar-maturity Italian debt climbed three basis points to 4.32 percent

Yields Climb

Yields on Treasury bills rose as investors sought compensation for the risk of a U.S. default. Rates on $93 billion of Treasury bills due on Oct. 24 climbed to as high as 0.18 percent, the most since they were issued in April, from negative 0.01 percent as recently as Sept. 27.
The Treasury is scheduled to sell $30 billion of three-year notes today, $21 billion of 10-year debt tomorrow and $13 billion of 30-year bonds on Oct. 10.
WTI rose to $103.60 a barrel and copper advanced 0.5 percent. Gold slipped less than 0.1 percent to $1,322.23 an ounce. Rubber surged 2.8 percent, extending its recovery from a two-month low in Tokyo amid speculation a glut of supply will shrink on record car sales and reduced output in India and Malaysia.
----With assistance from Sharon Cho in Seoul, Yoshiaki Nohara in Tokyo, Claudia Carpenter,Paul Dobson, Andrew Rummer, Sofia Horta e Costa in London. Editors: Stephen Kirkland, Stuart Wallace
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net