Global Markets - Euro on the ropes after dive in inflation

By Marc Jones

LONDON (Reuters) - The euro tumbled to a two-week low on Friday after a plunge in euro zone inflation left markets suddenly eyeing the possibility of an interest rate cut by the European Central Bank next week.

European shares saw a subdued end to what looked to be a fourth week of gains, but the combination of Thursday's surprise dive in inflation to just 0.7 percent and a revitalised dollar kept the main focus on the fragile euro.

After its biggest fall in six months in the previous session, the shared currency shed a further 0.6 percent to $1.3513, leaving it flirting with its biggest weekly drop since July last year.

"It is clear that there has been a major sentiment change on the euro," said John Hardy, head of FX strategy at Saxo bank in Copenhagen.

"The ECB's single mandate has always been on inflation so this gives Draghi and co further reason to do something at next week's meeting. We see considerable further downside, the likes of euro/dollar back into the old range, down towards $1.30."

A handful of big banks including UBS, RBS and Bank of America/Merrill Lynch revised their calls saying they now expect a rate cut next week and the pressure on the euro increased after banks made their biggest repayment of ECB crisis loans since April.

The move was also amplified as the dollar continued to kick away from a recent nine-month low, boosted by upbeat U.S. data overnight that added to the debate on future Fed stimulus.

U.S. S&P E-mini futures edged up about 0.2 percent, pointing to a slightly higher start on Wall Street, after the S&P 500 Index closed down about 0.4 percent on Thursday but still gained 4.5 percent for the month.

Stock markets across Europe were between flat and down 0.5 percent ahead of the U.S. restart, pegged back by signs of third-quarter weakness at some major European firms.

At the same time, the return of bets on an ECB rate cut saw euro zone government bonds extend this week's gains.

TAPER TALK

Markets' focus remains heavily on U.S. monetary policy and how soon the Federal Reserve will begin tapering back its $85 billion a month support programme, having delayed a move in September.

The ISM survey of manufacturing for October will give investors the latest temperature reading on the state of the U.S. economy after some upbeat PMI data on Thursday.

"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Not all players are convinced that this week's U.S. newsflow heralds a shift in monetary policy expectations, given the disruption caused by last month's Federal shutdown.

"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays said in a note.

CHINA REASSURES

In Asian trading, reassuring signals on China's factory activity offered support to the region's markets, though Tokyo's Nikkei finished at a one-week low as the yen strengthened against the euro.

Among commodities, gold dropped to $1,313 an ounce leaving it at its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar.

Copper got a lift from the China data, rising to $7,282 a tonne and back toward a one-week peak of $7,300 hit on Thursday. But it was not enough to help oil, with Brent falling back to $107.8 a barrel as U.S. crude slid to $95.72.

"There were reports that some of the ports in Libya were reopening and any signs that that oil is coming back online is going to hit the oil price," said Abhishek Deshpande, oil market analyst for Nataxis in London.

"There are also signs of generally lower season demand for oil at the moment as China's refineries go into maintenance."

(Additional reporting by Lisa Twaronite in Tokyo; Editing by Patrick Graham and Susan Fenton)

View the original article here

Euro falls on potential ECB rate cut, global stocks slip anew

By Herbert Lash

NEW YORK (Reuters) - Global equity markets slipped on Friday despite upbeat factory data worldwide, while the euro fell to a two-week low against the dollar on expectations that a rate cut by the European Central Bank is possible by the end of the year.

Stocks on Wall Street edged lower after data showing U.S. manufacturing expanded briskly in October raised some worries that the U.S. Federal Reserve may scale back its massive stimulus much sooner than expected.

U.S. equities have been pressured since a Fed statement on Wednesday raised concerns about when the central bank would begin to scale back its stimulus program, which has fueled the benchmark S&P 500 index's 23-percent rally this year.

The Institute for Supply Management (ISM) said its index of U.S. factory activity rose to 56.4 last month - its best showing since April 2011 - from 56.2 in September. Economists polled by Reuters had expected a reading of 55.

The S&P and Dow Jones industrial average have repeatedly hit record highs this year, including earlier in the week, but the strong gains have triggered some concerns about how much further the rally can continue, especially in light of tepid corporate revenue growth.

With almost three-fourths of S&P 500 companies reporting results so far, 68.5 percent have beaten profit expectations, above the long-term average of 63 percent, according to Thomson Reuters data. However, only 53.3 percent have topped revenue forecasts, below the 61 percent average since 2002.

"I'm not comfortable with the market at all-time highs, especially with earnings being mediocre," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale, Florida.

"But the manufacturing report was better than expected, and where else can you go with the Fed putting so much liquidity into the system?" Grant said.

The Dow Jones industrial average was up 30.57 points, or 0.20 percent, at 15,576.32. The Standard & Poor's 500 Index was down 0.28 points, or 0.02 percent, at 1,756.26. The Nasdaq Composite Index was down 7.57 points, or 0.19 percent, at 3,912.13.

European stock markets eased off five-year highs amid signs of weakness in regional corporate earnings.

The pan-European FTSEurofirst 300 index of leading European companies fell 0.31 percent to close at 1,288.67.

U.S. Treasuries prices fell for a third consecutive session as the encouraging ISM report on manufacturing suggested the U.S. economy overcame a drag from the partial government shutdown in October.

The rosier data revived some worries among investors that the Fed might scale back its bond-buying earlier than expected - at its December meeting - rather than early in 2014.

"There is a feeling that they might taper in December. It has gained a little steam, but that's not the consensus," said Matt Duch, a portfolio manager at Calvert Investments in Bethesda, Maryland.

The benchmark 10-year U.S. Treasury note was down 19/32 in price to yield 2.6108 percent.

Euro zone bonds broadly edged higher, extending this week's rise, after data showed a surprisingly sharp inflation slowdown in the euro zone. Many in the market expect the ECB to signal a rate cut or new liquidity injections at its meeting next week.

German two-year yields, the most sensitive to shifts in monetary policy expectations, were 1 basis point lower at 0.11 percent,

Bund futures fell 15 ticks to settle at 141.85, having hit a two-month peak of 142.32 on Thursday.

Expectations of an ECB rate cut was seen eroding the euro's interest rate advantage over other major currencies. The single currency was poised to notch its worst weekly loss against the dollar since July 2012.

The euro fell 0.74 percent to $1.3482.

Renewed pressure on the euro saw the dollar index rise to a six-week high of 80.785, climbing further up from a nine-month trough of 78.998 plumbed a week earlier. It last traded at 80.777.

The dollar was up 0.43 percent against the yen at 98.77 yen, according to Reuters data.

Brent crude oil dropped by more than $2 to below $107 a barrel as a strong dollar outweighed previous concerns over a drop in Libyan crude exports.

Brent crude for December delivery was down by $2.14 at $106.70 after rising as high as $109.41 a barrel in early trading.

U.S. oil for December was down $1.37 at $95.01, putting it in line for a fourth straight week of declines, its longest losing streak since June 2012.

(Reporting by Herbert Lash; Editing by Bernadette Baum)

View the original article here

Global Markets - Euro on the ropes after dive in inflation

By Marc Jones

LONDON (Reuters) - The euro tumbled to a two-week low on Friday after a plunge in euro zone inflation left markets suddenly eyeing the possibility of an interest rate cut by the European Central Bank next week.

European shares saw a subdued end to what looked to be a fourth week of gains, but the combination of Thursday's surprise dive in inflation to just 0.7 percent and a revitalised dollar kept the main focus on the fragile euro.

After its biggest fall in six months in the previous session, the shared currency shed a further 0.6 percent to $1.3513, leaving it flirting with its biggest weekly drop since July last year.

"It is clear that there has been a major sentiment change on the euro," said John Hardy, head of FX strategy at Saxo bank in Copenhagen.

"The ECB's single mandate has always been on inflation so this gives Draghi and co further reason to do something at next week's meeting. We see considerable further downside, the likes of euro/dollar back into the old range, down towards $1.30."

A handful of big banks including UBS, RBS and Bank of America/Merrill Lynch revised their calls saying they now expect a rate cut next week and the pressure on the euro increased after banks made their biggest repayment of ECB crisis loans since April.

The move was also amplified as the dollar continued to kick away from a recent nine-month low, boosted by upbeat U.S. data overnight that added to the debate on future Fed stimulus.

U.S. S&P E-mini futures edged up about 0.2 percent, pointing to a slightly higher start on Wall Street, after the S&P 500 Index closed down about 0.4 percent on Thursday but still gained 4.5 percent for the month.

Stock markets across Europe were between flat and down 0.5 percent ahead of the U.S. restart, pegged back by signs of third-quarter weakness at some major European firms.

At the same time, the return of bets on an ECB rate cut saw euro zone government bonds extend this week's gains.

TAPER TALK

Markets' focus remains heavily on U.S. monetary policy and how soon the Federal Reserve will begin tapering back its $85 billion a month support programme, having delayed a move in September.

The ISM survey of manufacturing for October will give investors the latest temperature reading on the state of the U.S. economy after some upbeat PMI data on Thursday.

"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Not all players are convinced that this week's U.S. newsflow heralds a shift in monetary policy expectations, given the disruption caused by last month's Federal shutdown.

"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays said in a note.

CHINA REASSURES

In Asian trading, reassuring signals on China's factory activity offered support to the region's markets, though Tokyo's Nikkei finished at a one-week low as the yen strengthened against the euro.

Among commodities, gold dropped to $1,313 an ounce leaving it at its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar.

Copper got a lift from the China data, rising to $7,282 a tonne and back toward a one-week peak of $7,300 hit on Thursday. But it was not enough to help oil, with Brent falling back to $107.8 a barrel as U.S. crude slid to $95.72.

"There were reports that some of the ports in Libya were reopening and any signs that that oil is coming back online is going to hit the oil price," said Abhishek Deshpande, oil market analyst for Nataxis in London.

"There are also signs of generally lower season demand for oil at the moment as China's refineries go into maintenance."

(Additional reporting by Lisa Twaronite in Tokyo; Editing by Patrick Graham and Susan Fenton)

View the original article here

Adopt sustainable biz models: Unilever global chief to India Inc

Mumbai, Oct 30 (IANS) Rapid globalisation and the resulting inter-dependence of financial markets, technology and economic systems have made the world more complex to manage and now is the time for India Inc to embrace sustainable business models, a top official said here Wednesday.

"Never before have we seen such rapid explosions in the global population, shifts in economic power or resulting pressures on natural resources with enormous swings in currencies, raw material costs and climate becoming the norm," said Unilever Global CEO Paul Polman.

He said the digital revolution will continue to change lives and business at an increasingly fast pace and many struggle with this 'new normal' with the average tenure of a CEO now less than four years and those of politicians even shorter.

Polman was addressing the day-long Indian Society of Advertisers Global CEO Conference on Navigating VUCA (volatile, uncertain, complex and ambiguous).

He urged India Inc to embrace sustainable business models, be intuitive, explore new markets and pare unnecessary costs.

"All of us need to be net contributors to society, offer more than we take from the society. We cannot afford any more global warming, let people go hungry or allow people to work for abysmally low fees. Capitalism needs to evolve," Polman emphasised, advising how business leaders could navigate through tough economic situations.

Other top corporate heads like Tata Sons' R. Gopalakrishnan, Cadbury India's Manu Anand and Tata Motors' Ravi Kant, Hero Motocorp's Pawan Munjal, Vodafone India's Marten Pieters, Facebook India head Kirthiga Reddy, Raymond Lifestyle Business' Sanjay Behl, MCCS India's Ashok Venkatramani, ISA Chairman and HUL executive director Hemant Bakshi, Exchange4media Group's Anurag Batra and Indian Society of Advertisers' (ISA) treasurer Paulomi Dhawan were among other prominent speakers at the conference.

The ISA is the peak national body for advertisers since more than six decades and represents organisations involved in Indian advertising, marketing and media industries.

ISA members constitute more than two-thirds of India's national non-government ad spends and aims to protect consumers by ensuring that advertising and marketing communications are conducted responsibly besides safeguarding rights of its members to communicate freely with their customers.

View the original article here

Global shares, gold creep higher as Fed decision nears

By Richard Hubbard

LONDON (Reuters) - World shares and gold inched higher on Wednesday as investors wagered that the U.S. Federal Reserve would signal plans later in the day to keep its stimulus intact for several more months.

However, after solid rallies across most riskier asset markets in the run-up to the decision, investors were wary of driving prices much higher until they hear what the Fed has to say about future plans for scaling back its stimulus.

"Tapering, while put off right now, will come back quite soon. We think in the first half of next year they are going to reduce that stimulus," said Christian Schulz, senior economist at Berenberg Bank.

A majority of U.S. primary dealers surveyed by Reuters confirmed that the recent government shutdown and standoff over raising the debt ceiling had made it more likely the Fed would delay the timing of its stimulus reduction. The Fed will release a statement at 1800 GMT after a two-day meeting.

The conviction that it would delay any move to end its steady cash injections though was enough to see the MSCI world equity index add 0.2 percent in early European trade to bring it back to a level last seen in January 2009.

Europe's broad FTSE Eurofirst 300 index also reached its highest peak in five years after a gain of 0.3 percent in early trading.

European shares were supported by some solid corporate earnings news from the likes of clothing retailer Next , and after Wall Street's strong finish on Tuesday.

The Dow Jones Industrial Average and S&P 500 set life-time closing highs when a key gauge of consumer sentiment showed confidence tumbled in October, adding to recent evidence of sluggish economic growth.

A report on private sector jobs growth in the United States for October due out later should add further weight to the view that this month's political showdown in Washington has caused a setback in the nascent recovery.

DOLLAR DULL

In the currency market, the dollar touched a one-week high against a basket of major currencies as investors who had been selling the greenback trimmed positions ahead of the announcement.

Dollar sellers had driven the U.S. unit to nine-month lows by the end of last week, taking their lead from steady easing in U.S. Treasury yields. The 10-year T-note stood at around 2.5 percent, down from 3 percent in September when the Fed first delayed a widely-anticipated tapering decision.

Against the yen, the dollar was steady at 98.17 yen JPY=, also close to a one-week high.

The euro meanwhile held firm at $1.3741, and showed little reaction to data confirming that Spain's economy emerged from recession between July and September after contracting for nine quarters.

Commodity markets were mostly holding their ground as the Fed announcement neared, with gold seen the most exposed to any extension in the Fed's money printing programme due its role as protector against the ravages of any future inflation.

Gold has risen about 7 percent from a three-month low on October 15 when investors began to price in a tapering delay and was up 0.2 percent at $1,346.11 an ounce.

Conversely, Brent crude oil slipped slightly as the Fed announcement neared and was trading under $109 a barrel though prices were expected to be supported by the announcement.

"If (the Fed) acts as expected and there is no change in their position, it will likely support oil prices, but not cause them to be pushed up significantly," Tetsu Emori, a commodities fund manager at Astmax Investments, said.

Brent oil futures lost 7 cents to $108.94 a barrel while U.S. crude oil dipped 65 cents to $97.54.

Traders termed this partly a consolidation after a big gain on Monday when reports of a sharp drop in Libyan oil exports rekindled worries over global supply. (Additional reporting by David Sheppard; editing by Stephen Nisbet)

View the original article here

Global liquidity swell to spill into 2014

By Mike Dolan

LONDON (Reuters) - After a bone-dry summer, world markets seem awash with cash again and it looks like spilling into 2014.

Even though the U.S. Federal Reserve has kept its $85 billion-a-month of bond buying constant throughout, fevered speculation surrounding its easy money spigot has by itself dictated the massive ebb and flow of liquidity seen this year.

The rethink of Fed intentions after September 18 - when the central bank declined to cut back its asset purchases as expected - has raised all financial boats in one big wave.

Since the Fed demurred six weeks ago, the S&P500 index of top Wall St stocks has jumped 3.5 percent. So too have 10-year U.S. Treasury bonds. High-yield corporate "junk" bonds are also up more than 3 percent, as are gold and the euro. Even indices of the most esoteric and speculative 'frontier markets' have added more than 3 percent.

The global surge has been remarkable as an evaporation of this year's U.S. dollar's gains has removed huge pressure from emerging market currencies and, in turn, eased the strain on some $7.2 trillion of emerging central bank reserves. And given these reserves are largely banked in western bonds, a virtuous circle of liquidity appears to have formed.

And by pumping up the euro and Japanese yen, the retreating dollar has upped chances of further easing - quantitative or otherwise - by the Bank of Japan and European Central Bank.

The global liquidity pool - one seeded by central banks and supercharged by the markets themselves - seems to expand anew.

Major stock markets from Tokyo, London, Frankfurt and New York have now clocked up year-to-date gains of between 20 and 30 percent and the latter two are in uncharted territory. Property hotspots in many of the same locales are similarly motoring.

Is this the mirror of the financial bubble that blew up pre-2007, as long-term bears such as Societe Generale's Albert Edwards insist it is?

With huge amounts of spare capacity still across developed labour markets and economies and little or no sign of rising inflation, policymakers seemed unperturbed.

But scale of money building up appears very real.

'MOST EXTREME EVER'

JPMorgan analysts reckon investor flows behind the latest market surge are akin to the indiscriminate, liquidity-fueled equity and bond buying seen at the start of the year before talk of Fed tapering saw an equity bias emerge as many funds fled bonds and the economy sped up.

More "Asset Reflation" than "Great Rotation" this time around, they surmise.

To be sure, U.S. Mutual fund data from Thomson Reuters' Lipper showed that last week alone there were hefty net inflows to equity, bond and money funds alike - more than $11 billion net to domestic equity, almost $5 billion to overseas equity and more than 3 billion to all taxable bond funds.

So what's the scale of this global sea of liquidity?

JPM splits the notion of liquidity into two buckets - one looks at how the banking system absorbs and distributes new QE money from central banks and another is the broad view of money supply in the wider economy of households, firms and investors.

The former can be febrile, as we saw during the summer.

When the central banks pump in new zero-yielding money, or excess reserves to the banking system, the banks just buy bills and bonds from other banks as the money gets passed around like a 'hot potato', bidding up asset prices and depressing yields.

That is until policy uncertainty lifts interest rate volatility and threatens bond prices, as it did after May, and forces those 'excess reserves' to go to ground and hunker down in cash again until the coast is clear.

With the Fed speaking softly again, one-month U.S. Treasury bond volatility indices have fallen to their lowest since May - half of June's peaks.

On one level, it shows the power that policyspeak alone still has in controlling this money and many argue the stretch for yield during the first four months of the year prompted the Fed to deliberately fire its verbal shots across the bow.

The other measure of global liquidity, however, appears positively explosive.

JPMorgan estimates its measure of "excess liquidity" in the global system is still surging into record territory, with global M2 aggregates up by $3 trillion, or 4.6 percent, so far this year - far outstripping a 2 percent global inflation rate.

Two thirds of that M2 expansion came from emerging markets, where domestic loan growth shows few signs of being fazed by the mid-year financial market turbulence.

Using these "excess liquidity" gauges as a guide to asset prices and assessing their power over time, the report concludes that remains a powerful upsurge.

"The current episode of excess liquidity, which began in May 2012, appears to have been the most extreme ever in terms of magnitude," it concluded.

(Editing by Ron Askew)

View the original article here

Global carmakers need to look beyond 'BRICs' - study

TROY, Michigan (Reuters) - Global automakers must look beyond China, India, Russia and Brazil to other clusters of emerging countries if they want to get their share of growth worldwide, a consulting firm said on Tuesday.

The countries beyond the four large markets known collectively as the BRICs, a name derived from the first letters of each nation, will account for one-fifth of global new-vehicle sales by 2020, according to a report released by Boston Consulting Group.

Vehicle sales growth in the "Beyond BRIC" markets, which have more than 40 percent of the world's population, will run at 6 percent annually through 2020, the report said. That would be four times as fast as the rate in traditional established markets in North America, Europe and Japan.

For the BRICs, growth is projected at 10 percent in India, 6 percent in China, 5 percent in Brazil and 4 percent in Russia.

"When we look at the Beyond BRIC markets, it is obviously the last frontier for the automotive industry to grow," said Boston Consulting senior partner Nikolaus Lang, a co-author of the report. "There is no other region, I always say jokingly, except the moon."

Automakers should tailor their marketing to regional clusters, he added. "A one-size-fits-all approach doesn't work."

Boston Consulting broke the most promising markets into four regional clusters: the ASEAN nations in Southeast Asia, the emerging Mideast, the Andean countries in South America and the North African belt.

Each regional cluster differs in size, trends and customer preferences, and few carmakers have managed to dominate any of them, Boston Consulting said.

None of the 88 auto markets studied can generate sales equal to those of any single BRIC country. For instance, the Beyond BRIC auto market collectively is not quite the size of China, the world's largest.

Indonesia will be the biggest Beyond BRIC market by 2020, with 1.7 million new-car sales, according to the report. It is part of the ASEAN cluster that also includes Malaysia and Thailand, and the group's projected annual sales of 4.6 million vehicles would rank it above Russia's 4.4 million.

The ASEAN cluster, described as the most developed and dynamic of the four regions in the report, is dominated by Japanese automakers, especially Toyota Motor Corp , and different customer preferences mean strategies should vary by country. For example, Indonesian buyers want higher ground clearance on their multipurpose vehicles because of the heavy flooding there, while affordable sedans are the focus in Malaysia, and pickup trucks in Thailand.

That kind of variety is found in each cluster.

The Mideast cluster includes Iran, Saudi Arabia and Turkey; the Andean nations include Argentina, Chile and Colombia; and the North African belt includes Algeria, Egypt and Morocco, according to the report.

The expected annual sales growth rates for the clusters through 2020 are 4.7 percent for Southeast Asia, 4.6 percent for the Mideast, 5.4 percent for the Andean region and 4.2 percent for North Africa, Boston Consulting said. All four will be benefiting from growing local economies and the larger middle class, Lang said.

Most of the clusters remain competitive markets, but any automaker that can dominate a region like Toyota does in Southeast Asia can generate huge profits, said Xavier Mosquet, global leader of Boston Consulting's automotive practice.

For the purposes of the study, Boston Consulting excluded South Korea, Mexico and South Africa, which it deemed mature and well-developed car markets, as well as the former Soviet Republics known as the Commonwealth of Independent States and sub-Saharan Africa, which it concluded were promising but fragmented.

(Reporting by Ben Klayman in Troy, Michigan; Editing by Lisa Von Ahn)

View the original article here

Indian-origin researcher warns failure to raise US debt ceiling could impair global economies

Washington, Oct. 12 (ANI): An expert in emerging global economies has stated that International Monetary Fund's warning of the US' failure to raise the debt ceiling would seriously damage the American and global economy.

Raja Kali, an economics professor at the University of Arkansas believes the impact of the shutdown thus far is relatively minor but it could produce deleterious consequences for both domestic and international financial markets.

Kali said that the real concern is the threat that Congress and President Obama will fail to raise the debt ceiling by the Oct. 17 deadline, as indicative from the reports that markets are currently waking up to the government shutdown and debt ceiling.

During the last debt-ceiling crisis, S and P downgraded the US government credit rating from AAA to AA+, which impaired investor confidence in US Treasury bonds and Kali warned that current crisis could cause similar reaction.

If the debt ceiling is not raised, the US Treasury will have difficulty paying its bills, may have difficulty paying interest and principal on Treasury securities and may be forced to renege on Social Security payments.

Kali further said that if the debt ceiling is not raised, investors may decide that US Treasury bonds are no longer the world's most secure investment and ultimately interest rates across the board will rise, as will costs for mortgages, car loans and corporate borrowing.

He further said that the crisis could cause credit markets to freeze, and the value of the US dollar to plummet and all of these consequences will cause turmoil in international financial markets and could trigger a global economic crisis. (ANI)

View the original article here